Enclosure - Energy Future Competitive Holdings CO, 10-Q As Of September .

Table of ContentsMergerMerger AgreementMMBtuMoody'sMWMWhNERCNRCNYMEXOncorOncor HoldingsOPEBPUCTPURApurchase accountingREPRRCS&PSECSG&ASponsor GroupThe transaction referred to in "Merger Agreement" (defined immediately below) that was completed onOctober 10, 2007.Agreement and Plan of Merger, dated February 25, 2007, under which Texas Holdings agreed to acquire EFHCorp.million British thermal unitsMoody's Investors Services, Inc. (a credit rating agency)megawattsmegawatt-hoursNorth American Electric Reliability CorporationUS Nuclear Regulatory CommissionRefers to the New York Mercantile Exchange, a physical commodity futures exchange.Refers to Oncor Electric Delivery Company LLC, a direct, majority-owned subsidiary of Oncor Holdings and anindirect subsidiary of EFH Corp., and/or its consolidated bankruptcy-remote financing subsidiary, Oncor ElectricDelivery Transition Bond Company LLC, depending on context, that is engaged in regulated electricitytransmission and distribution activities.Refers to Oncor Electric Delivery Holdings Company LLC, a direct, wholly-owned subsidiary of EFIH and thedirect majority owner of Oncor, and/or its subsidiaries, depending on context.other postretirement employee benefitsPublic Utility Commission of TexasTexas Public Utility Regulatory ActThe purchase method of accounting for a business combination as prescribed by US GAAP, whereby the cost or"purchase price" of a business combination, including the amount paid for the equity and direct transaction costsare allocated to identifiable assets and liabilities (including intangible assets) based upon their fair values. Theexcess of the purchase price over the fair values of assets and liabilities is recorded as goodwill.retail electric providerRailroad Commission of Texas, which among other things, has oversight of lignite mining activity in TexasStandard & Poor's Ratings Services, a division of the McGraw-Hill Companies Inc. (a credit rating agency)US Securities and Exchange Commissionselling, general and administrativeRefers collectively to the investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (KKR), TPGCapital, L.P. and GS Capital Partners, an affiliate of Goldman Sachs & Co. (See Texas Holdings below.)iv

Table of ContentsTCEHTCEH FinanceTCEH Senior NotesTCEH Senior Secured FacilitiesTCEH Senior Secured Second LienNotesTCEQTexas HoldingsTRETXU EnergyUSVIERefers to Texas Competitive Electric Holdings Company L.LC, a direct, wholly-owned subsidiary of EFCH andan indirect subsidiary of EFH Corp., and/or its subsidiaries, depending on context, that are engaged in electricitygeneration and wholesale and retail energy markets activities. Its major subsidiaries include Luminant and TXUEnergy.Refers to TCEH Finance, Inc., a direct, wholly-owned subsidiary of TCEH, formed for the sole purpose ofserving as co-issuer with TCEH of certain debt securities.Refers collectively to TCEH's 10.25% Senior Notes due November 1, 2015 and 10.25% Senior Notes dueNovember I, 2015 Series B (collectively, TCEH 10.25% Notes) and TCEH's 10.50%/I 1.25% Senior ToggleNotes due November 1, 2016 (TCEH Toggle Notes).Refers collectively to the TCEH Initial Term Loan Facility, TCEH Delayed Draw Term Loan Facility, TCEHRevolving Credit Facility, TCEH Letter of Credit Facility and TCEH Commodity Collateral Posting Facility. SeeNote 4 to Financial Statements for details of these facilities.Refers collectively to TCEH's 15% Senior Secured Second Lien Notes due April 1, 2021 and TCEH's 15% SeniorSecured Second Lien Notes due April 1, 2021, Series B.Texas Commission on Environmental QualityRefers to Texas Energy Future Holdings Limited Partnership, a limited partnership controlled by the SponsorGroup that owns substantially all of the common stock of EFH Corp.Refers to Texas Reliability Entity, Inc., an independent organization that develops reliability standards for theERCOT region and monitors and enforces compliance with NERC standards and ERCOT protocols.Refers to TXU Energy Retail Company LLC, a direct, wholly-owned subsidiary of TCEH engaged in the retailsale of electricity to residential and business customers. TXU Energy is a REP in competitive areas of ERCOT.United States of Americavariable interest entity

