8,650,000 Shares

Atmos Energy Corporation

Common Stock

          Atmos Energy Corporation is selling all of the shares.

          The shares trade on the New York Stock Exchange under the symbol “ATO.” On July 13, 2004, the last sale price of the shares as reported on the New York Stock Exchange was $24.91 per share.

          Investing in our common stock involves risks that are described in the “Risk Factors” section beginning on page S-7 of this prospectus supplement.

          The underwriters may also purchase up to an additional 1,289,393 shares at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus supplement to cover overallotments.

          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

          The shares will be ready for delivery on or about July 19, 2004.

Merrill Lynch & Co.

	JPMorgan

	Lehman Brothers

	UBS Investment Bank

	A.G. Edwards

	Edward Jones

The date of this prospectus supplement is July 13, 2004.

          We have not, and the underwriters have not, authorized any other person to provide you with any information or to make any representations not contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer of any securities other than the shares. This document is in two parts. The first part is this prospectus supplement, which describes specific terms of this offering and other matters relating to us and our financial condition. The second part is the accompanying prospectus, dated January 30, 2002, which gives more general information about securities we have offered from time to time, some of which may not apply to the shares we are currently offering. If the description of this offering or our operations varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus, as well as the information contained in any document incorporated by reference, is accurate as of the date of each such document only.

 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          Statements contained or incorporated by reference in this prospectus supplement that are not statements of historical fact are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933. Forward-looking statements are based on management’s beliefs as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future results and are not statements of fact, actual results may differ materially from those stated. Important factors that could cause future results to differ include, but are not limited to:

	•	successful completion, financing and integration of our pending acquisition of the operations of TXU Gas Company and other acquisitions we have made or may make in the future;
	•	adverse weather conditions, such as warmer-than-normal weather in our utility service territories or colder-than-normal weather that could adversely affect our natural gas marketing activities;
	•	national, regional and local economic conditions;
	•	increased competition from other energy suppliers and alternative forms of energy;
	•	regulatory trends and decisions, including deregulation initiatives and the impact of rate proceedings before various state regulatory commissions;
	•	changes in the availability and prices of natural gas, including the volatility of natural gas prices;
	•	effects of inflation;
	•	market risks beyond our control affecting our risk management activities, including market liquidity, commodity price volatility and counterparty creditworthiness;
	•	our ability to continue to access the capital markets; and
	•	other factors discussed in this prospectus supplement and our other filings with the SEC.

All of these factors are difficult to predict and many are beyond our control. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. When used in our documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “objective,” “plan,” “projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. We undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise. For further factors you should consider, please refer to the “Risk Factors” section beginning on page S-7 of this prospectus supplement and the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our annual report on Form 10-K for the year ended September 30, 2003 and in our quarterly reports on Form 10-Q for the quarterly periods ended December 31, 2003 and March 31, 2004.

          The terms “we,” “our,” “us” and “Atmos” refer to Atmos Energy Corporation and its subsidiaries unless the context suggests otherwise. The term “you” refers to a prospective investor. The abbreviations “Mcf,” “MMcf” and “Bcf” mean thousand cubic feet, million cubic feet and billion cubic feet, respectively.

          Except as otherwise indicated, all information in this prospectus supplement assumes that the underwriters have not exercised their overallotment option.

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RISK FACTORS

          You should consider carefully all of the information that is included or incorporated by reference in this prospectus supplement before investing in our common stock. In particular, you should evaluate the uncertainties and risks referred to or described below, which may adversely affect our business, financial condition or results of operations. Additional uncertainties and risks that are not presently known to us or that we currently deem immaterial, including those associated with the TXU Gas acquisition, may also adversely affect our business, financial condition or results of operations.

Factors Affecting Our Company and Our Industry

          The factors affecting our company and our industry that could impact our business, financial condition or results of operations include those factors described in this prospectus supplement and in the information incorporated by reference in this prospectus supplement. In particular, please refer to “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors that May Affect Our Future Performance” in our annual report on Form 10-K for the year ended September 30, 2003, which is incorporated by reference in this prospectus supplement, and those factors listed in this prospectus supplement in “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of some of the factors that could affect our future operations or performance.

