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Duke Energy press release on acquisition

CHARLOTTE, N.C. and CINCINNATI, OHIO – Cinergy (CIN) and Duke Energy (DUK) today announced they have entered into a definitive merger agreement to create an energy company with approximately $36 billion in market capitalization and 5.4 million retail customers.

The merger, which was unanimously approved by both companies’ boards of directors, will create a combined energy company with assets totaling more than $70 billion.

The combined company, to be named Duke Energy Corporation, will have approximately $27 billion in annual revenues and $1.9 billion in annual net income (combined figures as of Dec. 31, 2004). It will own and/or operate approximately 54,000 megawatts of electric generation domestically and internationally – relying on a diverse fuel mix of nuclear, coal, natural gas and hydroelectric power to meet customers’ needs. Duke Energy also operates more than 17,500 miles of natural gas transmission pipeline with 250 billion cubic feet of natural gas storage capacity and, through its joint venture with ConocoPhillips, is the largest producer of natural gas liquids (NGLs) in North America. The combined company will have operations in two-thirds of the United States, as well as Canada and several other international locations – primarily in Latin America.

By combining resources and best practices, the merger will enhance operations and create efficiencies at all levels of the new company, including generation, transmission and distribution as well as power and gas marketing.

Under the merger agreement, each common share of Cinergy will be converted into 1.56 shares of Duke Energy upon closing of the merger. Based on the closing prices on May 6, Cinergy investors will receive a premium of 13.4 percent. Following the merger, Cinergy shareholders will own approximately 24 percent, or about 310 million shares, of Duke Energy pro-forma shares outstanding, and Duke Energy shareholders will own approximately 76 percent of the total 1.3 billion shares. The transaction will be accretive to Duke Energy’s earnings in the first full year of operation.

Upon completion of the merger, Paul M. Anderson, currently chairman and chief executive officer of Duke Energy, will become chairman of the board of the combined company. James E. Rogers, currently chairman, president and chief executive officer of Cinergy, will become president and chief executive officer. The new board will be comprised initially of 10 members named by Duke Energy and five members named by Cinergy.

“The combination of Duke Energy and Cinergy will create a rock-solid portfolio of electric and gas businesses, increasing value for our shareholders immediately and in the longer term,” said Anderson. “This union is a great strategic fit and leaves us well positioned for continued consolidation in the energy sector as both the electric and gas businesses will have the scale to stand alone. Importantly, it also provides an immediate and significant improvement for our merchant operations and enhances their future prospects.

“Just as significant as the strong strategic fit of our companies is the cultural fit. Duke Energy and Cinergy share compatible values, operating philosophies and views of the future,” Anderson said.

“The increased scope and scale will make the combined company a major industry leader with a strong balance sheet, complementary assets and a low-cost generation portfolio,” said Rogers. “Both companies are known for operational excellence as well as strong customer service and reliability.

“We are creating a top-tier energy company that will assume a key leadership role in the future of our industry while delivering benefits to all of our stakeholders. Moreover, this combination creates a stronger platform from which to continue our leadership in finding practical solutions to the environmental challenges facing our industry and country.”

Benefits of the Merger

The merger will deliver significant value to customers and shareholders of both companies:

Increased Scale and Scope of Regulated Businesses: The combined company will create a stronger portfolio of utility businesses with 3.7 million retail electric customers and 1.7 million retail gas customers in Ohio, Kentucky, Indiana, North Carolina, South Carolina and Ontario, Canada. The retail electric businesses will have more than 25,000 megawatts of generation and broad operational and regulatory experience. Coupled with the company’s pipeline operations, the regulated businesses will contribute a substantial percentage of stable earnings and create the financial strength and scale to participate in the continuing consolidation of the utility sector.

Stronger Merchant Power Platform: With a fleet of more than 16,000 megawatts of unregulated generation, the combined merchant power operation will benefit from increased fuel and market diversity. Consolidation of the trading and marketing units and midwestern merchant generating fleets will enhance scale and efficiencies -- reducing the cost structure of merchant operations by approximately $95 million during year one and $125 million per year subsequently. Significantly, Duke Energy’s gas-fired generation in the Midwest complements Cinergy’s coal-fired generation in that region. The merchant operations, with a competitive market presence in North America and South America, will be well positioned to participate in the continuing consolidation of the wholesale power sector.