Table of ContentsPART 1. FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSENERGY FUTURE COMPETITIVE HOLDINGS COMPANYCONDENSED STATEMENTS OF CONSOLIDATED INCOME (LOSS)(Unaudited)(millions of dollars)Nine Months EndedThree Months EndedSeptember 30,September 30, Operating revenuesFuel, purchased power costs and delivery feesNet gain from commodity hedging and trading activitiesOperating costsDepreciation and amortizationSelling, general and administrative expensesFranchise and revenue-based taxesImpairment of goodwill (Note 2)Other income (Note 13)Other deductions (Note 13)Interest incomeInterest expense and related charges (Note 13)Income (loss) before income taxesIncome tax (expense) benefitNet income (loss)Net (income) loss attributable to noncontrolling interestsNet income (loss) attributable to EFCH See Notes to Financial 10 2,433(1,187)123(161)(303)(192)(27) -33(6)21(842)(108)36(72) 5(12)64(2,718(3,589)(1882009S(3,777) 19)39(1,547)606(259)347. 347

Table of ContentsENERGY FUTURE COMPETITIVE HOLDINGS COMPANYCONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)(Unaudited)(millions of dollars)Three Months EndedSeptember 30,20102009Net income (loss) Other comprehensive income (loss), net of tax effects:Cash flow hedges:Net decrease in fair value of derivatives (net of tax benefit of 5-, 2, - and 11)Derivative value net loss related to hedged transactions recognized during the period and reported innet income (loss) (net of tax benefit of 7, 21, 25 and 53)Total effect of cash flow hedgesComprehensive income (loss)Comprehensive (income) loss attributable to noncontrolling interestsComprehensive income (loss) attributable to EFCHSee Notes to Financial Statements.2(3,720) --Nine Months EndedSeptember 30,20102009(72) (3,777) 347(20)(4)1313(3,707) 4137(35)4949(3,728)9979426(35) (3,728) 426

Table of ContentsENERGY FUTURE COMPETITIVE HOLDINGS COMPANYCONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS(Unaudited)(millions of dollars)Nine Months EndedSeptember 30, 2010Cash flows - operating activities:Net income (loss)Adjustments to reconcile net income (loss) to cash provided by operating activities:Depreciation and amortizationDeferred income tax expense (benefit) - netNoncash interest expense related to pushed down debt of Parent (Note 4)Impairment of goodwill (Note 2)Increase of toggle notes in lieu of cash interest (Note 4)Net gain on sale of assetsUnrealized net gains from mark-to-market valuations of commodity positionsUnrealized net (gains) losses from mark-to-market valuations of interest rate swapsLosses on dedesignated cash flow hedges (interest rate swaps)Bad debt expense (Note 3)Stock-based incentive compensation expenseReversal of use tax accrual (Note 13)Other, netChanges in operating assets and liabilities:Impact of accounts receivable securitization program (Note 3)Margin deposits - netOther operating assets and liabilitiesCash provided by operating activitiesCash flows - financing activities:Issuances of long-term debt (Note 4)Repayments of long-term debt (Note 4)Net short-term borrowings under accounts receivable securitization program (Note 3)Decrease in other short-term borrowings (Note 4)Notes/loans from affiliatesDecrease in income tax-related note payable to OncorContributions from noncontrolling interests (Note 6)Debt issuance costsOther, netCash provided by (used in) financing activitiesCash flows - investing activities:Net notes/loans to affiliatesCapital expendituresNuclear fuel purchasesMoney market fund redemptionsProceeds from sale of assetsReduction of restricted cash related to letter of credit facility (Note 4)Other changes in restricted cashProceeds from sale of environmental allowances and creditsPurchases of environmental allowances and creditsProceeds from sales of nuclear decommissioning trust fund securitiesInvestments in nuclear decommissioning trust fund securitiesOther, netCash used in investing activitiesNet change in cash and cash equivalentsCash received from VIECash and cash equivalents - beginning balanceCash and cash equivalents - ending balanceSee Notes to Financial Statements.3 Nine Months EndedSeptember 30, 2009(3,777) 31,471(243)228(873)804(27)2428(59) )79478 (23)2,972(2,983)20(1,483)275479754

