News Release
Jan. 20, 2000

DUKE ENERGY ANNOUNCES RECORD EARNINGS

CHARLOTTE, N.C. -- Fueled by rapid growth in its unregulated energy businesses and strong performances by electric and gas transmission operations, Duke Energy today reported record earnings of $4.08 per share for the year ending Dec. 31, 1999, on revenues of $21.7 billion. Excluding an extraordinary gain and a one-time charge, earnings were $3.60 per share, compared with 1998 earnings of $3.41 on revenues of $17.6 billion.

For the year, Duke Energy posted earnings before interest and taxes (EBIT) of $2.8 billion, before a $660 million after-tax gain on the sale of the Midwest Pipelines and a one-time charge of $800 million at Duke Power. EBIT for 1998 was $2.6 billion.

"Duke Energy’s 1999 results flow from our global energy merchant strategy," said Richard B. Priory, Duke Energy's chairman, president and chief executive officer. "We exceeded our earnings target for 1999 and are looking forward to building on those results in 2000 as we continue to grow our earnings."

"Central to our strategy is actively managing a multi-national portfolio that includes natural gas and power generation assets, trading of energy positions and risks and delivery of energy solutions to large customers and aggregators. We have assembled the right mix of expertise, assets and market positions. This has begun to pay off, as our domestic and international investments are producing strong earnings," Priory said.

In the fourth quarter, Duke Energy reported earnings of $0.81 per share, a 35-percent increase over the $0.60 earned in the fourth quarter of 1998. EBIT for the quarter was $684 million, compared with $516 million in the year-ago quarter. Revenues increased 48 percent in the quarter to $6.2 billion.

Energy Services' businesses delivered their target of year-to-year EBIT growth of 40 percent to 50 percent, achieving a 48-percent increase in EBIT, excluding one-time charges. The group was led by the outstanding performances of Duke Energy International (DEI) and Duke Energy North America (DENA), which reported a combined 183-percent increase in EBIT over the prior year.

Duke Energy Field Services, another unregulated business, reported an 89-percent increase in EBIT.

Duke Energy’s regulated business groups also posted strong operating performance. 1999 EBIT at Duke Power was $1.7 billion, a 13-percent increase over 1998. The Northeast Pipelines increased EBIT by 17 percent to $557 million.

The Diversified Businesses group, which includes real estate operations and telecommunications, achieved a 33-percent increase in EBIT to $162 million for the year.

"Duke Energy performed well across all lines of business last year. Our unregulated, growth businesses contributed exceptional revenue and earnings increases and are on track for growing earnings contributions in 2000 and beyond," Priory said. "Our electric operations and gas transmission businesses continued to lend diversity, expertise, operating efficiency and strong earnings stability to our portfolio of assets. Underlying this strong performance is our ongoing commitment to optimize the enterprise’s asset portfolio."

1999 Year-End and 4th Quarter Segment Results

Global Asset Development

Duke Energy’s Global Asset Development segment, comprised of DEI and DENA, is a major driver for growth in unregulated businesses. The group was successful in executing its aggressive growth strategy in 1999. Overall, Global Asset Development reported EBIT of $181 million for the year, a 183-percent increase over the $64 million reported for 1998. Fourth-quarter results also showed strong year-over-year growth as 1999 EBIT increased 37 percent over 1998. The quarter and annual results were driven by increased contributions from new projects in Latin America and Australia, and premiums captured through active management of our asset portfolios.

DEI develops, owns and manages a global portfolio of integrated natural gas and power generation assets, as well as energy trading and marketing in key markets in Asia Pacific, Latin America and Europe.

In 1999, DEI achieved a strategic position in Latin America. Through acquisitions and the trading of non-strategic assets, DEI gained controlling interest in 3,800 gross megawatts of generating capacity in six Latin American countries. This includes the 2,300 megawatts of hydroelectric generation purchased in Brazil, which established DEI as one of the country’s leading private power providers. DEI opened a trading and marketing office in Buenos Aires, Argentina, and received government approval to commence physical trading and marketing of electricity and natural gas in that country. DEI is well positioned to deliver significant earnings and to capitalize on new opportunities emerging across the region.

In Australia, DEI’s Asia Pacific operations purchased 270 megawatts of power generation facilities and interest in a natural gas pipeline from BHP Power. The transaction also included 112 megawatts of generation in New Zealand. DEI completed its first full year as owner/operator

of the Queensland Gas Pipeline, and launched construction of the Eastern Gas Pipeline, which will introduce competitive gas supply to New South Wales and Victoria in 2000. DEI also became the first energy merchant in Australia with a portfolio of gas and power assets and energy trading and marketing business.