Increased Duke Energy Dividend Creates Immediate Shareholder Value: In conjunction with today’s merger announcement, Duke Energy’s board of directors said it intends to increase Duke Energy’s dividend by 12.7 percent, or 14 cents a year, for an annual dividend of $1.24. The dividend increase, which will be voted on during the board’s June meeting, would be effective with the September 2005 disbursement. As a result of the merger transaction and the Duke Energy dividend increase, Cinergy shareholders will be kept whole at closing with respect to their current dividend.

Continued Financial Strength: Increased scale and scope will also strengthen the balance sheet of the combined company, improving financial flexibility and positioning it well for the future. The combined company will have electric and gas businesses with stand-alone scale. Based on implied market capitalization, the electric business would be one of the top five in the United States; the gas business would be the largest in North America.

Significant Synergies: The merger offers both strategic and financial advantages in serving the energy marketplace. Not including implementation costs, the combination will generate approximately $400 million in annual gross synergies -- when fully realized in year three -- from across corporate activities, regulated utilities and non-regulated marketing, trading and generation businesses. These cost savings will result from elimination of duplicate spending and overlapping functions, improved sourcing strategies, avoidance of planned expenditures and the consolidation of non-regulated business unit operations. The combined companies currently employ approximately 29,350 and expect a reduction of approximately 1,500, primarily through attrition, early retirements and other severance programs. The companies anticipate that upon review with state commissions, regulated savings will be shared between customers and shareholders over time in an equitable manner.

Steadfast Community Involvement: Duke Energy and Cinergy have long been committed to the communities in which they operate. That demonstrated commitment will continue through local presence, economic development efforts and corporate contributions.

Structure and Organization

Following the merger, the combined company will be a registered holding company with corporate headquarters in Charlotte, N.C. Local headquarters of the operating utilities will remain unchanged by the merger: Cincinnati Gas & Electric Company and Union Light, Heat & Power will remain in Cincinnati; PSI Energy will remain in Plainfield, Indiana; and Duke Power will continue to be headquartered in Charlotte. Duke Energy Gas Transmission (DEGT) and certain commercial operations will remain in Houston. Duke Energy Field Services (DEFS) will remain headquartered in Denver and Crescent Resources will continue to be located in Charlotte.

At the completion of the merger, Rogers will have responsibility for all Duke Energy’s business units, corporate functions and support services with the exception of the company’s gas businesses: DEGT and DEFS. At closing, Fred Fowler, currently president of Duke Energy, will become president and chief executive officer of these gas operations, reporting to Rogers on operations and to Anderson on strategy, pending completion of a strategic review of the portfolio.

Approvals and Timing

The merger is conditioned upon approval by the shareholders of both companies, as well as a number of regulatory approvals or reviews by federal and state energy authorities, including the North Carolina Utilities Commission, the Public Service Commission of South Carolina, the Public Utilities Commission of Ohio, the Kentucky Public Service Commission, the Indiana Utility Regulatory Commission, the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission (for assurance of continuing financial qualifications and operational standards), the Securities and Exchange Commission (SEC) and the Department of Justice.

The new company intends to register as a holding company with SEC under the Public Utility Holding Company Act. The companies anticipate making required regulatory filings by July 2005, with necessary approvals obtained in about 12 months. The companies will work to secure necessary government approvals consistent with FERC’s Merger Policy Statement and the Hart-Scott-Rodino Antitrust Improvements Act.

Duke Energy dividend to be increased 12.7 percent for an annual dividend of $1.24
Combined company to have more than $70 billion in total assets
All stock transaction; each common share of Cinergy to be converted into 1.56 shares of Duke Energy
Duke Energy’s Anderson to be chairman of combined company; Cinergy’s Rogers to be president and CEO

King of the Queen
2,164 Posts
duke has already consolidated operations in charlotte. they now have 400 south tryon as their building [27 floors of it, i believe]. their plan for a 'signature tower' has since faded now that wachovia will be using the land for their new tower. the energy sector isnt too hot right now <- reason duke isnt going to build a new building.

Uptown Bound
1,204 Posts
Well, they are still leaving Duke a piece of that block, so there is still a potential for a new tower, though not likely very soon. The own much of the old Wach building, I don't know how many jobs we will get out of this.

Sic Semper Tyrannis
1,455 Posts
I have American Electric Power, and they suck. Big Time. So, I hope Duke will come up my way sometime....

King of the Queen
2,164 Posts
Merger turns Duke into national leader

Cinergy deal sets stage for more consolidation

The new Duke Energy Corp., the one emerging from the deal announced Monday with Cinergy Corp., could be reminiscent of the Duke of old.

