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Duke Energy, Cinergy Seek FERC Approval of $9B Merger

Energy giant Duke Energy and Cinergy Corp. last Tuesday filed an application with the Federal Energy Regulatory Commission seeking approval of their $9 billion all-stock merger by early 2006.

The filing came two months after Duke Energy reported that it entered into a definitive agreement to acquire Cincinnati, OH-based Cinergy for $9 billion in stock, creating a formidable utility company with 5.4 million natural gas and electric customers (see NGI, May 16). Company officials at the time also hinted that the future might see Charlotte, NC-based Duke Energy splitting off its natural gas assets and going forward as a pure electric play.

In addition to FERC's approval, the merger, announced on May 9, will require the approval of the shareholders of both companies, as well as a number of additional regulatory approvals or reviews by state and federal authorities, including North Carolina, South Carolina, Ohio, Kentucky and Indiana state regulators, the Nuclear Regulatory Commission, Securities and Exchange Commission (SEC), Department of Justice and the Federal Communications Commission (for transfer of certain licenses).

The companies said they already have filed applications related to the merger in Ohio, Indiana, North Carolina and South Carolina, and a draft registration statement with the SEC. They said they anticipate receiving all of the necessary regulatory approvals by the summer of 2006.

The new company, to retain the name Duke Energy Corp., will have approximately $27 billion in annual revenues and $1.9 billion in annual net income, and will -- on a combined basis -- own or operate 54,000 MW of electric generation domestically and internationally (35,000 MW from Duke Energy, and 19,000 MW from Cinergy).

The transaction will form a utility business with 3.7 million retail electric customers and 1.7 million retail gas customers in Ohio, Kentucky, Indiana, North Carolina, South Carolina and Ontario, Canada.

The combined company also will include Duke Energy's major natural gas pipeline assets (Texas Eastern Transmission, Algonquin Gas Transmission, East Tennessee Natural Gas, BC Pipeline, Maritimes & Northeast and Gulfstream), along with storage assets, about 57,000 miles of natural gas gathering pipeline and processing facilities.

Under the merger agreement, each common share of Cinergy will be converted into 1.56 shares of Duke Energy upon the closing of the merger. Cinergy investors are expected to receive 13.4% above the $40.36/share that the company's stock closed at on May 6. Duke Energy shareholders will own about 76% of the total 1.3 billion shares, while Cinergy shareholders will own approximately 24% or about 310 million shares of Duke Energy shares outstanding.

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