Filed by Duke Energy Corporation Commission File No. 1-4928 Pursuant to Rule 425 under the Securities Act of 1933 And Deemed Filed Pursuant to Rule 14a-12 Under the Securities Exchange Act of 1934 Subject Company: Duke Energy Holding Corp. Commission File No. 132-02302 |
Northern Region
June 28, 2005
Joe Crapster
Director, Investor Relations
Forward Looking Statements
This document includes statements that do not directly or exclusively relate to historical facts. Such statements are
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements include statements regarding benefits of the
proposed mergers and Restructuring Transactions, integration plans and expected synergies, anticipated future financial
operating performance and results, including estimates of growth. These statements are based on the current
expectations of management of Duke and Cinergy. There are a number of risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements included in this document. For example, (1) the companies
may be unable to obtain shareholder approvals required for the transaction; (2) the companies may be unable to obtain
regulatory approvals required for the transaction, or required regulatory approvals may delay the transaction or result in
the imposition of conditions that could have a material adverse effect on the combined company or cause the companies
to abandon the transaction; (3) conditions to the closing of the mergers and the restructuring transactions may not be
satisfied; (4) problems may arise in successfully integrating the businesses of the companies, which may result in the
combined company not operating as effectively and efficiently as expected; (5) the combined company may be unable to
achieve cost-cutting synergies or it may take longer than expected to achieve those synergies; (6) the transaction may
involve unexpected costs or unexpected liabilities, or the effects of purchase accounting may be different from the
companies’ expectations; (7) the credit ratings of the combined company or its subsidiaries may be different from what the
companies expect; (8) the businesses of the companies may suffer as a result of uncertainty surrounding the transaction;
(9) the industry may be subject to future regulatory or legislative actions that could adversely affect the companies; and
(10) the companies may be adversely affected by other economic, business, and/or competitive factors. Additional factors
that may affect the future results of Duke and Cinergy are set forth in their respective filings with the Securities and
Exchange Commission ("SEC"), which are available at www.duke-energy.com/investors and www.cinergy.com/investors,
respectively. Duke and Cinergy undertake no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
2
Additional Information and Where to Find It
In connection with the proposed transaction, a registration statement of Deer Holding Corp., which will
include a joint proxy statement of Duke and Cinergy, and other materials will be filed with the SEC. WE
URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT AND
THESE OTHER MATERIALS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT DUKE, CINERGY, DEER HOLDING CORP., AND THE
PROPOSED TRANSACTION. Investors will be able to obtain free copies of the registration statement
and proxy statement (when available) as well as other filed documents containing information about Duke
and Cinergy at http://www.sec.gov, the SEC's website. Free copies of Duke’s SEC filings are also
available on Duke’s website at www.duke-energy.com/investors, and free copies of Cinergy’s SEC filings
are also available on Cinergy’s website at www.cinergy.com/investors.
Participants in the Solicitation
Duke, Cinergy and their respective executive officers and directors may be deemed, under SEC rules, to
be participants in the solicitation of proxies from Duke’s or Cinergy’s stockholders with respect to the
proposed transaction. Information regarding the officers and directors of Duke is included in its definitive
proxy statement for its 2005 Annual Meeting filed with the SEC on March 31, 2005. Information regarding
the officers and directors of Cinergy is included in its definitive proxy statement for its 2005 Annual
Meeting filed with the SEC on March 28, 2005. More detailed information regarding the identity of
potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set
forth in the registration statement and proxy statement and other materials to be filed with the SEC in
connection with the proposed transaction.
3
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 websites at:
www.duke-energy.com/investors/financial/gaap/
www.cinergy.com/Investors/Reports_and_Presentations/presentations.asp
Regulation G
4
Recent DUK Merger History
PanEnergy / Duke Power 1997
DUK acquired Westcoast Energy 2001
DUK / CIN announced May 2005
5
Motives for Mergers
1)
Synergy
2)
Tax considerations
3)
Purchase of assets below their replacement costs
4)
Diversification
5)
Gaining control over a large enterprise
Friendly merger – Surviving company stronger if deal financed with stock
“Merger Waves” Largest
Are we about to see a wave in our sector?