Risks Relating to the TXU Gas Acquisition

          In addition to the factors affecting our company and our industry, the risks outlined below relating to the TXU Gas acquisition could also adversely affect our business, financial condition or results of operations.

          We have received a commitment from Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters for this offering, and one of its affiliates to provide the financing required for the TXU Gas acquisition through the bridge financing facility. Although we believe the terms of the commitment are suitable for our financing requirements in connection with the TXU Gas acquisition, we still must negotiate the final terms and the definitive documentation for the bridge financing facility. The pricing anticipated for the bridge financing facility would increase if the bridge financing facility cannot be syndicated on the terms contemplated by the commitment letter. Additionally, other terms and conditions of the bridge financing facility may not be as currently anticipated. Our obligations under the agreement for the TXU Gas acquisition are not conditioned upon our entering into the bridge financing facility on particular terms or completing the financing under the bridge financing facility. If we fail to enter into the bridge financing facility or it does not close, we would be required to seek alternative sources of financing for the TXU Gas acquisition. For regulatory and other reasons, we may not be successful in obtaining alternative financing on reasonable terms, if at all. If we could not obtain alternative sources of financing, we would be unable to complete the TXU Gas acquisition and would breach our obligations under the acquisition agreement.

          The bridge financing facility will be limited to a term of 364 days from the closing of the TXU Gas acquisition. As a result, we will be required to find long-term financing to refinance the bridge financing facility prior to its maturity. We intend to refinance the bridge financing facility with the proceeds we receive from long-term debt and additional common equity financings. The issuance of additional debt and common stock will require regulatory approvals in several of the states in which we operate and the filing of one or more registration statements with the SEC. There can be no assurance that we will obtain the necessary regulatory approvals to issue additional securities or that we will be able to issue long-term debt or common stock on reasonable terms, if at all. If we fail to refinance the bridge

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          In addition, holders of about 2.4 million shares of our common stock have registration rights that require us to register their shares for sale or that may allow them to participate in equity offerings under future registration statements. This may restrict our ability to raise capital through the issuance of common stock. Moreover, depending on future market conditions, sales of additional common stock would be dilutive to our shareholders, including investors who purchase shares of common stock in this offering.

          Assuming completion of this offering, the TXU Gas acquisition and the related financing, we will incur at least $1.7 billion of short-term debt through the bridge financing facility. On a pro forma basis, this would have increased our total debt, as of March 31, 2004, from $872.7 million to $2.6 billion and increased our ratio of total debt to capitalization (including short-term debt and current maturities of long-term debt), as of March 31, 2004, from 48.3% to 69.6%, after giving effect to the acquisition, this offering and the bridge financing, but not to our intention to refinance a portion of the bridge financing facility with additional common equity financings. This ratio could be greater depending on our working capital requirements during the upcoming winter heating season as we may make additional short-term borrowings to fund natural gas purchases. This increase could limit our flexibility in planning for, or reacting to, changes in our business or economic conditions. This increase may also result in a decline in our credit ratings. Following our announcement of the proposed TXU Gas acquisition, rating agencies placed us on negative credit watch and are currently reviewing our ratings. A decline in our ratings would increase our cost of capital and could limit our access to the credit markets. It could also increase the cost or reduce the extent of our commodity hedging activities. If we were to lose our investment-grade rating, the commercial paper markets and the commodity derivatives markets could become unavailable to us. This would increase our borrowing costs for working capital and the anticipated costs of our bridge financing facility. In addition, the borrowing capacity of our gas marketing affiliate would be reduced.

          The TXU Gas acquisition is larger than any of the nine other acquisitions we have made since 1986. In addition to operating the TXU Gas distribution system as our largest division, we will manage pipeline operations on a scale greater than in the past. As a consequence, we may experience the need for additional management attention and resources or unanticipated challenges or delays in integrating the TXU Gas operations into our business. In addition, employees important to the TXU Gas operations we are acquiring may decide not to continue employment with us. If these events occur, the acquired operations may not achieve the results or otherwise perform as expected.

          The financial results of the TXU Gas operations we are acquiring are subject to many of the same factors that affect our financial condition and results of operations, including weather sensitivity, extensive federal, state and local regulation, increasing gas costs, competition, market risks and national, regional and local economic conditions.

