BC95 Citi Fun 24

RNS Number:7506C
Powergen UK PLC
21 October 2002

Powergen UK plc

21 October 2002

Powergen acquires TXU's retail business for #1.37 billion to become the UK's
largest electricity retailer

Powergen today announced the acquisition of TXU's retail business and three
coal-fired power stations for #1.37 billion.

TXU's 5.5 million electricity and gas customers (1) will make Powergen one of
the market leaders in energy retailing, and a powerful force in the competitive
UK energy market. The acquisition provides a strong presence across the UK, in
residential, SME and larger industrial and commercial customer segments.
Increased scale will enable increased efficiency and improved services to our
customers. The transaction also improves the balance of Powergen's portfolio
between generation output and customer demand, protecting the business from
fluctuations in wholesale prices.

Powergen will additionally acquire 3 coal-fired plants and the Citigen CHP
scheme. This additional generation capacity will help ensure that the immediate
needs of TXU customers can be met. The deal does not include TXU's continental
European businesses, its trading operation or its portfolio of contractual
obligations.

Paul Golby, Powergen UK's Chief Executive, said: "This is a transforming deal
for Powergen. Today we become the UK's largest electricity supplier and number
two in the highly competitive retail energy sector, with 6 million electricity
and 2.4 million gas customer accounts (1). This is a good day for all our
customers and employees.

"Powergen has acted swiftly to safeguard the interests of TXU customers and they
can be assured that they do not need to do anything, they will continue to
receive electricity and gas without interruption. Powergen has one of the best
records in the industry for customer service.

"Our immediate priority is to stabilise the TXU retail business and to work to
remove any staff uncertainty as soon as possible. We have a good record in
managing change during previous acquisitions and look forward to talking to
staff and their trade union representatives in the near future."

Commenting on the sale and ongoing operations, Paul Marsh, TXU's Chief Operating
Officer - Europe, said: "This transaction is good for all involved. Our people
who move to Powergen will have a first class employer with full protected
pension rights, our customers will continue to enjoy security of supply with
extraordinary customer service and our creditors will benefit from the good
value achieved through the sale.

"With the proceeds of the sale and the continued support of creditors, we
believe we are well placed to restructure the remainder of the UK and European
operations to promote its future viability. It has been a hectic time since the
events that led to a credit rating downgrade but we have made great progress in
stabilising the business. There is much more to do but we are moving solidly
towards our goal."

Approval from the European Commission (EC) is required for this transaction.
However, in view of TXU's situation, the EC has granted a derogation, which
allows the transaction to proceed prior to completion of the approval process.

Under the terms of this deal around 1900 TXU employees, the majority of whom are
based in Ipswich, have transferred to Powergen, a division of E.ON AG.

The acquisition, which Powergen expects to be earnings enhancing in the first
full year, is a cash transaction, which has been funded through existing credit
facilities.

Morgan Stanley is advising Powergen in connection with this transaction.
Powergen has also received financial advice from UBS Warburg.

Notes to editors:

(1) = Figures from Datamonitor, August 2002

Assets included in the transaction:

The acquisition includes: Drakelow C, a 999MW power station near
Burton-on-Trent; High Marnham, a 945 MW station in Nottinghamshire; Ironbridge,
a 970 MW station in Shropshire; and the Citigen City of London CHP scheme.

Datamonitor statistics August 2002

The Powergen figures are combined Powergen and TXU figures. They do not include
300,000 Powergen telecoms customers or Powergen & TXU industrial & commercial
customers.

Fuel and customer type    Company                       Customer numbers               Ranking

Domestic electric         Powergen                          5,477,000                    1st
                          British Gas                       5,110,000                    2nd

SME electric              Powergen                           559,000                     1st
                          British Gas                        387,000                     2nd

Total electric            Powergen                          6,036,000                    1st
                          British Gas                       5,497,000                    2nd

Domestic gas              Powergen                          2,298,000                    2nd
                          British Gas                      12,781,000                    1st

SME gas                   Powergen                           72,000                      2nd
                          British Gas                        105,000                     1st

Total gas                 Powergen                          2,370,000                    2nd
                          British Gas                      12,886,000                    1st

Total energy              Powergen                          8,406,000                    2nd
                          British Gas                      18,382,000                    1st



For more information please contact:

Powergen Press Office on 020 7826 2768

Statements made in this document that state the Company's or management's
intentions or expectations are forward looking statements. By their nature,
forward looking statements involve uncertainty. The Company's actual results
could differ materially from those projected in the forward looking statements,
and there can be no assurance that estimates of future results will be achieved.
You should read the discussion of forward looking statements in the Company's
Annual Report Form 20F for more information on factors that could cause actual
results to differ.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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