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Duke Energy 02/01/06_Slides

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Duke Energy 02/01/06_Slides

  1. 1. 2005 Earnings Review and 2006 Outlook February 1, 2006 Paul Anderson Chairman and Chief Executive Officer
  2. 2. Safe Harbor Statement This document includes statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements regarding benefits of the proposed mergers and restructuring transactions, integration plans and expected synergies, anticipated future financial operating performance and results, including estimates of growth. These statements are based on the current expectations of management of Duke Energy. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this document. For example, (1) the companies may be unable to obtain shareholder approvals required for the transaction; (2) the companies may be unable to obtain regulatory approvals required for the transaction, or required regulatory approvals may delay the transaction or result in the imposition of conditions that could have a material adverse effect on the combined company or cause the companies to abandon the transaction; (3) conditions to the closing of the transaction may not be satisfied; (4) problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; (5) the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies; (6) the transaction may involve unexpected costs or unexpected liabilities, or the effects of purchase accounting may be different from the companies’ expectations; (7) the credit ratings of the combined company or its subsidiaries may be different from what the companies expect; (8) the businesses of the companies may suffer as a result of uncertainty surrounding the transaction; (9) the industry may be subject to future regulatory or legislative actions that could adversely affect the companies; (10) commercial, industrial and residential growth in the companies’ service territories may not increase as anticipated; (11) the weather and other natural phenomena could adversely affect the companies; and (12) the companies may be adversely affected by other economic, business, and/or competitive factors. Additional factors that may affect the future results of Duke Energy and Cinergy are set forth in their most recent Form 10-Q and other filings with the Securities and Exchange Commission (quot;SECquot;), which are available at www.duke-energy.com/investors and www.cinergy.com/investors, respectively. Duke Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2
  3. 3. Disclosure Statements Additional Information and Where to Find It In connection with the proposed transaction, a registration statement of Duke Energy Holding Corp. (Registration No. 333- 126318), which includes a preliminary prospectus and a preliminary joint proxy statement of Duke Energy and Cinergy, and other materials have been filed with the SEC and are publicly available. WE URGE INVESTORS TO READ THE DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS WHEN IT BECOMES AVAILABLE AND THESE OTHER MATERIALS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT DUKE ENERGY, CINERGY, DUKE ENERGY HOLDING CORP., AND THE PROPOSED TRANSACTION. Investors will be able to obtain free copies of the joint proxy statement-prospectus as well as other filed documents containing information about Duke Energy and Cinergy at www.sec.gov, the SEC’s Web site. Free copies of Duke Energy’s SEC filings are also available on Duke Energy’s Web site at www.duke- energy.com/investors, and free copies of Cinergy’s SEC filings are also available on Cinergy’s Web site at www.cinergy.com/investors. Participants in the Solicitation Duke Energy, Cinergy and their respective executive officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from Duke Energy’s or Cinergy’s stockholders with respect to the proposed transaction. Information regarding the officers and directors of Duke Energy is included in its definitive proxy statement for its 2005 annual meeting filed with the SEC on March 31, 2005. Information regarding the officers and directors of Cinergy is included in its definitive proxy statement for its 2005 annual meeting filed with the SEC on March 28, 2005. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the registration statement and proxy statement and other materials to be filed with the SEC in connection with the proposed transaction. Regulation G This document includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is included in the printed version of these slides which can be downloaded from our investor relations website at: www.duke-energy.com/investors/publications/gaap/ 3
