Investor Chat Series December 17, Tom O Connor. President & CEO Duke Energy Gas Transmission

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1 Investor Chat Series December 17, 2004 Tom O Connor President & CEO Duke Energy Gas Transmission

2 Safe Harbor Statement Under the Private Securities Litigation Act of 1995 This document contains forward looking information which is subject to risks and uncertainties, including, but not limited to, changes in the utility regulatory environment, the impact of competition from other energy suppliers, industrial, commercial and residential growth in the Company s service territory, the results of financing efforts, the effect of accounting pronouncements, growth in opportunities for the Company s subsidiaries and diversified operations, and other risks described in the Company s Securities and Exchange Commission filings. Regulation G This document includes certain non-gaap financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is included in the printed version of these slides which can be downloaded from our investor relations website at: 2

3 Duke Energy Gas Transmission System BC Pipeline & Field Services Union Gas Service Area Dawn Hub Maritimes & Northeast Algonquin Texas Eastern East Tennessee Gulfstream Storage Capacity more than 250 Bcf Miles of Transmission Pipe more than 17,500 System Compressor Horsepower 3,000,000 Miles of Distribution Main 21,000 Miles of Distribution Service 13,000 Retail Customers 1.2 million Storage Storage Union Union Gas Gas Service Service Area Area Processing Plant 3

4 DEGT Strategic Position Our assets access multiple supply sources and are attached to premium markets Storage integration adds flexibility, reliability and differentiates our product We add value by integrating our physical assets, organization and information technology Our regulated assets operate under stable and welldeveloped regulatory regimes in U.S. and Canada We have a strong base of long-term contracts and highquality customers 4

5 Expansion Projects In Service 2004 BC Pipeline & Field Services Union Gas Service Area Capacity Distrigas 60 Mdth/d Dominion 223 Mdth/d Gulfstream 350 Mdth/d M1 197 Mdth/d Saltville 1-6 Bcf M1 Expansion Texas Eastern Union Gas East Tennessee Algonquin Maritimes & Northeast Distrigas Dominion Saltville 50% Gulfstream Gulfstream Phase II 50% 5

6 Identified Expansion Opportunities 2005 & Beyond BC Pipeline & Field Services Storage Sikanni South Peace River Pine River Dawn-Trafalgar Sarnia Pool 50% St. Clair Pool Accident Saltville 50% Egan Union Gas Service Area Texas Eastern Union Gas East Tennessee Islander East 50% Algonquin Maritimes & Northeast Piedmont Jewell Ridge LNG Pipeline Projects Maritimes LNG Excelerate NE Gateway KLNG Lateral Logan Lateral Gulfstream 6

7 LNG A Requirement For Growth Demand Growth Demand to grow by 1.8% to 2.9% annually (1) on average in DEGT East Coast market area through 2010 Growth driven by LDC winter demand and electric generation Production Decline Gulf production anticipated to decline by 2.3% to 2.6% annually (1) on average through 2010 LNG will be key to filling this supply gap Balancing LNG delivery pattern not aligned with market needs Storage will be required to turn summer LNG imports into winter deliverability Geographic / Seasonal / Operational changes associated with LNG supply will drive new transportation and storage opportunities (1) EIA 2004, Wood Mackenzie 10/2004, PIRA 10/2004 7

8 Areas of DEGT Focus for LNG Related Opportunities Union Gas Dawn Hub Maritimes & Northeast Algonquin Texas Eastern East Tennessee Egan Gulfstream 8

9 Areas of DEGT Focus for LNG Related Opportunities Texas Eastern Union Gas Dawn Hub East Tennessee Maritimes & Northeast Algonquin Existing LNG terminals averaged 1.8 Bcf/d of sendout in 2004; expected sendout of 3.5 Bcf/d in 2010 Egan Gulfstream Eastern U.S. LNG Terminals Current LNG Terminals 9

