Fitch Upgrades Duke Energy and Subsidiaries.

NEW YORK -- Fitch Ratings has upgraded the Issuer Default Rating (IDR) and individual issue ratings of Duke Energy Corporation (DUK) and each of its subsidiaries, as shown in the list below. In addition, DUK's ratings and those of Duke Energy Carolinas, LLC (DEC) were removed from rating Watch Positive, where they were placed on June 29, 2006. Approximately $11.5 billion of debt is affected. The Rating Outlook is Stable.

The DUK upgrade reflects the company's strong consolidated credit profile, the substantial and geographically diverse cash flow and earnings derived from its four regulated electric and natural gas utility subsidiaries, and a relatively low-risk business strategy intended to pursue regulated utility businesses with stable cash flow. The higher ratings also recognize the overall corporate transformation and reduction in business risk that has occurred over the past year as a result of the following events: the spin-off to shareholders of Duke Capital, LLC, renamed Spectra Energy Corp.; the merger with Cinergy and subsequent sale of Cinergy's Commercial Marketing and Trading Business; and the monetization of the company's real estate subsidiary, Crescent Resources, through a joint venture and re-capitalization. The Duke Capital spin-off eliminated approximately $8.6 billion of consolidated debt while the recapitalization of Crescent Resources provided more than $1 billion of cash that will be used to ease utility subsidiary financing requirements. DUK currently has no direct long-term debt outstanding, but is likely to add some parent leverage to support utility subsidiary capital spending within the next several years.

The upgrade of DEC is consistent with the company's strong stand-alone credit profile. The ratio of EBITDA/interest is expected to be in the 6 times (x) range over the next several years and debt/EBITDA below 3x. The ratings also benefit from the company's largely coal and nuclear based generation mix, which tends to limit fuel cost volatility, and a constructive regulatory environment. Primary credit concerns are a relatively large construction program and a pending rate review by the North Carolina Utilities Commission (NCUC). The capital expenditures include environmental retrofits and plans for a new coal-fired generating plant in 2011. The company is also pursuing the possible construction of a nuclear plant to be in service no earlier than 2016. The rate review was ordered by the NCUC as a condition for approval of the Cinergy merger and could result in a rate decrease.

The upgrade for Duke Energy Ohio (DEO) reflects a credit profile that is very strong for the previous rating category, the reduction in business risk from the sale of the Cinergy Marketing and Trading business and the extension of the Rate Stabilization Plan (RSP) through 2008. The RSP includes an adjustment mechanism that provides recovery of fuel costs, emission allowances and environmental compliance expenditures for generation used to serve the RSP. The adjustment mechanisms meaningfully lower the risk of DEO's unregulated generation portfolio. The company has requested a continuation of the RSP through 2010, which if approved further delays the introduction of competitive markets in Ohio. The ratings of Duke Energy Kentucky (DEK), a direct subsidiary of DEO, are linked to those of DEO. DEO recently transferred 1,100 MWs (megawatts) of coal-fired and gas-fired generation to DEK to replace a power supply agreement between the companies. This generation, which includes a minority ownership by DPL, is operated by DEK/DEO.

The upgrade of Duke Energy Indiana (DEI) reflects a credit profile that is consistent with the higher ratings and a very constructive regulatory environment. The ratio of EBITDA/interest is expected to be in the 4x-5x range over the next several years, and debt/EBITDA below 3.5x. Regulatory statutes include a number of mechanisms that allow for recovery of certain costs outside of a fully litigated rate case, mitigating the risks of a substantial construction program to install pollution control equipment. In 2006, the company received approval to recover an estimated $1.08 billion of expenditures to comply with the Clean Air Interstate Rules (CAIR) and Clean Air Mercury Rules (CAMR) to be made by 2009. The approval includes a semi-annual adjustment to recover financing costs on the cumulative balance of environmental expenditures, development costs and emission allowances. DEI is also seeking regulatory approval to build an Integrated Gas Combined Cycle (IGCC) plant.

The higher Cinergy Corp. ratings are the result of the strong credit profiles and higher ratings of its direct subsidiaries DEO, DEK and DEI and the lower consolidated risk that results from the sale of the CMT business.

Overall, consolidated financial measures for DUK are projected to be consistent with the new ratings. The ratio of EBITDA/interest is expected to be in the 5x range over the next several years, and debt/EBITDA in the 3x range. DUK and its subsidiaries have ample liquidity and manageable debt maturities over the next few years.

The longer term credit effects of potential future carbon regulations cannot be quantified at this time and are not reflected in any of the ratings. DUK's Indiana and Ohio subsidiaries have above-average concentration of coal-fired generation.

Fitch upgrades the following ratings, with a Stable Outlook:

Duke Energy Corp

--Issuer Default Rating (IDR) 'to 'BBB+' from 'BBB'.

Duke Energy Carolinas, LLC

--Issuer Default Rating (IDR) to 'A-' from 'BBB+';

--Secured debt to 'A+' from 'A' (including York County, SC pollution control facility revenue refunding bonds);

--Senior unsecured debt to 'A' from 'A-' (including Gaston County, NC, and Oconee County, SC, pollution control revenue refunding bonds);

--Commercial paper to 'F1' from 'F2'.

Cinergy Corp.

--Issuer Default Rating (IDR) to 'BBB+' from 'BBB';

--Senior unsecured debt to 'BBB+' from 'BBB'

Duke Energy Ohio, LLC

--Issuer Default Rating (IDR) to 'BBB+' from 'BBB';

--Senior unsecured debt to 'A-' from 'BBB+'.

Duke Energy Indiana, LLC

--Issuer Default Rating (IDR) to 'BBB+' from 'BBB';

--Secured debt to 'A' from 'A-';

--Senior unsecured debt to 'A-' 'BBB+';

--Subordinated debt to 'BBB+' from 'BBB'.

Duke Energy Kentucky, LLC

--Issuer Default Rating (IDR) to 'BBB+' from 'BBB'

--Senior unsecured debt to 'A-' 'BBB+'

California Maritime Infrastructure Authority (guaranteed by Duke Energy Corp.)

--Lease revenue bonds (San Diego Unified Port District-South Bay Point Acquisition) to 'BBB+' from 'BBB-'

In addition, Fitch affirms the following ratings:

Cinergy Corp.

--Short-term ratings at 'F2'.

Duke Energy Indiana, LLC

--Short-term ratings at 'F2'.

Duke Energy Ohio, LLC

--Short-term ratings at 'F2'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.