  4. 4. Highlights for 2005 4Q05 4Q04 2005 2004 Reported Basic EPS $ 0.65 $ 0.38 $ 1.94 $ 1.59 Adjustments ** (0.22) (0.09) (0.15) (0.08) Ongoing Basic EPS $ 0.43 $ 0.29 $ 1.79 $ 1.51 Franchised Electric benefited from favorable summer weather and strong bulk power ■ sales; partially offset by a $46 million charge for storm damage and higher O&M Natural Gas Transmission reported higher earnings on U.S. business expansion, new ■ Canadian assets and continued benefits from the stronger Canadian dollar Field Services delivered another record year, benefiting from strong commodity prices ■ and gas marketing International Energy reported record earnings on improving operations in Latin ■ America, favorable foreign currency translation of the Brazilian real and higher margins at National Methanol Crescent Resources set an earnings record, boosted by sales of multi-family projects, ■ residential lots and legacy land DENA’s continuing operations, which are reported in “Other”, ended the year with an ■ ongoing loss of about $120 million 4 ** Adjustments include special items and discontinued operations not associated with Crescent Resources
  5. 5. Disposition of DENA’s Discontinued Operations Generation assets ■ Agreed to sell DENA’s plants in the West and Northeast to LS Power for ● $1.54 billion, assuming certain performance measures are met, and no less than $1.48 billion ● Expect to close before June 2006 Contracts ■ Barclays Capital transaction closed in early January ● Essentially eliminated our credit, collateral, market and legal risks ● associated with DENA’s derivative trading positions ● Novation process on plan Including the Barclays transaction, about 95% of the trading and ● marketing portfolio has been transferred More than 85% of the gas transportation, gas storage and structured ● contracts have been sold ● Certain contracts will go away with the sale of the generation assets Expect to complete disposition of these operations by mid-2006 ■ 5
  6. 6. Merger Update State approvals ■ Received approvals from the state commissions in South ● Carolina, Kentucky and Ohio Hearings completed in Indiana and North Carolina ● Nuclear Regulatory Commission approval expected shortly ■ Filed amendment to the SEC S-4 filing on January 31, 2006 ■ Shareholder vote targeted for March 10th ■ 6
  7. 7. Duke Energy 2006 Short-Term Incentive Plan Assumptions ■ Includes 9 months of Cinergy’s operations ● ● Assumes merger closing at April 1st, which is our internal ready date ● Includes synergy savings and sharing with customers ● Excludes costs-to-achieve, which will be classified as special item Earnings per share incentive ■ Incentive target of $1.90 per ongoing diluted share, which is ● approximately 10% above ongoing EPS results for 2005 ● Minimum threshold at $1.75 per ongoing diluted share, which exceeds the ongoing diluted EPS for 2005 5% reduction in management incentive in the event of any employee, ■ contractor or sub-contractor fatality 7
  8. 8. 2006 Outlook Fred Fowler President and Chief Operating Officer
  9. 9. Expectations for 2006 Duke Power ■ 2006 ongoing segment EBIT is anticipated to be ● Franchised essentially flat compared with 2005 Electric Assumptions ■ Excludes merger-related costs-to-achieve, cost savings ● Duke Power and sharing ● Customer growth of 2% ● Normal weather ● Clean Air amortization continues on plan; actual cash expenditures will be about $400 million Expectations for Cinergy’s franchised electric and gas ■ businesses will be provided after merger closing 9
  10. 10. Expectations for 2006 Natural Gas Transmission ■ 2006 ongoing segment EBIT is also anticipated to be ● Natural Gas essentially flat compared with 2005 Transmission Assumptions ■ Higher earnings from expansion projects will be offset by: ● DEGT ● Approximately $25 million of interest expense at Gulfstream Union Gas ● Recent formation of the Canadian income trust ● Demand growth for natural gas supplies will provide opportunities to deliver annual long-term ongoing earnings growth in the range of 3 – 5% 10
