Duke Energy’s board of directors said Thursday it has approved a plan to buy back up to $2.5 billion in common stock over the next three years, which will be funded in part by the sell-off of nearly 20% of the company’s ownership interest in Duke Energy Field Services LLC (DEFS) to partner ConocoPhillips, the sale by DEFS of the general partner of TEPPCO Partners LP to EPCO Inc. subsidiary Enterprise GP Holdings LP, and the sale of 2.5 million TEPPCO limited partner units to EPCO and affiliates.

The transaction will bring Duke Energy almost enough funds to carry out the stock repurchase plan — $2.3 billion (pretax). Duke Energy reported that it and ConocoPhillips have reached an agreement to reduce Duke’s ownership share of DEFS to 50% from 69.7%, resulting in a 50-50 joint venture between Duke Energy and ConocoPhillips.

In addition, the Duke Energy board approved the sale by DEFS of the TEPPCO general partner (Texas Eastern Products Pipeline Co. LLC) to EPCO for $1.1 billion and the sale by Duke Energy of its 2.5 million limited partner units in TEPPCO to EPCO at Tuesday’s closing price of $41.58 per share, for a total of about $100 million. Houston-based EPCO is a privately held company, which owns 100% of the equity in Enterprise Products Partners LP and controls about 40% of the total common units outstanding of Enterprise Products GP LLC.

Under the terms of the deal with ConocoPhillips, Charlotte, NC-based Duke Energy will receive directly and indirectly through its ownership interest in DEFS approximately $1.1 billion in cash and assets from the Houston producer. About 50% of the transaction will be in cash, said Duke Energy.

The transaction includes the transfer of DEFS’s gathering and processing facilities in Alberta and British Columbia to Duke Energy Gas Transmission (DEGT). In addition, ConocoPhillips will transfer its interest in the Empress System into DEGT’s operations in western Canada. The Empress System operations include natural gas liquids extraction and fractionation facilities in Alberta and related liquids transportation and storage operations. The addition of these assets is designed to strengthen DEGT’s position in western Canada, the company said.

Despite the proposed sell-down of its ownership interest in DEFS, Duke Energy said its earnings target for 2005 remains at $1.60 a share. It noted that the DEFS sell-down would be offset by its share buyback and transfer of additional assets to DEGT.

Duke Energy and ConocoPhillips have discussed moving to a 50-50 structure for some time now, it noted. “The time is now right for both parties,” said Duke Energy CEO Paul Anderson. To support continued growth, he noted that DEFS is mulling over the prospect of forming a new master limited partnership.

The sale of TEPPCO’s general partner to EPCO closed today (Feb. 24), the company said. The sale of Duke Energy’s limited partner units in TEPPCO is expected to close on or before March 1. The restructuring of Duke Energy’s DEFS venture with ConocoPhillips is subject to customary regulatory approvals in the U.S. and Canada, and is scheduled to close either late in the second quarter or early in the third quarter of this year, it noted.

Together, the multiple transactions are expected to result in a one-time gain that will be recognized by Duke Energy at the closing of the sales. Those gains will likely be in the range of 80 cents to 90 cents per share.

The impact of the transactions on the company’s future earnings per share will be virtually offset by the planned stock buyback, Duke Energy said. The share buyback will be funded with the proceeds from the transactions along with current cash balances and future gas generation. Duke Energy said it ended 2004 with $1.85 billion in cash, cash equivalents and short-term investments.

The share buyback program is expected to begin this year and last for three years, according to the company. It indicated that there will be more shares repurchased in the near term than in the long term.

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