Fitch lifts TXU outlook to stable

Fitch Ratings said it revised the outlook of TXU Corp., TXU US Holdings Co. and TXU Energy Co. LLC to stable from negative. The outlook of TXU Electric Delivery Co. remains stable.

The agency also affirmed the BBB- issuer default and senior unsecured ratings of TXU and TXU US Holdings; TXU's F3 commercial paper rating; TXU Energy's BBB issuer default and senior unsecured ratings and F2 commercial paper rating; and TXU Electric's BBB issuer default rating, BBB+ senior unsecured rating and F2 commercial paper rating.

The agency said the revised outlook is based in part upon significantly improved earnings and cash flow coverage of debt and assumes the elimination of the 'price to beat' at the end of 2006 without pricing constraints imposed by any new Texas law, thus enabling TXU's retail business to be the source of a dynamic hedge for TXU Energy.

The stable outlook also reflects Fitch's expectation of continued success in risk management of the group's wholesale and retail operations and that the funding for TXU's new power plant development will largely consist of non-recourse debt and minority equity investments from third parties.

Fitch said its credit concerns include significant debt at the holding company, the group's exposure to natural gas prices and risks associated with the significant new baseload power plant development plan. Total debt to EBITDA was 2.2x for the 12-month period ended Sept 30, a decrease from 4x at the end of 2003.

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