Buffet – Mid American acquire PacifiCorp from Scottish Power
Exelon – PSEG
Merger Regulation
Social Issues – Who will be CEO, etc.!
1)
Pfizer Warner-Lambert 116B
2)
AOL TimeWarner 106B
3)
Exxol Mobil 81B
Around
Year
2000
6
Duke Energy Strategic Rationale
Merger will strengthen business platforms and will increase value immediately
and in the longer term
Creates immediate value
DUK board intends to increase the annual dividend 12.7% to $1.24 per
share
effective September 2005
Accretive to earnings
Approximately $400 million in gross annual synergies at a steady state
Regulated savings to be shared between customers and shareholders
Increased scale and scope of North American generation
Regulated operations with more than 25,000 MW of generating capacity
Merchant power business with combined 16,000 MW of generating capacity
Merchant power business gains fuel and market diversity
Stand-alone strength for both electric and gas operations provides portfolio
flexibility
Electric operations would be in top 5 of largest in US by implied market cap
Gas operations would be the largest in US by implied market cap
As utility and merchant businesses continue to consolidate, Duke Energy will be
very well positioned to participate
7
Transaction Specifics
Delaware holding company – Duke Energy Corporation
Consideration – 100% stock Debt to equity drops
Cinergy shareholders will receive 1.56 shares of DUK for each
CIN share
Premium of 13.4% based on May 6 closing prices
Post merger, Cinergy shareholders will hold approximately 24%
of Duke shares outstanding (approximately 310 million shares)
Duke Energy’s board intends to increase its annual dividend 12.7%
to $1.24 per share effective with September 2005 dividend
8
Key Operational Metrics
1.7
0.5
1.2
Gas distribution customers (millions)
47,000
25,000
22,000
Service territory (square-miles)
54,000
19,000
35,000
Generation assets operated (MW) (1)
46,000
14,000
32,000
Generation assets owned (MW) (1)
1.5
7,850
Cinergy
3.7
29,350
Combined
2.2
21,500
Duke
Electric customers (millions)
Number of employees
(1) Amounts include domestic and international MW and are rounded.
As of December 31, 2004
9
Lee
Vermillion
Hanging Rock
Washington
Fayette
Cayuga
Wabash River
Edwardsport
Gibson
Miami Wabash
Gallagher
Markland
Noblesville
Connersville
Madison
Conesville
Dick’s Creek
Midwest Generation Assets
East Bend
Miami Fort
Beckjord
Wm. Zimmer
J.M. Stuart
Killen
Duke Midwest merchant generation
Cinergy unregulated generation
Cinergy regulated generation
Cinergy regulated utility service area
IN
OH
WV
KY
IL
MI
CHICAGO
INDIANAPOLIS
COLUMBUS
LOUISVILLE
CINCINNATI
Woodsdale
Henry County
Age
Fuel diversity
Transfer of at least 1500 MW
Emissions
10
Midwest Regulated Generation Information
Oil
98
33
Indiana
Connersville
Gas
129
4
Indiana
Henry County
Gas
310
1
Indiana
Noblesville
Coal/Oil
160
55
Indiana
Edwardsport
Coal/Oil
966
37-46
Indiana
Wabash River
Coal/Gas/Oil
1,135
11-33
Indiana
Cayuga
Coal
560
45
Indiana
Gallagher
Oil
104
36
Indiana
Miami Wabash
Coal
2,844
27
Indiana
Gibson
SO2: xx NOx: xx
7,055
Gas
704
5
Ohio
Madison
Hydro
45
38
Indiana
Markland
Cinergy Regulated
Emissions
(Lbs/MMBtu)
Fuel Source
Net Capacity
(MW)
Age
(years)
Location
Plant
11
Midwest Unregulated Generation Information
Coal
312
32
Ohio
Conesville
Coal/Oil
962
28-47
Ohio
