TXU's Texas market is an important enabler of our growth strategy, with an economy predicted to grow at 4 percent annually over the next five years.

TXU's successful turnaround has made us strong and positioned us to grow. We have established ourselves as one of the leading U.S. power companies with the financial strength and focus to deliver superior returns for our shareholders.

Core Principles

Our fundamental strategy is built on three core principles of what it takes to win in the energy industry:

• Success is based on access to structurally advantaged assets. Energy markets will continue to go through cycles, and only businesses that have an advantaged cost position that cannot be easily replicated will win. Our businesses have the inherent strengths - robust markets, low costs, and superior execution - to ride through commodity cycles.
• An industrial skill set is crucial for high performance and sustained favorable returns in asset-intensive businesses. During the turnaround, we have focused on developing the skills to perfect operational excellence, market leadership, a risk/return mindset, and rigorous performance management. We believe the difference between average and superior operations is a 200-basis-point increase in return on invested capital throughout the cycle. This operating edge also provides TXU a platform for growth through acquisition and improvement of third-party assets.
• Long-term winners must leverage not only scale but quality scale. Scale is necessary to standardize operations, gain critical mass, increase supplier efficiencies, and lower materials costs. Quality scale, which derives from acquiring and developing knowledge, competitive strengths, and scale in defined regions, produces deep, distinctive insights into market dynamics and regulatory frameworks. It enables better execution in today's volatile commodity environment. Regional scale can also create access to advantaged development opportunities. TXU's Oak Grove coal plant project is a good example.

Value Creation TXU has a portfolio of initiatives based on these three core principles and a strategy aimed at creating value through: Continuous improvement to the core businesses. Organic growth through new coal plant opportunities. Leveraging transactions to gain quality scale outside Texas and drive improvements through third-party assets. Maximizing value for TXU's owners through sustained top-quartile returns is our goal. View our growth strategy and progress for TXU Power, TXU Wholesale/TXU Energy, and TXU Electric Delivery. TXU's Industrial Mindset Can Mean The Difference Between Average And Superior Performance Operational Excellence Market Leadership Risk/Return Mindset Top-decile throughput World-class industrial production costs Industry-leading reliability Lean corporate SG&A Superior customer service/brand management Customer segmentation and pricing Distinctive commodity sourcing Strict capital allocation discipline Risk/return restructuring Commodity risk management Performance Management High-performance culture Balanced cascading scorecards Employee development Incentives linked to key value drivers

A New Mindset A powerful new tool we're using to drive superior performance across TXU is the TXU Operating System. Employee teams are applying it to take a systematic approach to critical thinking, breaking down every work process, eliminating waste, and then putting the task back together in the most logical, efficient sequence. At the Monticello power plant, for example, employees used it to reorganize the facility's tools and maintenance equipment, curing a bottleneck and shortening work time. It has already improved the net present value of the coal plants we're building by over $100 million. The TXU Operating System is part of our high-performance industrial mindset.