The right mix of energy assets, knowledge, businesses and people.

A company that's disciplined. Dynamic. Agile.

Leading change, not adapting to it.

Duke Energy is one company with many faces — asset management, trading and marketing, risk management, electric power, natural gas and more. It is a thriving network of energy businesses, each with a distinctive history, a unique focus, a service niche.

Yet the Duke Energy companies are united in purpose and direction — delivering real results to customers and creating value for investors. They share a keen awareness of supply and demand, critical to forecasting market cycles. Together, they work to uphold Duke Energy's reputation for integrity, customer commitment, environmental responsibility and good citizenship.

But success requires more than diverse capabilities and common values. It requires knowing how to put those competitive advantages to work.

Duke Energy has consistently held to a solid, straightforward strategy: Develop and manage a dynamic portfolio of energy assets. Deliver energy solutions to customers. Trade and market energy. Actively manage risk.

Duke Energy's management team launched this strategy with confidence, and it has served us well. Not only have we stayed the strategic course amid market uncertainties, but we've also applied this plan across the board, to every business line in every region. And it is working.

In the U.S., we are building regional energy businesses in gas, power, trading and marketing. And we are replicating that success to create a strong foothold in newly competitive international markets. Duke Energy is supplying and moving energy to targeted growth markets in North America, Latin America, Asia Pacific and Europe.

We are leading the evolution from regulated utilities to full-scope competitive energy companies. Most of Duke Energy's revenue — roughly 90 percent — and more than half its earnings are now generated by the company's competitive businesses. We saw the market signs and moved into profitable new ventures. Smart moves.

Industry restructuring and dramatic growth in demand are changing the way the world thinks about energy. Higher standards of living and light-speed communication have whetted the world's appetite for new electric generation. What used to be "wants" are now "needs."

In the U.S. alone, consumers will need more than 200,000 additional megawatts of electricity — nearly a 25 percent increase — within the next decade. Most of that new capacity — some 90 percent — will likely be fueled by natural gas. Duke Energy — with the knowledge, skills, speed and agility to turn market openings into market positions — will be filling those energy needs.

Putting strategy into action is Duke Energy's forte. Not just doing it, but doing it right. With foresight. Market intelligence. Decisiveness. Every decision to build, buy, sell or operate is carefully weighed against a two-part litmus test: Does it meet market demand? Does it create value?

In hundreds of transactions since Duke Energy made the leap from pipelines and kilowatts to an integrated energy company, the answers to the litmus test have been "yes" and "yes."

In the U.S., Duke Energy is answering the nation's mandate for more electric power with a fleet of energy-efficient merchant plants. Last summer, Duke Energy North America (DENA) hustled to bring four plants on line — an unprecedented achievement — to help the nation keep its cool during the peak demand season. And the company promises six more to help ensure power availability during the summer of 2001.

Duke Energy's first-to-market advantage comes from its integrated capabilities. DENA oversees plant development, negotiates gas supply and markets the power. Duke Engineering & Services provides environmental and siting expertise, and ties the finished plant to the electric grid. Duke/Fluor Daniel handles plant design, construction and operation. And Duke Energy Gas Transmission pipelines bring the fuel to the plants.

Knowing when and where to buy, and being in a position to act swiftly, are equally valuable. Case in point: DENA gained an early entrance into the growing Southwest power market by purchasing a half-interest in the Griffith Energy Project, a gas-fired merchant plant under construction in Arizona and due to begin operation in mid-2001.

Duke Energy North America's growing merchant plant portfolio is on schedule to put more than 23,000 megawatts of new capacity in operation by 2004. In addition, DENA trades eight times as much power and five to six times as much natural gas as Duke Energy owns, operates or controls.

By 2010, U.S. demand for natural gas is expected to grow from 22 trillion to 30 trillion cubic feet per year — mostly to fuel electric generation. The Department of Energy estimates $1.5 trillion will be invested in new pipelines and gas infrastructure over the next 15 years. Duke Energy is increasing its share of that business by developing new gas projects in high-growth eastern U.S. markets.

In the Southeast, natural gas usage is growing at an annual rate of more than 4 percent, twice the national average. To open the region to natural gas supplies from the Gulf Coast, Duke Energy Gas Transmission (DEGT) purchased the East Tennessee Natural Gas Company and connected its pipelines to Duke Energy's own Texas Eastern system. Further expansion is planned via the Patriot Extension, which will bring natural gas to southwest Virginia for the first time and will introduce a competitive gas supply to North Carolina.

In New England, Duke Energy is a partner in the Maritimes & Northeast Pipeline, completed in 1999. Originating offshore of Nova Scotia, the pipeline is fueling new merchant plants and expanding its reach into the Boston area with the current Hubline project.

The demand for natural gas in Florida is expected to double in the next decade. Duke Energy is partnering with Williams to build the Gulfstream pipeline from Alabama across the Gulf of Mexico to Central Florida — bringing over one billion cubic feet per day of new pipeline capacity to the state by mid-2002.