Miami Fort
Gas
564
12
Ohio
Woodsdale
Gas
172
37
Ohio
Dick’s Creek
Coal
604
14
Ohio
Wm. Zimmer
Coal/Oil
1,107
22-46
Ohio
Beckjord
Coal
414
24
Kentucky
East Bend
Duke Energy
SO2: xx NOx: xx
5,246
Coal
198
23
Ohio
Killen
Coal
913
33
Ohio
J.M. Stuart
Cinergy Unregulated
SO2: 0 NOx: 0.02
3,600
Gas
620
2
Ohio
Hanging Rock #2
Gas
620
2
Ohio
Hanging Rock #1
Gas
620
2
Pennsylvania
Fayette
Gas
620
3
Ohio
Washington
Gas
640
4
Illinois
Lee (peaker)
Gas
480
5
Indiana
Vermillion (peaker)
Emissions
(Lbs/MMBtu)
Fuel
Source
Net Capacity
(MW)
Age
(years)
Location
Plant
12
Regulatory Timeline
State regulatory approvals
File applications by June 30
Expect approvals within 9 months
after filing
FERC
Filing expected in July
Expect approvals within 10 months
after filing
SEC
Approval expected 4 – 6 weeks
after obtaining all state and FERC
regulatory approvals
Other filings include DOJ, NRC, etc.
13
Selected Investor-Owned
Electric Utility Holding Companies
For Illustration only
14
Merger Cost Savings
Approximately $400 million in
annual pre-tax cost savings, before
costs to achieve, by year 3
Savings are ~50% non-regulated
and 50% regulated, before sharing
between customers and
shareholders
Costs-to-achieve largely incurred
by end of year 2
~ 40% expensed
~ 60% capitalized
Rapid integration approach to
achieve Day-1 readiness and
accelerate savings realization
Five-Year Savings Summary
($ in millions)
~$275
~$350
($425)
($175)
~$400
($50)
~$425
($40)
~$450
Year 1
Year 2
Year 3
Year 4
Year 5
Pre-tax savings
Costs to achieve
15
Other Considerations
Initial Board of Directors – 10 named by Duke, 5 named by
Cinergy
Corporate headquarters – Charlotte, North Carolina
Headquarter offices for PSI – Plainfield, Indiana
Headquarter offices for CG&E and Union Light Heat & Power –
Cincinnati, Ohio
Duke Power will continue to be headquartered in Charlotte
Duke Energy Gas Transmission (DEGT) and certain commercial
operations will remain in Houston, Texas
Headquarter offices for Duke Energy Field Services – Denver,
Colorado
Headquarter offices for Crescent Resources – Charlotte
16
Gas Operations
Electric Operations
Other Operations
* Includes Cinergy’s gas distribution activities
Functional Organization
Paul Anderson
Chairman
Jim Rogers
CEO
Fred Fowler
President & CEO
Leadership
to be named
Leadership
to be named
Duke Power
PSI
Merchant Generation
International
CG&E*
Gas Pipelines
Field Services
Union Gas
Crescent
Corporate
17
Total Shareholder Return
September 30, 1988 through December 31, 2004
Source: Bloomberg Financial Markets LLC
18
Duke Energy Corporation - Investment Recommendation Summary as of June 16, 2005
Firm
Analyst (back-up)
Recom
FC Rec
Target
2005
2006
3
n/a
1.50
1.55
1
n/a
1.55
n/a
3
$30
1.58
1.90
3
$26
1.55
1.60
3
n/a
1.55
1.65
3
$27
1.57
1.71
2
$31
1.56
1.77
3
$28
1.62
1.81
3
$30
1.65
1.70
3
$29
1.62
1.71
3
$27
1.66
1.89
4
n/a
n/a
n/a
3
n/a
1.55
n/a
1
$33
1.57
1.65
3
n/a
1.45
1.55
3
$27
1.51
n/a
1
$31
1.65
1.80
3
n/a
1.50
n/a
3
$28
1.50
1.65
3
n/a
1.55
1.65
3
$28
1.55
1.70
2
$32
1.62
1.74
1
$30
1.60
1.85
3
$30
1.55
1.70
3
n/a
1.60
1.80
A.G. Edwards
Argus Research
Atlantic Equities
B of A Securities
BB&T Capital
Bernstein Securities
BMO Nesbitt Burns
Calyon Securities
CIBC
CSFB
Deutsche Bank
Goldman Sachs
Hilliard Lyons
Howard Weil
J.P. Morgan
Janney Montgomery
Jefferies & Co.