  11. 11. Expectations for 2006 Field Services ■ 2006 ongoing equity earnings are anticipated to be ● Field approximately $500 million Services Assumptions ■ Average crude oil price of $61 per barrel ● DEFS Equity earnings sensitivity ■ $1 per barrel increase in crude oil prices increases equity ● earnings by approximately $15 million ● Partially offset by approximately $5 million in Other due to de-designated hedges reported there 11
  12. 12. Expectations for 2006 Duke Energy International ■ 2006 ongoing segment EBIT is anticipated to be ● International approximately $275 million Assumptions ■ 96% contracted in Brazil ● DEI ● Normal hydrology for Latin American operations Expectations for Cinergy’s international businesses ■ will be provided after merger closing 12
  13. 13. Expectations for 2006 Crescent Resources ■ 2006 ongoing segment EBIT from continuing and ● Crescent discontinued operations is anticipated to be approximately Resources $250 million Crescent’s book value at year-end 2005 was $1.3 billion ■ Crescent Expected to contribute at least $100 million of positive ■ Resources net cash flow to Duke Energy 13
  14. 14. Expectations for 2006 Other EBIT for current Duke Energy operations ■ Results for 2006 are anticipated to be approximately $330 ● million in ongoing net expenses, including DENA’s Other continuing operations ● $20 million increase in “Other”, excluding DENA, is due to an accounting change related to timing of recognition of DENA’s executive stock awards and a shift in shared services costs continuing from the business units to corporate governance operations DukeNet DENA’s Continuing Operations ■ Corporate 2006 ongoing losses are expected to be approximately governance ● Other $110 million parent-level ● Lower gross margins in the Midwest are partially offset by activities lower G&A expenses and the wind-down of DETM compared with 2005 Expectations for Cinergy’s non-regulated businesses ■ will be provided after merger closing 14
  15. 15. Expectations for 2006 Cinergy’s operations ■ Ongoing EBIT contribution for nine months of 2006 is anticipated to be ● approximately $800 million Assumptions ■ Excludes merger-related costs-to-achieve, cost savings and revenue ● reductions ● Base rate increases as already publicly disclosed $50 million for CG&E’s transmission and distribution business ● ● $10 million for ULH&P ● $10 million for PSI Sales growth rate of approximately 1.6% ● ● No synfuel earnings - adjustments are handled at the Duke Energy level 15
  16. 16. Merger Savings and Costs-to-Achieve Extremely confident in ability to meet merger targets as presented ■ on September 15, 2005 Five-year targets ■ Gross savings of slightly more than $1.3 billion ● ● Costs to achieve of approximately $675 million ● Net savings of about $650 million 2006 expectations ■ Approximately $140 million in merger cost savings ● ● Approximately $140 million of cost sharing with customers ● Cost sharing assumed to commence June 1st ● $140 million in 2006; $90 million in 2007 16
  17. 17. 2006 Outlook David Hauser Group Vice President and Chief Financial Officer
  18. 18. 2006 Earnings per Share Assumptions Net income of $2.225 billion relates to $1.90 incentive target ■ 3-cent benefit due to purchase accounting adjustments ● ● 5-cent benefit related to synfuel Current oil prices may prohibit operation of these facilities this year ● ● Natural hedge with Field Services and National Methanol when crude exceeds $60 per barrel Share buybacks ■ SEC restrictions prohibit the repurchase of any meaningful number of ● shares until after the shareholder vote on the merger ● While no definitive decisions have been made, our plans include a stock buyback of approximately $1 billion in 2006 Ongoing mark-to-market earnings are not excluded in the $1.90 ■ 18
  19. 19. Combined Company: Cash Flow ($ in millions) 2006 Estimate Primary Sources: Net income $ 2,225 (Based on $1.90 per ongoing diluted share target) Depreciation & amortization 2,075 NBV of ongoing Crescent sales 425 NBV of asset and equity investment sales 1,475 Book/tax timing differences 700 Other sources/(uses), net (650) Total Sources $ 6,250 Primary Uses: Capital expenditures $ (4,325) Dividends (1,450) Total Uses $ (5,775) $ 475 Positive Net Cash 19
  20. 20. 2006 Capital Expenditures ($ in millions) Maintenance Environmental Expansion Total Franchised Electric $1,200 $400 $100 $1,700 Natural Gas Transmission 475 -- 475 950 Crescent Resources -- -- 650 650 International 30 -- 20 50 Other 25 -- -- 25 Duke Energy Total $1,730 $400 $1,245 $3,375 Cinergy 465 465 20 950 Total $2,195 $865 $1,265 $4,325 20
