TXU
ANNOUNCES FIRST PHASE OF RESTRUCTURING TRANSACTIONS
TOTALING $8 BILLION
ACTIONS GEARED TO UNLOCK
VALUE AND REDUCE RISK
---------
RAISES 2004 EARNINGS GUIDANCE
April 26, 2004—Dallas,
Texas, TXU Corp. (NYSE: TXU)
today announced a series of transactions totaling
approximately $8 billion: the sale of TXU Australia,
the sale of TXU Fuel, its intent to sell TXU Gas
and the repurchase of TXU Energy’s Exchangeable
Preferred Membership Interests. Additionally, TXU
announced expected 2004 results of its 4+4 business
improvement program. TXU should realize value and
reduced risks from these transactions and initiatives,
including an enhanced earnings outlook, reduced
debt level, reduced debt to total capital and increased
interest coverage ratio.
Based on the strong first quarter
and assuming the successful completion of these
transactions, TXU estimates that operational earnings
for full year 2004 will range between $2.45 and
$2.55 per share, up from prior guidance of $2.15
per share. Income from continuing operations is
projected to be $1.74 to $1.84 per share of common
stock. TXU also announced today that first quarter
2004 operational earnings, scheduled for release
on May 6, are expected to be at least $0.60 per
diluted share. Income from continuing operations
for the first quarter is expected to be $0.59 per
share of common stock.
C. John Wilder, TXU’s Chief
Executive Officer, said, “Today’s announcements
represent a good first step to unlock value and
reduce risks. We look forward to describing our
entire plan during the May 18th Investor Conference.”
Phase 1 of the restructuring of
TXU’s businesses includes the following divestments,investments
and improvements.
Divestments
Sale
of TXU Australia
The largest transaction involves the sale of TXU
Australia to Singapore Power for an enterprise value
of $3.72 billion. This results in a reduction of
$1.7 billion in consolidated TXU debt and proceeds
to TXU of approximately $1.8 billion after taxes
and transaction costs. The transaction is to be
cleared by the Australian Competition and Consumer
Commission. The sale is expected to close in the
third quarter. The pre-tax gain related to the sale
is expected to be approximately $375 million. TXU
was advised on the transaction by Credit Suisse
First Boston LLC and Black River Capital,
LLC.
Sale
of TXU Fuel
TXU has agreed to sell the assets of TXU Fuel Company,
the gas transportation subsidiary of TXU Energy
with approximately 1,900 miles of intrastate pipeline
and a total system capacity of 1.3 Bcf/day, to Energy
Transfer Partners, L.P. for $502 million. As part
of the transaction, TXU Energy will have an eight
year transportation agreement with the new owner
to transport gas to TXU Energy’s generating
assets. The transaction is expected to close on
June 1, 2004, subject to review under the federal
Hart-Scott-Rodino Act. The pre-tax gain related
to the sale is expected to be approximately $390
million, which will be recognized over eight years.
TXU was advised on the transaction by Lehman Brothers
and Black River Capital, LLC.
Investments
With
the anticipated $3.36 billion in net proceeds from
the divestments, TXU intends to increase value and
reduce risks through executing a comprehensive liability
management initiative. We expect this initiative
will include repurchasing and issuing, over time,
various forms of securities, including debt, preferred,
and equity securities.
Toward
this goal, TXU repurchased all $750 million outstanding
principal amount of TXU Energy’s Exchangeable
Preferred Membership Interests (EPMI) at a price
of $1.842 billion. The repurchase closed today and
will result in the elimination of $750 million of
9% securities and 57.1 million diluted common shares
outstanding, as well as annual savings of $54 million
in preferred membership interest distributions.
The transaction will also result in a reduction
in additional paid-in capital of approximately $815
million. This amount represents the excess of the
$1.842 billion repurchase amount over the carrying
amount of the security, net of approximately $380
million in deferred income tax benefits arising
from the transaction. The carrying amount of the
security is the $750 million principal amount less
an approximate $105 million remaining unamortized
discount. The $815 million charge to paid-in capital
will reduce earnings available to common shareholders,
in the same manner as TXU’s existing preference
share dividends.
|