Table of ContentsENERGY FUTURE COMPETITIVE HOLDINGS COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(millions of dollars)ASSETSCurrent assets:Cash and cash equivalentsRestricted cash (Note 13)Trade accounts receivable - net (2010 includes 885 in pledged amounts related to a VIE (Notes 3 and I1))Notes receivable from parent (Note 12)Inventories (Note 13)Commodity and other derivative contractual assets (Note 9)Accumulated deferred income taxesMargin deposits related to commodity positionsOther current assetsTotal current assetsRestricted cash (Note 13)Receivable from affiliate (Note 12)Investments (Note 13)Property, plant and equipment - net (Note 13)Goodwill (Note 2)Identifiable intangible assets - net (Note 2)Commodity and other derivative contractual assets (Note 9)Other noncurrent assets, principally unamortized debt issuance costsTotal assetsSeptember 30,2010December 31,2009S 1522,4372,55347840,7379411,0091,4063932,3391 5LIABILITIES AND EQUITYCurrent liabilities:Short-term borrowings (2010 includes 228 related to a VIE (Notes 3 and I1))Long-term debt due currently (Note 4)Trade accounts payableTrade accounts and other payables to affiliatesNotes payable to affiliate (Note 12)Commodity and other derivative contractual liabilities (Note 9)Margin deposits related to commodity positionsAccrued income taxes payable to parent (Note 12)Accrued taxes other than incomeAccrued interestOther current liabilitiesTotal current liabilitiesAccumulated deferred income taxesCommodity and other derivative contractual liabilities (Note 9)Notes or other liabilities due affiliates (Note 12)Long-term debt held by affiliates (Note 12)Long-term debt, less amounts due currently (Note 4)Other noncurrent liabilities and deferred credits (Note 13)Total liabilitiesCommitments and Contingencies (Note 5)Equity (Note 6):EFCH shareholder's equityNoncontrolling interests in subsidiariesTotal equityTotal liabilities and equitySee Notes to Financial Statements.4 308 6021714331,9782,74947,463(6,521)79(6,442)40,737 (4,266)48(4,218)43,245953302748203

Table of ContentsENERGY FUTURE COMPETITIVE HOLDINGS COMPANYNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)1.BUSINESS AND SIGNIFICANT ACCOUNTING POLICIESDescriptionof BusinessEFCH, a wholly-owned subsidiary of EFH Corp., is a Dallas-based holding company that conducts its operations almost entirely through its whollyowned subsidiary, TCEH. TCEH is a Dallas-based holding company for subsidiaries engaged in competitive electricity market activities largely in Texas,including electricity generation, wholesale energy sales and purchases, commodity risk management and trading activities and retail electricity sales. Keymanagement activities, including commodity risk management, are performed on an integrated basis; consequently, there are no reportable business segments.See "Glossary" for definition of terms and abbreviations.Basis of PresentationThe condensed consolidated financial statements have been prepared in accordance with US GAAP and on the same basis as the audited financialstatements included in the 2009 Form 10-K with the exception of the prospective adoption of amended guidance regarding transfers of financial assets thatresulted in the accounts receivable securitization program no longer being accounted for as a sale of accounts receivable and the funding under the programnow reported as short-term borrowings as discussed in Note 3 and the prospective adoption of amended guidance that requires reconsideration ofconsolidation conclusions for all variable interest entities (VIEs) that resulted in the consolidation of TXU Receivables Company. All adjustments (consistingof normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been included therein. All intercompanyitems and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financialstatements prepared in accordance with US GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the condensed consolidatedinterim financial statements do not include all of the information and footnotes required by US GAAP, they should be read in conjunction with the auditedfinancial statements and related notes included in the 2009 Form 10-K. The results of operations for an interim period may not give a true indication of resultsfor a full year. All dollar amounts in the financial statements and tables in the notes are stated in millions of US dollars unless otherwise indicated.Use of EstimatesPreparation of financial statements requires estimates and assumptions about future events that affect the reporting of assets and liabilities as of thebalance sheet dates and the reported amounts of revenue and expense, including fair value measurements. In the event estimates and/or assumptions prove tobe different from actual amounts, adjustments are made in subsequent periods to reflect more current information. No material adjustments, other than thosedisclosed elsewhere herein, were made to previous estimates or assumptions during the current year.Changesin Accounting StandardsAs of January I, 2010, EFCH adopted new FASB guidance that requires reconsideration of consolidation conclusions for all VIEs and other entitieswith which EFCH is involved. See Note II for discussion of EFCH's evaluation of VIEs. There were no material effects on EFCH's financial statements as aresult of the adoption of this new guidance.5

Table of ContentsAs of January 1, 2010, EFCH adopted new FASB guidance regarding accounting for transfers of financial assets that eliminates the concept of aqualifying special purpose entity, changes the requirements for derecognizing financial assets and requires additional disclosures. Accordingly, the tradeaccounts receivable amounts under the accounts receivable securitization program discussed in Note 3 are prospectively reported as pledged balances, and therelated funding amounts are reported as short-term borrowings. Prior to January I, 2010, the activity was accounted for as a sale of accounts receivable inaccordance with previous accounting standards, which resulted in the funding being recorded as a reduction of accounts receivable. This new guidance doesnot impact the covenant-related ratio calculations in EFCH's debt agreements.2.GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETSGoodwillThe following table provides the goodwill balances as of September 30, 2010 and the changes in such balances for the nine months endedSeptember 30, 2010. None of the goodwill is being deducted for tax purposes.As of January 1,2010:Goodwill before impairment chargesAccumulated impairment chargesBalance as of January 1, 2010Changes - nine months ended September 30, 2010:Impairment chargeAs of September 30, 2010:Goodwill before impairment chargesAccumulated impairment chargesBalance as of September 30, 2010 18,322(8,070)10,252(4,100) 18,322(12,170)6,152Goodwill ImpairmentIn the third quarter 2010, EFCH recorded a 4.1 billion noncash goodwill impairment charge. The impairment charge reflected the estimated effect oflower wholesale power prices on the enterprise value of EFCH, driven by the sustained decline in forward natural gas prices, as indicated by EFCH's cashflow projections and declines in market values of securities of comparable companies.The calculation of the goodwill impairment involved the following steps: first, EFCH estimated the debt-free enterprise value of its business taking intoaccount future estimated cash flows and current securities values of comparable companies; second, EFCH estimated the fair values of the individualoperating assets and liabilities of its business; third, EFCH calculated "implied" goodwill as the excess of the estimated enterprise value over the estimatedvalue of the net operating assets; and finally, EFCH compared the implied goodwill amount to the carrying value of goodwill and recorded an impairmentcharge for the amount the carrying value of goodwill exceeded implied goodwill.The impairment determination involved significant assumptions and judgments. The calculations supporting the estimates of the enterprise value ofTCEH and the fair values of certain of its operating assets and liabilities utilized models that take into consideration multiple inputs, including commodityprices, discount rates, debt yields, securities prices of comparable companies and other inputs, assumptions regarding each of which could have a significanteffect on valuations. The fair value measurements resulting from these models are classified as non-recurring Level 3 measurements consistent withaccounting standards related to the determination of fair value (see Note 7).The goodwill impairment testing in the third quarter 2010 resulted from current market conditions, and the annual impairment testing required byaccounting rules remains scheduled for December 1, 2010. EFCH cannot predict the likelihood or amount of any future impairment.

Table of ContentsIdentifiable Intangible AssetsIdentifiable intangible assets reported in the balance sheet are comprised of the following:As of September 30, 2010GrossCarryingAmountIdentifiable Intangible AssetRetail customer relationshipFavorable purchase and sales contractsCapitalized in-service softwareEnvironmental allowances and creditsMining development costsTotal intangible assets subject to amortizationTrade name (not subject to amortization)Mineral interests (not currently subject to amortization)Total intangible assets As of December 31, 2742474428214861 189301154712331,38995593S S46370018499232 2,371 215374282125834S248326156780271,537955101S 2,593Amortization expense related to intangible assets (including income statement line item) consisted of:Three Months Ended September 30,Identifiable Intangible AssetIncome Statement Line2010Retail customer relationshipDepreciation and amortization Operating revenues/

Energy Future Competitive Holdings CO 1O-Q Quarterly report pursuant to sections 13 or 15(d) Filed on 10/29/2010 . Texas Competitive Electric Holdings Company LLC. The information on Energy Future Holdings Corp.'s website shall not be . Refers to Oncor Electric Delivery Company LLC, a direct, majority-owned subsidiary of Oncor Holdings and .