10 Areas of DEGT Focus for LNG Related Opportunities Texas Eastern Union Gas Dawn Hub East Tennessee Maritimes & Northeast Algonquin Existing LNG terminals averaged 1.8 Bcf/d of sendout in 2004; expected sendout of 3.5 Bcf/d in 2010 About 30 new facilities announced in Eastern North America Siting and supply are key drivers of success Egan Gulfstream Eastern U.S. LNG Terminals Current LNG Terminals LNG Terminal Projects 10

11 Areas of DEGT Focus for LNG Related Opportunities MARKET AREA INFRASTRUCTURE OPPORTUNITIES Union Gas Dawn Hub Maritimes & Northeast Algonquin NORTHEAST LNG OPPORTUNITIES GULF LNG OPPORTUNITIES Texas Eastern East Tennessee Egan Gulfstream Eastern U.S. LNG Terminals Current LNG Terminals LNG Terminal Projects 11

12 Northeast LNG Connection Strategy Actively pursue all LNG attachments Position M&NE, Algonquin and TETLP as key conduits to markets Capture efficient expansion opportunities from dynamic supply shift Union Gas Dawn Hub Maritimes & Northeast Algonquin NORTHEAST LNG OPPORTUNITIES Texas Eastern Egan East Tennessee Gulfstream Deal Activity Everett / Tractebel Expansion in service Providence / BG LNG signed Crown Landing / BP LNG signed Advanced discussions with three terminal developers 12

13 Gulf Coast Connection Strategy Union Gas Dawn Hub Maritimes & Northeast Algonquin GULF LNG OPPORTUNITIES Texas Eastern East Tennessee Create Gulf Coast supply header connected to Egan storage Secure multiple terminal connections to header Egan Enhance liquidity / optionality for suppliers through the Egan hub HEADER DETAIL AREA Gulfstream 13

6 Bcf/d capacity Shell LNG Gulf Landing West Cameron Blk 213 ExxonMobil West Cameron Blk 220 Egan Storage 16 Bcf expandable

14 Gulf Coast Supply Header / Egan Hub Moss Bluff Storage BG LNG Lake Charles, LA Egan Storage Cheniere Sabine Pass, LA ExxonMobil Sabine Pass, TX Sempra Cameron, LA Cheniere Cameron, LA Henry Hub Gulf Coast Header 110 miles of pipeline 2.6 Bcf/d capacity Shell LNG Gulf Landing West Cameron Blk 213 ExxonMobil West Cameron Blk 220 Egan Storage 16 Bcf expandable to 40 Bcf 3.6 Bcf/d takeaway capacity via 8 pipelines Access to all East Coast and Gulf Markets Chevron LNG Port Pelican Vermillion Blk

15 Market Area Optimization Opportunities MARKET AREA INFRASTRUCTURE OPPORTUNITIES Texas Eastern Egan Union Gas Dawn Hub East Tennessee Gulfstream Maritimes & Northeast Algonquin Customers are developing long-term supply strategies Focus on growing winter/peak demand combined with ability to mitigate price spikes Storage is natural complement to LNG supplies Union Dawn hub storage is critical (150 Bcf) Open Season showed significant customer interest 15

16 DEGT Northeast Open Season Results 54 BCF of Storage at Dawn Texas Eastern Union Gas East Tennessee Gulfstream Maritimes & Northeast Algonquin Open Season Nominations 1.8 Bcf/d on Union (Dawn to Eastern Canada) 0.7 Bcf/d on Union (Dawn to Northeast) 54 Bcf of storage at Dawn 1.2 Bcf/d on Algonquin 0.5 Bcf/d TETLP short haul to Northeast 0.1 Bcf/d TETLP long haul to Northeast 16

17 Market Area Development Strategy DEGT has a two-step strategy to participate in the increased infrastructure needs of East Coast markets Step 1: Expand existing market area transmission and storage Provide infrastructure to connect Michigan / Ontario storage and Chicago supply to Northeast markets Step 2: Provide market infrastructure to optimize LNG imports Union Gas MI Dawn Storage 20 Bcf Dawn Dawn-Ontario/Northeast ( Bcf/d) NY Leidy PA M&NE ( Bcf/d) VT MA NH CT ME Maritimes & Northeast Algonquin Chicago IN OH MD NJ Texas Eastern Lebanon TETCO WV ( Bcf/d) 17

