DUKE ENERGY NORTH AMERICA

"The merchant power business is competitive and dynamic – driven by market cycles and commodity prices. To capture the greatest value we actively manage our portfolio of generation assets, just as savvy investors manage their stock portfolios. Ours is a strategy of buy-build-manage-sell. We invest in a market when it is low in the capacity cycle and seek opportunities to divest when we can realize significant value from our assets. What gives us the competitive edge? We understand market fundamentals. We have an aggressive development program. We're top-flight asset managers, delivering superior performance and building value while managing our portfolio. The core skills unique to Duke Energy deliver greater value from our generation portfolio."

Duke Energy North America (DENA) entered the wholesale merchant generation business less than three years ago and is today one of the leading developers, owners and managers of wholesale merchant generation in the U.S. By the end of 1999, DENA's asset portfolio included interest in 4,400 MW in operation, 3,300 MW under construction and 9,300 MW in advanced stages of development.

Recognizing that the traditional "buy and hold" approach would not capture the value to be realized in a merchant environment, DENA adopted a strategy of portfolio management. Currently it targets five high-growth regions, continually assessing its position in each market and increasing or decreasing its presence depending on the opportunities presented. Several deals highlight 1999. (1) DENA sold its 50 percent interest in the 130 MW Mecklenburg Energy Facility to United American Energy. (2) DENA signed a 10-year lease with the Port of San Diego (California) to operate the 706 MW South Bay Power Plant, and secured the opportunity to develop a next-generation replacement plant. (3) The company entered the Southwest market through its acquisition of a 50 percent interest in the Griffith Energy Project from PP&L Global, Inc. The 590 MW merchant plant in Arizona will begin commercial service in 2001. (4) DENA began construction of two 640 MW merchant peaking power plants in Indiana and Ohio. Within a month of groundbreaking, DENA announced the sale of a 50 percent interest in both facilities to Cinergy Capital & Trading, Inc. In addition, DENA acquired a 50 percent interest in a 130 MW Cinergy facility under development in Ohio. Commercial operation of the two peaking facilities is scheduled for the summer of 2000. (5) Construction proceeded on DENA's 510 MW Hidalgo Energy project in Texas, and DENA sold a 21.4 percent interest in the facility's output to the Brownsville Public Utilities Board.

By integrating Duke Energy's full range of capabilities, DENA will continue to maintain its speed to market and "first mover" advantage. This, coupled with the capability to accomplish multiple, simultaneous transactions, enables DENA to contribute increased earnings of as much as 10 percent to 20 percent on a project basis compared with its competition.

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