1445049--3/5/2009--Energy_Future_Competitive_Holdings

related topics

{financial, litigation, operation}

{debt, indebtedness, cash}

{condition, economic, financial}

{gas, price, oil}

{operation, natural, condition}

{regulation, change, law}

{system, service, information}

{cost, operation, labor}

{stock, price, operating}

Risks Relating to Substantial Indebtedness and Debt Agreements EFC Holdings substantial leverage could adversely affect its ability to raise additional capital to fund its operations, limit its ability to react to changes in the economy or its industry, expose EFC Holdings to interest rate risk to the extent of its variable rate debt and prevent EFC Holdings from meeting obligations under the various debt agreements governing its indebtedness. Despite EFC Holdings current high indebtedness level, it may still be able to incur substantially more indebtedness. This could further exacerbate the risks associated with EFC Holdings substantial indebtedness. Increases in interest rates may negatively impact EFC Holdings operating results and financial condition. EFC Holdings debt agreements contain restrictions that limit flexibility in operating its businesses. EFC Holdings 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., which may result in EFH Corp. depending solely on distributions from EFC Holdings. EFC Holdings businesses are subject to ongoing complex governmental regulations and legislation that have impacted, and may in the future impact, its businesses and/or results of operations. Litigation or legal proceedings could expose EFC Holdings to significant liabilities and reputation damage, and have a material adverse effect on its results of operations, and the litigation environment in which EFC Holdings operates poses a significant risk to its businesses. TXU Energy may lose a significant number of retail customers due to competitive marketing activity by other retail electric providers. EFC Holdings 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. EFC Holdings 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. EFC Holdings may suffer material losses, costs and liabilities due to ownership and operation of the Comanche Peak nuclear generation plant. The operation and maintenance of electricity generation facilities involves significant risks that could adversely affect EFC Holdings results of operations and financial condition. EFC Holdings cost of compliance with environmental laws and regulations and its commitments, and the cost of compliance with new environmental laws, regulations or commitments could materially adversely affect EFC Holdings results of operations and financial condition. EFC Holdings 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. EFC Holdings financial condition and results of operations may be materially adversely affected by the effects of extreme weather conditions. EFC Holdings growth strategy, including investment in three new lignite-fueled generation units, may not be executed as planned which could adversely impact its 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. In addition, EFC Holdings may incur significant transition costs and/or experience significant operational disruptions in connection with the termination of its outsourcing arrangement with Capgemini. 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 retail business is subject to the risk that it will not be able to profitably serve its customers given its previously announced price cuts and price protection, which could result in an adverse impact to its reputation and/or results of operations. TXU Energy s REP certification is subject to PUCT review. Changes in technology may reduce the value of EFC Holdings generation plants and may significantly impact its businesses in other ways as well. EFC Holdings 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. EFC Holdings revenues and results of operations may be adversely impacted as ERCOT transitions the current zonal market structure to a nodal wholesale market. EFC Holdings future results of operations may be negatively impacted by settlement adjustments determined by ERCOT related to prior periods. EFC Holdings results of operations and financial condition could be negatively impacted by any development or event beyond EFC Holdings control that causes economic weakness in the ERCOT market. TCEH s credit ratings could negatively affect EFC Holdings ability to access capital and could require EFC Holdings or its subsidiaries to post collateral or repay certain indebtedness. The global financial crisis has caused unprecedented market volatility and may have impacts on EFC Holdings business and financial condition that EFC Holdings currently cannot predict. EFC Holdings 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. 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 EFC Holdings has recorded in connection with the Merger are subject to at least annual impairment evaluations and as a result, EFC Holdings could be required to write off some or all of this goodwill and other intangible assets, which may reflect adverse impacts on EFC Holdings financial condition and results of operations. The loss of the services of EFC Holdings key management and personnel could adversely affect EFC Holdings ability to operate its businesses. The Sponsor Group controls and may have conflicts of interest with EFC Holdings in the future.

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1445049--3/5/2009--Energy_Future_Competitive_Holdings_CO