Southern Co., which had the foresight to spin off its marketing operations over a year ago and plod along as an unglamorous utility, was the one sporting the positive results Wednesday, reporting third quarter earnings up 5% this year over last at $595 million, or 84 cents per share. At the same time TXU Corp., which expanded marketing operations to the Continent, has lost its sparkle, settling for 73 cents/share earnings in the quarter or $206 million, off 38% from 3Q 2001.

Southern’s success story was buoyed by hot summer weather which drove increased demand for electricity, Southern CEO Allen Franklin said Thursday. The 3Q results compared with reported earnings of $554 million, or 80 cents per share, in the third quarter a year ago.

“The return of more seasonal weather this summer and the continued focus on executing our strategy were the keys to our strong financial performance in the third quarter,” said Franklin. “We are on track to keep our promise of meeting or exceeding our full-year targets for earnings, operations and customer service.”

TXU, meanwhile, attempted to paint a slightly brighter face on its earnings report, saying that its 3Q results, excluding its failing European operations, which are expected to be reflected as discontinued operations in the fourth quarter, and other unusual items, were $0.92 per share, compared to $1.27 per share for the prior year quarter. The company also noted the per share numbers are somewhat distorted because there currently are more shares. TXU’s 3Q 2001 earnings were $334 million.

The Texas company also announced critical financing had been completed, with its wholly owned subsidiary, Oncor Electric Delivery Co., obtaining a $1 billion 364-day senior secured credit facility. The facility may be used for the interim refinancing of maturing indebtedness of Oncor and for general corporate purposes at Oncor. Borrowings under the facility will be secured by First Mortgage Bonds of Oncor.

TXU reiterated that it was continuing to pursue a prompt resolution of its business interests in Europe. For the quarter, the European business net loss was $37 million, compared to net income in 3Q 2001 of $21 million. The company expects to record a charge in the fourth quarter associated with the wind-down of the European business.

The North America Energy segment delivered $223 million of net income and this continent’s energy delivery segment produced $78 million net income in the quarter. The energy segment contains generation, wholesale and retail operations primarily in Texas, and the results “reflect the successful transition to competition of the Texas operations,” TXU said. The delivery segment includes the electric transmission and distribution assets as well as the company’s gas pipeline and distribution business. The segment results reflect strong customer growth in the North Texas area, decreased operating expenses and improvement in the natural gas business.

Southern’s third quarter performance, which exceeded analysts’ expectations, benefited from continued customer growth, solid results from the competitive generation business and the overall impact of rate proceedings in Alabama, Florida and Mississippi. These factors offset the negative impact on earnings from higher operating expenses related to new generating units that have come on line in the past year, start-up costs at Southern Co. Gas, the impact on the energy services business from the manufacturing industry’s downturn and the effect of additional shares outstanding.

Reviewing operations, Franklin said electricity use by retail customers in Southern’s four-state service area increased 3.4% in the first nine months of 2002. Southern spun off its marketing business, the now-struggling Mirant Corp., in April 2001.

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