TXU on Friday agreed to pay $150m to settle a class action lawsuit alleging that the US utility misled investors about its strategy and financial performance. Dallas-based TXU denied any liability in the action first brought in October 2002, but also agreed to look at tightening its corporate governance standards following negotiations lasting more than eight months. Counsel for the plaintiffs said the proposed settlement required these changes to be made. The proposed settlement is the latest stemming from a line of suits brought in the wake of the deregulation of the US energy industry and the subsequent collapse in power prices and derating of the sector following Enron's demise. The suit alleged that TXU and certain directors and officers misrepresented its ability to compete in the deregulated US power market and its commitment to its TXU Europe business, built up through a series of acquisitions. However, TXU issued a profits warning on October 4 2002, and 10 days later said it cut its dividend by from $2.40 to 50 cents a share and cease support for its European business in a bid to maintain the investment-grade rating of the parent company. TXU Europe had been weakened by a slide in UK wholesale electricity prices, and its assets have since been sold. The stock fell 31 per cent on October 14, and the class action was brought by purchasers of TXU securities between April 26 2001 - when they alleged management started provided false statements - and October 11 2002, the last business day before the restructuring announcement. The settlement is subject to approval by TXU's board and the court, and will also see the company reform its corporate governance. This will include more stringent criteria for determining director independence, and see at least two of its board members replaced by those meeting a tougher test by May 2006. Darren Robbins, lead counsel for the plaintiffs, said the changes would protect the integrity of the company for class members which retain holdings in TXU.