DENA is a leading developer and asset manager of wholesale electric generation projects throughout the United States. By the end of 1999, DENA had 13,600 megawatts of generation in operation, under construction or in advanced development. In 1999, DENA sold a 50-percent interest in the 640-megawatt plants under construction in Butler County, Ohio, and Vermillion County, Ind., to Cinergy Capital and Trading. DENA also sold 21.5 percent of the capacity of its Hidalgo plant being constructed near Edinburg, Texas, to the city of Brownsville, Texas. These transactions typify DENA's active management of its growing generation portfolio. DENA will deploy this capital in additional generation projects in North America. A first mover in these markets, DENA's ability to develop projects with speed and efficiency enables it to capture value from a commodity market while maintaining a strategic position in the market.

Field Services

Duke Energy Field Services is the country's largest natural gas gatherer and producer of natural gas liquids (NGLs), with strategically located assets spanning the Rocky Mountains, mid-continent, Permian Basin, Gulf Coast and offshore Gulf of Mexico.

Duke Energy Field Services experienced substantial earnings growth in 1999 with EBIT of $144 million, a 90-percent increase over 1998. The increase is attributable to continued efficiency improvements at existing plants, the acquisition of UPFuels and the integration of those assets, along with higher NGL prices, which averaged $0.34 per gallon compared to $0.26 in 1998.

For the quarter, Duke Energy Field Services' EBIT increased 571 percent to $47 million over the same quarter in 1998. The increase is attributable to higher volumes, improved operations and higher NGL prices, which averaged $0.41 per gallon in the quarter, compared with $0.24 for the fourth quarter last year.

Also during the fourth quarter, Duke Energy Field Services announced it would combine its gas gathering and processing businesses with Phillips Petroleum's Gas Processing and Marketing

(GPM) unit to form a new midstream company to be called Duke Energy Field Services. The new company will further enhance Duke Energy Field Services' position as the nation's largest midstream natural gas liquids business and the premier gatherer and processor of natural gas in the continental United States. During the first half of 2000, subject to regulatory approval, completion of the transaction and market conditions, the new company is expected to offer approximately 20 percent of its equity to the public in an initial public offering (IPO).

Electric Operations

Electric Operations' EBIT was nearly $1.7 billion for the year, excluding the one-time charge for contingency reserves related to construction activity on Duke Power's electric generating plants in the 1970s and 1980s. 1998 EBIT was $1.5 billion. Duke Power produced steady sales combined with excellent operating efficiency in 1999. For the year, the average number of total customers rose 2.8 percent while total kilowatt-hour sales decreased slightly by 0.6 percent. Electric Operations reported fourth quarter EBIT of $313 million vs. $182 million in fourth quarter 1998.

Natural Gas Transmission

For the year, EBIT for Duke Energy Gas Transmission group's Northeast Pipelines increased $81 million to $557 million – a 17-percent increase over 1998. For the quarter, the Northeast Pipelines reported EBIT of $145 million, a 41-percent increase over the same period in 1998. Market expansion projects, joint ventures, higher throughput and lower operating expenses contributed to increased earnings over last year. Gas Transmission's total EBIT for the year was $627 million, down from $702 million reported in 1998, reflecting the loss of earnings from the Midwest Pipelines. Gas Transmission reported fourth quarter EBIT of $145 million, compared with last year's fourth quarter of $168 million.

In December, the Maritimes & Northeast Pipeline, in which Duke Energy has an ownership interest and is the operator of the U.S. portion of the pipeline, received delivery of the first natural gas produced from Canada’s Sable Offshore Energy Inc. The delivery marked the first

time in more than 20 years that a major new natural gas supply basin in North America has been brought to market. In addition, the Gas Transmission group entered 2000 with continued growth, announcing a definitive agreement to purchase East Tennessee Natural Gas Co., with closing scheduled for late March 2000.

Trading and Marketing

Duke Energy Merchants (DEM), the North American energy trading and marketing subsidiary of Duke Energy, contributed 1999 EBIT, net of minority interests, of $70 million for the year and $45 million for the fourth quarter. An increase in structured transactions, including an agreement with Northeast Utilities to purchase 15 percent of the output from the Millstone 2 and 3 nuclear units for two years beginning Jan. 1, 2000, contributed to strong results. In addition, DEM’s non-operating working interest participation programs have yielded discoveries of approximately 45 Bcfe of proven reserves during the year, providing DEM a significant source of future earnings.

DEM's 1999 annual and fourth quarter EBIT were down slightly from 1998, due mainly to lower natural gas margins, which were offset partially by improved power margins and lower operating expenses.

