Duke Energy has successfully moderated its risk by winding down its merchant generation and trading activities, Standard & Poor’s Ratings Services said Wednesday in affirming the company’s corporate credit and issue ratings (‘BBB/A-2’) and those of its direct and indirect subsidiaries Duke Capital LLC, Texas Eastern Transmission L.P., PanEnergy Corp., Westcoast Energy Inc., and Union Gas Ltd. At the same time, the ratings agency revised the company’s outlook to positive from stable.

Charlotte, N.C.-based Duke Energy had about $18.8 billion in debt as of Sept. 30, 2004. The company draws its fundamental strength from its regulated power generation and natural gas transmission and distribution units which “provide for consistent and stable cash flow generation,” said S&P analyst Dimitri Nikas.

The ratings affirmation also reflects Duke’s higher-risk activities such as the real estate development, merchant generation, and Latin American operations.

S&P based its positive outlook on Duke Energy’s efforts to: “moderate business risk by reducing its merchant generation exposure; resolve various regulatory challenges in North Carolina and South Carolina, as well as in the western power markets; wind down and eventually dissolve Duke Energy Trading and Marketing, which conducted proprietary trading; and limit exposure to open positions created as a result of the sale of the southeastern merchant generation assets and the decision to not build three plants under construction.

“The positive outlook also recognizes the material debt reduction, which has taken place during 2004, as well as incorporating anticipated debt reduction during 2005,” S&P said.

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