Keybank Capital Markets
Lehman Brothers
Merrill Lynch
Morgan Stanley
RBC Capital
Smith Barney Citigroup
UBS (US)
Wachovia Securities
Wells Fargo
Tim Winter (Jonathan Reeder)
Gary Hovis
Nathan Judge
Shelby Tucker
Robert Chewning (Michael Creager)
Hugh Wynne
Karen Taylor (Andrew Shufelt)
Craig Shere (Patrick Keane)
Matthew Akman (Alda Pavao)
Dan Eggers (Sebastian Iannariello)
Robert Rubin (Stephen Levine)
David Maccarrone
David Burks
Rebecca (Becca) Followill (Jonathan Robert)
Andy Smith (Brooke Mullin)
David Schanzer (Heike Doerr)
Paul Fremont (Debra Bromberg)
Paul Ridzon
Dan Ford (Tom O'Neill)
Steve Fleishman (Jonathan Arnold)
Scott Soler
Maureen Howe (Robert Kwan)
Greg Gordon (Marc Minikes)
Ronald Barone (Shalini Mahajan) (Jay Tobin)
Tom Hamlin (John White)
Ali Agha (Ed Yuen)
Hold
Buy
Neutral
Neutral
Hold
Marketperform
Outperform
Neutral
Marketperform
Neutral
Hold
Underperform
Neutral
Buy
Neutral
Hold
Buy
Hold
Equal Weight
Neutral
Equal Weight
Outperform
Hold
Neutral
Marketperform
Hold
3
n/a
1.55
1.65
Mean Estimates
2.7
$29
$1.56
$1.70
Based on First Call
Management Incentive Target for 2005: $1.60
2nd Qtr '05
$0.38
1=Buy 3=Hold 5=Sell
Analysts not on First Call
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
19
Morgan Stanley
Assessing the Duke/Cinergy Proposed Merger
Duke and Cinergy (CIN, EW, $42) announced a definitive merger
agreement Transaction, if approved, will likely take up to 18 months
to close, in our estimation. We estimate the transaction to have
$0.10 to $0.17 of EPS accretion to DUK over the next three years.
Expected cost savings to be $400 million, of which approximately
$175 million is for regulated operations and will likely be shared with
ratepayers.
Summary of Sell Side Analysts’ Reports
20
Deutsche
We really don't get it...
We are maintaining our Hold on DUK. While we are in the process
of working through our model to revise our 2007 estimate to reflect
the CIN operations, we do not expect to change our Hold
recommendation.
21
Lehman Brothers
Duke Energy and Cinergy Agree to Merge. 2 Equal Weight.
Deal likely takes 12-18 months to close with state approvals (IN, KY,
NC, OH, SC and Ontario, Canada) and FERC, NRC, DOJ and SEC
(PUHCA) federally.
22
JP Morgan
Ohio Market Appears to Compel Deal; Unknown Until 2009.
DUK and CIN announced an all stock deal today. Each share of CIN
would be exchanged for 1.56 shares of DUK, a premium of 13.4%
on May 6 closing prices. DUK expects gross annual synergies of
$400M (before costs to achieve of nearly $700M) and expects a
summer 2006 closing following various regulatory approvals. We
believe synergy expectations appear reasonable but believe deal
close timing may be aggressive.
23
Jefferies & Company
Mister Rogers, Won’t You be My Neighbor.
Duke Energy’s Board of Directors announced that it intends to
increase Duke’s dividend by 12.7% or 14 cents per share to $1.24
per share effective September 2005.
