Fitch Revises Duke & Duke Capital's Outlook to Stable from Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 7, 2004

Fitch Ratings has affirmed the outstanding ratings of Duke Energy Corp. (Duke Energy; senior unsecured rated 'BBB+' by Fitch) and its wholly-owned subsidiary Duke Capital, LLC (senior unsecured rated 'BBB-') and revised the Rating Outlook of both entities to Stable from Negative. The rating actions also affect other Duke Energy Corp. affiliates as listed below. The Stable Outlook reflects the lower business risk that results from the successful execution of the company's targeted asset sales, expectations of reduced leverage and the reduction of legal and regulatory uncertainty from the resolution of several investigations and litigation.

Duke Energy has announced or closed asset sales of approximately $2 billion in 2004, exceeding management's target of $1.5 billion for the full year. Sale proceeds supplemented by associated tax benefits and equity funds from mandatory debt conversions should allow Duke Energy to meet its forecasted debt and trust preferred security reductions of $3.5 to $4 billion by year-end. Approximately $1.2 billion of the debt reductions are contractual retirements with over half that occurs in the fourth quarter. Meeting the targets would solidify current debt ratings.

The two primary dispositions were the sale of Duke Energy's Australian assets (largely gas pipelines) to Alinta Ltd for $1.28 billion, resulting in net proceeds of approximately $380 million after the retirement of nearly $900 million in related debt, and the Southeast electric generation portfolio to KGEN Partners, LLC for $475 million. Sale of the southeast portfolio reduced Duke Energy's merchant portfolio by 5,325 MW to 10,495 MW. Cash proceeds from the two transactions are approximately $850 million (after recognizing the debt retirement). Duke Energy also anticipates tax benefits of approximately $500 million from the loss incurred on the plant sales. Miscellaneous other sales to date aggregate $262 million, the largest being $138 million from the sale of turbines and surplus equipment. Mandatory equity unit conversions will provide additional funds of $1.625 billion. The Australian sale closed in May and the sale of the southeast generating portfolio is expected to close in the third quarter.

Duke Energy has also made significant progress in reducing regulatory uncertainty and legal risk. In early March, the US Attorney completed its investigation of accounting issues at Duke Power with no charges brought against the company or its employees. Previously, in September 2003, Duke Energy reached a settlement with the Commodities Future Trading Commission (CFTC) regarding the reporting of natural gas trading information, settled in December with the Federal Energy Regulatory Commission (FERC) allegations of price manipulation in California and in November two federal courts dismissed pending shareholder lawsuits. Total settlement payments were less than $35 million.

Going forward, the merchant generation portfolio will continue to be a drag on earnings and cash flow. Duke Energy is projecting earnings before interest and taxes (EBIT) of negative $300 million in 2004 and breakeven by the end of 2006. The Southeast sale should reduce the EBIT loss by about $50 million annually beginning in 2005, but further reductions will require an improvement in spark spreads in the regions in which Duke Energy continues to operate and lower operating costs. Proceeds from the sale of the southeast plants are in line with expectations, but even with the tax benefits are significantly below Duke Energy's initial investment. Nonetheless, since power markets in the southeast region are not expected to recover for an extended period, the reduced merchant exposure is beneficial to credit quality.

Ratings on the following issues are affirmed with a Stable Outlook by Fitch:

Duke Energy Corp.

-- Secured debt 'A-';

(including York County (SC) pollution control facility revenue refunding bonds)

-- Senior unsecured debt 'BBB+';

(including Gaston County (NC) and Oconee County (SC) pollution control revenue refunding bonds)

-- Preferred stock 'BBB' ;

-- Trust preferred securities issued by Duke Energy Capital

-- Trust II 'BBB';

-- Commercial paper 'F2'.

Duke Capital, LLC (Previously Duke Capital Corp.)

-- Senior unsecured debt 'BBB-';

-- Trust preferred securities issued by Duke Capital Financing

Trust III 'BB+';

-- Commercial paper 'F3'.

PanEnergy Corp.

-- Senior unsecured debt 'BBB-'.

Texas Eastern Transmission, LP (formerly Texas Eastern Transmission Corp.)

-- Senior unsecured debt 'BBB'.