  21. 21. Other Financial Items Assumptions are for the combined company ■ Total debt at year-end 2005 was $21.7 billion; no material changes ■ expected for 2006 Debt to capitalization should be approximately 46% at year-end 2006 ■ Interest expense for 2006 is expected to be approximately $1.2 billion ■ Increased interest expense associated with Cinergy’s debt is partially ● offset by the deconsolidation of Field Services’ debt FFO interest coverage is expected to be 4.8x ■ Effective tax rate expected to be approximately 35% ■ Approximately 5 cents related to interest income on prior period tax ■ credit 21
  22. 22. Duke Energy We are Duke Energy, a leading energy company located in the Americas with an 2006 Charter affiliate real estate operation Our purpose is to create superior value for our customers, employees, communities and investors through the production, conversion, delivery and sale of energy and energy services To be an energy industry leader in a new era of growth, we must: ■ Establish an industry-leading electric power platform through successful execution of the merger with Cinergy. ■ Continue to build a high-performance culture focused on safety, diversity and inclusion. ■ Deliver on our 2006 financial objectives and position the company for growth in 2007 and beyond. ■ Complete the Duke Energy North America exit and pursue strategic portfolio opportunities. ■ Build credibility through leadership on key policy issues, transparent communications and excellent customer service. We will be successful when: ■ Our investors realize a superior return on their investment. ■ Our customers and suppliers benefit from our business relationships. ■ The communities in which we operate value our citizenship. ■ Every employee starts each day with a sense of purpose, and ends each day safely with a sense of accomplishment. 22
  23. 23. Duke Energy Corporation Non-GAAP Reconciliation Schedules 2006 Earnings per Share (“EPS”) Incentive Target Measure The slides and prepared remarks for the February 1, 2006 Earnings Conference Call include a discussion of the Company's 2006 EPS incentive target of $1.90 and the minimum payout level of $1.75. This EPS measure is used for employee incentive bonuses and should track ongoing diluted EPS, which is a non-GAAP financial measure as it represents diluted EPS from continuing operations plus the per-share effect of any discontinued operations from the Company’s Crescent Resources real estate unit, adjusted for the per-share impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing diluted EPS is reported diluted EPS from continuing operations which includes the impact of special items. Due to the forward-looking nature of this non-GAAP financial measure, information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to project any special items for 2006. 2006 and Beyond Ongoing Segment EBIT and Related Growth Percentages The Company’s slides and prepared remarks for the February 1, 2006 Earnings Conference Call include a discussion of forecasted ongoing EBIT for 2006 for certain segments, including a discussion of ongoing equity earnings for Field Services, Other, and ongoing EBIT contributions for Cinergy’s operations post merger, in addition to, for certain segments, a discussion of a forecasted ongoing segment EBIT growth rates, which are based on historical and forecasted ongoing segment EBIT. Ongoing segment or Other EBIT, and related growth rates, are non-GAAP financial measures as they represent reported segment or Other EBIT adjusted for “special items,” which represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing segment or Other EBIT is reported segment or Other EBIT, which represents EBIT from continuing operations, including any “special items.” Due to the forward-looking nature of forecasted ongoing segment or Other EBIT and related growth rates, for future periods, information to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures is not available at this time as the Company is unable to project any “special items” for any future periods. 23
