·         Expectations for 2003 earnings are flat, assuming a modest improvement in market conditions

·         Company formalizes decision to defer three merchant power plants

·         Expects one-time, third-quarter charge of 19 cents to 23 cents per share

·         Capex for 2002 and 2003 reduced; 2003 capex to be internally funded

·         Other lines of business producing solid, sustainable results

CHARLOTTE, N.C. – Duke Energy is revising its 2002 and 2003 earnings expectations based on continued weakness in Duke Energy North America (DENA), which operates in the merchant energy market. 

2002 ongoing earnings per share are expected to be between $1.95 and $2.05, excluding  one-time charges. The earnings outlook for 2003 is flat, assuming a modest improvement in the current extremely depressed market conditions. If the North American merchant energy market does not improve in 2003, earnings may be lower than 2002 ongoing earnings.

“The young merchant energy sector has experienced both an extreme up cycle and an equally extreme down cycle,” said Richard B. Priory, Duke Energy’s chairman, president and chief executive officer. “A number of factors sharply depressed spot and forward wholesale power prices during the critical summer months and led us to our revised expectations.”

Priory noted that these factors include the prolonged economic downturn, continued low price volatility, further reduced spark spreads and decreased market liquidity. The market has also felt the impact of substantial new capacity additions, credit weakness of some participants and continued uncertainty due to regulatory investigations, litigation and government intervention in the markets.

Priory noted that the weakness is confined to one of Duke Energy’s businesses. The other businesses in the company’s portfolio, particularly Duke Energy Gas Transmission and Duke Power, continue to generate solid, sustainable results.

“We are taking aggressive steps to manage through this weakness in the North American merchant energy market to maintain our financial strength and to be well positioned for growth when market conditions change,” Priory said.

The company is aggressively reducing capital expenditures. Capital expenditures in 2002 have been further reduced from the $6.8 billion indicated in July to $6.2 billion, excluding the acquisition of Westcoast.

Capital expenditures for 2003 have been reduced to approximately $3.5 billion, all of which the company intends to fund through internal cash flow, after dividend payments and including asset sales. While dividend decisions are made by the board of directors, our plans retain the current level of $1.10 per share per year.

“Our plan to fund 2003 capex internally will greatly reduce our dependence on the volatile capital marketplace and help us maintain our industry-leading financial strength,” Priory said.

The company also announced that it is deferring construction of three power plants in the western United States until market conditions improve. Deferred are the Grays Harbor Energy Facility in Washington, the Deming Energy Facility in New Mexico and the Moapa Energy Facility in Nevada. The company announced on Aug. 16 that it was halting construction at the Washington and New Mexico plants and eliminating overtime and weekend work at the Nevada plant. Today’s announcement formalizes the decision to defer their construction.

In addition, the company is negotiating new terms for its purchase of turbines and associated equipment. This action, along with the demobilization costs of the construction deferrals and the write-off of site development costs at some other sites, will result in a one-time, pre-tax charge in the range of $250 million to $300 million (or 19 cents to 23 cents per share) to be taken against third-quarter 2002 earnings.

Priory said Duke Energy’s diversified business model, including both natural gas and power and regulated and unregulated businesses, differentiates it from many others in the industry and gives the company valuable flexibility, even in down market cycles.

“Our product – energy – is a must-have, and overall demand is increasing. We are strengthening our competitive position in the market, as customers look to do business with strong, reliable energy suppliers,” Priory said.

He noted that Duke Energy’s merchant plants are strategically dispersed geographically and are among the newest, cleanest and most efficient electric generating plants in the country. “These plants will play a critical role in U.S. power supply for years to come. Our historic tradition of operational excellence will serve us well and allow us to make the most of our assets and expertise,” Priory said.

Priory and other company executives will discuss the revised outlook in the company’s Monthly Chat for investors, which will be webcast at 10 a.m. EDT today. It can be accessed on the investors' section  of the company's Web site at www.duke-energy.com or by dialing 800/500-0311, confirmation code 256895, for the audio portion. International callers should use 719/457-2698, confirmation code 256895. A replay of the conference call will be available through Oct. 4. The replay number is 888/203-1112, PIN 256895. The international replay number is 719/457-0820, PIN 256895.

Duke Energy is a diversified multinational energy company with an integrated network of energy assets and expertise. The company manages a dynamic portfolio of natural gas and electric supply, delivery and trading businesses – meeting the energy needs of customers throughout North America and in key markets around the world. 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.