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$69.24 0.00 (0.00%)
10/10/2007 4:00 PM

TXU Corp (TXU)

CAPS Rating:
****

The Company is an holding energy company that manages a competitive and regulated energy businesses in Texas. It operates principally through its TXU Energy Company, TXU Electric Delivery and TXU DevCo subsidiaries.

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Avatar NetscribeEnergy (98.94) Submitted: 12/22/06 9:24 AM : Outperform Start Price: $52.97 TXU Score: 40.20

TXU Corp. (TXU) manages a portfolio of regulated and non-regulated energy businesses in North America with a focus area being Texas. It believes in renewable sources of energy and is the largest purchaser of the wind generated electricity in Texas. Further, it operates the largest electricity distribution and transmission system in Texas.

To meet the growing demand in the region, TXU is moving ahead with its ‘Power the Future of Texas’ program and is heavily investing to ensure greater supply of power at low cost. Starting 2007, the Texas retail energy market will be unregulated. The natural gas prices are used as a benchmark commodity for arriving at the electricity rates in Texas. The company will benefit from its low cost nuclear and coal fired generation fleet, which contributes 43% of the total electricity produced. With natural gas pricing expected to rise in the future the company will be in a favourable position, which will directly give a boost to its top-line.

However, the company’s plans of not changing the prices charged to its customers even in the event of a fall in the natural gas prices sound a bit skeptical. This strategy could result in higher customer churn rates sharply affecting the revenues. Further, TXU’s gas plants are among the oldest and most inefficient in the state. This has increased its reliance on third party vendors for meeting supply needs, which are not met by TXU’s nuclear and coal-fired plants. This could have a negative effect on its earnings. However, the company’s new expansion projects, which could eventually start production after a decade, and its growth-oriented strategies, will take its stock price a long way.


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Avatar NetscribeETF (97.94) Submitted: 4/17/07 8:30 AM

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The race to acquire TXU is almost over. The company on its April 16, 2007 deadline didn’t received any second bid and as a result it brings Kohlberg Kravis Roberts & Co. and Texas Pacific Group one step closer to clinch the company for $45 billion or $69.25 per share. However, the deal still requires the blessing of federal regulators, and is subject to a shareholder vote. The company expects the deal to close in the second half of the year.

In April 2007, the Texas House of Representatives approved a bill that would require electric utilities to have no more than an arm's-length relationship with unregulated affiliates and will also give the Texas Public Utility Commission access to records pertaining to all of a utility's transactions with affiliates. In addition, an amendment was passed to mandate a 15% electric-rate reduction for residential customers who are still paying the rate charged by monopolies companies by Jan. 1, 2008. However, the bill is not expected to affect the company, as the planned acquisition translates fundamental strength.

TXU reported 33.4% and 49.1% Y-o-Y increase in net income to $475.0 million and $2,552 million, respectively for the fourth quarter and full-year 2006. Currently, TXU is trading at $65.38 dollars or 5.9% below the bid price of $69.25, which can give the investors healthy returns, making TXU Corp. a good opportunity.

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