Real Estate Operations and Other Diversified Businesses

Crescent Resources, Duke Energy's real estate development and land management company, reported 1999 EBIT of $176 million, an increase of 24 percent over 1998. This increase reflects the continued success of Crescent Resources' residential communities as well as a strong contribution from commercial project sales. Increased land sales for the year were partially offset by a lake lot sales program that was successfully completed in 1998.

 For the quarter, EBIT increased 118 percent to $98 million, primarily due to strong land sales and the sale of nearly 1.1 million square feet of industrial space and 803,000 square feet of office space for $144.4 million.

Crescent announced in 1999 that it will enter the multi-family real estate market and significantly increase its retail development.

DukeNet Communications, Duke Energy's telecommunications arm, increased EBIT by $6.7 million for the year and $2.8 million in the fourth quarter on the strength of improvements in fiber optic network services revenues.

Other Energy Services

Fourth quarter EBIT for Other Energy Services essentially was breakeven, excluding a one-time charge of $35 million related to the repositioning of DukeSolutions. DukeSolutions provides an integrated package of energy solutions that help organizations improve their competitiveness, productivity and profitability. EBIT for the same period last year was ($5 million).

For the year, EBIT for Other Energy Services declined approximately $104 million from 1998, primarily due to the aforementioned one-time charge in DukeSolutions and a one-time charge of $38 million related to the restructuring and repositioning of Duke Engineering & Services (DE&S). DE&S is one of the world's leading engineering and technical services companies, specializing in energy and environmental projects in strategically chosen markets. Partially offsetting the decline in EBIT were increased EBIT contributions from Duke/Fluor Daniel, recognized as the leading engineering and construction contractor for fossil-fueled power facilities with a 40-percent market share of projects under construction in the United States.

"The impressive results produced by our businesses is confirmation that Duke Energy is well equipped to take advantage of the evolving energy services landscape and that our integrated strategy is working. We have a very capable team that is turning in solid results in our rapidly changing and competitive industry," Priory said.

Duke Energy, a premier global energy services company, serves customers and creates shareholder value through an integrated network of energy assets and energy experts. As market leaders in their respective fields, Duke Energy businesses manage a multi-national portfolio of energy supply, delivery and trading assets valued at approximately $30 billion. Duke Energy, headquartered in Charlotte, N.C., is a Fortune 100 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: www.duke-energy.com.

 This press release includes 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. Although Duke Energy believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include regulatory developments, the timing and extent of changes in commodity prices for oil, gas, coal, electricity and interest rates, the extent of success in connecting natural gas supplies to gathering and processing systems and in connecting and expanding gas and electric markets, the performance of electric generation, pipeline and gas processing facilities, the timing and success of efforts to develop domestic and international power, pipeline, gathering, processing and other infrastructure projects and conditions of the capital markets and equity markets during the periods covered by the forward-looking statements.

This does not constitute an offer to sell or a solicitation of an offer to purchase any securities, which may only be made by means of a prospectus describing the securities and the business of the issuer thereof.

###

 

December 1999
QUARTERLY HIGHLIGHTS
(unaudited)

Three Months Ended
December 31,

Year To Date
December 31,



(In millions, except where noted)

1999

1998

1999

1998


COMMON STOCK DATA

Earnings Per Share (before extraordinary item)

Basic

$(0.53)

$0.60

$2.26

$3.43

Dilutive

(0.53)

0.60

2.25

3.42

Earnings Per Share

  Basic

(0.53)

0.60

4.08

3.41

  Dilutive

(0.53)

0.60

4.07

3.40

Dividends Per Share

0.55

0.55

2.20

2.20

Actual Shares Outstanding

366

363

366

363

Weighted Average Shares Outstanding

  Basic

366

362

365

361

  Dilutive

367

364

365

362


INCOME

Operating Revenues

$6,197

$4,183

$21,742

$17,610

Earnings Before Interest and Taxes (EBIT)

(116)

516

2,043

2,647

Interest Expense

196

129

601

514

Minority Interests (a)

43

34

142

96

Income Taxes

(166)

129

453

777

Extraordinary Gain (Loss)

-

-

660

(8)

Net Income

(189)

224

1,507

1,252

Preferred Stock Dividends and Redemption Premiums

5

5

20

21

Earnings Available for Common Stockholders

$(194)