          In addition, the TXU Gas distribution operations we are acquiring do not have weather normalized rates. This means we would not be able to increase customers’ bills to offset lower gas usage when the weather is warmer than normal. As a result, the financial results for the TXU Gas operations we are acquiring may be adversely affected in the event of a warmer than normal heating season unless we are able to obtain weather normalization adjustments from the Texas regulatory authorities.

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          The TXU Gas transmission operations we are acquiring include interconnected natural gas transmission lines, underground storage reservoirs, compressor stations and related properties within Texas. The operation of these transmission facilities also involves risks. These include the possibility of breakdown or failure of equipment or pipelines, the impact of unusual or adverse weather conditions or other natural events and the risk of performance below expected levels of throughput or efficiency. Breakdown or reduced performance of a transmission facility may prevent the facility from performing under applicable sales agreements which, in certain situations, could result in termination of those agreements or incurring a liability for liquidated damages. Insurance, warranties, indemnities or performance guarantees may not cover any or all of the liquidated damages, lost revenues or increased expenses associated with a breakdown or reduction in performance of a transmission facility. If we are unsuccessful in managing these risks, our business, financial condition and results of operations could be adversely affected.

          The consummation of the TXU Gas acquisition depends on several factors, some of which are outside our control. For example, the acquisition and the bridge financing facility require the approval of regulatory authorities in three of the states in which we operate. Under the terms of the acquisition agreement, if we are unable to obtain these approvals by December 31, 2004, TXU Gas will have the right to terminate the acquisition agreement and require us to pay $15 million in satisfaction of our obligations under the acquisition agreement.

          The diligence conducted in connection with the TXU Gas acquisition and the indemnification provided in the acquisition agreement may not be sufficient to protect us from, or compensate us for, all losses resulting from the acquisition or TXU Gas’s prior operations. For example, under the terms of the acquisition agreement, the first $15 million of many indemnifiable losses are to be borne by us, and the agreement provides for sharing of losses with respect to unknown environmental matters that may affect the assets we are acquiring after we have borne $10 million in costs relating to such matters. In addition, under the terms of the acquisition agreement, the maximum aggregate amount of such losses for which TXU Gas will indemnify us is approximately $192.5 million. A material loss associated with the TXU Gas acquisition for which there is not adequate indemnification could negatively affect our results of operations, our financial condition and our reputation in the industry and reduce the anticipated benefits of the acquisition.

          We may not be aware of all of the risks associated with the TXU Gas acquisition. Any discovery of adverse information concerning the assets that we are acquiring after the closing of the acquisition could be material and, in many cases, would be subject to only limited rights of recovery. In addition, following completion of the TXU Gas acquisition, we will likely have to make capital expenditures, which may be significant, but which amount has not been fixed, to enhance or integrate the assets and operations we acquire.

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USE OF PROCEEDS

          We expect that we will receive net proceeds from this offering of approximately $205.1 million ($235.8 million if the underwriters’ overallotment option is exercised in full), after deducting the underwriting discount and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering, along with borrowings under the bridge financing facility, to pay the $1.925 billion purchase price for the TXU Gas acquisition. We intend to pay the other expenses associated with the TXU Gas acquisition through short-term debt borrowings. For more information on the operations of TXU Gas we are acquiring and the bridge financing facility, please see “The TXU Gas Acquisition.”

          Until the closing of the TXU Gas acquisition, we may use a portion of the net proceeds of this offering for working capital and other general corporate purposes. Pending application of the net proceeds, we intend to invest the net proceeds of this offering in short-term cash equivalent investments. If we do not consummate the acquisition, we intend to use the net proceeds of this offering for working capital and other general corporate purposes, including capital spending and purchases of natural gas, which would otherwise have been financed with short-term debt under our commercial paper program, or for other acquisitions.

 
MARKET PRICE OF COMMON STOCK AND DIVIDENDS

          Our common stock is listed on the New York Stock Exchange under the symbol “ATO.” The following table indicates the high and low closing prices of our common stock, as reported by the New York Stock Exchange, and the dividends that we paid per share during the periods indicated.

