SECURITIES AND EXCHANGE COMMISSION

                    Washington, D.C.  20549



                           FORM 10-Q


  (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934



       FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001



                            - OR -

(    ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934


              Commission File Number 001 - 15709


                      TXU Europe Limited




                                                       I.R.S.
  Incorporated under the                     Employer Identification
Laws of England and Wales                          No. 98-0188080





 The Adelphi, 1-11 John Adam Street, London, England WC2N 6HT
                      011-44-207-879-8081



Indicate by check mark whether the registrant (1) has filed all
reports  required to be filed by Section 13  or  15(d)  of  the
Securities Exchange Act of 1934 during the preceding 12  months
(or for such shorter period that the registrant was required to
file  such  reports), and (2) has been subject to  such  filing
requirements for the past 90 days.
Yes    x        No ____



 Common Stock outstanding at November 12, 2001 - 2,455,705,299
shares, at US$1 par value, and 100 deferred shares, at pounds 1
                          par value.


<page>
TABLE OF CONTENTS


Part I. Financial information                                     Page

     Item 1.  Financial Statements

            Condensed Statements of Consolidated Income -
            Three and Nine Months Ended September 30,
              2001 and 2000 .....................................    1

            Condensed  Statements of Consolidated Comprehensive
             Income -
            Three and Nine Months Ended September 30,
              2001 and 2000 .....................................    2

            Condensed Statements of Consolidated Cash Flows -
            Nine  Months  Ended  September 30, 2001 and 2000 ....    3

            Condensed Consolidated Balance Sheets -
            September 30, 2001 and December 31, 2000 ............    4

            Notes to Financial Statements .......................    5

            Independent Accountants' Report .....................   15

      Item 2. Management's Discussion and Analysis of Financial
              Condition and Results of Operations ...............   16

      Item 3. Quantitative and Qualitative Disclosures About
              Market Risk .......................................   26


Part II. Other Information
     Item 1.  Legal Proceedings .................................   26

     Item 6.  Exhibits and Reports on Form 8-K ..................   26

Signatures ......................................................   27

                               (i)
<page>

                    PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
<table>
<caption>

              TXU EUROPE LIMITED AND SUBSIDIARIES
          CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                          (Unaudited)

                                       Three Months         Nine Months
                                          Ended                Ended
                                       September 30,       September 30,
                                    ___________________  __________________

                                       2001      2000       2001       2000
                                    ________   ________  ________  ________
                                                      (pounds  million)

                                    
        
      
       

Operating Revenues ...............     2,008      1,013    6,215      2,985
                                    ________   ________  ________  ________
Operating Expenses
Energy purchased for resale and
  fuel consumed ..................     1,644        740    4,968      2,084
Operation and maintenance ........       221        152      668        425
Loss on sale and transfer of
  plants .........................       164          -      164          -
Depreciation and other
  amortization ...................        37         32      122        105
Goodwill amortization ............        30         28       92         72
                                    ________   ________  ________  ________

Total operating expenses .........     2,096        952    6,014      2,686
                                    ________   ________  ________  ________
Operating Income (Loss) ..........       (88)        61      201        299
Other Income (Loss)  - Net .......        (3)        32       62         76
                                    ________   ________  ________  ________
Income (Loss) Before Interest,
  Income Taxes, Distributions
  and Minority Interest ..........       (91)        93      263        375
Interest Income ..................        11         10       36         42
Interest Expense .................        91         95      292        275
                                    ________   ________  ________  ________
Income (Loss) Before Income
  Taxes, Cumulative Effect of
  Change in Accounting,
  Distributions and Minority
  Interest .......................      (171)         8        7        142
Income Tax Expense (Benefit) .....      (153)         5      (80)        57
                                    ________   ________  ________  ________
Income (Loss) Before Cumulative
  Effect of Change in
  Accounting, Distributions and
  Minority Interest ..............       (18)         3       87         85
Cumulative Effect on Prior
  Years (to December 31, 1999)
  of Change in Depreciation
  Method (Net of pounds 3
  million tax effect) ............         -          -        -          7
Cumulative Effect of  Change in
  SFAS No. 133 Treatment
  Related to DIG Issue
  effective July 1, 2001 (Net
  of pounds 1 million tax
  effect).........................        (3)         -       (3)         -
Distributions on Preferred
  Securities of Subsidiary
  Perpetual Trust ................        (3)        (3)      (8)        (6)
Minority Interest ................         -         (2)     (17)       (10)
                                     ________   ________  ________   ________
Net Income (Loss) ................       (24)        (2)       59         76
                                     ========   ========  ========   ========
<fn>
See Notes to Financial Statements.
</fn>
</table>
                                      1

<page>
<table>
<caption>
              TXU EUROPE LIMITED AND SUBSIDIARIES
   CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
                          (Unaudited)



                                              Three Months    Nine  Months
                                                 Ended           Ended
                                             September 30,   September 30,
                                            ---------------  ---------------
                                              2001    2000    2001    2000
                                             ------  ------  -------  -----
                                                   (pounds  million)


                                            <c>     <c>      <c>      <c>
Net Income (Loss) ..........................   (24)     (2)       59     76
                                             ------  ------  -------  -----

Other Comprehensive Income (Loss)-
 Net change during period, net of tax
   effects:
   Investments classified as available
     for sale:
       Unrealized holding gains (losses)...      -      (3)       38     38
       Reclassification of net gain
         realized on sale of investments to
         other income .....................      -     (14)      (35)   (14)
   Cumulative currency translation
     adjustment ...........................      4       -         1      1
   Cash flow hedges (under SFAS No.
     133):
     Cumulative transition adjustment as
       of January 1, 2001 .................      -       -       (72)     -
     Net change in fair value of
       derivative losses ..................    (19)      -       (30)     -
     Amount realized in earnings during
       the period .........................     40       -        76      -
                                            ------   ------  -------  -----
Total .....................................     25      (17)     (22)    25
                                            ------   ------  -------  -----
Comprehensive Income (Loss) ...............      1      (19)      37    101
                                            ======   ======  =======  =====

<fn>
See Notes to Financial Statements.
</fn>
</table>
                                           2
<page>
<table>
<caption>
              TXU EUROPE LIMITED AND SUBSIDIARIES
        CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
                          (Unaudited)


                                              Nine Months
                                                 Ended
                                             September 30,
                                         -------------------
                                           2001        2000
                                          ______     ______
                                           (pounds million)


                                        <c>         <c>
Cash Flows - Operating Activities
 Net income .............................    59          76
 Adjustments to reconcile net income to
   cash provided by operating activities:
 Cumulative effect of change in
   accounting principle .................     4         (10)
 Loss (gain) on sale of assets and
   other investments ....................   104         (58)
 Depreciation and amortization ..........   214         178
 Deferred income taxes (benefits)........  (139)         29
 Minority interest ......................    17          10
 Changes in merchant energy trading
   assets and liabilities ...............   (90)          -
 Changes in operating assets and
   liabilities ..........................   (24)        114
 Other ..................................    (5)          9
                                          ______     ______
    Cash provided by operating
       activities .......................   140         348
                                          ______     ______
Cash Flows - Investing Activities
 Capital expenditures ...................  (171)       (162)
 Investments ............................   (22)       (152)
 Acquisition of business ................  (153)       (319)
 Proceeds from sale of investments and
   other assets .........................   518         123
 Other ..................................     -          (4)
                                          ______     ______
    Cash provided by (used in)
       investing activities .............   172        (514)
                                          ______     ______
Cash Flows - Financing Activities
 Net borrowings under the:
   Sterling credit facility - Tranche B..    84         321
   EMTN Note ............................     -         325
   Other long-term debt..................    28          78
 Issuance of preferred securities of
   subsidiary perpetual trust ...........     -          95
 Retirements of:
   Sterling credit facility - Tranche B..  (158)       (513)
   EMTN Note ............................  (100)          -
   Other long-term debt .................  (413)       (368)
 Change in notes payable - banks and
   other short-term loans ...............  (205)        184
 Distributions on preferred securities
   of subsidiary perpetual trust.........    (6)         (3)
 Dividends paid on minority interest ....    (3)          -
 Debt financing costs....................    (1)         (7)
                                          ______     ______
  Cash (used for) provided by financing
     activities .........................   (774)       112
                                          ______     ______
Net Change in Cash and Cash
  Equivalents ...........................   (462)       (54)
Cash and Cash Equivalents - Beginning
  Balance ...............................    663        285
                                          ______     ______
Cash and Cash Equivalents - Ending
  Balance ...............................    201        231
                                          ======      ======
<fn>
See Notes to Financial
Statements.
</fn>
</table>
                                           3
<page>
<table>
<caption>
              TXU EUROPE LIMITED AND SUBSIDIARIES
             CONDENSED CONSOLIDATED BALANCE SHEETS

                                            September 30,  December 31,
                                                2001         2000
                                             (Unaudited)
                                              ________     _______
                                               (pounds  million)

                                               <c>         <c>
ASSETS
Current Assets
Cash and cash equivalents ..................       201         663
Accounts receivable ........................       788         743
Inventories - at average cost...............       133          72
Merchant energy trading assets..............       608         585
Prepayments and other current assets........       247          97
                                              ________     _______
Total current assets .......................     1,977       2,160
                                              ________     _______
Investments
Restricted cash.............................       711         672
Other.......................................       434         695
                                              ________     _______
Total investments ..........................     1,145       1,367
                                              ________     _______
Property, Plant and Equipment - Net.........     2,626       2,781
Goodwill ...................................     3,972       3,945
Merchant Energy Trading Assets..............       242         121
Derivative Assets ..........................       228           -
Deferred Debits and Other Assets............       495         670
                                              ________     _______
      Total.................................    10,685      11,044
                                              ========     =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Notes payable - banks and short-term
loans on accounts receivable ...............       336         530
Long-term debt due currently ...............       382         862
Accounts payable:
Trade ......................................       823         712
Affiliates..................................        55          52
Merchant energy trading liabilities.........       515         571
Interest and taxes accrued..................       157          78
Other current liabilities...................       297         166
                                              ________     _______
Total current liabilities...................     2,565       2,971
                                              ________     _______
Accumulated Deferred Income Taxes...........       312         467
Provision for Unfavorable Contracts.........       514         573
Merchant Energy Trading Liabilities.........       189          81
Derivative Liabilities .....................       134           -
Other Deferred Credits and Noncurrent
 Liabilities................................       219         320
Long-term Debt, Less Amounts due
 Currently..................................     4,508       4,480
Preferred Securities of Subsidiary
 Perpetual Trust............................        95          95
Minority Interest...........................       313         258
Contingencies (Note 6)
Shareholder's Equity
Common stock (authorized  - 3,000,000,000
 shares at US$1 par and 100 deferred
 shares at pounds 1 par; issued and
 outstanding -  2,455,705, 299 shares and
 100 deferred shares).......................     1,467       1,467
Retained earnings ..........................       392         333
Accumulated other comprehensive income
(loss)......................................       (23)         (1)
                                              ________     _______
Total shareholder's equity..................     1,836       1,799
                                              ________     _______
      Total.................................    10,685      11,044
                                              ========     =======

<fn>
See Notes to Financial Statements.