The $9 billion acquisition of the smaller Cincinnati-based Cinergy, which needs approval from a slew of regulators, would make Duke 27 percent bigger by assets. Much of that is in power plants in the Midwest, where Cinergy provides electricity to parts of Ohio, Kentucky and Indiana.

The deal would make Duke one of the country's biggest players in electricity, executives said Monday. With that heft, they said, Duke can think about splitting its electricity and natural-gas businesses.

If Duke spins off its gas units and returns to being an electric-only company, it would be only the latest in a series of big moves by Duke Chairman and Chief Executive Paul Anderson. Since taking over a listing Duke in 2003, Anderson has pulled the company back from risky businesses, paid off a load of debt and sold off non-core assets.

The Cinergy deal positions Duke to be a major player in the consolidation of the electric industry that both companies see coming.

"What do the owners of Duke stock in Charlotte want out of their utility? They want the old Duke," said David Schanzer, an analyst with Janney Montgomery Scott. "They want a national leader, a very well-run utility."

With this deal, Duke is becoming that, Schanzer said. He owns no Duke shares, and his company does no underwriting for Duke.

The new Duke, including the natural-gas businesses, would be an industry titan, with $27 billion in annual revenue, $1.9 billion in annual income and 5.4 million customers.

The new Duke will wring $400 million in annual cost savings through the consolidation, including cuts of 1,500 jobs from 29,350.

It's too early to know whether Duke's employment in Charlotte will grow or shrink through the deal, said Anderson and Cinergy Chairman and CEO Jim Rogers. Duke now employs about 10,000 in the Charlotte area.

But Rogers, who will become CEO of the new Duke, emphasized in an interview Monday that he has not laid off anyone in his nearly 17 years of being a CEO. And he hopes not to begin now.

The companies hope the job cuts come primarily through attrition, early retirement and severance programs.

If Duke does return to its electric-only roots, it still would be a far cry from the lone hydroelectric dam on the Catawba River that marked Duke's 1904 birth.

Duke has three nuclear plants in the Carolinas, power plants stretching from California to the Northeast selling to big industrial users and hydro dams running across Latin America. On the gas side, Duke's pipelines run from the Gulf of Mexico to eastern Canada, with another set in western Canada. The company also has natural-gas processing and storage units scattered across the continent.

An electric-only Duke, combined with Cinergy, would mean the company is well positioned to be buying rather than getting bought, the executives said.

Duke will try to decide whether to sell or spin off its gas business over the next year, Anderson said.

"If separated, the gas company would look to consolidate with other players in the gas industry," Anderson said. "Duke Energy would be at that point a pure-play electric company with a fairly diverse set of assets in fuel mix, geographic territory and regulatory environment. We would be in a very good position at that point to further consolidate the energy industry after that."

Anderson searches for partner

The talks between Duke and Cinergy began in early December, but it wasn't about a merger, Anderson said.Rogers was just one of dozens of energy CEOs that Anderson had been calling, trying to get a feel for the industry and seeing who had a similar view of the future, Anderson said.

He was searching for a partner for Duke's wholesale energy division, Duke Energy North America. The unit makes and sells power to big industrial users and other utilities. Once the company's biggest star, the unit has recently been Duke's Achilles' heel.

After talking with Rogers, Anderson found another CEO who was as vocal as he about global warming and environmental issues, and they found the two companies were pretty compatible.

Soon, the two bosses began thinking about pairing their companies together, rather than just their wholesale-energy divisions.

Rogers will become CEO of the new Duke, and Anderson, who intended to retire from Duke next year, said he's happy to find his successor.

"I have every confidence Jim will lead the new Duke Energy well into the future," Anderson said.

Anderson said he will remain with the company for one year after the deal is completed as chairman.

Seeking fuel diversity

One of Anderson's main criteria in finding a partner was fuel diversity. A company that uses several different kinds of fuel doesn't become trapped when the price for one spikes, as natural gas has.

Duke's wholesale power plants in the Midwest run on natural gas, the price of which has been rising. Cinergy's plants run on coal, which costs less than gas.

The wholesale unit would no longer be a money loser, after it joins with Cinergy's profitable wholesale division, but it will still be an underperformer, Anderson said. Duke will continue to look for partners to improve it, either through an acquisition or a joint venture.

As Duke continues to look for more partners for DENA, it's seeking companies with nuclear or renewable power assets to mix with Duke's natural gas and Cinergy's coal-fired plants.