          The last reported sale price of our common stock on the New York Stock Exchange on July 13, 2004 was $24.91 per share.

          The quarterly dividends of $.305 per share paid during the first three quarters of fiscal 2004 would indicate an annual dividend rate for fiscal 2004 of $1.22 per share. We do not expect to change our current dividend policy as a result of the TXU Gas acquisition or the related financings. However, additional dividends for fiscal 2004 have not been declared and dividends on our shares of common stock are payable at the discretion of our board of directors out of legally available funds. Future payments of dividends, and the amounts of these dividends, will depend on our financial condition, results of operations, capital requirements and other factors.

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CAPITALIZATION

          The following table presents our short-term debt and capitalization as of March 31, 2004:

	•	on an actual basis;
	•	on an adjusted basis, giving effect to the issuance and sale of 8,650,000 shares at the public offering price of $24.75, after deducting the underwriting discount and commissions and estimated offering expenses payable by us, as if this offering occurred on March 31, 2004; and
	•	on a pro forma adjusted basis, giving effect to this offering, the borrowing under the bridge financing facility and the application of the estimated net proceeds of this offering and such borrowing to consummate the TXU Gas acquisition, as if these transactions all occurred on March 31, 2004.

          You should read this table in conjunction with the unaudited consolidated financial statements and related notes included in our quarterly report on Form 10-Q for the quarterly period ended March 31, 2004, which is incorporated by reference in this prospectus supplement. For more information on the terms of the TXU Gas acquisition and the bridge financing facility, see “The TXU Gas Acquisition.”

(1)	The amount of borrowings under the bridge financing facility is expected to be approximately $1.7 billion, which is the TXU Gas acquisition purchase price of $1.925 billion less the estimated net proceeds of this offering. If the underwriters exercise their overallotment option, our borrowings under the bridge financing facility would be correspondingly reduced.
(2)	Reflects an assumed short-term borrowing to pay estimated costs and expenses of approximately $9.3 million associated with the TXU Gas acquisition and the bridge financing facility.
(3)	The number of shares of common stock issued and outstanding excludes 1,703,746 shares of our common stock then issuable upon exercise of outstanding options and share unit awards and up to 1,289,393 shares then issuable upon the exercise of the underwriters’ overallotment option.
(4)	Total capitalization excludes the bridge financing facility, the current portion of long-term debt and other short-term debt.

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THE TXU GAS ACQUISITION

Description of the TXU Gas Acquisition

          On June 17, 2004, our wholly owned subsidiary, LSG Acquisition Corporation, entered into a definitive agreement with TXU Gas Company to acquire substantially all of its operations. TXU Gas is a subsidiary of TXU Corp., a public company. The following is a summary of the material provisions of the agreement. This summary is qualified in its entirety by reference to the agreement, which is included as an exhibit to our current report on Form 8-K, filed with the SEC on July 7, 2004, and incorporated by reference in this prospectus supplement. See “Incorporation by Reference.”

          Principal Terms. The agreement provides for the acquisition of the natural gas distribution and pipeline operations of TXU Gas and the assumption of certain liabilities related to those operations. Although the TXU Gas acquisition is structured as a merger between LSG Acquisition and TXU Gas, TXU Gas will, following the merger, be a surviving entity and remain a subsidiary of TXU Corp. Accordingly, we will treat the TXU Gas acquisition as an asset acquisition for accounting purposes. The purchase price, excluding transaction costs, for the acquisition is $1.925 billion, which is payable in cash. The price is subject to a decrease or increase if at the time of closing the working capital of TXU Gas, as defined in the acquisition agreement, is less or more than approximately $121 million. The purchase price is also subject to increase by the amount of any capital expenditures made by TXU Gas prior to closing that exceed its budgeted amounts. We are not assuming any indebtedness of TXU Gas in connection with the acquisition. Under the terms of the agreement, TXU Gas has agreed to repay or redeem all of its existing indebtedness and its preferred stock. We have guaranteed our subsidiary’s obligations under the agreement and expect to merge our subsidiary into us immediately after the closing. TXU Corp. will provide a guarantee of TXU Gas’s payment obligations under the acquisition agreement at the time of the closing.

