Global Economy (International Business)Global Economy Importance to DFW AreaSlide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Support Processes Driven by the needs of the GEM businessCritical Success Factors for International Business OperationKeys to ImplementationGlobal Business SuccessGlobal EconomyGlobal Economy(International Business)(International Business)Importance to DFW AreaImportance to DFW AreaWhy TXU Went InternationalWhy TXU Went InternationalHow TXU Decided Where to Enter How TXU Decided Where to Enter (the Strategy)(the Strategy)What TXU Has Learned in Order to What TXU Has Learned in Order to Be Successful (the Execution)Be Successful (the Execution)Global EconomyGlobal EconomyImportance to DFW AreaImportance to DFW AreaForeign trade in DFW totaled over $23 Billion in 1999, up from Foreign trade in DFW totaled over $23 Billion in 1999, up from $16 Billion in 1997.$16 Billion in 1997.Nine Fortune Nine Fortune GlobalGlobal 500 companies (and 10 additional Fortune 500 companies (and 10 additional Fortune 500 companies) are headquartered in DFW. DFW was ranked 500 companies) are headquartered in DFW. DFW was ranked number one for international corporate location (by AA in number one for international corporate location (by AA in 1997).1997).The number of foreign destinations served out of DFW Airport The number of foreign destinations served out of DFW Airport has more than doubled from 1990 to today. International air has more than doubled from 1990 to today. International air service yields $2.3 Billion to the local economy. This is service yields $2.3 Billion to the local economy. This is expected to double by 2005.expected to double by 2005.Wholesale and retail trade is the second largest employment Wholesale and retail trade is the second largest employment sector in Dallas, with 24% of the jobs.sector in Dallas, with 24% of the jobs.If DFW were a country, we’d rank 24th in the world economy.If DFW were a country, we’d rank 24th in the world economy.Why TXU Went InternationalWhy TXU Went InternationalA way to diversify our market risk (financial & A way to diversify our market risk (financial & operational)operational)A way to learn “hands on” about deregulated A way to learn “hands on” about deregulated energy marketsenergy marketsLeverage TXU management and technical Leverage TXU management and technical expertise related to energy business expertise related to energy business (economies of scale and operational synergies)(economies of scale and operational synergies)Opportunity for growth and adding to Opportunity for growth and adding to shareholder value given international market shareholder value given international market deregulation compared to USderegulation compared to USGlobal Business DriversGlobal Business DriversFor Other IndustriesFor Other IndustriesGlobal Products -- Leverage BrandGlobal Products -- Leverage BrandJoint Resources -- Move Work to Other Joint Resources -- Move Work to Other CountriesCountriesRationalized/Flexible Operations -- Rationalized/Flexible Operations -- Production CapabilitiesProduction CapabilitiesSuppliers -- Economies of Scale and Suppliers -- Economies of Scale and Delivery or ScarcityDelivery or ScarcityCorporate Customers -- Are They Global?Corporate Customers -- Are They Global?100%1994TXU Transformation of Assets(From Texas Only)Total - $24.2 BillionResulting fromSuccessfulStrategicAcquisitions20006%44%7%7%36%TXU Transformation of Assets(From Texas Only)US Electric $15.2 BillionUS Gas 2.4 BillionUS Energy 2.4 BillionEurope 12.4 BillionAustralia 2.0 BillionTOTAL $34.4 BillionMillions of Dollars$0$5,000$10,000$15,000$20,000$25,0001995 1996 1997 1998 1999 200014,736 17,1187,946US ElectricUS GasUS EnergyEuropeCommunications/OtherAustralia 22,009TXU Operating Revenues12 Months Ended6,5515,639How TXU Decided WhereHow TXU Decided WhereTo Enter (The Strategy)To Enter (The Strategy)Stable economies and currenciesStable economies and currenciesGrowth potentialGrowth potentialRational government, regulatory and legal Rational government, regulatory and legal structurestructureLimited barriers to competition and foreign Limited barriers to competition and foreign investmentinvestmentFinancial returns that are compelling (a good Financial returns that are compelling (a good deal)deal)GasSupplyPowerGeneration ContractsUpstream PortfolioOptimizationDownstream Merchant Trading & Portfolio ManagementResidential & Small Business Commercial & Industrial Wholesale & Alliances Strategy: TXU will achieve excellent operations of significant scale in selected regions, which optimize a portfolio of assets, capabilities and customer relationships across multiple products and services.Merchant Energy ModelStrong Base EstablishedTXU Has Established aStrong International BaseAustraliaCentral EuropeNordicNortheastTexasMidwestOthersPortfoliosGlobalPortfolioProcessesGlobal ManagementProcessesUKFunctionalProcessesSupportProcessesTrioTradewindGlobal Processes Create ValueIn excess of the sum of the parts• Global Management Processes- Standard ‘must do’- Integrate with Global PortfolioProcesses• Global Portfolio Management Processes- Glue portfolios together into the GEM• Functional Processes- Drive global operational excellence• Support Processes- Transactional processesAustraliaCentral EuropeMidwestNordicNortheastTexasUKOthersPortfoliosGlobalPortfolioProcessesFunctionalProcessesSupportProcessesGlobal ManagementProcessesFiduciary ProcessesLegal/GovernanceFinancial / assuranceRisk monitoringStrategic Elements of:Brand and reputationStakeholdermanagementHRITRegulatoryHealth, Safety andEnvironmentGEM Corporatestrategy &developmentGEM BusinessplanningAlliance/IntegrationmanagementTreasury/FinanceTalent managementOther GlobalProcessesStrategic ProcessesGlobal Management ProcessesAre basic to any corporationPortfoliosGlobal Management Processes• Portfolio planning &development• Resource allocation- Capital- Risk capital• Risk management• Performance management• Talent managementGlobal Portfolio Processes• Global Portfolio Management creates distinct competitive advantage• Need common processes and metrics within portfolios to enable globalportfolio processesAustraliaCentral EuropeMidwestNordicNortheastTexasUKOthersGlobalPortfolioProcessesFunctionalProcessesSupportProcessesThey