Duke Energy files with SEC to separate gas and electric businesses

Charlotte, NC, Sept. 8, 2006 — Duke Energy and its wholly owned subsidiary, Gas SpinCo Inc. (GasCo) filed documents with the U.S. Securities and Exchange Commission (SEC) providing details of the proposed separation of the company’s natural gas and electric businesses.

GasCo, the temporary name of the natural gas business, filed a Form 10, including historical financial information, governance and other details of the proposed new business. Duke Energy furnished a Form 8-K that provides summary financial information on GasCo and the businesses that will remain in Duke Energy after the separation.

When the separation is complete, targeted for Jan. 1, 2007, Duke Energy shareholders will own two separate, publicly traded companies. Shareholders will not only continue to hold their shares of Duke Energy, they will receive shares of the new GasCo stock. The distribution ratio will be determined in the next few months. It is expected that both companies’ shares will be listed on the New York Stock Exchange, with GasCo applying for listing with NYSE in the fourth quarter.

At the time of the separation, the sum of the two companies’ dividends is expected to be equal to the current Duke Energy annual dividend of $1.28. Thus, on a hypothetical one-for-one distribution of stock, the initial dividend would be 84 cents per share for Duke Energy and 44 cents per share for GasCo in 2007.
Going forward, GasCo anticipates a target payout ratio of approximately 60 percent, while Duke Energy anticipates a target payout ratio in the range of 70 to 75 percent.

“We’re well on our way to unlocking the true shareholder value of our corporation,” Duke Energy President and CEO James E. Rogers said. “To our customers, this transition will be seamless. We will continue to provide safe, reliable and cost effective energy services.
“However, to our shareholders, this is an opportunity to be part of the creation of two dynamic companies. Today’s milestone moves us closer to achieving our goal of growing two corporations built upon sustainability and integrity.”

Duke Energy president and CEO James E. Rogers will serve as chairman, chief executive officer and president of Duke Energy after the separation. The corporation will continue to be headquartered in Charlotte.

Fred J. Fowler, currently group executive and president of Duke Energy Gas, will serve as president and CEO of GasCo. GasCo will be headquartered in Houston, Texas, and primarily consist of Duke Energy Gas Transmission (DEGT) and Duke Energy Field Services (DEFS).

With the gas separation, Duke Energy Canada Exchangeco’s exchangeable shares (exchangeable for Duke Energy common shares) are expected to be reorganized to allow for equivalent participation in the separation.

As detailed in the Form 10, GasCo expects ongoing diluted earnings per share (EPS) growth on average in the range of 5 percent to 7 percent annually over the next five years. Duke Energy expects to grow diluted ongoing earnings by an average of 4 to 6 percent annually.

The remaining business units that will make up Duke Energy after the separation will create one of the five largest electric utilities in the United States. It will consist of the U.S. Franchised Electric & Gas business unit (Duke Energy Carolinas, Duke Energy Indiana, Duke Energy Ohio and Duke Energy Kentucky); Duke Energy’s international business unit, with operations in Latin America; Duke Energy’s Commercial Power business unit; and Crescent Resources, which is Duke Energy’s affiliated real estate company.

Although the separation is not subject to shareholder approval, it is subject to SEC and other regulatory review. Duke Energy also is seeking a private letter ruling from the Internal Revenue Service that the separation qualifies as a tax-free reorganization.

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