          Representations and Warranties. TXU Gas has made representations and warranties as to its historical financial statements, material liabilities, operation in the ordinary course and absence of any material adverse change in its assets or business. It has also provided a representation and warranty as to the compliance of its recent SEC filings with the applicable SEC requirements. Other representations and warranties address its permits, title to assets, material contracts, environmental matters, regulatory matters, labor matters, benefits matters, tax matters, insurance matters, transactions with affiliates and other matters.

          Indemnification. TXU Gas has agreed to indemnify us against a breach of specified representations and warranties for a period of 15 months after closing for aggregate losses that exceed $15 million. However, TXU Gas has also agreed to retain all liabilities relating to pre-closing tax and employee matters, environmental liabilities that are related to its former manufactured gas plants, which we are not acquiring, or that are not related to the assets we are acquiring. The indemnity from TXU Gas relating to these retained liabilities is without limit as to time or amount. In addition, for three years after the closing, we have agreed to share any environmental liabilities associated with the assets acquired that are not disclosed in the acquisition agreement. In this regard, TXU Gas will indemnify us against environmental liabilities involving at least $1 million once these liabilities exceed $10 million in the aggregate and TXU Gas will pay 50% of the amount of these liabilities between $10 million and $20 million and 100% of these liabilities thereafter. The maximum aggregate indemnity payable by TXU Gas on account of these representations and warranties or environmental liabilities associated with the assets being acquired is approximately $192.5 million.

          Employees. We have agreed to offer to employ all employees of TXU Gas as of the closing of the acquisition, including a limited number of employees transferred to TXU Gas prior to the closing who are involved in the TXU Gas operations we are acquiring. The initial positions and base salaries of the TXU Gas employees who accept employment with us will be comparable to the positions and base salaries held by them immediately prior to the closing of the TXU Gas acquisition, and we have agreed that the employees’ base salaries will not be reduced for at least one year after the closing of the TXU Gas

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          Regulatory Approvals. The agreement contains customary closing conditions, including clearance under the Hart-Scott-Rodino Act antitrust notification procedures and the absence of a material adverse effect on the assets or business of TXU Gas. In addition, our obligation to close is subject to our receipt of satisfactory regulatory approvals in Virginia, Missouri and Iowa and the absence of pending or threatened actions or proceedings by specified regulatory authorities in Texas that would materially and adversely affect our ability to conduct the acquired operations in all material respects as now conducted by TXU Gas.

          Termination of the Agreement. Both parties must use their reasonable efforts to take the actions required to consummate the acquisition as contemplated by the agreement. However, we are not required to agree to any material burden in order to obtain any required regulatory consent or approval. If we have not obtained our three state regulatory approvals by December 31, 2004 and the other conditions to closing have been satisfied, TXU Gas may terminate the agreement and require us to pay $15 million in full satisfaction of our obligations under the agreement. In addition, we or TXU Gas may terminate the agreement if the applicable closing conditions are not satisfied or waived by December 31, 2004. The closing date may be extended for up to 90 days to the extent required for TXU Gas to repair any material casualty loss before closing.

          Transition Services. At closing, TXU Gas and some of its affiliates will enter into transition service agreements with us to provide call center, meter reading, customer billing, collections, information reporting, software, accounting, administrative and other services traditionally provided to TXU Gas. The initial term of each of these agreements is for one year from closing. During the initial term, any particular service may be terminated on 90 days’ notice and, after the initial term, the agreements continue on a month to month basis and are terminable on 30 days’ notice. The agreements require us to pay the service providers’ costs for the services.

          Closing. We expect to close the TXU Gas acquisition by the end of calendar year 2004.

TXU Gas Company

          The TXU Gas operations we are acquiring are regulated businesses engaged in the purchase, transmission, distribution and sale of natural gas in the north-central, eastern and western parts of Texas.

          TXU Gas provides gas distribution service through 26,431 miles of distribution mains. TXU Gas purchases, distributes and sells natural gas to over 1.4 million residential and business customers in approximately 550 cities and towns, including the 11-county Dallas/ Fort Worth metropolitan area. The distribution service rates that TXU Gas charges its residential and business customers have been generally established by the municipal governments of the cities and towns served, with the Texas Railroad Commission having appellate, or in some instances, primary jurisdiction. The majority of TXU Gas’s residential and business customers use natural gas for heating, and their needs are directly affected by the mildness or severity of the heating season.