It's also looking for companies with plants in other parts of the country, after the Cinergy deal beefs up Duke's portfolio in the Midwest.

Crescent Resources to be sold?

As part of the merger, Duke would likely have to register under the Public Utility Holding Company Act because its service territories would no longer be contiguous.

That would likely mean it would have to sell Crescent Resources, its big Charlotte-based real-estate arm, because the 70-year-old regulation prohibits companies from owning non-energy businesses.

Based on other cases, Duke expects it would have three to five years to sell Crescent. And it may not have to.

For years, legislators have debated ending the measure, enacted in 1935 to protect customers from rate exploitation but now seen as a deterrent to growth and investment.

Crescent developed the Coliseum Centre on Tyvola Road next to the Charlotte Coliseum, Lakemont Business Park off Interstate 77 in Fort Mill, The Peninsula golf course community on Lake Norman, Ballantyne Country Club golf course community and The Point golf course community of Lake Norman.

684 Posts
This article would go great in the is Charlotte overrated thread….

Tuesday, May 10, 2005

Charlotte adds another star to Fortune 500 crown
Companies praise city's location, cost

By Jeff McKinney
Enquirer staff writer

Cincinnati's loss is Charlotte's gain, in a sense.

With Duke Energy Corp.'s $9.1 billion purchase of Cincinnati-based Cinergy Corp., Charlotte will become home to an even bigger Fortune 500 company and an even bigger utility company that is already among the nation's largest.

Duke Energy is one of eight Fortune 500 companies with corporate headquarters in Charlotte. Others include banking giants Bank of America Corp. and Wachovia Corp; discount retailer Family Dollar Stores Inc.; and steel maker Nucor Corp.

With combined revenue of $27 billion, the new Duke Energy would have ranked 68th on the 2005 Fortune 500 list.

Although it's unknown how many Cinergy employees might move to Charlotte because of the merger, the deal means that Charlotte will likely benefit, experts say.

"It's great for Charlotte because this continues to build its reputation as a destination city for corporate headquarters," said Karim Khan, editor-in chief at Business Facilities, a Tinton Falls, N.J.-based corporate relocation magazine.

Charlotte ranked third behind Atlanta and New York among the top 15 cities for corporate headquarters in a 2003 survey by the magazine, which surveyed 75 corporate site selectors, location consultants and real estate professionals.

Khan said Charlotte ranked well because it already had a high number of big companies established there.

For instance, when Charlotte-based NationsBank Corp. agreed to buy San Francisco-based Bank of America Corp. in 1998 to create the nation's second-largest banking company at the time, the combined company adopted Bank of America's name but kept its headquarters in Charlotte.

Smaller but attractive

Charlotte is smaller than Cincinnati, with a population of about 1.5 million in the metro area, compared with about 2.2 million in Greater Cincinnati.

"Charlotte has the cache of being a hot city for corporate headquarters," Khan said. "Once you get that reputation, you won't lose it for a long time."

Though Charlotte does not have the reputation of Atlanta or New York City, he said, it is viewed as an attractive regional capital for companies doing business in the Southeast.

Charlotte has another thing Cincinnati business and city leaders covet: appeal to young people, the so-called "creative class" of 25-to-44-year-old professionals who have a liking for urban living and spending money on entertainment.

A study reported April 20 in the Charlotte Observer found that the city has a more vibrant evening scene, better parks and longer resident life spans than other medium- to large-sized cities.

According to the study, Charlotte is emerging as a world-class dining city and has lively festivals, is clean and has mild seasons.

Many different variables

Jeff Edge, vice president of industrial development of the Charlotte Chamber of Commerce, said several factors make Charlotte attractive to major companies.

He said a lot of companies that move their headquarters there like Charlotte's location: central between New York and Miami, offering easy access to their customers and operations.

Also, the cost of such things as residential utilities, groceries and transportation is below the national average, and it is the center of NASCAR racing.

Charlotte also is home to the NFL's Carolina Panthers, NBA's Charlotte Bobcats and WNBA's Charlotte Sting, Edge said.

"Charlotte offers the best of many of the variables that go into the ultimate location decision that companies would make," Edge said. "Charlotte stacks up strong in all of those areas."


King of the Queen
2,164 Posts
i hate when they say 'world class.' that's not something i want charlotte to have.

charlotte should be going for 'charlotte class.' something that is not a duplicate of other big cities in this world, something totally unique and ours. the term world class is used to describe so much stuff these days that it almost means nothing.

anyway, good article.

