said its second-quarter earnings rose 32.5% from the year-ago period, led by higher margins and lower operating costs.

The Dallas-based generation company earned $497 million, or $1.07 a share, in the quarter, compared with a earnings of $375 million, or 70 cents a share, a year ago. Operational earnings, excluding special items and discontinued operations, were $739 million, or $1.59 a share, in the recent quarter, compared with $381 million, or 78 cents a share, a year ago. On that basis, analysts surveyed by Thomson First Call were expecting earnings of $1.34 a share in the most recent quarter.

Second-quarter revenue rose 5.2% from a year-ago period to $2.67 billion, compared with the analysts' expectation of $2.64 billion.

TXU maintaned its forecast for 2006 operational earnings of $5.50 to $5.75 a share. For 2007, the company expects a 2% increase relative to the midpoint of the 2006 outlook. Analysts polled by Thomson First Call estimated $5.56 a share for 2006 and $5.48 a share for 2007.

"On average, electricity demand is growing in Texas at a rate equal to adding two large new power generation units each year, and in 2006 we have already set a record peak that is equal to four new units of capacity relative to 2005," the company said.

The company's shares were up 45 cents at $64.68 Tuesday.

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