18 Conclusion DEGT has an exceptional asset base attached to key growth markets and diverse supplies Near-term opportunities are driven by traditional market growth, storage requirements and supply expansion which were confirmed by the DEGT Open Season New LNG supply will realign supply, resulting in significant investment opportunities focused on pipeline connections, operational integration and storage DEGT is ideally positioned to meet the current needs of the market and to provide integrated delivery solutions for new LNG imports Market growth and supply push initiatives, combined with continued efficiencies, should produce segment EBIT growth of 3% to 5% 18

19 Initial Outlook for 2005 Fred Fowler President and COO Duke Energy Corporation

20 2005 Earnings per Share Earnings per share incentive Incentive target of $1.60 per ongoing basic share Minimum payout at $1.45 per ongoing basic share 2004 vs Lower losses at DENA; expect $150 million loss in Strong commodity prices at Field Services Crescent Resources returns to a more normal earnings profile Other run rate of approximately $200 million + Interest expense for 2005 is expected to be about $1.1 billion 20

21 Field Services 2005 segment EBIT scenarios Assumptions Current hedging for NGL production is 63% at 12/10/04 All other factors remain the same, except crude prices If crude goes to $40 per barrel then segment EBIT would be approximately $500 million If crude goes to $30 per barrel then segment EBIT would be approximately $350 million 21

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23 Duke Energy Gas Transmission The Company's script and prepared remarks for the December 17, 2004 analyst conference call on "LNG Discussion and Initial Views on 2005" include a statement that Duke Energy Gas Transmission (DEGT) should produce 3-5% annual EBIT growth from adjusted base of $1.226 billion in The 3-5% EBIT growth and adjusted base EBIT of $1.226 billion in 2003 are non-gaap financial measures as defined under SEC Regulation G as they exclude any special items as defined by the Company. A reconciliation of the adjusted base EBIT of $1.226 billion to reported segment EBIT for 2003 has been provided in the accompanying materials. The most directly comparable GAAP measure for the EBIT growth rate is a growth rate based upon reported segment EBIT, which includes the impact of special items. Due to the forward-looking nature of this non-gaap financial measure, information to reconcile such non-gaap financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to forecast any special items for future periods Duke Energy EPS compensation target The Company's prepared remarks for the December 17, 2004 analyst conference call on "LNG Discussion and Initial Views on 2005" includes a discussion of the 2004 earnings per share (EPS) compensation target of $1.20, which is a non- GAAP financial measure as it excludes any "special items," as defined by the Company, occurring during the year. The most directly comparable GAAP measure is EPS based upon reported earnings available for common stockholders for Due to the forward-looking nature of this non-gaap financial measure, information to reconcile such non-gaap financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to forecast any "special items" for the remainder of Duke Energy compensation target and minimum The Company's prepared remarks for the December 17, 2004 analyst conference call on "LNG Discussion and Initial Views on 2005" includes a discussion of the $1.60 and $1.45 ongoing basic earnings per share compensation target and minimum amounts, respectively, for 2005 which are non-gaap financial measures as they exclude any "special items," as defined by the Company. The most directly comparable GAAP measure is basic earnings per share that will be based upon reported earnings available for common stockholders for Due to the forward-looking nature of these non-gaap financial measures, information to reconcile such non-gaap financial measures to the most directly comparable

24 GAAP financial measure is not available at this time as the Company is unable to project any "special items" for DENA Segment EBIT The Company's prepared remarks for the December 17, 2004 analyst conference call on "LNG Discussion and Initial Views on 2005" includes a discussion of DENA's expected segment EBIT losses of $150 million for This amount represents a non-gaap financial measure as it excludes any mark-to-market (MTM) earnings and "special items", as defined by the Company. The most directly comparable GAAP measure is DENA reported segment EBIT earnings or loss. Due to the forward-looking nature of this non-gaap financial measure, information to reconcile such non-gaap financial measure to the most directly comparable GAAP financial measure is not available at this time as the Company is unable to forecast the volatility of mark-to-market movements or the value of such movements and we are unable to forecast any "special items" for 2005.

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