</fn>
</table>
                                      4

<page>
                              TXU Europe Limited
                        Notes to Financial Statements

BUSINESS, ACQUISITIONS AND DISPOSITIONS

Business

   TXU  Europe  Limited  (TXU Europe) is an  indirect,  wholly-
owned  subsidiary of TXU Corp., a Texas corporation.  TXU Corp.
is  a  global energy services company that engages in  electric
and  natural  gas  services, electricity  generation,  merchant
energy    trading,    energy   marketing,   energy    delivery,
telecommunications,   and   other   energy-related    services,
primarily in the United States (US), Europe and Australia.  TXU
Europe is a holding company for TXU Corp.'s United Kingdom (UK)
and  other  European  operations. Almost all  of  TXU  Europe's
operating  income is derived from, and consolidated assets  are
held by, TXU Europe Group plc (TXU Europe Group) and TXU Europe
Group's subsidiaries.

   TXU  Europe  uses a single energy business concept  for  the
management of its energy activities in a consistent  manner  in
its  different  geographical areas.  There  are  two  reporting
operating segments for TXU Europe:

   ENERGY  -  which consists of the energy retail business  and
      the  portfolio  trading and power  business.  The  single
      energy  business  manages  the  integrated  portfolio  of
      generation assets and contracts and retail customer  base
      within  two  separate geographical areas  -  the  UK  and
      continental  Europe  (which comprises  primarily  Central
      Europe and the Nordic region); and

   NETWORKS  -  which owns, manages and, through its 50%  owned
      networks  management  joint venture  (24seven),  operates
      its electricity distribution system in the UK.

   As  of  October  1,  2001, TXU Europe  has  reorganized  its
ownership  interests  within the UK to  meet  requirements  for
separate   legal   ownership  and  licensing   of   electricity
distribution  and  retail activities.  The  retail  electricity
supply   business  of  Eastern  Electricity  Limited   (Eastern
Electricity - formerly Eastern Electricity plc) was transferred
to TXU UK Limited (TXU UK - formerly called Eastern Natural Gas
(Retail)  Limited).   At the same time the business  of  Norweb
Energi,  which was acquired by TXU Europe in August  2000,  was
also  transferred to TXU UK, which is now the  retail  gas  and
electric   supplier   for  TXU  Europe.   Eastern   Electricity
continues to operate the distribution business of TXU Europe.

Acquisitions

   In  January  2001, TXU Europe completed the  acquisition  of
51% of Stadtwerke Kiel AG (Kiel AG) for pounds 145 million. The
acquisition of Kiel AG was accounted for as a purchase business
combination.  The process of determining the fair value of  the
assets and liabilities of Kiel AG continues but is expected  to
be completed in the fourth quarter of 2001. TXU Europe's latest
estimate  of  goodwill is pounds 107 million,  which  is  being
amortized  over  40  years. This amount is subject  to  further
revision as additional information on the fair value of  assets
acquired and liabilities assumed becomes available. The results
of  operations  of  Kiel AG are reflected in  the  consolidated
financial statements from the January 8, 2001 acquisition date.

   In  May  2001, TXU Europe acquired all of the share  capital
of  Ares  Energie  GmbH (Ares), based in Berlin,  Germany,  for
approximately 24 million Deutsche Marks (pounds 8 million). The
acquisition  of  Ares was accounted for as a purchase  business
combination.  The process of determining the fair value of  the
assets and liabilities of Ares continues but is expected to  be
completed within one year of the acquisition date. Ares  is  an
electricity  retailer  that  offers  energy  services  to  both
business and residential customers throughout Germany.

   Pro  forma  information for the nine months ended  September
30,  2001 and 2000, reflecting the acquisitions of Kiel AG  and
Ares,  would  not  be  significantly  different  from  reported
amounts.

                                    5
<page>
   In  August 2000, TXU Europe purchased United Utilities plc's
retail  energy  supply business, Norweb Energi (a  division  of
Norweb plc), for total consideration, including direct costs of
the acquisition, of pounds 340 million. In the transaction, TXU
Europe  assumed certain of Norweb Energi's obligations.   These
include  Norweb Energi's power purchase agreements, which  have
been  integrated  into  TXU  Europe's  energy  portfolio.   The
acquisition  of Norweb Energi was accounted for as  a  purchase
business  combination.  The final amount assigned  to  goodwill
was pounds 628 million, which is being amortized over 20 years.

   The results of operations of Norweb Energi are reflected  in
the consolidated financial statements of TXU Europe from August
3,  2000, the effective date of the acquisition.  The following
summary  of  unaudited pro forma consolidated  results  of  TXU
Europe's operations reflect the acquisition of Norweb Energi as
though  it  had  occurred at the beginning  of  the  comparable
period of 2000.

                                                 Pro Forma
                                                Nine Months
                                                   Ended
                                             September 30, 2000
                                             -------------------
                                               pounds  million

        Operating Revenues ....................    3,584
        Operating Income ......................      363
        Net Income ............................       98


   The  pro  forma results above are not necessarily indicative
of  what the actual results would have been had the acquisition
actually occurred at the beginning of the period.  Further, the
pro forma amounts are not intended to be a projection of future
results  of  the combined companies. In particular,  the  above
amounts  do  not take into account the expected  impact  Norweb
Energi  would  have  on  the timing of  earnings  from  the  UK
electricity portfolio across the year such that profits in  the
first  and  fourth  quarters  are reduced,  with  a  more  than
offsetting  increase  in the second and third  quarters.   This
arises from constant retail customer prices throughout the year
compared  with  more  seasonal  wholesale  contracts  and  spot
prices.


Dispositions

   In  January  2001, TXU Europe entered into a  commitment  to
sell  its  19.2% interest in Hidroelectrica del Cantabrico,  SA
(Hidrocantabrico)  to  a  consortium led  by  Electricidade  de
Portugal  S.A.,  a  Portuguese  utility  company,  and  Spanish
savings bank Caja de Ahorro de Asturias for euros 24 per share.
TXU  Europe waived the pre-emption rights it had over  4.9%  of
the   stock   in   Hidrocantabrico  held   by   Electrabel   SA
(Electrabel),  an  electricity company in  Belgium.   In  April
2001,  TXU Europe received net proceeds from the sale of  euros
522 million (pounds 325 million) and recorded a pre-tax gain of
pounds  50  million in Other Income (Loss)  -  Net  (pounds  35
million after-tax).

   In  February  2001, TXU Europe finalized  the  sale  of  its
interest  in  the North Sea gas fields for pounds 138  million.
From  the  date  of the sale through September  30,  2001,  TXU
Europe  has  received net cash proceeds of pounds  106  million
after settlement of certain outstanding issues, and recorded  a
net pre-tax gain of  pounds 7 million in Other Income (Loss)  -
Net (pounds 5 million after-tax).  At the time of the sale, TXU
Europe  entered  into  a  forward sell contract  to  match  the
outstanding  forward purchase contracts on the  Johnston  field
portion of the North Sea assets.

   On  July  12,  2001, TXU Europe completed the  sale  of  its
1,000 MW coal-fired Rugeley generating station to International
Power  for  pounds 200 million.  Cash received at  closing  was
pounds  67  million with the remaining cash proceeds  from  the
sale to be received in January 2002.  TXU Europe has received a
letter of credit to secure the remaining cash proceeds. The pre-
tax loss on the sale was pounds 24 million and is reflected  as
a component of Operating Income.

                               6
<page>
   On October  19, 2001, TXU Europe completed the transfer  of
its  380  MW  Peterborough  and 325 MW  King's  Lynn  gas-fired
generating  stations to Centrica through a  series  of  leasing
arrangements.   TXU  Europe  previously  had  a  capital  lease
interest in each of the plants.  The proceeds from the transfer
was  pounds  173  million.  In addition,  TXU  Europe  retained
certain tax benefits.  TXU Europe recorded a loss before tax in
respect  of these transfer of pounds 140 million and this  loss
is reflected as a component of Operating Income.

   The  restructuring  of  the generating portfolio,  including
the sale of Rugeley and the transfer of Peterborough and King's
Lynn  generating  stations, resulted in a net  tax  benefit  of
pounds 146 million in the third quarter. This results from  the
retention  of certain tax benefits related to the stations  and
reversal of previously established deferred taxes.

   The  sale  and the transfer followed TXU Europe's review  of
its  energy  portfolio  and  in particular  its  UK  generating
portfolio that was announced last year and is in line with  its
flexible  portfolio  management  strategy.   Under  its  single
energy  business concept, TXU Europe allocates risk capital  so
as  to  maximize returns across each of its markets. TXU Europe
may  dispose  of  certain  assets  to  allow  redeployment   of
resources  into faster growing opportunities. As a consequence,
the  composition of assets and operations in each market within
the portfolio changes from time to time. TXU Europe continually
reviews its energy portfolio within each of its markets.


2.   SIGNIFICANT ACCOUNTING POLICIES

   The  condensed  consolidated  financial  statements  of  TXU
Europe  and  its subsidiaries have been prepared in  accordance
with  accounting principles generally accepted  in  the  United
States  of  America  (US GAAP) and, except for the adoption  in
the  first  quarter of 2001 of the new accounting standard  for
derivatives discussed in Note 3 below, on the same basis as the
audited  financial  statements included in  TXU  Europe's  2000
Annual Report on Form 10-K (2000 Form 10-K).  In the opinion of
TXU Europe's management, all adjustments  (consisting of normal
recurring  accruals) necessary for a fair presentation  of  the
results of operations and financial position have been included
therein.  Certain information and footnote disclosures normally
included  in annual consolidated financial statements  prepared
in  accordance with US GAAP have been omitted pursuant  to  the
rules  and  regulations  of  the  US  Securities  and  Exchange
Commission. The results of operations for an interim period may
not  give a true indication of results for a full year. Certain
previously  reported amounts have been reclassified to  conform
to current classifications.