          TXU Gas owns and operates interconnected natural gas transmission lines, five underground storage reservoirs (including a salt dome facility), 20 compressor stations and related properties, all within Texas. With a system consisting of 6,162 miles of transmission and gathering lines, TXU Gas is one of the largest intrastate pipeline operators in Texas. Through these facilities, it transports natural gas to its distribution system and other customers.

          The gas distribution and transmission lines of TXU Gas have been constructed over lands of others pursuant to easements or along public highways, streets and rights-of-way as permitted by law.

          TXU Gas is wholly intrastate in character and performs distribution utility operations and pipeline transportation services in the State of Texas subject to regulation by municipalities in Texas and the Texas

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          In May 2003, TXU Gas filed, for the first time, a system-wide rate case for its distribution and pipeline operations. The case was filed in all incorporated cities served by the distribution operations, and at the Texas Railroad Commission for the pipeline business and for unincorporated areas served by the distribution operations. All of the cities took action on the case, and TXU Gas appealed their actions to the Texas Railroad Commission. Although significant portions of the relief requested by TXU Gas were denied, on May 25, 2004, the Texas Railroad Commission ruled that TXU Gas could increase its charges to its pipeline and distribution customers by approximately $11.7 million per year.

          For more information on TXU Gas, please see the historical consolidated financial statements and related notes of TXU Gas for the years ended December 31, 2003, 2002 and 2001 and for the quarterly period ended March 31, 2004, which are included in our current report on Form 8-K filed with the SEC on July 7, 2004 and incorporated by reference in this prospectus supplement. See “Incorporation by Reference.”

Financing for the Acquisition

          We have received a commitment from Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters in this offering, and its affiliate Merrill Lynch Capital Corporation to provide a senior unsecured credit facility in the amount of $1.925 billion to finance, or backstop the issuance of commercial paper to finance, the TXU Gas acquisition. The following is a brief summary of the material terms of the commitment letter. This summary is qualified in its entirety by reference to the commitment letter, which is filed as an exhibit to our current report on Form 8-K, filed with the SEC on July 7, 2004, and incorporated by reference in this prospectus supplement.

          The commitment is subject to the absence of a material adverse effect on our business and assets after giving effect to the acquisition, the absence of any new adverse information affecting us, TXU Gas or the TXU Gas acquisition that would materially impair the syndication of the bridge financing facility, and other specified conditions. The commitment does not contain other conditions relative to diligence or market conditions.

          The bridge financing facility provided for in the commitment would be available at the time of the closing of the TXU Gas acquisition upon satisfaction of its conditions. The amount of the bridge financing facility would be reduced to the extent we obtain acquisition financing prior to the closing of the TXU Gas acquisition, such as the proceeds of this offering. The bridge financing facility would mature 364 days after the closing date of the acquisition. We would be required to reduce the indebtedness outstanding under the bridge financing facility to the extent of the net cash proceeds from the sales of debt and equity securities after the closing of the acquisition, with exceptions for sales of commercial paper, purchase money financings and other sales to be agreed upon. Availability under the bridge financing facility would expire on December 31, 2004, unless the date for closing of the acquisition is extended under the merger agreement to allow TXU Gas to repair any casualty.

          We plan to fund the acquisition through commercial paper borrowings, if economically practicable, the rate for which will be based on prevailing commercial paper pricing. In such event, the bridge financing facility would serve as a backup liquidity facility for our commercial paper borrowings. Should the commercial paper market be unavailable to us, we would draw directly upon the bridge financing facility. The pricing under the bridge financing facility would be tied to our credit ratings at Standard & Poor’s Rating Services or Moody’s Investors Service. Under the bridge financing facility, in addition to any commitment and utilization fees, the pricing for funding to which LIBOR is applicable could range from 0.625% per year over LIBOR at our current ratings level to 1.25% per year over LIBOR at the lowest investment-grade rating. In the absence of an investment-grade credit rating, the pricing would be 1.75% per year over LIBOR.