  24. 24. Duke Energy Corporation Non-GAAP Reconciliation Schedules 2006 Segment EBIT from Continuing and Discontinued Operations for Crescent The Company’s slides and prepared remarks for the February 1, 2006 Earnings Conference Call include a discussion of Crescent Resources’ segment EBIT from continuing and discontinued operations for 2006. As the Company’s segment GAAP measure is EBIT from continuing operations, the combination of segment EBIT from continuing and discontinued operations represents a non-GAAP financial measure. The most directly comparable GAAP measure for Crescent’s segment EBIT from continuing and discontinued operations is reported segment EBIT from continuing operations. Information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to forecast those Crescent operations, if any, which will be discontinued operations during 2006. Post-2007 Ongoing Diluted EPS Growth The Company’s prepared remarks for the February 1, 2006 Earnings Conference Call include a discussion of the expected range of growth in ongoing diluted EPS after 2007. These percentages are based on anticipated ongoing diluted EPS amounts for future periods. This ongoing diluted EPS measure is a non-GAAP financial measure as it represents diluted EPS from continuing operations plus the per-share effects of any discontinued operations from the Company’s Crescent Resources real estate unit, adjusted for the impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. Management believes that the presentation of ongoing diluted EPS provides useful information to investors, as it allows them to more accurately compare the Company’s ongoing performance across all periods. The most directly comparable GAAP measure for ongoing diluted EPS is reported diluted EPS from continuing operations which includes the impact of special items. Due to the forward-looking nature of ongoing diluted EPS for future periods, information to reconcile such non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to forecast any special items for future periods. 24
  25. 25. Duke Energy Corporation Non-GAAP Reconciliation Schedules FFO Interest Coverage The Company's slides and script for the February 1, 2006 Earnings Conference Call include a discussion of expected FFO Interest Coverage Ratios for 2006, which is a non-GAAP financial measure. Funds from Operations (numerator) is defined as net cash provided by operating activities on a GAAP basis. Adjustments to the GAAP number primarily include changes in working capital and adjustments for off-credit entities. Cash interest paid (numerator) and interest expense (denominator) on a GAAP basis are adjusted for interest paid on off-credit entity debt and capitalized interest, which includes AFUDC interest. 25
  26. 26. Duke Energy Corporation Field Services Pro-Forma Segment Earnings Reg G Reconciliation (Amounts in millions) Year-Ended 12/31/2005 DEFS LLC Net Income (100%) - Year Ended 12/31/2005 $ 2,166 Less Special Items: Gain on sale of TEPPCO (1,134) Pro-Forma DEFS LLC Net Income (100%) - Year Ended 12/31/2005 1,032 Duke Energy ownership % 50% Pro-Forma Equity Earnings 516 Adjustment for 2005 hedge impacts (238) Pro-Forma Pretax Earnings Impact, Net of Hedging $ 278 Year-Ended 12/31/2006 Projected 2006 DEFS Equity Earnings (50%) $ 500 Pro-Forma Pretax Earnings Impact, Net of Hedging (278) Net Increase $ 222 (approximately $220 million)
  27. 27. DUKE ENERGY CORPORATION ONGOING TO REPORTED EARNINGS RECONCILIATION December 2004 Quarter-to-date (Dollars in Millions) Special Items (Note 1) Discontinued Gains (losses) Gains Adjustment Operations, on sales and Total Reported Ongoing (Losses) on to Captive Loss on excluding impairments Adjustments Earnings Earnings sale Insurance Asset Crescent of equity of assets Reserves Exchanges Resources investments SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS Franchised Electric $ 252 $ - $ - $ - $ - $ - $ - $ 252 Gas Transmission 328 4 11 - - - 15 343 Field Services 124 - - - - - - 124 Duke Energy North America (41) (30) A - - - - (30) (71) International Energy 64 (3) - - - - (3) 61 Crescent 50 - - - - - - 50 Total reportable segment EBIT 777 (29) 11 - - - (18) 759 Other (80) - (1) 64 B (4) C - 59 (21) Total reportable segment EBIT and other EBIT $ 697 $ (29) $ 10 $ 64 $ (4) $ - $ 41 $ 738 EARNINGS FOR COMMON Total reportable segment EBIT and other EBIT $ 697 $ (29) $ 10 $ 64 $ (4) $ - $ 41 $ 738 Foreign Currency Translation Gains (Losses) 1 - - - - - - 1 Interest Income and other 18 - - - - - - 18 Interest Expense (297) - - - - - - (297) Minority