1023291--2/19/2010--Energy_Future_Holdings_Corp

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Risks Relating to Substantial Indebtedness and Debt Agreements Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting obligations under the various debt agreements governing our indebtedness. Despite our current high indebtedness level, we may still be able to incur substantially more indebtedness. This could further exacerbate the risks associated with our substantial indebtedness. Increases in interest rates may negatively impact our operating results and financial condition. EFH Corp. s and its subsidiaries debt agreements contain restrictions that limit flexibility in operating our businesses. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our debt agreements, which may not be successful. Under the terms of TCEH s debt agreements, TCEH is restricted from making certain payments to EFH Corp. Under the terms of the indentures governing the EFIH Notes, Intermediate Holding is restricted from making certain payments to EFH Corp. EFH Corp. has a very limited ability to control activities at Oncor due to structural and operational ring-fencing measures. EFH Corp. is a holding company and its obligations are structurally subordinated to existing and future liabilities and preferred stock of its subsidiaries. Oncor may or may not make any distributions to EFH Corp. Our businesses are subject to ongoing complex governmental regulations and legislation that have impacted, and may in the future impact, our businesses and/or results of operations. PURA, the PUCT, ERCOT, the RRC and the Office of Public Utility Council (OPC) are subject to a Sunset review by the Texas Sunset Advisory Commission. PURA will expire, and the PUCT and the RRC will be abolished, on September 1, 2011 unless extended by the Texas Legislature following such review. If any of PURA, the PUCT, ERCOT, the RRC or the OPC are not renewed by the Texas Legislature pursuant to Sunset review, it could have a material effect on our business. Litigation, legal proceedings, regulatory investigations or other administrative proceedings could expose us to significant liabilities and reputation damage, and have a material adverse effect on our results of operations, and the litigation environment in which we operate poses a significant risk to our businesses. TXU Energy may lose a significant number of retail customers due to competitive marketing activity by other retail electric providers. TCEH s revenues and results of operations may be negatively impacted by decreases in market prices for power, decreases in natural gas prices, and/or decreases in market heat rates. Our assets or positions cannot be fully hedged against changes in commodity prices and market heat rates, and hedging transactions may not work as planned or hedge counterparties may default on their obligations. Our use of assets as collateral for hedging arrangements could be materially impacted if certain proposed legislation regarding the regulation of over-the-counter financial derivatives were to be enacted and be applicable to us. We may suffer material losses, costs and liabilities due to ownership and operation of the Comanche Peak nuclear generation facility. The operation and maintenance of electricity generation and delivery facilities involves significant risks that could adversely affect our results of operations and financial condition. Our cost of compliance with environmental laws and regulations and our commitments, and the cost of compliance with new environmental laws, regulations or commitments could materially adversely affect our results of operations and financial condition. Our financial condition and results of operations may be materially adversely affected if new federal and/or state legislation or regulations are adopted to address global climate change. Our financial condition and results of operations may be materially adversely affected by the effects of extreme weather conditions. The rates of Oncor s electricity delivery business are subject to regulatory review, and may be reduced below current levels, which could adversely impact Oncor s financial condition and results of operations. Our growth strategy, including investment in three new lignite-fueled generation units and Oncor s capital program, may not be executed as planned, which could adversely impact our financial condition and results of operations. Ongoing performance improvement initiatives may not achieve desired cost reductions and may instead result in significant additional costs if unsuccessful. TXU Energy s retail business is subject to the risk that sensitive customer data may be compromised, which could result in an adverse impact to its reputation and/or the results of operations of the retail business. TXU Energy relies on the infrastructure of local utilities or independent transmission system operators to provide electricity to, and to obtain information about, its customers. Any infrastructure failure could negatively impact customer satisfaction and could have a material negative impact on its business and results of operations. TXU Energy offers bundled services to its retail customers, with some bundled services offered at fixed prices and for fixed terms. If TXU Energy s costs for these bundled services exceed the prices paid by its customers, its results of operations could be materially adversely affected. TXU Energy s REP certification is subject to PUCT review. Changes in technology or increased electricity conservation efforts may reduce the value of our generation plants and/or Oncor s electricity delivery facilities and may significantly impact our businesses in other ways as well. Our revenues and results of operations may be adversely impacted by decreases in market prices of power due to the development of wind generation power sources. Our revenues and results of operations may be adversely impacted as ERCOT transitions the current zonal market structure to a nodal wholesale market. Our future results of operations may be negatively impacted by settlement adjustments determined by ERCOT related to prior periods. Our results of operations and financial condition could be negatively impacted by any development or event beyond our control that causes economic weakness in the ERCOT market. EFH Corp. s (or any applicable subsidiary s) credit ratings could negatively affect EFH Corp. s (or the pertinent subsidiary s) ability to access capital and could require EFH Corp. or its subsidiaries to post collateral or repay certain indebtedness. Continued market volatility may have impacts on our businesses and financial condition that we currently cannot predict. Our liquidity needs could be difficult to satisfy, particularly during times of uncertainty in the financial markets and/or during times when there are significant changes in commodity prices. The inability to access liquidity, particularly on favorable terms, could materially adversely affect results of operations and/or financial condition. The costs of providing pension and OPEB and related funding requirements are subject to changes in pension fund values, changing demographics and fluctuating actuarial assumptions and may have a material adverse effect on our results of operations and financial condition. As was the case in the fourth quarter 2008 (as discussed in Notes 1 and 3 to Financial Statements), goodwill and/or other intangible assets not subject to amortization that we have recorded in connection with the Merger are subject to at least annual impairment evaluations, and as a result, we could be required to write off some or all of this goodwill and other intangible assets, which may cause adverse impacts on our financial condition and results of operations. The loss of the services of our key management and personnel could adversely affect our ability to operate our businesses. The Sponsor Group controls and may have conflicts of interest with us in the future. Litigation Related to Generation Facilities

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1023291--2/19/2010--Energy_Future_Holdings_Corp_/TX/