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          Other conditions to the availability under the bridge financing facility include the negotiation of reasonably satisfactory definitive financing documentation and the renewal of our existing commercial paper facility, which matures on July 26, 2004. We have begun the process of renewing our existing commercial paper facility, which is subject to customary conditions, and expect to complete this renewal prior to the commercial paper facility’s expiration date. Like the commercial paper facility, the bridge financing facility would require compliance with a maximum ratio of debt to capitalization, which may be higher than the ratio specified in our existing commercial paper facility, and continued compliance with specified affirmative and negative covenants.

          We intend to seek long-term debt and additional common equity financings to refinance the bridge financing facility before its maturity. We have hedged the Treasury yield component for $675 million of this future long-term debt financing.

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

          The following unaudited pro forma combined financial statements are based on our historical consolidated financial statements and TXU Gas’s historical financial statements, each incorporated by reference in this prospectus supplement, adjusted to give effect to the TXU Gas acquisition, this offering and the proposed bridge financing for the TXU Gas acquisition. The unaudited pro forma combined statement of income for the six months ended March 31, 2004 and for the twelve months ended September 30, 2003 gives effect to the TXU Gas acquisition, this offering and the bridge financing for this acquisition as if each had occurred on October 1, 2002. The unaudited pro forma combined balance sheet as of March 31, 2004 gives effect to the TXU Gas acquisition, this offering and the bridge financing for this acquisition, as if each had occurred on March 31, 2004. The unaudited pro forma combined financial information does not give effect to the anticipated refinancing of the bridge financing facility with long-term debt and additional common equity financings.

          The unaudited pro forma combined financial statements reflect pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions we believe are reasonable but are subject to change. In our opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The unaudited pro forma combined financial statements do not purport to represent what our results of operations or financial position would actually have been had the TXU Gas acquisition, this offering and the bridge financing for the acquisition occurred on such dates or to project our results of operations or financial position for any future date or period. The unaudited pro forma combined financial statements include adjustments that reflect our preliminary estimates of the allocation of the purchase price to the acquired assets and assumed liabilities of TXU Gas. The preliminary purchase price allocation is subject to change as more detailed analyses are completed and additional information related to the fair values of TXU Gas’s assets and liabilities assumed in the TXU Gas acquisition become available. Final purchase accounting adjustments may differ materially from the pro forma adjustments presented herein. The unaudited pro forma combined financial statements also include the receipt of the estimated net proceeds of this offering, the incurrence of the indebtedness under the bridge financing facility and related fees and expenses. The unaudited pro forma combined financial statements do not reflect any operating efficiencies and cost savings that we may achieve with respect to the combined entities nor any expense associated with achieving these benefits. Further, the pro forma combined financial statements do not give any effect to the interest income that may be derived from investing the proceeds of this offering in short-term cash equivalent investments between the closing of the offering and the closing of the TXU Gas acquisition.

          The historical financial statements of TXU Gas are based on TXU Gas’s historical financial statements as filed with the SEC. To prepare the unaudited pro forma combined statement of income for the year ended September 30, 2003, we used our consolidated statement of income for the twelve months ended September 30, 2003 and TXU Gas’s statement of income for the twelve months ended December 31, 2003. To prepare the unaudited pro forma combined statement of income for the six months ended March 31, 2004, we used our consolidated statement of income for the six months ended March 31, 2004 and derived TXU Gas’s statement of income for the six months ended March 31, 2004 using TXU Gas’s unaudited statement of income for the three months ended March 31, 2004 and its audited statement of income for the twelve months ended December 31, 2003, which are incorporated by reference in this prospectus supplement, and TXU Gas’s unaudited statement of income for the nine months ended September 30, 2003, which is not incorporated by reference in this prospectus supplement.

          You should read the following unaudited pro forma combined financial information in conjunction with our audited and unaudited consolidated financial statements and the related notes incorporated by reference in this prospectus supplement and TXU Gas’s audited and unaudited financial statements and related notes, which are included in our current report on Form 8-K filed with the SEC on July 7, 2004 and incorporated by reference in this prospectus supplement. See “Incorporation by Reference.”

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UNAUDITED PRO FORMA COMBINED BALANCE SHEET

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

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UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME