EXHIBIT 2(a)
FOR IMMEDIATE RELEASE
CONTACT FOR DUKE POWER COMPANY: CONTACT FOR PANENERGY CORP:
MEDIA: Joe Maher MEDIA: John Barnett
704/382-8323 713/627-4072
INVESTORS: Allen Stewart INVESTORS: Brad Porlier
704/382-5087 713/627-4600
DUKE POWER AND PANENERGY ANNOUNCE $23 BILLION MERGER
TO CREATE UNPARALLELED INTEGRATED ENERGY PROVIDER
CHARLOTTE, NC AND HOUSTON, TX (NOVEMBER 25, 1996) -- Duke Power Company [NYSE:
DUK] and PanEnergy Corp [NYSE: PEL] today announced that their Boards of
Directors have approved a definitive merger agreement for a tax-free, stock-for-
stock transaction creating an integrated energy company with a total market
capitalization of approximately $23 billion ($17 billion in equity and $6
billion in debt and preferred stock). Under the agreement, each PanEnergy share
would be converted into 1.0444 shares of Duke Power. Based upon Duke Power's
closing price of $47.875 on November 22, 1996, Duke Power will issue
approximately $7.7 billion in stock to PanEnergy stockholders to complete the
transaction. PanEnergy stockholders will own approximately 44 percent of the
common stock of the company. The transaction will be accounted for as a pooling
of interests and is anticipated to become accretive towards the end of the
second year after the completion of the transaction. At closing, Duke Power
Company will change its name to Duke Energy Corporation.
The proposed combination would create an unparalleled integrated energy
provider that unites Duke Power, one of the nation's largest investor-owned
electric utilities serving 1.8 million customers, with PanEnergy, one of the
nation's leading energy services companies handling over 15 percent of the
natural gas consumed in the United States.
Duke Power currently pays an indicated annual dividend of $2.12 per share.
Accordingly, PanEnergy's shareholders will receive an increase of $1.25 in
dividends per share, based on the implied exchange ratio, from PanEnergy's
current indicated dividend of $0.96 per share.
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William H. Grigg, chairman and chief executive officer of Duke Power, said,
"This strategic merger is about growth, opportunity and creating value. Each of
our companies has a recognized name and a strong reputation in our industries.
This combination creates the preeminent provider of energy and energy services
in North America. Duke Power and PanEnergy share the vision that customer choice
is the driver of the energy services marketplace of the future. In our
dramatically changing industry, we need to define ourselves by our customers'
needs, not by our traditional product offerings. Companies that are positioned
to help their customers find business solutions that optimize a broad array of
energy products and services at competitive prices will be rewarded with
satisfied shareholders, customers, and employees.
"We at Duke Power realized that the implementation of our strategic goals
required a partner who shares our vision," Mr. Grigg continued. "We will
continue to be committed to our core electric business. However, both Duke
Power and PanEnergy realize that the convergence of the gas and electricity
industries means that a combined company would achieve distinct advantages not
available to either on a stand alone basis. The combination brings together one
of the largest and lowest-cost investor-owned electric utilities in the country
with PanEnergy, North America's third largest marketer of natural gas, the
fourth-largest U.S. natural gas liquids producer and owner of one of the
nation's leading interstate natural gas pipeline networks. Our companies are
committed to forging a union based on profitability, opportunity, efficiency and
growth.
"In forming this partnership with PanEnergy, we have aligned ourselves with a
team of management and Board members that has successfully navigated through a
period of deregulation and profound changes in the natural gas industry. The
skills that Mr. Anderson and his colleagues honed during that time will be
invaluable to us as we confront the challenges of deregulation in the electric
utility industry," Mr. Grigg concluded.
Paul M. Anderson, president and chief executive officer of PanEnergy, said,
"Over the last two years, PanEnergy has emerged as a mega-marketer of natural
gas with an expanding presence in other energy forms. As the gas and electric
markets have begun to converge, we have recognized a need to align ourselves
with an electric partner. Duke Power is the acknowledged industry leader in
providing safe, reliable, responsive and economical service to its customers.
It is upon this bedrock that we will build a true industry pacesetter in the
field of energy services. Moreover, Duke Power is recognized as having
engineering and global power asset management skills which rank it among the
best. I cannot imagine a better company for PanEnergy to join with in pursuing
its strategic vision. PanEnergy shareholders will have a substantial ownership
interest in a financially strong company with excellent access to financial
markets and a solid record of earnings and dividend growth."
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"We expect the unregulated business segments to generate significant
incremental operating income for Duke Energy through the marketing of energy
products and services both nationally and internationally," Mr. Anderson
continued. "We estimate incremental annual pre-tax income to be approximately
$225 million by the year 2000. PanEnergy currently gathers and processes 2.7
Trillion British thermal units (TBtu) of natural gas and markets 7.2 TBtu each
day. Combining this natural gas business base with Duke Power's knowledge of
the electric generation business, its experience in serving electric customers,
and its customer base, Duke Energy will have marketing expertise and market
reach far beyond what either company could achieve on its own."
