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Duke Energy Corp. (DUK) Rating: Buy

Duke Energy Corp. (DUK) Rating: Buy. Patrick Matchell Fall 2005. Company Overview. Company is comprised of 6 divisions Franchise Electric (34%) Natural Gas Transmission (32%) Duke Energy North America (DNEA) (13%) Field Services (50 / 50 JV) (12%) International Energy (6%)

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Duke Energy Corp. (DUK) Rating: Buy

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  1. Duke Energy Corp. (DUK)Rating: Buy Patrick Matchell Fall 2005

  2. Company Overview • Company is comprised of 6 divisions • Franchise Electric (34%) • Natural Gas Transmission (32%) • Duke Energy North America (DNEA) (13%) • Field Services (50 / 50 JV) (12%) • International Energy (6%) • Crescent Resources (3%) % = percent of total assets

  3. Business Environment • Still recovering from Enron collapse and deregulation. • Consolidation to increase due to repeal of Public Utility Holding Company Act of 1935. • Industry wide repair of highly leveraged balance sheets.

  4. Current Events • June 2005 - Announced merger with Cinergy • July 2005 - Energy Bill passed allowing over $14 billion in tax credits • July 2005 - Duke power customers set record for use of electricity

  5. Investment Highlights • Growth rate for next quarter is at 56.5% • Industry average at 6.8% • Increased dividend by 13% in June • Yield currently over 4% • Over $1 billion in cash reserves • Selling assets with high risk and negative returns (DENA Segment) • Continuing to acquire

  6. More Investment Highlights • Upward revision of earnings • Revised EPS of $1.65 from $1.60 • Increasing liquidity by repaying LTD • Leader in low carbon technologies • 5 Star S&P Rating

  7. Key Price Drivers • Q3 Earnings results • Price of DENA asset sales • Completion of Cinergy merger • Further strategic acquisitions • IPO of master limited partnership • Impact from Hurricanes

  8. Technical Analysis

  9. Entry / Exit • Entry price: between $27.50 – 28.50 • Entry time: next 10 -15 days; before earnings Target Price (12 Month): $35 - $36 (estimated 2006 EPS $1.75 x 20 P/E Multiple) Holding Period Return: Approximately 29.5% (including dividends)

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