Interest (Expense) Benefit - Interest/Income Tax Expense 11 - - - - - - 11 Income taxes on continuing operations (154) 10 (3) (22) 1 - (14) (168) Discontinued operations, net of taxes 1 - - - - 54 54 55 Trust Preferred/Preferred Dividends (2) - - - - - - (2) Total Earnings for Common $ 275 $ (19) $ 7 $ 42 $ (3) $ 54 $ 81 $ 356 $ 0.29 $ (0.02) $ 0.01 $ 0.04 $ - $ 0.06 $ 0.09 $ 0.38 EARNINGS PER SHARE, BASIC $ 0.28 $ (0.02) $ 0.01 $ 0.04 $ - $ 0.05 $ 0.08 $ 0.36 EARNINGS PER SHARE, DILUTED Note 1 - Amounts for special items are entered net of minority interest A - Net of minority interest of $20 million. B - Recorded in Operation, maintenance and other on the Consolidated Statements of Operations. C - Recorded in Other income and expenses, net on the Consolidated Statements of Operations. Weighted Average Shares (reported and ongoing) - in millions Basic 947 Diluted 983
  28. 28. DUKE ENERGY CORPORATION ONGOING TO REPORTED EARNINGS RECONCILIATION December 2005 Quarter-to-date (Dollars in Millions) Special Items (Note 1) Discontinued MTM change on Loss on MTM impact of de- Operations/ Field Services de-designated Ongoing Southeast designated Cumulative Total Reported hedge de- Field Services Tax Adjustments Earnings DENA contract Southeast DENA Effect of Change Adjustments Earnings designation, net hedges for 2005, termination hedges in Accounting net Principle SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS Franchised Electric $ 279 $ - $ - $ - $ - $ - $ - $ - $ 279 Gas Transmission 344 - - - - - - - 344 Field Services 127 - 35 B - - - - 35 162 Duke Energy North America - - - - - - - - - International Energy 97 - - - - - - - 97 Crescent 104 - - - - - - - 104 Total reportable segment EBIT 951 - 35 - - - - 35 986 Other (130) (75) A - 64 C (9) D - - (20) (150) Total reportable segment EBIT and other EBIT $ 821 $ (75) $ 35 $ 64 $ (9) $ - $ - $ 15 $ 836 EARNINGS FOR COMMON Total reportable segment EBIT and other EBIT $ 821 $ (75) $ 35 $ 64 $ (9) $ - $ - $ 15 $ 836 Foreign Currency Translation Gains (Losses) 1 - - - - - - - 1 Interest Income and other 22 - - - - - - - 22 Interest Expense (249) - - - - - - - (249) Minority Interest (Expense) Benefit - Interest/Income Tax Expense (1) - - - - - - - (1) Income taxes on Continuing Operations (196) 28 (13) (22) 3 12 - 8 (188) Discontinued Operations, net of taxes 5 - - - - - 184 E,F 184 189 Cumulative Effect of Change in Accounting Principle - - - - - - (4) (4) (4) Trust Preferred/Preferred Dividends (5) - - - - - - - (5) Total Earnings for Common $ 398 $ (47) $ 22 $ 42 $ (6) $ 12 $ 180 $ 203 $ 601 $ 0.43 $ (0.05) $ 0.02 $ 0.05 $ (0.01) $ 0.01 $ 0.20 $ 0.22 $ 0.65 EARNINGS PER SHARE, BASIC $ 0.42 $ (0.04) $ 0.02 $ 0.04 $ (0.01) $ 0.01 $ 0.19 $ 0.21 $ 0.63 EARNINGS PER SHARE, DILUTED Note 1 - Amounts for special items are entered net of minority interest A - Recorded in Gains (Losses) on Sales of Other Assets, net on the Consolidated Statements of Operations. B - Fourth quarter settlement of the 2005 portion of the Field Services de-designated hedges as of 2/22/05, recorded in Equity in earnings of unconsolidated affiliates on the Consolidated Statements of Operations. C - Recorded in Other income and expenses, net on the Consolidated Statements of Operations. D - Recorded in Non-regulated electric, natural gas, natural gas liquids and other revenues on the Consolidated Statements of Operations. E - Excludes Crescent discontinued operations. F - Primarily DENA discontinued operations. Recorded in (Loss) Income From Discontinued Operations, net of tax on the Consolidated Statements of Operations. Weighted Average Shares (reported and ongoing) - in millions Basic 928 Diluted 962
  29. 29. DUKE ENERGY CORPORATION ONGOING TO REPORTED EARNINGS RECONCILIATION December 2004 Year-to-date (Dollars in Millions) Special Items (Note 1) Gains Discontinued Gains (losses) on Adjustment to Tax Benefit from Operations, Ongoing (Losses) on Enron Total Reported sales and Captive Impairment DEA excluding Earnings sale Settlement Adjustments Earnings impairments Insurance Loss on Asset Restructuring Crescent of assets of equity Reserves Exchanges Resources investments SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS Franchised Electric $ 1,464 $ 3 $ - $ - $ - $ - $ - $ - $ - $ 3 $ 1,467 Gas Transmission 1,297 16 - 16 - - - - - 32 1,329 Field Services 391 1A (10) B (16) C 1 D - - - - (24) 367 Duke Energy North America (190) (403) E - - 8 D,F - - - - (395) (585) International Energy 236 (2) (13) D 1 - - - - - (14) 222 Crescent 240 - - - - - - - - - 240 Total reportable segment EBIT 3,438 (385) (23) 1 9 - - - - (398) 3,040 Other (164) 4 - 2 21 D 64 D (4) G - - 87 (77) Total reportable segment EBIT and other EBIT $ 3,274 $ (381) $ (23) $ 3 $ 30 $ 64 $ (4) $ - $ - $ (311) $ 2,963 EARNINGS FOR COMMON Total reportable segment EBIT and other EBIT $ 3,274 $ (381) $ (23) $ 3 $ 30 $ 64 $ (4) $ - $ - $ (311) $ 2,963 Foreign Currency Translation Gains (Losses) 1 - - - - - - - - - 1 Interest Income and other 64 - - - - - - - - - 64 Interest Expense (1,281) - - - - - - - - - (1,281) Minority Interest (Expense) Benefit - Interest/Income Tax Expense 38 - - - - - - - - - 38 Income taxes on continuing operations (690) 133 8 - (11) (22) 1 48 - 157 (533) Discontinued operations, net of taxes 5 - - - - - - - 233 233 238 Trust Preferred/Preferred Dividends (9) - - - - - - - - - (9) Total Earnings for Common $ 1,402 $ (248) $ (15) $ 3 $ 19 $ 42 $ (3) $ 48 $ 233 $ 79 $ 1,481 $ 1.51 $ (0.27) $ (0.02) $ - $ 0.02 $ 0.05 $ - $ 0.05 $ 0.25 $ 0.08 $ 1.59 EARNINGS PER SHARE, BASIC $ 1.46 $ (0.25) $ (0.02) $ - $ 0.02 $ 0.04 $ - $ 0.05 $ 0.24 $ 0.08 $ 1.54 EARNINGS PER SHARE, DILUTED Note 1 - Amounts for special items are entered net of minority interest A - Net of minority interest of $1 million. B - Net of minority interest of $12 million. C - Net of minority interest of $7 million. D - Recorded in Operation, maintenance and other on the Consolidated Statements of Operations. E - $(397) million recorded in Gains (Losses) on Sales of Other Assets, net (net of $25 million of minority interest) and $(6) million recorded in Operation, maintenance and other on the Consolidated Statements of Operations. F - Amount is net of $5 million of minority interest. G -Recorded in Other income and expenses, net on the Consolidated Statements of Operations. Weighted Average Shares (reported and ongoing) - in millions Basic 931 Diluted 966
  30. 30. DUKE ENERGY CORPORATION ONGOING TO REPORTED EARNINGS RECONCILIATION December 2005 Year-to-date (Dollars in Millions) Special Items (Note 1) Initial gain and Discontinued Loss on Gain on Gains (losses) Mutual Field Services subsequent Operations/ Southeast transfer of on sales and Ongoing insurance hedge de- MTM change on Tax Cumulative Effect Total Reported DENA 19.7% impairments of Earnings liability designation, de-designated Adjustments of Change in Adjustments Earnings contract interest in equity adjustment net Southeast DENA Accounting termination DEFS investments hedges Principle SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS Franchised Electric $ 1,495 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 1,495 Gas Transmission 1,388 - - - - - - - - - 1,388 Field Services 505 - - 576 C 888 A (23) B - - - 1,441 1,946 Duke Energy North America - - - - - - - - - - - International Energy 334 - - - (20) E - - - - (20) 314 Crescent 314 - - - - - - - - - 314 Total reportable segment EBIT 4,036 - - 576 868 (23) - - - 1,421 5,457 Other (563) (75) C (28) D - - - 21 F - - (82) (645) Total reportable segment EBIT and other EBIT $ 3,473 $ (75) $ (28) $ 576 $ 868 $ (23) $ 21 $ - $ - $ 1,339 $ 4,812 EARNINGS FOR COMMON Total reportable segment EBIT and other EBIT $ 3,473 $ (75) $ (28) $ 576 $ 868 $ (23) $ 21 $ - $ - $ 1,339 $ 4,812 Foreign Currency Translation Gains (Losses) (11) - - - - - - - - - (11) Interest Income and other 57 - - - - - - - - - 57 Interest Expense (1,062) - - - - - - - - - (1,062) Minority Interest (Expense) Benefit - Interest/Income Tax Expense 20 - - - - - - - - - 20 Income taxes on Continuing Operations (798) 28 10 (213) (323) 9 (8) 12 - (485) (1,283) Discontinued Operations, net of taxes 7 - - - - - - - (712) G,H (712) (705) Cumulative Effect of Change in Accounting Principle - - - - - - - - (4) (4) (4) Trust Preferred/Preferred Dividends (12) - - - - - - - - - (12) Total Earnings for Common $ 1,674 $ (47) $ (18) $ 363 $ 545 $ (14) $ 13 $ 12 $ (716) $ 138 $ 1,812 $ 1.79 $ (0.05) $ (0.02) $ 0.39 $ 0.58 $ (0.01) $ 0.01 $ 0.01 $ (0.76) $ 0.15 $ 1.94 EARNINGS PER SHARE, BASIC $ 1.73 $ (0.04) $ (0.02) $ 0.37 $ 0.56 $ (0.01) $ 0.01 $ 0.01 $ (0.73) $ 0.15 $ 1.88 EARNINGS PER SHARE, DILUTED Note 1 - Amounts for special items are entered net of minority interest A - Gain on sale of investment