Getting the gas to market is one challenge. Storing it for quick accessibility is another, particularly when it is needed to bring peaking power plants on line at a moment's notice. That reality prompted DEGT to purchase Market Hub Partners, a salt cavern storage business with 23 billion cubic feet of capacity in Texas and Louisiana, and potential expansion facilities in Mississippi and Pennsylvania.

Duke Energy Gas Transmission operates 12,000 miles of natural gas pipeline, transporting 8 percent of the natural gas consumed in the U.S.

In March 2000, Duke Energy merged its field services business with Phillips Petroleum's gas gathering, processing and marketing unit to form a new midstream company — Duke Energy Field Services (DEFS).

DEFS separates valuable natural gas liquids (NGLs) like propane and butane from raw natural gas, and sells both the residue gas and the NGLs. The new company is the nation's number one producer of NGLs and one of the largest natural gas gatherers and marketers in the U.S.

Duke Energy Field Services owns and operates 70 plants and 57,000 miles of pipeline, and produces approximately 20 percent of NGL processing volumes in the U.S.

Worldwide, the energy industry is changing dramatically. In the U.S., electric deregulation is under way, while in other countries, government control of energy is giving way to private interests. Standards of living continue to rise, and the electronic age is creating unprecedented demand.

In the new economy, energy companies have a choice. They can look the other way, pretend the world is not changing around them, and become extinct. Or they can use change as an opportunity — to focus on their core businesses, devise successful strategies, expertly manage their risks and deliver energy to the world.

Duke Energy believes that a competitive market offers consumers more choices in both power supply and pricing, and breeds new, innovative technologies. Around the world, deregulation and privatization are opening new markets — and creating new opportunities for energy companies that act swiftly in response to customer needs.

Duke Energy is replicating its domestic strategy internationally, targeting key regions of the world where more open energy markets are emerging. Currently, we're focused on Latin America, Asia Pacific and Europe.

Energy privatization, population growth, economic prosperity and rising demand for power have created rich fields of opportunity for Duke Energy International (DEI) in both South America and Central America. Duke Energy is one of Latin America's leading energy companies, with a diverse portfolio of generation facilities in Argentina, Bolivia, Brazil, Ecuador, El Salvador and Peru.

Driving Duke Energy's position in Latin America is the company's $1 billion investment in Brazil, the eighth largest economy in the world. In 2000, Duke Energy acquired an additional interest in the Paranapanema hydroelectric system, bringing DEI's ownership in one of Brazil's largest generation companies to 95 percent.

DEI successfully manages a growing portfolio of hydroelectric and thermal assets in Peru's competitive power market. DEI also holds generating facilities in El Salvador, and has innovated cross-border power trades with neighboring Guatemala. These asset positions are complemented by DEI's natural gas and power wholesale marketing business in Buenos Aires and other energy hubs.

The first merchant player to build natural gas infrastructure in Australia, Duke Energy swiftly addressed a familiar need — a shortage of natural gas pipelines. In August, DEI completed the 500-mile Eastern Gas Pipeline, introducing natural gas competition to Australia's deregulating industry. And we fueled competition of a different sort, the 2000 Olympic Games in Sydney, by providing gas for the Olympic flame.

The pipeline will also deliver natural gas to a new Duke Energy asset - the Bairnsdale Power Plant. And in mid-2001, DEI will begin construction of a pipeline that will deliver natural gas to the energy markets of the Australian state of Tasmania for the first time.

Duke Energy has moved to capture the potential in Europe's liberalizing energy markets by establishing a trading and marketing position. DEI has acquired Mobil Europe Gas Inc. (MEGAS), the Netherlands' largest independent gas marketing company. From that platform and DEI's London office, Duke Energy will expand into power marketing, asset positions and other pursuits in targeted European regions.

Expansion into new markets has brought new risks — currency volatility and diverse economic conditions. Add volatility in fuel costs, fluctuating interest rates and other factors, and risk management becomes even more critical.

Across North America and around the world, an effective risk management program buoys Duke Energy to tackle projects that make economic sense and to buy or sell assets when market conditions are right. Duke Energy has elevated its risk management function to a competitive advantage by making risk calculation and mitigation a high priority across the enterprise.

Duke Energy's power company consistently leads the industry in customer service, ranking first or second among utilities by the American Customer Service Index every year since 1994. Approximately 2 million customers in Duke Power's 22,000-square-mile service area have 24-hour access to the company's Customer Service Center.

Wherever in the world we do business, environmental stewardship guides our work. We work hard to protect natural and cultural resources, from California's marine habitats to Maine's stone walls and wetlands to Australia's aboriginal homelands.

Duke Energy is putting its values and expertise to use in new and different ways to benefit our customers and impact the bottom line. DukeSolutions provides supply management, risk hedging and e-business solutions to help major energy consumers use energy more wisely and more efficiently. Duke Capital Partners makes financing and asset management services available to wholesale and commercial energy markets. And Duke Energy Merchants is expanding our strong trading and marketing capabilities to energy-related ventures beyond natural gas and power — like refined products, fertilizers and crude oil.

We intend to continue to revolutionize the energy industry. By producing and delivering energy. By serving our customers with unparalleled commitment. By leading our industry with innovative solutions to the world's energy needs.

We are Duke Energy. Decisive. Results driven. Leading the way to the future.