   Unless  otherwise  indicated, all amounts in  the  financial
statements  and  notes to financial statements  are  stated  in
millions of UK pounds sterling.

   New   Accounting   Standards  -   Statement   of   Financial
Accounting  Standards (SFAS) No. 141, "Business  Combinations",
became effective for TXU Europe on July 1, 2001.  SFAS No.  141
requires  the  use  of the purchase method  of  accounting  for
business  combinations initiated and completed after  June  30,
2001 and eliminates the use of the pooling-of-interests method.

   SFAS  No.  142, "Goodwill and Other Intangible  Assets",  is
effective for TXU Europe beginning January 1, 2002.   SFAS  No.
142 requires, among other things, the allocation of goodwill to
reporting  units  based  upon the current  fair  value  of  the
reporting   units   and   the   discontinuance   of    goodwill
amortization.   The  amortization  of  TXU  Europe's   existing
goodwill  (approximately pounds 123 million  on  an  annualized
basis)  will  cease  after  December  31,  2001.

   In addition, SFAS No. 142 requires TXU Europe to complete  a
transitional goodwill impairment test six months from the  date
of  adoption  and establishes a new method of testing  goodwill
for impairment on an annual basis or on an interim basis if  an
event occurs or circumstances change that would reduce the fair
value  of  a  reporting  unit below its  carrying  value.   Any
goodwill impairment loss during the transition period  will  be
recognized  as the cumulative effect of a change in  accounting
principle.    Subsequent  impairments  will  be   recorded   in
operations.

                                 7
<page>
   As  part of its implementation effort to adopt SFAS No. 142,
TXU Europe is in the process of determining its reporting units
as  defined by SFAS No. 142, the fair value of those  reporting
units  and the allocation of goodwill to those reporting  units
based upon their determined fair value.

   SFAS    No.    143,   "Accounting   for   Asset   Retirement
Obligations",  will  be  effective  for  TXU  Europe  beginning
January  1, 2003.  SFAS No. 143 requires the recognition  of  a
fair  value  liability for any retirement obligation associated
with  long-lived assets.   The offset to any liability recorded
is  added  to the previously recorded asset and the  additional
amount  is  depreciated over the same period as the  long-lived
asset for which the retirement obligation is established.  SFAS
No. 143 also requires additional disclosures.

   SFAS No. 144, "Accounting for the Impairment or Disposal  of
Long-Lived Assets", will be effective for TXU Europe  beginning
January  1, 2002.  SFAS No. 144 establishes a single accounting
model,  based  on the framework established in  SFAS  No.  121,
"Accounting  for the Impairment of Long-Lived  Assets  and  for
Long-Lived Assets to be Disposed Of", for long-lived assets  to
be  disposed of by sale and resolves significant implementation
issues related to SFAS No. 121.

   TXU  Europe is evaluating the impact the adoption  of  these
standards  will have on its financial position and  results  of
operations.


3.   DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

   On  January  1,  2001,  TXU Europe  adopted  SFAS  No.  133,
"Accounting for Derivative Instruments and Hedging Activities",
as  amended  and  as extended by SFAS No. 137 (June  1999)  and
further amended by SFAS No. 138 (June 2000).

   In  accordance with the transition provisions  of  SFAS  No.
133,  TXU  Europe recorded, as of January 1, 2001, a cumulative
effect  of pounds 72 million after-tax as a decrease  to  Other
Comprehensive  Income  to  recognize  the  fair  value  of  all
derivatives  effective as cash-flow hedging  instruments.   For
the  period  from transition to September 30, 2001,  pounds  38
million  of  this  cumulative  transition  net  loss  has  been
reclassified into earnings.

   Impact  of  NETA - Prior to the implementation  of  NETA  on
March 27, 2001, almost all electricity generated in England and
Wales  had  to  be  sold to the wholesale  trading  market  for
electricity,  commonly known as the Pool. In turn,  electricity
suppliers  generally had to buy electricity from the  Pool  for
resale to their customers. Even groups that are both generators
and licensed suppliers, like TXU Europe, in most circumstances,
had  to  act through the Pool to sell all the electricity  they
generated  and  to purchase all the electricity  they  sold  to
customers. Prices for electricity were set by the Pool for each
half  hour,  based on bids of generators and a complex  set  of
calculations designed to match supply and demand.

   NETA  provides  those  companies wishing  to  buy  and  sell
electricity  the  freedom  to enter  into  directly  negotiated
contracts  instead of having to trade through the Pool.   Under
the  new arrangement, bulk electricity is traded on one or more
exchanges  and  through  a variety of  bilateral  and  physical
contracts.  Market participants include not only generators and
suppliers  but  also traders, such as energy wholesalers,  with
physical  positions. Consequently, the implementation  of  NETA
has eliminated the Pool.  Most of the derivative contracts used
to  hedge  exposure  to changes in Pool prices  have  now  been
renegotiated   into  bilateral  contracts.   These   contracts,
previously  qualifying as cash flow hedges, are now  considered
to be "normal purchase" contracts.

   Financial Summary - The implementation of SFAS No.  133  has
not  affected  reported operating results  of  merchant  energy
trading  activities. The merchant energy trading businesses  in
the   UK   and  continental  Europe  have  used  mark-to-market
accounting  for their trading activities, consistent  with  the
required accounting under SFAS No. 133 for trading transactions

                              8
<page>
that are derivatives.  However, as a result of SFAS No. 133 and
ongoing  implementation issues, contracts that no  longer  meet
the normal purchase exception effective July 1, 2001 are marked-
to-market.

   Essentially  all  of  the terms of TXU Europe's  derivatives
match  the terms of its underlying hedged items.  As a  result,
TXU  Europe experienced minimal hedge ineffectiveness of pounds
0.4  million, mainly from treasury hedges, for the nine  months
ended September 30, 2001.  This amount was reported in Interest
Expense and represented the total ineffectiveness of all  cash-
flow  hedges.   Also,  pounds 0.5 million  of  net  derivatives
losses were realized as a result of the discontinuance of cash-
flow hedges related to certain forecasted treasury transactions
that are not likely to occur.

   Ongoing  implementation issues being addressed by  standard-
setting  groups may affect the application of SFAS No. 133.  In
April  2001,  the Financial Accounting Standards  Board  (FASB)
finalized  a  conclusion that volume option  contracts  do  not
qualify  for  the  normal purchase and sale  exception.   As  a
result, certain of TXU Europe's gas option contracts have  been
accounted  for as derivatives since July 1, 2001 in  accordance
with  the  transition  provisions  of  such  revised  guidance.
Results  for  the  third quarter reflect, as  required  by  the
guidance, a charge of pounds 3 million (net of pounds 1 million
tax)   as  a  cumulative  effect  of  a  change  in  accounting
principle.   Further mark-to-market gains of pounds 21  million
were  recorded  in  respect of the contracts during  the  third
quarter of 2001.

   In  June  2001, the FASB approved a number of implementation
issues  regarding the normal purchase and sale exception.   One
of  the issues applied exclusively to the electric industry and
provided  for  the  normal purchase and  sale  exception  under
specific  circumstances.  TXU Europe evaluated its  electricity
contracts under the new guidance and determined that they  will
qualify for the normal purchase and sale exception from July 1,
2001.

   As  of September 30, 2001, TXU Europe expects that less than
pounds  1 million of after-tax net losses now included  in  the
net   gains/losses   from  derivative  instruments   that   are
accumulated  in Other Comprehensive Income will be reclassified
into  earnings  during the next twelve  months.    This  amount
represents  the  projected value of the hedges  over  the  next
twelve  months relative to what would be recorded if the  hedge
transactions had not been entered into. The amount expected  to
be  reclassified is not a forecasted loss incremental to normal
operations,  but  rather it demonstrates the  extent  to  which
volatility  in  earnings  (which  would  otherwise  exist)   is
mitigated through the presence of cash-flow hedges. The  amount
is  affected  by the uncertainty that NETA has brought  to  the
industry and its effect on near-term contract prices.


4.   RESTRUCTURING CHARGES AND OTHER COSTS

   During  the nine months ended September 30, 2001  and  2000,
TXU  Europe recorded restructuring charges and other  costs  of
pounds  46  million  and pounds 66 million pre-tax  (pounds  32
million  and  pounds 48 million after-tax),  respectively.  The
majority  of the costs consisted of asset writedowns and  other
exit and redundancy costs, primarily as a result of contracting
TXU Europe's customer service operations to Vertex Data Science
Limited, the creation of the 24seven joint venture and  certain
other   staff  reorganizations.   Redundancy  costs   represent
severance  benefits  paid to staff under  voluntary  retirement
programs  and  related pension benefits. The  asset  writedowns
were  charged to depreciation expense.  The rest of these costs
have been recorded in operation and maintenance expense.

   For  the  nine  months  ended September  30,  2001,  pre-tax
restructuring charges consisted of pounds 26 million  of  asset
writedowns,  pounds 13 million of other exit  costs  (primarily
facility  closing costs) and redundancy costs of  approximately
pounds  7  million  related  to  termination  benefits  for  65
employees that had accepted the benefits.

   For  the  nine  months  ended September  30,  2000,  pre-tax
restructuring costs consisted of redundancy costs of pounds  26
million  related  to  voluntary termination  benefits  for  476
employees  that  accepted the benefits, pounds  17  million  of
other exit costs  (primarily facility closing costs) and pounds
16  million of asset writedowns.  In addition, pounds 7 million
of  costs  associated  with the offer for Hidrocantabrico  were
recorded in Other Income - Net.

                                9
<page>
   Cash  payments  during the nine months ended  September  30,
2001and  2000, totaled pounds 10 million and pounds 19  million
of  redundancy costs and pounds 4 million and pounds 9  million
of other exit costs, respectively.


5.   FINANCING

   Short-term   Facilities  -  In  January  2001,  TXU   Europe
borrowed  euros 182 million (pounds 115 million) at  5.54%  per
annum  under  its  pounds 300 million 364-day revolving  credit
facility,  as  part of the financing to acquire Kiel  AG.   The
facility matured on August 22, 2001, however only euros 417 million
(pounds  260 million) of this facility was extended for another
twelve months and was outstanding as of September 30, 2001.

