Duke Energy Gas Transmission

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Duke Energy Gas Transmission has more than 17,500 miles of transmission pipelines; 250 billion cubic feet of natural gas storage; gathering and processing assets; a natural gas liquids processing operation; and a local distribution company serving more than 1.2 million customers in Canada. DEGT is well positioned to connect new and existing natural gas supplies to growing markets, with timely pipeline expansions and the development of highly flexible natural gas storage capacity.

Duke Energy Gas Transmission (DEGT) continues to make a consistent contribution to cash flow and earnings by providing natural gas transmission and storage, gathering and processing, and local distribution services to premium markets in North America.

Going forward, DEGT is expected to deliver ongoing segment EBIT of approximately $1.39 billion, which is essentially flat with 2005. Ongoing earnings for this business are anticipated to grow by 3 to 5 percent annually — driven by opportunities for continued pipeline development, optimization of existing transmission, distribution, gathering and processing systems, storage development and control of costs. Demand for natural gas is expected to grow 2 to 3 percent in DEGT’s key markets.

2005 Highlights

DEGT contributed approximately $1.39 billion in segment EBIT, compared to approximately $1.33 billion in 2004 — an increase driven by improved operations, U.S. system expansions, newly acquired Canadian assets and a favorable currency exchange rate.

The geographic strength of DEGT’s system was evident following last year’s devastating hurricanes. Although the company’s Gulf Coast-area assets were temporarily affected, not a single contracted customer in our Northeast market area missed a natural gas delivery during that trying time.

Other key 2005 successes included:

• An agreement with CenterPoint Energy on a proposed pipeline to connect supply from East Texas basins to growing eastern U.S. markets
• Acquisition from AGL Resources of the remaining 50 percent interest in Saltville Gas Storage, strengthening DEGT’s storage position in the Mid-Atlantic
• A high rate of long-term contract renewals
• Successful regulatory settlements which reduced volatility and created a stable rate environment for customers
• In Canada, acquisition of the Empress liquids processing system, the transfer of Duke Energy Field Services’ gas processing operations to DEGT and the establishment of the Duke Energy Income Fund investment vehicle
• Agreements to expand Union Gas’ Dawn–Trafalgar transportation system to reach markets in Ontario, Quebec and the U.S. Northeast
• Precedent agreements to expand the Maritimes & Northeast pipeline to transport natural gas to U.S. and Canadian markets from proposed liquefied natural gas import terminals in Atlantic Canada.