TXU 4Q Profit Up 33 Percent

The Associated Press
Tuesday, February 27, 2007; 7:54 PM

DALLAS -- For TXU Corp., higher fourth-quarter profits were eclipsed Tuesday by political wrangling over the pending sale of the company in what would be the largest private buyout ever.

Politicians in Washington and Austin raised questions about whether the deal would dump too much debt on TXU and whether the company should be allowed to build new coal-fired power plants.

Compared to that drama, TXU's fourth-quarter results contained few surprises for Wall Street. The company churned out a 33 percent increase in profits despite weak revenue caused by mild winter weather.

The Dallas-based electric utility said it earned $475 million, or $1.03 per share in the last quarter, up 33 percent from its profit of $356 million, or 74 cents per share, a year earlier.

Excluding what TXU termed one-time charges, the company said it would have earned $1.20 per share, which matched the forecast of analysts, who usually exclude those items from their estimates.

Operating revenue fell to $2.04 billion from $2.46 billion. TXU said it reduced operating costs to offset weak sales.

The earnings came a day after TXU announced its board had approved a $32 billion buyout led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group. The buyers would pay $69.25 per share and assume more than $12 billion in debt. Shareholders and federal regulators would have to approve the sale.

Politicians in Washington and Austin flagged the sale Tuesday, raising new potential obstacles for the buyers.

Sen. John Kerry, D-Mass., said Tuesday his technology subcommittee will hold a hearing on the investors' wish to build three new coal-fired power plants. Kerry is writing legislation to block all 11 plants that TXU had planned and other proposed around the country, saying they would use outdated technology that produces too much pollution.

In Texas, the chairman of the Senate commerce committee was miffed that state regulators don't get to oversee the sale. On Tuesday, state Sen. Troy Fraser, a Republican, passed a bill out of his committee that would require anyone buying a Texas utility to get approval from the state Public Utility Commission. The vote was 9-0.

The company's fourth-quarter results, by contrast, held few surprises.

Shelby Tucker of Banc of America Securities LLC said strong points such as lower fuel costs and more production of economical nuclear power were partly offset by lower sales and customer usage. The number of residential customers fell 5.6 percent in 2006.

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