   Also  in  January  2001, TXU Europe repaid  its  pounds  150
million Eastern Electricity revolving credit balance. In  April
2001,  TXU  Europe  repaid the 1.3 billion Czech  Koruna  (CzK)
(pounds  23  million)  outstanding  under  its  short-term  CzK
facility,  and the facility expired.  This short-term borrowing
had  been  used  to  hedge  the  net  investment  in  a  CzK  -
denominated  company, Teplarny Brno.   TXU Europe then  entered
into  a foreign currency derivative to serve as the replacement
hedge  of this investment.  In May 2001, TXU Europe repaid  and
allowed  to  expire  a euros 250 million (pounds  158  million)
facility.

   Accounts   Receivable  Securitization  -  TXU   Europe   has
facilities with a commercial bank to provide financing  through
trade  accounts receivable whereby TXU UK may sell up to pounds
300  million  of  its electricity and gas receivables  and  TXU
Finance  (No.2) Limited  (TXU Finance), which is 90%  owned  by
TXU  Europe,  may  borrow  up to an  aggregate  of  pounds  175
million,  collateralized  by  future  receivables  of  TXU  UK,
through  a short-term note issue arrangement.  The program  has
an overall limit of pounds 300 million.

   TXU  UK  continually sells additional receivables to replace
those  collected.  During the nine months ended  September  30,
2001,  TXU UK sold pounds 1.6 billion in receivables under  the
program  to  replace those receivables that had been collected.
Such sales resulted in no gain or loss. Under the program,  TXU
UK has a receivables servicing obligation but does not incur  a
measurable asset or liability.  At September 30, 2001, accounts
receivable  of Eastern Electricity were reduced by  pounds  170
million  under  the  program and pounds 34  million  of  future
receivables  sold were reflected as other short-term  loans  on
the  balance sheet. These borrowings bear interest at an annual
rate,  which  was  4.49%  at  September  30,  2001,  based   on
commercial paper rates plus a margin.

   Total   -   As  of  September  30,  2001,  total  short-term
borrowings  aggregated  pounds  336  million  with  a  weighted
average annual interest rate of 5.4%.

   Long-Term  Lines  of  Credit - At September  30,  2001,  TXU
Europe and TXU Finance had a joint sterling-denominated line of
credit  with  a  group of banking institutions under  a  credit
facility   agreement  (Sterling  Credit  Agreement).    As   of
September 30, 2001, the Sterling Credit Agreement provided  for
borrowings  of  up  to  pounds  1.075  billion  and   had   two
facilities: a pounds 750 million term facility and a pounds 325
million  revolving credit facility (Tranche B), both  of  which
terminate  on  March  2, 2003.  The Sterling  Credit  Agreement
allows for borrowings in various currencies with interest rates
based  on  the  prevailing rates in effect in the countries  in
which the borrowings originate.  In January 2001, in connection
with  the acquisition of Kiel AG, TXU Europe borrowed euros  47
million  (pounds 30 million) under Tranche B.  As of  September
30,  2001,  pounds  750 million of borrowings were  outstanding
under  the term facility at an interest rate of 6.8% per annum,
and  outstanding Tranche B borrowings consisted of 700  million
Norwegian  kroner (NOK) (pounds 54 million) at 8.2%  per  annum
and euros 147 million (pounds 91 million) at 4.5% per annum.

   TXU  Europe  has a euros 2.0 billion Euro Medium  Term  Note
(EMTN)  program.  Under the EMTN program, TXU Europe  may  from
time  to time issue notes in various currencies to one or  more
dealers  in an aggregate principal amount outstanding of  euros
2.0  billion.   On  September 4, 2001, pounds 100  million  was
repaid  under this program.  At September 30, 2001, there  were
pounds 576 million of various borrowings outstanding under this
program  with  an aggregate weighted average interest  rate  of
7.1% per annum.

                              10
<page>
   In  January  2001,  the outstanding balance  of  pounds  190
million of the rent factoring loans due to banks was repaid.

   In  June 2001, TXU Europe purchased approximately pounds  27
million  of  US Treasury securities with various maturities  to
match  the  required  interest  and  principal  repayments   to
maturity on a subsidiary's junior subordinated debentures  held
by another subsidiary.  These amounts have been included in the
September 30, 2001 balance sheet as restricted cash.

6. CONTINGENCIES

   Legal  Proceedings  -  On January 25,  1999,  the  Hindustan
Development Corporation (HDC) issued arbitration proceedings in
the  Arbitral Tribunal in Delhi, India against The Energy Group
PLC  (TEG)  (now  Energy  Holdings  (No.3)  Limited),  claiming
damages  of pounds 255 million for breach of contract following
the  termination of a Joint Development Agreement  dated  March
20,   1997  relating  to  the  construction,  development   and
operation of a lignite based thermal power plant at Barsingsar,
Rajasthan.  On November 21, 2000, the Arbitrators issued  their
decision and dismissed HDC's claim in full, and TEG was  liable
only for its own legal costs involved in the case, an estimated
pounds 1 million. On December 21, 2000, HDC filed a Request for
Clarification  of  the  Arbitrators' decision  (Request)  under
Section 33 of the Arbitration and Conciliation Act, the purpose
of  which  is  to  entitle  a  party  to  arbitration  to  seek
clarification  of  language used in the Arbitrators'  decision.
TEG  filed  its  response to the Request on January  15,  2001,
asserting  that  the Request was untimely  made  and  that  the
language  used by the Arbitrators needed no clarification.  TXU
Europe  believes that the Arbitrators will have no  alternative
but  to  dismiss the Request. The effect of filing the Request,
however, has been to stay the time HDC has to file an appeal of
the Arbitrators' decision.

   In   August   2000,  the  Spanish  Stock  Market  Commission
announced  it  was opening an investigation as to  whether  TXU
Europe and Electrabel acted in concert over share purchases  of
Hidrocantabrico in order to avoid making a formal takeover bid.
TXU  Europe and TXU Corp. have always maintained that there was
no   violation  of  Spanish  securities  laws  and  have  fully
cooperated  with  the investigation.  The  Commission  has  now
concluded  its  investigation and has formally determined  that
neither TXU Europe nor TXU Corp. has committed any offense  and
all allegations have been withdrawn.

   General  -  In  addition to the above, TXU  Europe  and  its
subsidiaries   are  involved  in  various   other   legal   and
administrative proceedings which, in the opinion of management,
should  not have a material effect on their financial position,
results of operations or cash flows.

   Financial  guarantees  -  TEG has guaranteed  up  to  US$110
million  (pounds 75 million) at September 30, 2001  of  certain
liabilities that may be incurred and payable by the  purchasers
of  TEG's  US  and  Australian coal businesses  and  US  energy
marketing operations sold in 1998 prior to acquisition  of  TEG
by  TXU Corp.  These guarantees are with respect to the Peabody
Holding  Company  Retirement Plan for Salaried  Employees,  the
Powder River Coal Company Retirement Plan and the Peabody  Coal
UMWA  Retirement  Plan  and are subject  to  certain  specified
conditions.

   TEG  entered  into  various  guarantees  of  obligations  of
affiliates  of  its  former  subsidiary,  Citizens  Power  LLC,
arising  under  power  purchase agreements  and  note  purchase
agreements in connection with various Citizens Power LLC energy
restructuring projects, as well as various indemnity agreements
in  connection with such projects.  TXU Europe and TEG continue
to  be  either the guarantor or the indemnifying party, as  the
case may be, under these various agreements.

                                11
<page>
7.   SEGMENT INFORMATION

   TXU  Europe has two reportable operating business  segments,
Energy  and Networks. Beginning in the first quarter  of  2001,
TXU   Europe  undertook  an  internal  reorganization  of   its
businesses to reflect a single energy business concept for  the
management of its energy activities in a consistent  manner  in
its  different geographical areas. Amounts for the three months
and nine months ended September 30, 2000 have been reclassified
to conform to the new presentation.  As reflected in the tables
below,  the  income  contribution  for  each  segment  includes
operating and other income on a US GAAP basis, before interest,
income  taxes, distributions and minority interests  and  after
deducting  a  notional charge for the cost of  capital  (income
before interest).

                                12
<page>

<table>
<caption>

                          Three Months Ended September 30,
                       --------------------------------------
                              2001                2000
                       -----------------   ------------------
                                 Income              Income
                                 before              before
                       Revenues  Interest  Revenues  Interest
                       --------  --------  --------  --------
                                   (pounds  millions)



                         <c>       <c>       <c>       <c>
UK                        1,614      (94)       891        29
Continental Europe          360      (13)        82        19
                         ------    ------   -------   -------
    Total Energy          1,974     (107)       973        48
                         ------    ------   -------   -------
Networks                     74       23         81        22
Other                         2       (5)         4        24
Inter-segment
  eliminations              (42)       -        (45)        -
                         ------    ------   -------   -------
        Total             2,008      (89)     1,013        94
                         ======    ------   =======   -------

Cost of capital
  elimination                         35                   35
Unallocated
  corporate costs                    (37)                 (36)
                                   ------             -------
Income (loss)
  before interest,
  income taxes,
  distributions and
  minority interest                  (91)                  93
                                   ======             =======
</table>
<table>
<caption>


                               Nine Months Ended September 30,
                           --------------------------------------
                                  2001                2000
                           -----------------   ------------------
                                     Income              Income
                                     before              before
                           Revenues  Interest  Revenues  Interest
                           --------  --------  --------  --------
                                       (pounds  millions)


                            <c>      <c>       <c>         <c>
UK                           5,106      118     2,649         189
Continental Europe           1,001       70       201          25
                            ------   ------     -----     -------
    Total Energy             6,107      188     2,850         214
                            ------   ------     -----     -------
Networks                       235       87       282         115
Other                            9        7        21          55
Inter-segment
  eliminations                (136)       -      (168)          -
                            ------   ------     -----     -------
        Total                6,215      282     2,985         384
                            ======   ------     =====     -------

Cost of capital
  elimination                           107                   112
Unallocated
  corporate costs                      (126)                 (121)
                                     ------               -------
Income before
  interest,  income
  taxes,
  distributions and
  minority interest                     263                   375
                                     ======               =======
</table>

                                       13

<page>

8.   SUPPLEMENTARY FINANCIAL INFORMATION

   Accounts  Receivable  - At September 30, 2001  and  December
31,  2000, accounts receivable were stated net of uncollectible
accounts   of   pounds  25  million  and  pounds  31   million,
respectively.

