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Other Operations

Beginning in 2003, the business segments formerly known as Other Energy Services and Duke Ventures were combined and have been presented as Other Operations. Other Operations is composed of diverse businesses, operating primarily through Crescent, DukeNet, DCP, DEM, D/FD and EDS.

Crescent develops high-quality commercial, residential and multi-family real estate projects, and manages land holdings, primarily in the Southeastern and Southwestern U.S. On December 31, 2003, Crescent owned 1.3 million square feet of commercial, industrial and retail space, with an additional 0.9 million square feet under construction. This portfolio included 1.4 million square feet of office space, 0.4 million square feet of warehouse space and 0.4 million square feet of retail space. Crescent's residential developments include high-end country club and golf course communities, with individual lots sold to custom builders and tract developments sold to national builders. Crescent had four multi-family communities at December 31, 2003, including two operating properties and two properties under development. On December 31, 2003, Crescent also managed approximately 134,000 acres of land.

DukeNet provides telecommunications bandwidth capacity for industrial and commercial customers through its fiber optic network. It owns and operates a fiber optic communications network centered in North Carolina and South Carolina and is interconnected with a fiber optic communications network through affiliate agreements with third parties.

DCP, a wholly owned merchant finance company, provided financing, investment banking and asset management services to wholesale and commercial markets in the energy and real estate industries. In 2003, Duke Energy announced that it will exit the merchant finance business at DCP in an orderly manner. DCP's operating results have been classified as discontinued operations in the Consolidated Statements of Operations.

DEM engages in commodity buying and selling, and risk management and financial services in non-regulated energy commodity markets other than physical natural gas and power (such as petroleum products). DEM's activities can fluctuate in response to seasonal demand for other energy-related commodities. In 2003, Duke Energy determined that it will exit the refined products and NGL business at DEM in an orderly manner. DEM expects to complete the exit during 2004. The exiting process will include both a wind down of the current business and the selling of remaining long-term contracts. In 2003, DEM also sold Duke Energy Hydrocarbons LLC, and the related hydrocarbons activity was classified as discontinued operations.

D/FD, operating through several entities, provides full-service siting, permitting, licensing, engineering, procurement, construction, start-up, operating and maintenance services for fossil-fueled electric power plants, both domestically and internationally. Subsidiaries of Duke Energy and Fluor Corporation each own 50% of D/FD. In 2003, Duke Energy and Fluor Corporation announced that the D/FD partnership will be dissolved. The partners of D/FD have adopted a plan for an orderly wind-down of the D/FD business targeted for completion in July 2005.

EDS is an engineering, construction, maintenance and technical services firm specializing in electric transmission and distribution lines and substation projects. It was formed in the second quarter of 2002 from the transmission and distribution services component of Duke Engineering Services, Inc. (DE&S) and was excluded from the sale of DE&S. On December 31, 2003, Duke Energy completed the sale of EDS to the Shaw Group Inc.

Competition and Regulation

DEM competes for other energy-related commodities. Competitors include major integrated oil companies, major interstate pipelines and their marketing affiliates, brokers and distributors. D/FD competes with major companies who provide engineering, procurement, construction, start-up and maintenance services for fossil fueled power generation facilities.

Crescent competes with multiple regional and national real estate developers across its various business lines in the Southeastern and Southwestern U.S. Crescent's residential division sells developed lots to regional and national home builders and retail buyers, competing with other developers and home builders with an inventory of developed lots. Crescent's commercial division leases office, industrial and retail space, competing with other public and private developers and owners of commercial property including national real estate investment trusts (REITs). Similarly, Crescent's multifamily division leases apartment units primarily to individuals, competing with other private developers and multifamily REITs.

Other Operations is subject to the jurisdiction of the EPA and international, state and local environmental agencies. (For a discussion of environmental regulation, see "Environmental Matters" in this section.)