$219

$1,487

$1,231


CAPITALIZATION

Common Equity

42%

48%

Minority Interest

6%

2%

Preferred Stock

1%

2%

Trust Preferred Securities

7%

5%

Total Debt

44%

43%


SEC Fixed Charges Coverage

2.9

4.7

Total Debt

$9,432

$7,168

Book Value Per Share

24.46

22.45


CAPITAL AND INVESTMENT EXPENDITURES

Electric Operations

$262

$200

$759

$586

Natural Gas Transmission

74

88

261

290

Field Services

35

99

1,630

304

Trading and Marketing

67

4

104

8

Global Asset Development

921

198

2,703

1,027

Other Energy Services

7

2

94

41

Real Estate Operations

133

54

368

217


EBIT BY BUSINESS SEGMENT

Electric Operations

$(487)

$182

$856

$1,513

Natural Gas Transmission

145

168

627

702

Field Services

47

7

144

76

Trading and Marketing

45

48

70

81

Global Asset Development

26

19

181

64

Other Energy Services

(36)

(5)

(94)

10

Real Estate Operations

98

45

176

142

Other Operations

9

33

(9)

2





Total Segment EBIT

(153)

497

1,951

2,590

EBIT attributable to Minority Interests

37

19

92

57





Total EBIT

$(116)

$516

$2,043

$2,647






(a) Includes expense related to the Trust Preferred Securities of $27 million and $18 million for the three months ended and $87 million and $44 million for the twelve months ended December 31, 1999 and 1998, respectively.

December 1999
QUARTERLY HIGHLIGHTS
(unaudited)

Three Months Ended
December 31,

Year To Date
December 31,



(In millions, except where noted)

1999

1998

1999

1998


ELECTRIC OPERATIONS

Operating Revenues

$1,041

$1,018

$4,700

$4,626

Operating Expenses

1,587

875

3,966

3,228

Other Income (Expenses)

59

39

122

115





EBIT

$(487)

$182

$856

$1,513





Sales, GWh

19,086

18,553

81,548

82,011


NATURAL GAS TRANSMISSION

Operating Revenues

$281

$376

$1,206

$1,528

Operating Expenses

158

224

615

864

Other Income (Expenses)

22

16

36

38





EBIT

$145

$168

$627

$702





Throughput, TBtu

404

697

1,893

2,593

FIELD SERVICES

Operating Revenues

$1,256

$515

$3,590

$2,639

Operating Expenses

1,207

513

3,444

2,598

Other Income (Expenses)

(2)

5

(2)

35





EBIT

$47

$7

$144

$76





Natural Gas Gathered and Processed/Transported, TBtu/day

5.9

3.5

5.1

3.6

Natural Gas Liquids Production, MBbl/d

224.3

106.4

192.4

110.2

Natural Gas Marketed, TBtu/day

0.5

0.4

0.5

0.4

Average Natural Gas Price per MMBtu

$2.59

$2.05

$2.27

$2.11

Average Natural Gas Liquids Price per Gallon

$0.41

$0.24

$0.34

$0.26

TRADING AND MARKETING

Operating Revenues

$3,241

$2,292

$11,793

$8,785

Operating Expenses

3,216

2,230

11,724

8,665

Other Income (Expenses)

37

1

43

2

Minority Interest Expense

17

15

42

41





EBIT

$45

$48

$70

$81





Natural Gas Marketed, TBtu/day

10.7

9.5

10.5

8.0

Electricity Marketed, GWh

31,487

18,565

109,634

98,991


GLOBAL ASSET DEVELOPMENT

Operating Revenues

$251

$111

$777

$319

Operating Expenses

202

94

571

261

Other Income (Expenses)

(3)

6

25

22

Minority Interest Expense

20

4

50

16





EBIT

$26

$19

$181

$64





Proportional MW Capacity Owned

(includes under construction or under contract)

NA

NA

8,773

6,041

Proportional Maximum Pipeline Capacity, MMcf/d(includes under construction or under contract)

NA

NA

309

124

Estimated Proportional Investment in Project Net Assets
(includes under construction or under contract)

NA

NA

$3,277

(a)

$1,831

(a)


OTHER ENERGY SERVICES

Operating Revenues

$525

$143

$989

$521

Operating Expenses

561

147

1,083

511

Other Income (Expenses)

-

(1)

-

-





EBIT

$(36)

$(5)

$(94)

$10






REAL ESTATE OPERATIONS

Operating Revenues

$124

$61

$233

$181

Operating Expenses

26

16

57

39





EBIT

$98

$45

$176

$142






(a) Includes total proportional estimated costs to complete projects under construction or under contract of $1,102 million and $439 million as of December 31, 1999 and 1998, respectively.



Contact: Paul Mason
Phone: 704/373-4512
24 Hour Phone: 704/382-8333
Email: pemason@duke-energy.com