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DCR Places Duke Power Co. on Rating Watch--Down, PanEnergy on Rating Watch--Up Following Merger Announcement

CHICAGO, Nov. 25 /PRNewswire/ -- Duke Power Co. (DUK) and PanEnergy Corp. (PEC) announced today that they have reached a definitive agreement to enter into a stock-for-stock exchange valued at roughly $7.7 billion, in a tax-free, pooling-of-interests transaction. The strategic underpinning for the merger is to garner strategic benefits and revenue enhancements by broadening the combined overall business mix and reach, and become a leading national energy provider and marketer.

Initially, the merger could potentially be credit weakening for DUK given the proposed combination with a financially weaker entity. In contrast, it could be a credit positive for PEC. As a result, DCR has placed DUK on Rating Watch--Down and PEC on Rating Watch--Up until a thorough review of the transaction has been completed. PEC's pipeline subsidiaries, Panhandle Eastern Pipe Line Co. and Texas Eastern Transmission Corp., are also placed on Rating Watch--Up. It should be noted that in each of these cases there are several credit-related outcomes depending on the specifics of the combined company's business and financial plans, of which we are undertaking a full review. DCR has also not yet had the opportunity to observe initial reactions of state and federal regulators to the proposed transaction.

DCR currently rates Duke's first and refunding mortgage bonds, notes and collateralized Pollution Control Revenue Bonds, 'AA' (Double-A); preferred stock, 'AA-' (Double-A-Minus); and commercial paper 'D-1+' (D-One-Plus). PanEnergy Corp.'s notes, debentures and Swiss Franc Bonds (Formerly TEC) are rated 'BBB' (Triple-B). Panhandle Eastern Pipe Line Co.'s notes and debentures are rated 'BBB+' (Triple-B-Plus). Texas Eastern Transmission Corp.'s notes and debentures are rated 'BBB+' (Triple-B-Plus).

Duke Power Company, one of the nation's largest investor-owned utility companies, is primarily engaged in electricity generation, transmission and distribution in the central portion of North Carolina and the western portion of South Carolina. Based in Charlotte, North Carolina, Duke supplies electricity to roughly 1.8 million residential, commercial, industrial and wholesale customers, with its largest industrial segment represented by the textile industry. Through its Nantahala Power and Light (NPL) unit, Duke also serves roughly 53,000 customers in western North Carolina. Duke is also engaged in various diversified operations, including independent power production and marketing, real estate development, and other investment and energy-related activities.

PanEnergy Corp. is the parent company for two separate operating groups engaged in the interstate transportation and storage of natural gas; marketing, gathering and processing of natural gas, natural gas liquids and crude oil; and power marketing. PanEnergy's consolidated entities delivered roughly 12 percent of all natural gas consumed in the United States through its network of nearly 37,000 miles of interstate pipelines.

SOURCE Duff & Phelps Credit Rating Co.
 -0- 11/25/96


/CONTACT: Lisa B. Metros, CFA, 312-368-3195, metros@dcrco.com, or John W. O'Connor, 312-368-2059, oconnor@dcrco.com, both of Duff & Phelps Credit Rating Co./

(DUK PEL)

CO: Duke Power Co; PanEnergy Corp. ST: North Carolina IN: UTI SU: RTG TNM

MS -- NYM129 -- 3848 11/25/96 14:41 EST http://www.prnewswire.com
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Date:Nov 25, 1996
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