   Property,  Plant and Equipment - At September 30,  2001  and
December  31, 2000, property, plant and equipment  were  stated
net  of  accumulated  depreciation of pounds  443  million  and
pounds 398 million, respectively.

   Goodwill  -  At  September 30, 2001 and December  31,  2000,
goodwill  was stated net of accumulated amortization of  pounds
333 million and pounds 240 million, respectively.

    Credit Risk - Credit risk relates to the risk of loss  that
TXU  Europe  would  incur  as a result  of  non-performance  by
counterparties.  TXU  Europe  maintains  credit  policies  with
regard   to   its   counterparties  that  management   believes
significantly  minimize overall credit  risk.   These  policies
include  an  evaluation of potential counterparties'  financial
condition (including credit ratings), guarantees and collateral
requirements and the use of standardized agreements that  allow
for  the  netting of positive and negative exposures associated
with  a  single  counterparty.  Additionally,  TXU  Europe  has
established    controls   to   determine   and   monitor    the
appropriateness of these limits on an ongoing basis. Price  and
credit  risk are evaluated daily within the established trading
policies  and limits established.  Any material adverse  change
in  the  financial condition of a counterparty or downgrade  of
its  credit  quality  will result in the  reassessment  of  the
credit  limit with that counterparty.  This could result  in  a
reduction  of  the  credit  limit  or  request  for  additional
financial assurances.

   Concentration  of  Credit Risk - TXU  Europe's  exposure  to
credit  risk  in Continental Europe and the UK as of  September
30,  2001 was pounds 1.9 billion (net of reserves of pounds  30
million).   TXU  Europe had no exposure  to  any  one  customer
greater  than 5% of the gross fair value of TXU Europe's  trade
account   receivable,  merchant  energy  trading   assets   and
derivative assets at September 30, 2001.  Most of TXU  Europe's
counterparties  are  major  energy  companies   and   financial
institutions  that  are considered to be of  investment  grade,
determined using publicly available information, which includes
a  Standard  &  Poor's rating of at least BBB-  and  a  Moody's
rating of at least Baa3. The risk of loss to TXU Europe arising
from non-performance by counterparties is considered unlikely.

   Based  on  TXU  Europe's policies for managing credit  risk,
its  exposures  and its credit and other reserves,  TXU  Europe
does  not anticipate a material adverse effect on its financial
position  or  its  results of operations as a  result  of  non-
performance by any counterparty.

                                        14
<page>

INDEPENDENT ACCOUNTANTS' REPORT



TXU Europe Limited:

We   have  reviewed  the  accompanying  condensed  consolidated
balance  sheet  of  TXU  Europe Limited and  subsidiaries  (TXU
Europe)  as  of  September 30, 2001, and the related  condensed
statements of consolidated income and comprehensive income  for
the three-month and nine-month periods ended September 30, 2001
and  2000  and  the  condensed statements of consolidated  cash
flows  for the nine-month period ended September 30,  2001  and
2000. These financial statements are the responsibility of  TXU
Europe's management.

We   conducted   our  review  in  accordance   with   standards
established  by  the  American Institute  of  Certified  Public
Accountants.    A  review  of  interim  financial   information
consists  principally  of  applying  analytical  procedures  to
financial data and making inquiries of persons responsible  for
financial and accounting matters.  It is substantially less  in
scope  than  an  audit  in accordance with  auditing  standards
generally  accepted  in  the  United  States  of  America,  the
objective  of  which is the expression of an opinion  regarding
the financial statements taken as a whole.  Accordingly, we  do
not express such an opinion.

Based  on  our  review,  we  are  not  aware  of  any  material
modifications   that   should  be  made   to   such   condensed
consolidated financial statements for them to be in  conformity
with  accounting principles generally accepted  in  the  United
States of America.

We   have  previously  audited,  in  accordance  with  auditing
standards  generally accepted in the United States of  America,
the consolidated balance sheet of TXU Europe as of December 31,
2000,  and  the  related  consolidated  statements  of  income,
comprehensive income, cash flows and shareholder's  equity  for
the  year then ended (not presented herein); and in our  report
dated February 1, 2001, we expressed an unqualified opinion  on
those  consolidated financial statements.  In our opinion,  the
information   set   forth   in   the   accompanying   condensed
consolidated  balance sheet as of December 31, 2000  is  fairly
stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.




DELOITTE & TOUCHE
London, England
October 24, 2001

                                        15
<page>

                  TXU Europe Limited
 Item 2. Management's Discussion and Analysis of Financial
         Condition and Results of Operations

BUSINESS, ACQUISITIONS AND DISPOSITIONS

   TXU  Europe  Limited  (TXU Europe) is an  indirect,  wholly-
owned  subsidiary of TXU Corp., a Texas corporation.  TXU Corp.
is  a  global energy services company that engages in  electric
and  natural  gas  services, electricity  generation,  merchant
energy    trading,    energy   marketing,   energy    delivery,
telecommunications,   and   other   energy-related    services,
primarily in the United States (US), Europe and Australia.  TXU
Europe is a holding company for TXU Corp.'s United Kingdom (UK)
and  other  European  operations. Almost all  of  TXU  Europe's
operating  income is derived from, and consolidated assets  are
held by, TXU Europe Group plc (TXU Europe Group) and TXU Europe
Group's subsidiaries.

   As  of  October  1,  2001, TXU Europe  has  reorganized  its
ownership  interests  within the UK to  meet  requirements  for
separate   legal   ownership  and  licensing   of   electricity
distribution  and  retail activities.  The  retail  electricity
supply   business  of  Eastern  Electricity  Limited   (Eastern
Electricity - formerly Eastern Electricity plc) was transferred
to TXU UK Limited (TXU UK - formerly called Eastern Natural Gas
(Retail)  Limited).   At the same time the business  of  Norweb
Energi,  which was acquired by TXU Europe in August  2000,  was
also  transferred to TXU UK, which is now the  retail  gas  and
electric   supplier   for  TXU  Europe.   Eastern   Electricity
continues to operate the distribution business of TXU Europe.

   In  January  2001, TXU Europe completed the  acquisition  of
51% of Stadtwerke Kiel AG (Kiel AG) for pounds 145 million. The
acquisition of Kiel AG was accounted for as a purchase business
combination.  The process of determining the fair value of  the
assets and liabilities of Kiel AG continues but is expected  to
be completed in the fourth quarter of 2001. TXU Europe's latest
estimate  of  goodwill is pounds 107 million,  which  is  being
amortized  over  40  years. This amount is subject  to  further
revision as additional information on the fair value of  assets
acquired and liabilities assumed becomes available. The results
of  operations  of  Kiel AG are reflected in  the  consolidated
financial statements from the January 8, 2001 acquisition date.

   In  May  2001, TXU Europe acquired all of the share  capital
of  Ares  Energie  GmbH (Ares), based in Berlin,  Germany,  for
approximately 24 million Deutsche Marks (pounds 8 million). The
acquisition  of  Ares was accounted for as a purchase  business
combination.  The process of determining the fair value of  the
assets and liabilities of Ares continues but is expected to  be
completed within one year of the acquisition date. Ares  is  an
electricity  retailer  that  offers  energy  services  to  both
business and residential customers throughout Germany.

   In  January  2001, TXU Europe entered into a  commitment  to
sell  its  19.2% interest in Hidroelectrica del Cantabrico,  SA
(Hidrocantabrico)  to  a  consortium led  by  Electricidade  de
Portugal  S.A.,  a  Portuguese  utility  company,  and  Spanish
savings bank Caja de Ahorro de Asturias for euros 24 per share.
TXU  Europe waived the pre-emption rights it had over  4.9%  of
the   stock   in   Hidrocantabrico  held   by   Electrabel   SA
(Electrabel),  an  electricity company in  Belgium.   In  April
2001,  TXU Europe received net proceeds from the sale of  euros
522 million (pounds 325 million) and recorded a pre-tax gain of
pounds  50  million in Other Income (Loss)  -  Net  (pounds  35
million after-tax).

   In  February  2001, TXU Europe finalized  the  sale  of  its
interest  in  the North Sea gas fields for pounds 138  million.
From  the  date  of the sale through September  30,  2001,  TXU
Europe  has  received net cash proceeds of pounds  106  million
after settlement of certain outstanding issues, and recorded  a
net pre-tax gain of  pounds 7 million in Other Income (Loss)  -
Net (pounds 5 million after-tax).  At the time of the sale, TXU
Europe  entered  into  a  forward sell contract  to  match  the
outstanding  forward purchase contracts on the  Johnston  field
portion of the North Sea assets.

   On  July  12,  2001, TXU Europe completed the  sale  of  its
1,000 MW Rugeley coal-fired generating station to International
Power  for  pounds 200 million.  Cash received at  closing  was
pounds  67  million with the remaining cash proceeds  from  the
sale to be received in January 2002.  TXU Europe has received a
letter of credit to secure the remaining cash proceeds.
The tax loss on the sale was pounds 24 million and is reflected
as a component of Operating Income.

                               16
<page>
   On  October  19,  2001,  TXU Europe completed  the  transfer
through  a  series  of  leasing arrangements,  of  its  380  MW
Peterborough  and  325  MW  King's  Lynn  gas-fired  generating
stations  to Centrica through a series of leasing arrangements.
TXU  Europe previously had a capital lease interest in each  of
the  plants.   The proceeds from the transfer were  pounds  173
million.    In  addition,  TXU  Europe  retained  certain   tax
benefits.  TXU Europe recorded a loss before tax in respect  of
these  transfers  of  pounds  140  million  and  this  loss  is
reflected as a component of Operating Income.

   The  restructuring  of  the generating portfolio,  including
the sale of Rugeley and the transfer of Peterborough and King's
Lynn  generating  stations, resulted in a net  tax  benefit  of
pounds 146 million in the third quarter. This results from  the
retention  of certain tax benefits related to the stations  and
reversal of previously established deferred taxes.

   The  sale  and the transfer followed TXU Europe's review  of
its  energy  portfolio  and  in particular  its  UK  generating
portfolio that was announced last year and is in line with  its
flexible portfolio management strategy. Under its single energy
business  concept, TXU Europe allocates risk capital so  as  to
maximize  returns across each of its markets.  TXU  Europe  may
dispose  of  certain assets to allow redeployment of  resources
into  faster  growing  opportunities.  As  a  consequence,  the
composition of assets and operations in each market within  the
portfolio  changes  from time to time. TXU  Europe  continually
reviews its energy portfolio within each of its markets.


