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Duke Power FitchAlert Negative; PanEnergy FitchAlert Positive

NEW YORK, Nov. 25 /PRNewswire/ -- In response to the definitive agreement to merge Duke Power Co. (NYSE: DUK; "Duke") and PanEnergy Corp. (NYSE: PEL), Duke's securities are placed on FitchAlert negative by Fitch Investors Service. Concurrently, the ratings of PEL and PEL's subsidiaries, Panhandle Eastern Pipe Line Co. and Texas Eastern Transmission Corp., are placed on FitchAlert positive. FitchAlert will continue until Fitch meets with management and reviews the business plan and pro forma financials. Upon consummation of the merger, PEL will be a wholly owned Duke subsidiary.

FitchAlert denotes a change in ratings is likely and the use of the negative and positive modifier indicates ratings for Duke may be lowered within the next 12 months. Similarly, ratings for PEL may be raised over the same period.

The following Duke Power issues are affected: $1 billion shelf registered 'AA' first and refunding bonds (FMB) and 'AA-' debt securities, $2.7 billion 'AA' FMB's, $593 million 'AA' secured medium-term notes, $40 million York County, SC 'AA' pollution control facility revenue refunding bonds series 1990, $684 million 'AA-' preferred stock, $140 million 'AA-' preferred shelf registration and 'F-1+' commercial paper program.

The following PanEnergy Corp. issues are affected: $1.0 billion 'BBB' notes, debentures, medium-term notes and shelf registration. The following Texas Eastern Transmission Corp. are affected: $572 million 'BBB+' notes, debentures and shelf registration. The following Panhandle Eastern Pipe Line Co. issues are affected: $300 million 'BBB+' debentures and senior debt shelf registration.

The merger agreement is structured as a tax-free, stock-for-stock transaction in which Duke will exchange about 160 million new shares, valued at approximately $7.7 billion, for 100% of PEL's stock. No new debt will be incurred in this transaction and Duke will not guarantee the obligations of PEL or its subsidiaries. However, increased common dividends on the Duke shares issued in the transaction will entail approximately $200 million incremental annual dividend payout. The merger is dependent upon approval of shareholders and authorization by the FERC and state utility regulators in both North and South Carolina. The parties expect the transaction to close before the end of 1997. Management of both companies believe the combination will enhance the likelihood for success in the energy services and Duke's Carolina based utility operations might ultimately be stimulated through the introduction of gas in eastern portions of the Carolinas.

Based on preliminary information, Duke's ratings are placed on FitchAlert negative given the potential that Duke's financial resources could be tapped to service PEL's 'BBB+'/'BBB' debt and the prospect the combined entity will be aggressive in acquiring new electric generating assets. Expansion of the power generation segment outside the Carolinas may introduce additional business risk due to the variability of cash flow.

Conversely, PEL should gain added financial flexibility, due to Duke's size and relative financial strength. PEL bondholder protection could improve if Duke funds a portion of the capital spending programs associated with PEL's future power generating and energy service transactions. The companies have indicated they expect to combine many of their functions, which could bring about convergence in their credit ratings.

SOURCE Fitch Investors Service
 -0- 11/25/96

/CONTACT: John Watt, 212-908-0523, or Bill Stellenwerf, 212-908-0558, both of Fitch Investors Service/


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

MW -- NYM151 -- 4000 11/25/96 18:21 EST
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Publication:PR Newswire
Date:Nov 25, 1996
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