TXU Hints of Dividend Hike, Plans to Cut $1.5B in Debt in '03

Calling the last year a "near death experience," TXU Chairman Erle Nye promised to keep liquidity high and work aggressively to strengthen the company's balance sheet. He said the Dallas-based utility's stabilizing operations and improved earnings outlook may allow it to raise its dividend within the next two years.

Flanked by his executive management team during an analyst conference in New York City, Nye said TXU was set to "aggressively defend our position in Texas" with a focus on operations and customer growth, which in turn will increase earnings. "We had a number of achievements through April, and we have turned the corner, back to what I would call a stable operation. Our prospects are positive," he added. With most of its problems behind it, he promised that TXU now will work on its initiatives to deliver on its 2003 plan.

"So far, so good," Nye said of the company's progress to date. "We're going to further strengthen the balance sheet, take down another $1.5 billion in debt this year. Our credit is improving and I believe the creditors are feeling much better about our situation. We will achieve major cost reductions this year, and we are well on our way with that program, I will say." Nye noted that the company was "blessed to be in a strong position in Texas," where its core operations are, but he said the "main thing, of course, is to deliver on this plan...back to a stable business."

When asked about the company's dividend, which was reduced to improve liquidity, Nye responded, "We are generating cash in significant amounts. I don't want to put a two-year embargo on the dividend. In the best of circumstances...we might initiate a dividend increase sooner than two years, but probably not this year." TXU cut its dividend 80% last October, to 12.5 cents from 60 cents a share, after its European unit collapsed and wholesale power prices fell. Since then, Nye reported that the company's moves to cut costs and reduce debt are well ahead of expectations.

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