RESULTS OF OPERATIONS

   Results  for  the  three and nine-month  periods  presented
herein  are not necessarily indicative of expectations  for  a
full   year's   operations   because   of   acquisitions   and
dispositions, seasonal and other factors, including variations
in  maintenance  and  other  operating  expense  patterns.  No
significant changes or events that might affect the  financial
condition  of TXU Europe have occurred subsequent to  year-end
other  than  as  disclosed in other reports of TXU  Europe  or
included herein.

Three Months Ended September 30, 2001 Compared to 2000

   Revenues  were  pounds 2.0 billion for the three  months  in
2001 compared with  pounds 1.0 billion for the three months  in
2000.   The  increase  in  operating  revenues  resulted   from
increased merchant energy trading activity, particularly in the
UK,  which was favorably impacted by the implementation of NETA
beginning  in  late March, 2001, and by the  inclusion  of  the
results of Norweb Energi and Kiel AG since their acquisition on
August 3, 2000 and January 8, 2001, respectively.

   Energy purchased for resale and fuel consumed for the  three
months ended September 30, 2001 was pounds 1.6 billion compared
with  pounds 740 million for the same period in 2000, primarily
as a result of the increase in merchant energy trading activity
together  with  the impact of Norweb Energi and Kiel  AG  since
their acquisition. Other operating expenses were higher in  the
2001  period  compared  with the three month  period  of  2000,
mainly due to the inclusion of Norweb Energi and Kiel AG.

   During  the three months ended September 30, 2001 and  2000,
TXU  Europe recorded restructuring charges and other  costs  of
approximately  pounds  17 million pre-tax  (pounds  12  million
after-tax)  and  pounds 10 million pre-tax  (pounds  7  million
after-tax),  respectively.  Most of these  costs  consisted  of
asset writedowns and other exit and redundancy costs (severance
benefits paid to staff under voluntary retirement programs  and
related  pension benefits), primarily a result  of  contracting
TXU Europe's customer service operations to Vertex Data Science
Limited, the creation of the 24seven joint venture and  certain
other staff reorganizations.

   TXU  Europe  had  a  loss  before  interest,  income  taxes,
distributions and minority interest (income before interest) of
pounds 91 million for the three months ended September 30, 2001

                                17
<page>
compared  with income before interest of pounds 93 million  for
the  same  period  in  2000.  The loss for the  current  period
resulted  from the pre-tax effects of the sale and the transfer
of generating stations during the quarter, totalling pounds 164
million.  Before  these items and the effect  of  restructuring
costs,  income before interest was pounds 90 million,  compared
with pounds 103 million for the same period in 2000.

   Net   interest  expense  (interest  expense  less   interest
income)  for  the  three months ended September  30,  2001  was
pounds 80 million compared with pounds 85 million for the  same
period in 2000, primarily due to lower levels of borrowings  as
a  result  of  certain  debt repayments made  during  the  2001
quarter  and  to accelerated amortization of debt  issue  costs
following  the early repayment of the rent factoring  loans  in
January 2001.

   Total   income  tax  benefit  for  the  three  months  ended
September  30,  2001 was pounds 153 million  compared  with  an
expense  of pounds 5 million for the same period in 2000.   The
effective  tax rate in 2001 was affected by credits related  to
the  restructuring of the UK generating station portfolio.  The
credits  arise from the retention of tax basis in the  transfer
and the reversal of certain tax liabilities no longer required.
The  tax effects associated with the sale and the transfer  and
the  restructuring  of  the  UK  generating  station  portfolio
totaled pounds 146 million. The effective tax rate in 2000  was
affected by non-deductible items related to a capital lease and
non-deductible   expenses  related   to   the   investment   in
Hidrocantabrico.

   Net  loss for the three months ended September 30, 2001  was
pounds  24 million compared with a net loss of pounds 2 million
for  the  same  period in 2000.  The net  loss  for  the  third
quarter of 2001 primarily reflects the loss on the sale and the
transfer of three generating stations.

Nine Months Ended September 30, 2001 Compared to 2000

   Operating revenues of pounds 6.2 billion for the first  nine
months of 2001 increased over 100% compared with the pounds 3.0
billion  for  the first nine months of 2000.  The  increase  in
revenues  resulted  primarily from  increased  merchant  energy
trading  activity  and the inclusion of the results  of  Norweb
Energi  and  Kiel  AG  since their acquisition.  These  revenue
increases  were partially offset by decreased revenues  in  the
networks segment resulting from price reductions following  the
April  1,  2000  OFGEM distribution price review.   Within  the
Energy  segment, in addition to the effect of the inclusion  of
Norweb  Energi  and Kiel AG, higher and more  volatile  UK  gas
prices  offered  more  favorable arbitrage  opportunities  than
prices in the same period in 2000.

   During  the nine months ended September 30, 2001  and  2000,
TXU  Europe recorded restructuring charges and other  costs  of
pounds  46  million  and pounds 66 million pre-tax  (pounds  32
million   and   pounds  48  million  after-tax),  respectively.
Included  in the costs for 2000 was pounds 7 million  of  costs
associated  with  the  offer for Hidrocantabrico,  recorded  in
Other  Income  -  Net.   The majority of  the  remaining  costs
consisted  of asset writedowns and other exit costs  (primarily
facility   closing  costs)  and  redundancy  costs   (severance
benefits paid to staff under voluntary retirement programs  and
related pension benefits), primarily as a result of contracting
TXU Europe's customer service operations to Vertex Data Science
Limited, the creation of the 24seven joint venture and  certain
other staff reorganizations.

   Energy  purchased for resale and fuel consumed for the  nine
months ended September 30, 2001 was pounds 5.0 billion compared
with  pounds 2.1 billion for the same period in 2000, primarily
as a result of the increase in merchant energy trading activity
together  with  the impact of Norweb Energi and Kiel  AG  since
their acquisition. Other operating expenses for the nine months
ended  September  30, 2001were higher compared  with  the  same
period  in  2000, mainly due to the inclusion of Norweb  Energi
and Kiel AG.

   Net  interest  expense for the nine months  ended  September
30,  2001  was  pounds  256 million compared  with  pounds  233
million  for the same period in 2000, primarily due  to  higher
borrowing levels as a result of financing the Norweb Energi and
Kiel  AG  acquisitions and to accelerated amortization of  debt
issue costs following the early repayment of the rent factoring
debt in January 2001.
                                18
<page>
   Income  before interest was pounds 263 million for the  nine
months  ended  September  30, 2001  compared  with  pounds  375
million  for  the  same  period in 2000.   The  current  period
results  include  the  pre-tax effects  of  the  sale  and  the
transfer  of generating stations during the quarter,  totalling
pounds  164  million.   These losses were  offset  by  the  tax
effects  associated with the transfer and the restructuring  of
the  UK generating station portfolio, which totalled pounds 146
million.   Before  these items and the effect of  restructuring
costs,  income before interest was pounds 473 million, compared
with pounds 441 million (before restructuring charges) for  the
same period in 2000.

   Total   income  tax  benefit  for  the  nine  months   ended
September  30,  2001  was pounds 80 million  compared  with  an
expense  of pounds 57 million for the same period in 2000.  The
change  was  due  primarily  to the items  discussed  above  in
explaining  the tax benefit in the third quarter of this  year.
The  effective  tax rate in both periods is  also  affected  by
amortization   of  goodwill  and  other  non-deductible   items
primarily related to a capital lease.

   Minority  interest in the nine-month period ended  September
30,  2001, has increased in comparison with the same period  in
2000,  primarily  as  a result of including  the  49%  minority
ownership in Kiel AG.

   Net  income for the nine months ended September 30, 2001 was
pounds 59 million compared with pounds 76 million for the  same
period  in 2000. Included in net income for the 2000 period  is
pounds  7  million (net of deferred taxes of pounds 3  million)
for the cumulative effect on periods prior to December 31, 1999
of  a  change in the method of depreciating distribution system
assets  from  an accelerated method to a straight line  method.
The  decrease in net income for 2001 reflects a change  to  the
timing  of  income following the acquisition of Norweb  Energi,
the  effect  of lower network revenue in the first  quarter  of
2001 following a rate reduction from April 2000 and the loss on
the sale and the transfer of generating stations in the current
period.   Offsetting these factors has been a continued  strong
performance in merchant energy trading activities across Europe
and  a  gain from the sale of Hidrocantabrico as well as  lower
restructuring costs. After adjusting for restructuring costs in
both  periods,  net  income in the 2001 period  was  pounds  91
million compared with pounds 124 million for the 2000 period.

   See  Note  7  to  Financial Statements  for  information  on
revenues and income before interest by operating segment.


                                    19
<page>
<table>
<caption>
OPERATING STATISTICS

                          Three Months Ended  Nine Months Ended
                            September 30,       September 30,
                          __________________  __________________
                             2001      2000      2001     2000
                          ________  ________  ________  ________

                       <c>       <c>       <c>       <c>

PHYSICAL SALES VOLUMES
Electricity (gigawatt-
 hours) - (GWh):
Industrial and
 commercial                  7,729     5,350    20,457    12,541
Residential                  3,998     3,950    15,767    10,923
                          --------  --------  --------  --------
Total electricity           11,727     9,300    36,224    23,464
                          ========  ========  ========  ========

Gas (billion cubic feet)
 - (Bcf):
Industrial and
 commercial                      8         8        42        40
Residential                      8         7        67        35
                          --------  --------  --------  --------
Total gas                       16        15       109        75
                          ========  ========  ========  ========

Wholesale energy sales :
 Electricity (GWh) *        34,989    26,887   110,344    77,023
                          ========  ========  ========  ========
 Gas (Bcf)                     431       316     1,155       777
                          ========  ========  ========  ========
Electricity units
 distributed (GWh)           7,083     7,274    24,391    24,099
                          ========  ========  ========  ========

CUSTOMERS (end of period
 & in thousands)
 Electricity (retail)        4,329     4,421
 Gas                         1,242     1,114


<fn>
  *  Wholesale electricity sales for 2000 have been revised to
  conform to the current period classification of physical volumes.
</fn>
</table>

Results by Segment

   Energy - TXU Europe's energy business segment is managed  on
a  geographical  basis  - in the UK and in  continental  Europe
which  comprises  the  Central European,  Nordic,  Iberian  and
German operations.