24
Merrill Lynch
Seeking "CIN"ergies.
We remain Neutral on DUK following the joint meeting with CIN
management yesterday. While the merger has positive financials,
DUK's valuation already included some positive transaction value.
25
Janney
Good Looking Merger With Cinergy.
Duke Energy and Cinergy announced merger plans under an
agreement that one share of Cinergy would convert into 1.56 shares
of DUK. After the merger, Cinergy shareholders will own roughly
24% of Duke.
26
Atlantic Equities
Downgrading to Neutral; Reducing price target to $29 and EPS
Estimates.
The stock has risen 77% since our upgrade in 2003. Now, the
reasons why we were bullish are now fully reflected in the share
price and future catalysts we were focused on to drive further
shareholder value have now been clearly communicated to the
market. Further evidence that this is last chapter in the Duke
recovery story is that the Duke management instrumental in turning
around the company is leaving. Investors may be disappointed with
this.
27
Summary
Merger will enhance strong business platforms
Creates immediate and long-term value
Increased scale and scope provides greater portfolio
flexibility
Merchant power business gains fuel and geographic
diversity
12.7% increase to current Duke annual dividend
Maintains dividend neutrality for Cinergy shareholders
As utility and merchant businesses continue to consolidate,
Duke Energy will be well positioned to participate
Closing is expected in summer 2006
28
Forward-Looking Statements |
This document includes statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements regarding benefits of the proposed mergers and Restructuring Transactions, integration plans and expected synergies, anticipated future financial operating performance and results, including estimates of growth. These statements are based on the current expectations of management of Duke and Cinergy. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this document. For example, (1) the companies may be unable to obtain shareholder approvals required for the transaction; (2) the companies may be unable to obtain regulatory approvals required for the transaction, or required regulatory approvals may delay the transaction or result in the imposition of conditions that could have a material adverse effect on the combined company or cause the companies to abandon the transaction; (3) conditions to the closing of the transaction may not be satisfied; (4) problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; (5) the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies; (6) the transaction may involve unexpected costs or unexpected liabilities, or the effects of purchase accounting may be different from the companies’ expectations; (7) the credit ratings of the combined company or its subsidiaries may be different from what the companies expect; (8) the businesses of the companies may suffer as a result of uncertainty surrounding the transaction; (9) the industry may be subject to future regulatory or legislative actions that could adversely affect the companies; and (10) the companies may be adversely affected by other economic, business, and/or competitive factors. Additional factors that may affect the future results of Duke and Cinergy are set forth in their respective filings with the Securities and Exchange Commission (“SEC”), which are available at www.duke-energy.com/investors and www.cinergy.com/investors, respectively. Duke and Cinergy undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
Additional Information and Where to Find It |
In connection with the proposed transaction, a registration statement of Duke Energy Holding Corp., which includes a joint proxy statement of Duke and Cinergy, and other materials has been filed with the SEC on July 1, 2005.WE URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT AND THESE OTHER MATERIALS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT DUKE, CINERGY, DUKE ENERGY HOLDING CORP., AND THE PROPOSED TRANSACTION.Investors may obtain free copies of the registration statement and proxy statement as well as other filed documents containing information about Duke and Cinergy at http://www.sec.gov, the SEC’s website. Free copies of Duke’s SEC filings are also available on Duke’s website at www.duke-energy.com/investors, and free copies of Cinergy’s SEC filings are also available on Cinergy’s website at www.cinergy.com/investors. |
Participants in the Solicitation |
Duke, Cinergy and their respective executive officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from Duke’s or Cinergy’s stockholders with respect to the proposed transaction. Information regarding the officers and directors of Duke is included in its definitive proxy statement for its 2005 Annual Meeting filed with the SEC on March 31, 2005. Information regarding the officers and directors of Cinergy is included in its definitive proxy statement for its 2005 Annual Meeting filed with the SEC on March 28, 2005. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by securities, holdings or otherwise, will be set forth in the registration statement and proxy statement and other materials to be filed with the SEC in connection with the proposed transaction. |