In the News: Recent Developments

May 28, 2004

TXU Sells $790 Million of AAA Bonds With State’s Guarantee

By Darrell Preston

TXU Corp., the largest power supplier in Texas, sold $790 million of bonds with top credit ratings at yields up to 5.34 percent for debt backed by a state promise to set power rates high enough to ensure repayment.

TXU’s AAA-rated bonds sold today at yields of 3.528 percent in the three-year maturity, 4.832 percent over seven year and 5.34 percent in the 10.4-year maturity, according to Merrill Lynch & Co. Merrill and Wachovia Securities managed the sale.

TXU will use the proceeds to pay down part of its $12.7 billion in debt, compensating the company for a 1999 change in the law that introduced competition to the electricity market.

Today’s sale came at rates 47 basis points over the three-year Treasury, 62 basis points over the seven-year Treasury and 66 basis points over the 10-year Treasury.

The yields were lower compared with the London Interbank Offered Rate, or Libor, than previous similar sales, said Joseph Fichera, chief executive of New York-based Saber Partners, adviser to the Public Utility Commission of Texas. Yields on the three-year term were three basis points over Libor, the seven-year term were 11 basis points over Libor and the 10.4-year term were 14 basis points over Libor

Last August, TXU sold $500 million of similar debt that was seven basis points over Libor in the two-year term, 16 basis points over Libor in the eight-year term and 19 basis points over Libor in the 10-year term.

TXU’s bonds were be sold through a subsidiary, TXU Electric Delivery Transition Bond Co. Oncor Electric Delivery Co., which is changing its name to TXU Electric Delivery Co. this week, runs the wires and other equipment that distributes power to customers and will collect the fee to repay debt. The Texas Public Utility Commission has promised to raise rates on 2.9 million electric customers enough to repay the debt.

Shares of TXU have risen more than 83 percent in the past year to close at $37.37 in New York Stock Exchange trading.

–Editor: Pittman

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