   UK  - Revenues for the three months ended September 30, 2001
were pounds 1.6 billion compared to pounds 891 million for  the
three  months ended September 30, 2000. The increase  primarily
reflects  the  significant increase in merchant energy  trading
activity, primarily an indirect result of the implementation of
NETA in the UK.

   Loss  before  interest for the three months ended  September
30,  2001  was  pounds  94 million compared  to  income  before
interest of pounds 29 million for the same period in 2000.  The
decrease results from losses of pounds 164 million incurred  on
the  sale and the transfer of three generating stations  (noted
above)  and  an increase of pounds 15 million of reorganization
costs.  Excluding  the loss on the generating  plant  sale  and
transfers and the effect of reorganization costs, income before
interest was pounds 56 million higher for the 2001 period  than

                               20
<page>
the  same  period in 2000.  This reflects a strong contribution
from  merchant energy trading (pounds 70 million more than  the
2000  period) where activity has increased due to more volatile
gas  prices.  This  was  partially offset  by  an  increase  in
operating  costs associated with Norweb Energi and an  increase
in  the  sales and marketing activity during the  period.   The
reorganization  costs  incurred during  the  2001  period  have
related   mainly   to  the  outsourcing  of  customer   service
operations.

   Revenues  for the nine months ended September 30, 2001  were
pounds 5.1 billion compared to pounds 2.6 billion for the  nine
months  ended  September 30, 2000. The  increase  is  primarily
associated  with  the significant increase in  merchant  energy
trading  activity.  The balance reflects the inclusion  of  the
results   from   Norweb  Energi  (pounds  482  million)   since
acquisition in August 2000.

   Income  before interest for the nine months ended  September
30,  2001 was pounds 118 million compared to pounds 189 million
for  the  period ended September 30, 2000. The decrease results
from losses of pounds 164 million incurred on the sale and  the
transfer  of  three  generating stations  and  an  increase  in
reorganization  costs  of pounds 21 million.   Excluding  these
items,  the  underlying income before interest was  pounds  114
million  higher than for the same period in 2000.  The increase
in  underlying  income over the 2000 period includes  increased
margins  from  gas trading and the inclusion of  Norweb,  which
together  total  pounds 180 million, offset by an  increase  in
operating  costs of pounds 71 million.  The margin  improvement
is a consequence of increased merchant energy trading activity,
taking advantage of higher and more volatile gas prices in  the
2001  period over the same period in 2000 (pounds 132  million)
and  increased margin from the electricity business (pounds  48
million).   The  increase  in  operating  costs  reflects   the
inclusion  of Norweb Energi as well as marketing costs  arising
from  the  re-branding of the retail business  under  a  single
brand umbrella (TXU Energi).

   Continental  Europe  - Revenues for the three  months  ended
September  30, 2001 were pounds 360 million compared to  pounds
82  million for the same period in 2000.  Part of the  increase
is  due to the inclusion of Kiel AG (pounds 41million), and the
balance  is  due  to  the increase in merchant  energy  trading
activity  in  continental European markets,  primarily  through
continuing portfolio-driven improvements in the Nordic  region.
This  merchant  energy trading activity has increased  steadily
from  the  relatively  low volumes in the  three  months  ended
September 30, 2000.

   Loss  before  interest for the three months ended  September
30,  2001  was  pounds  13 million compared  to  income  before
interest of pounds 19 million for the same period in 2000. This
decrease  reflects  the  mark-to-market accounting  for  energy
contracts  in  the  period  which were  adversely  affected  by
falling prices in both the Nordic region and Central Europe.

   Revenues  for the nine months ended September 30, 2001  were
pounds 1.0 billion compared to pounds 201 million for the  nine
months ended September 30, 2000. The increase is partly due  to
the  inclusion of Kiel AG (pounds 148 million). The balance  of
the  increase  is due to the significant increase  in  merchant
energy  trading  activity in the Central  European  and  Nordic
markets.

   Income  before interest for the nine months ended  September
30,  2001  was pounds 70 million compared to pounds 25  million
for  the  nine-month  period  ended  September  30,  2000.  The
increase  reflects  the gain on the sale of the  investment  in
Hidrocantabrico (pounds 50 million) and Kiel AG results (pounds
17  million) offset by a decrease in income before interest  in
Nordic and Central Europe (pounds 21 million).


   Networks  -  Revenues for the three months  ended  September
30,  2001 were pounds 74 million compared to pounds 81  million
for  the  same period in 2000. The reduction is due to  adverse
movements in the mix of volumes distributed at different tariff
rates.

   Income  before interest for the three months ended September
30,  2001  was pounds 23 million compared to pounds 22  million
for  the  same  period  in 2000. The increase  results  from  a
reduction  in  operating  expenses.   Operating  cost   savings

                                 21
<page>
reflect  the  on-going cost savings and operating  efficiencies
resulting  from  the operation of the electricity  distribution
system by its 50% owned 24seven joint venture.

   Revenues  for the nine months ended September 30, 2001  were
pounds 235 million compared to pounds 282 million for the  nine
months  ended September 30, 2000. The reduction is largely  due
to the impact of the OFGEM Distribution Price Review (pounds 29
million)  which was effective as of April 1, 2000  as  well  as
adverse  movements  in  the  mix  of  volumes  distributed   at
different tariff rates.

   Income  before interest for the nine months ended  September
30,  2001 was pounds 87 million compared to pounds 115  million
for the period ended September 30, 2000. The decrease is due to
the reduced revenues, as discussed above, offset by a reduction
in operating expenses resulting from the 24seven joint venture.

   Other  -  Loss  before interest for the three  months  ended
September  30,  2001  was pounds 5 million compared  to  income
before  interest of pounds 24 million for the  same  period  in
2000.   Income  before  interest  for  the  nine  months  ended
September  30, 2001 was pounds 7 million compared to pounds  55
million  for  the same period in 2000. Included in the  results
for  2001  is  the pre-tax gain on the sale of  the  North  Sea
upstream gas business (pounds 7 million) while the 2000  period
includes  the  pre-tax  gain from the  sales  of  the  metering
business  and  the interest in Severomovavska  energetika  a.s.
totaling pounds 50 million.


Comprehensive Income

   The  unrealized holding gains on investments  are  primarily
related  to market changes in the value of the 19.2% investment
in  Hidrocantabrico, which were realized into earnings with the
sale of the investment in the second quarter of 2001.

   The  implementation  of  Statement of  Financial  Accounting
Standards (SFAS) No. 133 "Accounting for Derivative Instruments
and   Hedging  Activities"  resulted  in  a  cumulative  effect
reduction   of   pounds  72  million  net  of  tax   in   Other
Comprehensive Income as of January 1, 2001.

   The   implementation  of  SFAS  No.  133  has  not  affected
reported   operating   results  of  merchant   energy   trading
activities. The merchant energy trading businesses  in  the  UK
and  continental Europe have used mark-to-market accounting for
their   trading  activities,  consistent  with   the   required
accounting under SFAS No. 133 for trading transactions that are
derivatives.   However, as a result of SFAS No. 133,  contracts
that  no  longer  meet the normal purchase exception  effective
July 1, 2001 are marked-to-market.

   TXU  Europe has historically used, and will continue to use,
other  derivatives  to offset future cash  flow  volatility  in
interest rates, currency exchange rates and energy commodities,
essentially   converting   variable   arrangements   to   fixed
arrangements.  The fair value of derivatives that are effective
as  cash-flow  hedges  are  recorded as  derivative  assets  or
liabilities  with  an  offset  in Other  Comprehensive  Income.
Accordingly, the principal impact of SFAS No. 133 has  been  on
the balance sheet.

   The  balance  sheet  value  of these  derivative  assets  or
liabilities  can change significantly from quarter  to  quarter
based  on  changes  in market expectations of economic  events,
such as movements in foreign exchange rates, the recent drop in
interest  rates and changes in actual and expected natural  gas
and  electricity  prices.  The fair value of  these  cash-flow-
hedge  derivatives is determined each quarter based  on  actual
and  forecasted  interest rates, currency rates  and  commodity
prices.  Consistent with the above, the effect  of  changes  in
fair  value  of effective hedges is reflected in the derivative
asset or liability and in Other Comprehensive Income.

                                22
<page>

   The  amounts  included  within  Other  Comprehensive  Income
reflect  the  value of the cash-flow hedges  based  on  current
market conditions and therefore the amount for which the  hedge
will  be  used in the future to offset the impact  of  expected
changes  in variable prices.   Consistent with hedge accounting
prior  to  SFAS No. 133, the effects of the hedged  transaction
will  be  recorded in the statement of income  as  the  related
transaction is actually settled.

   The  disclosure in Note 3 to the Financial Statements of the
amount  of derivative gains and losses "expected to be realized
in  earnings  during  the  next twelve months"  represents  the
projected  value  of  the  hedge over the  next  twelve  months
relative  to  what would be recorded had the hedge  transaction
not  been  entered into.  The amount is not a  forecasted  loss
incremental  to  normal operations, but rather it  demonstrates
the  extent  to  which  volatility  in  earnings  (which  would
otherwise exist) is mitigated through the presence of cash-flow
hedges.

Credit Risk

   See  Note  8  to  Financial Statements  for  information  on
Credit Risk.


LIQUIDITY AND CAPITAL RESOURCES

Nine Months Ended September 30, 2001 and 2000

   For    information   concerning   liquidity   and   capital
resources, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations in TXU  Europe's
2000 Annual Report on Form 10-K (2000 Form 10-K).  Results for
the  three-month and nine-month periods presented  herein  are
not  necessarily indicative of expectations for a full  year's
operations  because  of seasonal and other factors,  including
variations   in   maintenance  and  other  operating   expense
patterns. No significant changes or events which might  affect
the financial condition of TXU Europe have occurred subsequent
to  year-end other than as disclosed in other reports  of  TXU
Europe or included herein.

   Cash  generated  by  operating  activities  was  pounds  140
million  for the nine months ended September 30, 2001  compared
with  pounds  348 million for the same period  in  2000.   Cash
provided  by  operating activities before changes  in  merchant
energy  trading and operating assets and liabilities was pounds
254  million for the 2001 period and pounds 234 million for the
2000  period.  Included in the 2001 amounts were non-cash mark-
to-market gains of pounds 90 million and the net non-cash  pre-
tax  losses  from  the  sale  of generating  plants  and  other
investments of pounds 104 million. Changes in operating  assets
and  liabilities  used pounds 24 million for  the  nine  months
ended  September  30,  2001 but provided  cash  of  pounds  114
million for the same period of 2000.  The lower cash flows from
operating activities is primarily attributable to lower  levels
of  receivables  sold  or collateralized under  the  receivable
securitization program, to reduced cash flows from UK  merchant
energy  trading  operations  and to  a  replenishment  of  coal
inventory at certain generating plants.

