Duke Energy Corp. Duke Energy Corp. (DUK)(DUK)

Rating: BuyRating: Buy

Patrick Matchell Fall 2005

Company OverviewCompany Overview

Company is comprised of 6 divisionsCompany is comprised of 6 divisions– Franchise Electric (34%)Franchise Electric (34%)– Natural Gas Transmission (32%)Natural Gas Transmission (32%)– Duke Energy North America (DNEA) (13%)Duke Energy North America (DNEA) (13%)– Field Services (50 / 50 JV) (12%)Field Services (50 / 50 JV) (12%)– International Energy (6%)International Energy (6%)– Crescent Resources (3%)Crescent Resources (3%)

% = percent of total assets% = percent of total assets

Business EnvironmentBusiness Environment

Still recovering from Enron collapse and Still recovering from Enron collapse and deregulation.deregulation.

Consolidation to increase due to repeal of Consolidation to increase due to repeal of Public Utility Holding Company Act of Public Utility Holding Company Act of 1935.1935.

Industry wide repair of highly leveraged Industry wide repair of highly leveraged balance sheets.balance sheets.

Current EventsCurrent Events

June 2005 - June 2005 -

Announced merger with CinergyAnnounced merger with Cinergy

July 2005 -July 2005 -

Energy Bill passed allowing over Energy Bill passed allowing over $14 billion in tax credits$14 billion in tax credits

July 2005 - July 2005 -

Duke power customers set record forDuke power customers set record foruse of electricityuse of electricity

Investment HighlightsInvestment HighlightsGrowth rate for next quarter is at 56.5%Growth rate for next quarter is at 56.5%– Industry average at 6.8%Industry average at 6.8%

Increased dividend by 13% in June Increased dividend by 13% in June – Yield currently over 4%Yield currently over 4%

Over $1 billion in cash reservesOver $1 billion in cash reserves

Selling assets with high risk and negative Selling assets with high risk and negative returns (DENA Segment)returns (DENA Segment)

Continuing to acquireContinuing to acquire

More Investment HighlightsMore Investment Highlights

Upward revision of earningsUpward revision of earnings– Revised EPS of $1.65 from $1.60Revised EPS of $1.65 from $1.60

Increasing liquidity by repaying LTDIncreasing liquidity by repaying LTD

Leader in low carbon technologies Leader in low carbon technologies

5 Star S&P Rating 5 Star S&P Rating

Key Price DriversKey Price Drivers

Q3 Earnings resultsQ3 Earnings resultsPrice of DENA asset salesPrice of DENA asset salesCompletion of Cinergy mergerCompletion of Cinergy merger

Further strategic acquisitionsFurther strategic acquisitionsIPO of master limited partnershipIPO of master limited partnership

Impact from Hurricanes Impact from Hurricanes

Technical AnalysisTechnical Analysis

Entry / ExitEntry / ExitEntry price: between $27.50 – 28.50Entry price: between $27.50 – 28.50

Entry time: next 10 -15 days; before earningsEntry time: next 10 -15 days; before earnings

Target Price (12 Month): $35 - $36Target Price (12 Month): $35 - $36

(estimated 2006 EPS $1.75 x 20 P/E Multiple)(estimated 2006 EPS $1.75 x 20 P/E Multiple)

Holding Period Return: Approximately 29.5%Holding Period Return: Approximately 29.5%

(including dividends)(including dividends)