1,361 Posts
^ What's funny is that Charlotte isn't anywhere near world-class as a dining city, even with J&W in town. Compare Charlotte's culinary reputation to New Orleans, Paris or NYC. It's not even close. Not even in the same stratosphere. Our best restaurants are mom & pop diners!

56 Posts
Justadude said:
^ What's funny is that Charlotte isn't anywhere near world-class as a dining city, even with J&W in town. Compare Charlotte's culinary reputation to New Orleans, Paris or NYC. It's not even close. Not even in the same stratosphere. Our best restaurants are mom & pop diners!
What I don't understand is why if u are not like other cities in a certain regard or have the same thing they have and they are world class, then your'e not.That's not true.Charlotte doesn't have to have the same restaurants as NY to be World class and no it's not Paris or New Orleans either.I think that Charlotte has many distinguished restaurants and upscale dining and what makes it world class to me is that is has many different resturants that cater to many different cultures and you can find almost any type of eateries .How many cities can you find that in the same "metro population and size". To be honest if world class depended on being like NY , Paris,LA,CHI in the dining department or any other category , most cities wouldn't be concidered as world class but those 4 and maybe one or 2 in the US .You make it seem like Charlotte is only DENNY'S AND WAFFLE HOUSES AND that's not true.I'VE BEEN HERE ALMOST A YEAR AND I'VE DISCOVERED PLENTY. That's just my opinion and I know it's not my home ,NY, but how many cities are .....exactly!!!!!!! No offense man but lighten up and give a little credit where it is due.EVERY POSITIVE ARTICLE OR STATEMENT DOESN'T REQUIRE CRITIQUE AND NEGATIVE REMARKS ALL THE TIME.

56 Posts
How are you doing lokinyc? I once thought the same thing but the numbers show different in diverse population.Maybe a stronger arts community and I really dont know if cincy has more diverse architecture but " more appealing than Charlotte " I would have to say lately , no , that isn't the case at hand. Before I moved to CLT fron NY I had all kind of crazy speculations but experience and discoverings show different.

1,361 Posts
hotspottny said:
I think that Charlotte has many distinguished restaurants and upscale dining and what makes it world class to me is that is has many different resturants that cater to many different cultures and you can find almost any type of eateries .
If any city doesn't have a bunch of ethnic restaurants it hardly deserves to be called a city at all. That's a basic characteristic of any metro area.

How many cities can you find that in the same "metro population and size".
From what I have seen, any city of Charlotte's size has comparable assets in dining options. New Orleans is considerably smaller than Charlotte and it beats the shit out of our dining scene.

To be honest if world class depended on being like NY , Paris,LA,CHI in the dining department or any other category , most cities wouldn't be concidered as world class but those 4 and maybe one or 2 in the US .
Well... yeah. I'd say that the "world class" cities in the USA are New York City, Chicago, Los Angeles, Miami, Washington DC, San Francisco, Houston, and possibly Detroit and Boston. Beyond that, I can't think of any other place that has a worldwide reputation. Atlanta's just starting to crack into that group. "World class" is a very strong term, and like Style said it's been overused to the point that it hardly means anything. But no matter how you cut it, Charlotte is not a world class city. It has certain world-class assets; but as a city, it is very obviously not there yet.

You make it seem like Charlotte is only DENNY'S AND WAFFLE HOUSES AND that's not true.
No, I never said it was only Denny's and Waffle Houses. What I said was that the most uniquely-Charlotte restaurants (and, IMO, the best spots in the city) are diners, not upscale eateries. Charlotte's upscale scene is nothing but an imitation of what you see in other cities; one of the most prominent places is the "Buckhead Saloon", for crissakes. When someone asks me what places they can go to get a Charlotte flavor I think of the Penguin or Lupie's... small, family-owned joints that have a history in the city and have made their own mark without trying to be like anyone else.

I've been here most of my life and discovered a lot more. I've also been to enough places around the country and the world to know world-class when I see it. Charlotte isn't there yet, especially not on the culinary front.

When something's being realistic, I'll agree with it. But I'm more than happy to point out b.s. when I see it, especially when it's cited from a study that the city paid for.

King of the Queen
2,164 Posts
lokinyc said:
Interesting. But, as a member of the creative class, I have to say I find Cincinnatti more appealing than Charlotte. More diverse architeture, stronger arts community, more diverse ethnic population.
arts funding is higher in charlotte. while it might not be as strong, it has stronger funding in charlotte, i'd assume.
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