   Cash  provided  by  investing  activities  was  pounds   172
million  for the nine months ended September 30, 2001  compared
with  cash  used in investing activities of pounds 514  million
for  the  same period in 2000.  In the 2001 period, TXU  Europe
received  pounds  67  million from  the  sale  of  the  Rugeley
generating  station, pounds 325 million from the  sale  of  its
investment  in  Hidrocantabrico in  Spain,  a  net  pounds  102
million from the sale of the North Sea gas assets and pounds 24
million   from  the  sale  of  other  assets  and  investments.
Capital  expenditures were pounds 171 million in 2001  compared
with  pounds  162  million  in  the  2000  period.   Businesses
acquired  were Kiel AG and Ares for pounds 153 million  in  the
2001  period  and Norweb Energi for pounds 340 million  in  the
2000  period. The acquisition of investments in the 2000 period
was  primarily  for  the  purchase  of  additional  shares   in
Hidrocantabrico.

                                 23
<page>
   Cash  used  for  financing activities for  the  nine  months
ended  September 30, 2001 was pounds 774 million compared  with
cash  provided  of pounds 112 million for the  same  period  of
2000.   For  the  first  nine months of  2001,  long-term  debt
borrowings  were pounds 112 million while repayments  of  long-
term  debt  were pounds 671 million, primarily  for  the  early
repayment  of  the  rent  factoring arrangement  and  scheduled
payments on certain capital leases.  An additional reduction of
pounds 100 million was made in the outstanding balance of  EMTN
Notes  during this period.  For the nine months ended September
30, 2000, borrowings of long-term debt were pounds 724 million,
mainly  to  finance  the  acquisition  of  Norweb  Energi,  and
repayments  were pounds 881 million. There also was  pounds  95
million of Preferred Securities of a subsidiary perpetual trust
issued in March 2000.

Financing Arrangements

   See  Note  5  to  Financial Statements for more  information
concerning  available  sources  of  short-term  and   long-term
financing.

Regulation and Rates

   New  Licensing  Arrangements - Under the  UK  Utilities  Act
2000,  which became effective in April 2001, the concept  of  a
company  holding a "Public Electricity Supply Licence"  (a  PES
company)  was  abolished when the relevant commencement  orders
were  laid  before parliament.  This took place in  October  of
2001.   A  significant feature is that a single entity may  not
have  legal  ownership  of  both  an  electricity  distribution
business  and  an electricity supply business.   In  accordance
with  the  legislation the electricity supply business included
in  Eastern Electricity was transferred to TXU UK leaving  only
the    electricity   distribution   business   within   Eastern
Electricity.  TXU  Europe  does  not  believe  that  these  new
arrangements will have any significant financial impact on  the
consolidated financial statements.

   The  UK  Utilities Act 2000 includes provision for  the  Gas
and Electricity Markets Authority to impose on a license holder
a financial penalty where the license holder has contravened or
is  contravening a condition or requirement, or has  failed  to
achieve  any  standard  of  performance  prescribed  under  the
legislation.   The financial penalties regime is scheduled  for
commencement later this year.  Such penalties will  be  subject
to  a  maximum limit. The current proposal is for  the  maximum
limit to be set at 10% of the revenue of the company, generated
within  Great  Britain,  which is the holder  of  the  relevant
license. In addition, it is currently proposed that the maximum
penalty  at  the rate of 10% should apply to that  revenue  for
each  year in which the breach or failure took place, up  to  a
maximum  of three years.  TXU Europe is not presently aware  of
any   matters   that  would  make  it  subject  to  significant
penalties.

   New  Electricity Trading Arrangements - NETA was implemented
in  the  UK  on  March  27,  2001, replacing  the  Pooling  and
Settlement  Agreement  (the  Pool) arrangements  for  wholesale
electricity trading in England and Wales.  NETA provides  those
companies  wishing to buy and sell electricity the  freedom  to
enter  into directly negotiated contracts instead of having  to
trade  through  the  Pool.  Under the  new  arrangements,  bulk
electricity  is  traded  through a  variety  of  bilateral  and
physical  contracts.   Market  participants  include  not  only
generators  and  suppliers but also  traders,  such  as  energy
wholesalers,    with    physical    positions.     Accordingly,
implementation  of  NETA  has  eliminated  the  Pool.  The  new
arrangements provide mechanisms for near real-time clearing and
settlement  of  differences between  contractual  and  physical
positions  of  those buying, selling, producing  and  consuming
electricity.  A balancing mechanism enables the system operator
(National  Grid  Company) to change levels  of  generation  and
demand  to  near  real-time;  and  a  mechanism  for  imbalance
settlement provides for the settling of the differences between
net physical and net contractual position of parties.

   The  first  six  months of NETA have been  characterized  by
market  participants adapting their operations and  systems  to
accommodate new processes and requirements; furthermore, market
participants  have experienced either charges or  credits  from
the  balancing mechanism.   TXU Europe has had positive results

                                24
<page>
to  date.  The long-term effect of NETA, including how it  will
deal  with higher system demands, will become clearer over  the
coming  winter  months. Forward prices could  be  reduced,  but
volatility  in  the NETA balancing mechanism could  put  upward
pressure on end prices.

   Another  consequence of the introduction  of  NETA  is  that
operators  of combined heat and power (CHP) plants  argue  that
they  have  been disadvantaged because their output is  usually
contracted  to produce heat and they can only sell  the  excess
power  surplus to their onsite needs at prices dictated by  the
balancing  mechanism.  Government  ministers  have  received  a
report  from  OFGEM  on the impact of NETA  on  these  embedded
generators  and are considering the matter.  OFGEM has  advised
that the situation does not require any significant changes  to
NETA principles.


CHANGES IN ACCOUNTING STANDARDS

   New   Accounting  Standards  -  See  Note  2  to   Financial
Statements for a discussion of new accounting standards.


FORWARD-LOOKING STATEMENTS

   This  report  and  other presentations made  by  TXU  Europe
contain  forward-looking  statements  within  the  meaning   of
Section 21E of the Securities Exchange Act of 1934, as amended.
Although  TXU Europe believes that in making any such statement
its  expectations are based on reasonable assumptions, any such
statement  involves  uncertainties  and  is  qualified  in  its
entirety  by  reference to factors contained  in  the  Forward-
Looking  Statements section of Item 7. Management's  Discussion
and  Analysis of Financial Condition and Results of  Operations
in  the  TXU Europe 2000 Form 10-K as well as general  economic
and  business conditions in the UK and in the service area  for
Eastern  Electricity  which  has been  opened  to  competition;
unanticipated changes in interest rates, in rates of inflation,
or   in   foreign   exchange  rates;  prevailing  governmental,
statutory,   regulatory   or   administrative   policies    and
initiatives affecting TXU Europe, its subsidiaries or the UK or
European  electric and gas utility industries; general industry
trends;   regulation  issues;  power  costs  and  availability;
changes  in  business  strategy, development  plans  or  vendor
relationships; availability of qualified personnel; changes in,
or  the  failure  or  inability to  comply  with,  governmental
regulations,   including,  without  limitation,   environmental
regulations;  changes  in  tax laws;  and  access  to  adequate
transmission facilities to meet changing demands, among others,
that  could  cause the actual results of TXU Europe  to  differ
materially   from   those  projected  in  such  forward-looking
statements.

   Any forward-looking statement speaks only as of the date  on
which such statement is made, and TXU Europe does not undertake
any  obligation  to  update  any forward-looking  statement  to
reflect  events or circumstances after the date on  which  such
statement is made or to reflect the occurrence of unanticipated
events.   New factors emerge from time to time, and it  is  not
possible for TXU Europe to predict all of such factors, nor can
it assess the impact of each such factor or the extent to which
any  factor,  or combination of factors, may cause  results  to
differ  materially from those contained in any  forward-looking
statement.



                                 25
<page>


Item  3.  Quantitative and Qualitative Disclosures About Market
Risk

   The  information  required hereunder  is  not  significantly
different  from  the  information as  set  forth  in  Item  7A.
Quantitative  and  Qualitative Disclosures  About  Market  Risk
included in the TXU Europe 2000 Form 10-K and is therefore  not
presented  herein. Changes in the fair value  of  TXU  Europe's
cash flow hedges for foreign currency, interest rate and energy
related  derivative contracts that were discussed  in  the  TXU
Europe  2000  Form 10-K, are recorded as a component  of  Other
Comprehensive Income as a result of implementation of SFAS  No.
133.   Other than as described therein, since December 31, 2000
there  has been no significant change in the contractual  terms
and  notional amounts of such derivatives as disclosed  in  the
TXU Europe 2000 Form 10-K.



PART II.  OTHER INFORMATION

Item 1.      Legal Proceedings

     In  August  2000,  the  Spanish  Stock  Market  Commission
announced  it  was opening an investigation as to  whether  TXU
Europe and Electrabel acted in concert over share purchases  of
Hidrocantabrico in order to avoid making a formal takeover bid.
TXU  Europe and TXU Corp. have always maintained that there was
no   violation  of  Spanish  securities  laws  and  have  fully
cooperated  with  the investigation.  The  Commission  has  now
concluded  its  investigation and has formally determined  that
neither TXU Europe nor TXU Corp. has committed any offense  and
all allegations have been withdrawn.

   For  a  discussion  of other legal matters  that  have  been
settled  since  December  30, 2000,  refer  to  Item  1.  Legal
Proceedings  included  in  the TXU Europe  Form  10-Q  for  the
Quarter Ended June 30, 2001.

Item 6.      Exhibits and Reports On Form 8-K


 (a) Exhibits filed as a part of Part II are:

     None

 (b) Reports  on Form 8-K filed since June 30 2001,  are  as
     follows:

     None


                                    26
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                           SIGNATURES


   Pursuant  to  the requirements of the Securities Exchange  Act
of  1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.





                                        TXU EUROPE LIMITED


                                       By  /s/ Henry Birt
                                          -----------------------
                                             Henry Birt
                                       Principal Financial Officer



                                       By  /s/  Henry Davies
                                          ------------------------
                                             Henry Davies
                                       Principal Accounting Officer




Date:  November 12, 2001

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