Feb. 27 (Bloomberg) -- TXU Corp., the Texas power producer that's being acquired in the largest-ever leveraged buyout, said fourth-quarter profit rose 33 percent on sales of low-cost electricity from coal- and nuclear-fueled plants.

Net income climbed to $475 million, or $1.03 a share, from $356 million, or 74 cents, a year earlier, Dallas-based TXU said today in a statement. The company yesterday said it agreed to a $45 billion buyout offer from a group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group.

TXU is benefiting from relatively low power-generation costs. In a state where about 70 percent of power production is fueled by natural gas, costs for which skyrocketed in 2005, four of TXU's five biggest plants are nuclear- or coal-fired.

``There were high expectations, but they met them,'' said Barry Abramson, who helps manage $28 billion in assets, including about 200,000 TXU shares, at Gamco Investors in Rye, New York. ``The power-generation business is where most of the upside should come from, and I think that's why private equity firms want to own it.''

Fourth-quarter net income from TXU Energy Holdings, which includes power generation and electricity sales, rose 34 percent to $484 million. Profit from power lines climbed 27 percent to $62 million. Total revenue fell 14 percent to $2.4 billion.

Fourth-quarter costs to generate power at coal-fueled plants in the U.S. were 35 percent to 53 percent lower than for the most efficient gas-fired plants, based on benchmark futures, prices, said Ian Synnott, an analyst at Natexis Bleichroeder Inc. in London.

Nuclear Output

Nuclear power plants generated electricity for as little as $18 per megawatt-hour, or 61 percent of the cost for the best gas-fueled plants, Synnott said. TXU said it had record nuclear output last year.

Excluding one-time items that TXU didn't identify, profit from businesses the company is keeping was $1.20 a share, matching the average of 11 analyst estimates compiled by Bloomberg.

Shares of TXU fell 90 cents to $67.03 in New York Stock Exchange composite trading. Before today, the stock had jumped 25 percent this year, largely on the buyout news.

To help gain approval for the company's sale, TXU and its buyers agreed to abandon plans for eight of 11 coal-fueled generators that Chief Executive Officer C. John Wilder was seeking to build. The expansion plan drew opposition from environmentalists and politicians, who raised concern over pollution from the generators.

Prices Slide

TXU's low generation costs helped soften the blow of a drop in power prices. Warmer weather than a year earlier sapped demand for electricity to heat homes and businesses. The benchmark price for wholesale power in Texas slid 42 percent from a year earlier to an average of $47.95 per megawatt-hour.

TXU is the largest Texas power producer and retailer. The second-largest power retailer in the state, Reliant Energy Inc., today posted its 13th loss in 17 quarters.

Reliant, which has power plants nine U.S. states, was hurt by mild weather across much of the nation. The average wholesale electricity price in PJM Interconnection LLC, the largest U.S. power market, tumbled 45 percent from a year earlier to $50.62 per megawatt-hour, according to data from Intercontinental Exchange Inc.

Reliant's loss narrowed to $53.7 million, or 17 cents a share, from $134.1 million, or 44 cents, partly because of a gain in the valuation of energy contracts that lock in prices.

TXU supplies electricity to more than 2.1 million homes and businesses in Texas and can generate more than 18,100 megawatts in the state.

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

Last Updated: February 27, 2007 16:11 EST