in units of TEPPCO LP, $97 million, and TEPPCO GP, $791 million net of $343 million of minority interest. B - De-designation of hedges due to the transfer of 19.7% interest in DEFS to ConocoPhillips. $125 million loss recorded in Impairment and other charges on the Consolidated Statements of Operations, reduced by $29 million of hedge settlements recorded in Non-regulated electric, natural gas, natural gas liquids and other revenues, and $73 million of hedge settlements recorded in Equity in Earnings of Unconsolidated Affiliates on the Consolidated Statements of Operations. C - Recorded in Gains (Losses) on Sales of Other Assets, net on the Consolidated Statements of Operations. D - Recorded in Operation, maintenance and other on the Consolidated Statements of Operations. E - Campeche equity investment impairment, recorded in Gains (Losses) on sales and impairments of equity investments on the Consolidated Statements of Operations. F - Recorded in Non-regulated electric, natural gas, natural gas liquids and other revenues on the Consolidated Statements of Operations. G - Excludes Crescent discontinued operations. H - Primarily the non-cash, after-tax charge related to the planned exit of substantially all of DENA's physical and commercial assets outside the midwestern United States and the reclassification of DENA 2005 operations. Recorded in (Loss) Income From Discontinued Operations, net of tax on the Consolidated Statements of Operations. Weighted Average Shares (reported and ongoing) - in millions Basic 934 Diluted 970
  31. 31. Duke Energy Corporation Consolidated Cash Flow Reconciliation Required by SEC Regulation G ($ in Millions) 2006 Estimate Primary Sources: Net income (Based on $1.90 per ongoing diluted share target) (1) a $ 2,225 Depreciation & amortization a 2,075 NBV of ongoing Crescent sales a 425 NBV of asset and equity investment sales b 1,475 Book/Tax timing differences a 700 Other sources/(uses), net a (650) Total Sources 6,250 Primary Uses: Capital expenditures b (4,325) Dividends c (1,450) Total Uses (5,775) Positive Net Cash $ 475 Reconciliations to amounts per U.S. GAAP reporting: Operating cash flow components from above [summation of (a)] $ 4,775 Reconciling items to GAAP operating cash flow (2) (875) Net cash provided by operating activities per GAAP Consolidated Statement of Cash Flows $ 3,900 Investing cash flow components from above [summation of (b)] $ (2,850) Reconciling items to GAAP investing cash flow (3) 1,400 Net cash used in investing activities per GAAP Consolidated Statement of Cash Flows $ (1,450) Financing cash flow components from above [summation of (c)] $ (1,450) Reconciling items to GAAP financing cash flow (4) (1,000) Net cash used by financing activities per GAAP Consolidated Statement of Cash Flows $ (2,450) Notes: (1) Forecast net income of $2,225 million for 2006 is based on Duke Energy's 2006 employee incentive earnings target of $1.90 of ongoing diluted earnings per share (EPS). This EPS measure is used for employee incentive bonuses and should track ongoing diluted EPS, which is a non-GAAP financial measure as it represents diluted EPS from continuing operations plus the per-share effect of any discontinued operations from the Company’s Crescent Resources real estate unit, adjusted for the per-share impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing diluted EPS is reported diluted EPS from continuing operations which includes the impact of special items. Due to the forward-looking nature of this non-GAAP financial measure, information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to project any special items for 2006 (2) Amount consists primarily of non-operating cash flow items such as proceeds from the sales of commercial and multi-family real estate, and other operating cash flow reductions such as capital expenditures for residential real estate and gain on the sale of other assets and equity investments. (3) Amount consists primarily of proceeds from the sales of commercial and multi-family real estate, proceeds from the sale of other assets and equity investments in excess of book value (i.e. gain on sale), capital expenditures for residentia real estate, and net proceeds from the purchase and sale of available-for-sale securities (4) Amount consists of estimated net other financing activities.

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