Aiming to strengthen its balance sheet,

TXU

(TXU)

bought back 20 million shares from

Merrill Lynch

Wednesday.

TXU, a Dallas-based energy company, said it bought the shares at Tuesday's closing price, $39.86. The company said the buyback will partly offset the coming issuance of up to 21.2 million shares under an equity-linked securities issue.

TXU said the buyback "gives TXU the flexibility to consider liability management transactions involving these high-cost equity-linked securities that could result in common stock issuances." The company said it has just over $1 billion of outstanding equity-linked securities, the terms of which require issuance of common stock in November 2004, November 2005 and May 2006.

The share repurchase and other liability management transactions are part of the company's plans to repurchase over $4 billion of debt, equity and equity-linked securities in 2004 and an additional $800 to $900 million in 2005.

"This is yet another step in TXU's ongoing liability management program, where we will use free cash flow and proceeds from asset sales and securitization bonds to strengthen our balance sheet and increase financial flexibility," said CEO John Wilder. "We do not expect the repurchases to materially impact debt to capitalization ratios for 2004 and 2005, and we remain on course for debt to capitalization ratios of less than fifty percent and EBITDA interest coverage ratios of more than 6 times in 2006."

TXU was flat Wednesday at $39.86.