Oct 15, 2002 By Anita Chang Associated Press Writer 2 min read

DALLAS (AP) – TXU Corp. made another attempt to restore its financial footing Monday, slashing its quarterly dividend by 80 percent and saying it would sell all or part of its European operations. Shares in the utility and energy trader fell 32 percent, or $6.09, to $12.66 in afternoon trading on the New York Stock Exchange.

TXU said it was cutting the dividend to meet the new requirements of the rating agencies for investment-grade credit.

“Today’s actions are the direct result of rating agencies’ concerns as to the company’s liquidity and credit situation,” said Erle Nye, TXU’s chairman and chief executive. “Today’s financial markets and concerns of the rating agencies have forced us to take this dramatic action.”

TXU’s board of directors declared a quarterly dividend of 12.5 cents per share of common stock, an 80 percent reduction from the previous quarterly dividend of 60 cents per share. The dividend will be paid Jan. 2 to shareholders of record on Dec. 6. The indicated annual dividend is now 50 cents per share of common stock.

TXU also announced that its European operations are for sale.

“I think they might find that difficult, so the alternative would be potential bankruptcy,” said Paul Fremont, an analyst with Jefferies and Co.

TXU group president Tom Baker said the company has two plans of action for European operations. One is selling all or part of the operation. The other involves cutting costs through staff reductions and restructuring purchase power contracts to be in line with current market costs for wholesale electricity. Baker said the cost-reduction plan should save the company about $55 million for 2003.

“As we go forward with those two lines of action we will evaluate which is the most prudent and provide the best value going forward,” he said. Baker said a decision should be made within the month.

Fitch Ratings, which had cut bonds issued by TXU’s European unit to junk status last week, lowered them further on Monday.

TXU’s chief financial officer Mike McNally said “the company’s cash flows and earnings remain strong and stable in our Texas and Australia operations, which are performing very well.

In light of limited attractive investment opportunities, developmental capital expenditures will be reduced significantly.”