Utility convergence continues, with talks under way for aprospective new utility merger between New Jersey’s Public ServiceEnterprise Group and Ohio’s Cinergy Corp., according to Wall Streetreports.

Public Service, parent of Public Service Electric & Gas,reportedly is ready to pay more than $5.6 billion in stock for theparent of Cincinnati Electric & Gas, and assume an additional$2.9 billion of long-term debt.

Neither party is acknowledging that discussions are under way,but trading volumes shot up on Cinergy’s common stock Thursday andFriday. Its stock gained a point Thursday to $35, and then suffereda moderate decline to $34.48 Friday when many other stocks wereregistering more precipitous drops.

The move is PSEG’s first major foray outside its mid-Atlanticterritory where it serves 1.9 million electric and 1.6 million gascustomers. The 98-year old company counts nearly three quarters ofNew Jersey consumers as customers.

Under CEO Jim Rogers, Cinergy completed a contentious mergerwith neighboring Indiana utility PSI Energy in 1994. Cinergy’sutilities serve about 1.5 million electric customers and 500,000gas customers in Indiana, Ohio and Kentucky. The corporation claimsa total enterprise value of $9 billion and assets of $12 billion.Both companies have been active in deregulating markets in theirstates.

PSEG reported an 8% per share improvement in consolidatedoperating earnings in 2000 over 1999, reporting $764 million or$3.55 per share in 2000 v. $723 million or $3.29 a share in 1999.The company is estimating $3.70 in earnings per share this year and$4.00 to $4.10 in 2002. Expansion of its unregulated PSEG Power andPSEG Global Units are expected to contribute increasing amounts tothe bottom line.

Cinergy’s earnings also were up in 2000, to $2.61 per sharebefore special items, from $2.10 per share in 1999, without theaddition of $.43 per share from the sale of assets. The company hadoperating income of $861 million in 2000, up from $693 million in1999. Cinergy, through its Cinergy Ventures, also has been buildingits independent generating portfolio.

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