"Duke Energy will have the ability to offer physical delivery and management
of both gas and electricity in multiple regions of the country through
PanEnergy's extensive pipeline system and Duke Power's well-managed electric
transmission grid," Mr. Anderson continued. "These systems will be managed
together in a new energy transportation group giving Duke Energy the flexibility
required to better serve its customers and respond to market forces. Owning
diverse physical assets will enable us to optimize the delivery of energy to our
customers. The energy services group will build upon the demonstrated success
of each company's existing energy marketing ventures: PanEnergy Trading and
Market Services, L.L.C. venture with Mobil Corporation and the Duke Energy
Group, Inc. power marketing venture with Louis Dreyfus Electric Power."
"The combination of PanEnergy and Duke Power will capture the opportunities
that are developing in the new energy services environment," said Dennis
Hendrix, chairman of PanEnergy. "It will create a platform to market, trade and
arrange physical delivery of energy products and services on a large scale to
all major market areas. The new company will also create expanded opportunities
in international markets, some of which are currently served by Duke Power and
PanEnergy. This will increase our ability to serve more customers and offer
them comprehensive packages of energy resources and management services."
Richard B. Priory, president and chief operating officer of Duke Power, said,
"This is a compelling combination for customers, shareholders and employees of
Duke Power and PanEnergy. Our customers will benefit from one-stop shopping for
the provision -- and management -- of their energy needs. Shareholders will
participate in the earnings and growth opportunities created by a new market
leader in energy services that intends to build on a track record of sustained
financial strength. Our employees will share in the opportunity to be part of a
larger company, positioned for leadership in the emerging energy services
industry. The economic potential of this transaction lies primarily in revenue
enhancements and strategic positioning, not cost cutting."
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"Our goal is to build a company that combines the best of both worlds --
building on Duke Power's superb reputation for reliability and service and its
deep roots in the Carolina communities while taking the steps necessary to
ensure that the company will prosper in the era of regulatory change that we
believe is inevitable across the country and around the globe. The merger of
PanEnergy and Duke Power combines two powerful, innovative companies eager to
join forces to win in the energy marketplace of the twenty-first century," Mr.
Priory added.
Upon completion of the merger, Richard B. Priory, currently president and
chief operating officer of Duke Power, will become chairman and chief executive
officer of Duke Energy; Paul M. Anderson, president and chief executive officer
of PanEnergy, will become president and chief operating officer of Duke Energy;
and William H. Grigg, currently chairman and chief executive officer of Duke
Power, will retire. Dennis Hendrix will step down as chairman of PanEnergy
effective with the merger and will join Duke Energy's board. The board of
directors of Duke Energy will be made up of 18 members, eleven from Duke Power
and seven from PanEnergy. The company will be headquartered in Charlotte, with
Houston serving as the center for PanEnergy's pipeline operations, trading and
marketing services, and certain business development activities.
After the completion of the merger, PanEnergy will be a wholly-owned
subsidiary of Duke Energy. Under the merger agreement, there are no changes
required with respect to either company's public debt issues or the outstanding
preferred stock of Duke Power.
The merger is conditioned, among other things, upon the approval of the
holders of a majority of the PanEnergy common shares outstanding and a majority
of the Duke Power common shares voting, and the completion of appropriate state
and federal regulatory procedures. The companies anticipate that the regulatory
procedures can be completed in less than 12 months.
Barr Devlin Associates and Morgan Stanley & Co. Incorporated acted as
financial advisors and provided fairness opinions to Duke Power. Merrill Lynch
& Co. and Lehman Brothers Inc. acted as financial advisors and provided fairness
opinions to PanEnergy.
PanEnergy Corp -- one of North America's leading energy services companies --
operates more than 37,000 miles of natural gas pipeline, delivering gas
primarily to Northeast and Midwest markets. The company is also one of the
nation's largest natural gas gatherers and processors and markets liquefied
petroleum gases and related energy services throughout the United States and
Canada. Through its recently formed venture with Mobil, PanEnergy is one of the
leading marketers of natural gas and electricity in North America. The company
also has other energy interests worldwide.
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Duke Power is one of the nation's largest investor-owned electric utilities.
Headquartered in Charlotte, NC, it serves 1.8 million residential, commercial
and industrial customers in a 20,000 square-mile service area in North Carolina
and South Carolina. The company operates a diversified generating system
consisting of three nuclear generating stations, eight coal-fired generating
stations and 38 hydroelectric plants. In addition to its regulated activities,
Duke Power also has several non-regulated businesses whose services include
electric power facility development and management; real estate development;
energy and environmental engineering services; construction services;
merchandising; and telecommunications.
This press release includes 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. Although Duke Power believes that its expectations are
based on reasonable assumptions, it can give no assurance that its goals will be
achieved. Important factors that could cause actual results to differ
materially from those in the forward looking statements herein include the pace
of deregulation of retail natural gas and electricity markets in the United
States, federal and state regulatory developments, the timing and extent of
changes in commodity prices for oil, gas, coal, electricity and interest rates,
the extent of success in connecting natural gas supplies to gathering and
processing systems and in connecting and expanding gas and electric markets, the
performance of electric generation, pipeline and gas processing facilities,
decommissioning costs associated with nuclear generating facilities, the timing
and success of efforts to develop domestic and international power, pipeline,
gathering, processing and other infrastructure projects and conditions of the
capital markets and equity markets during the periods covered by the forward
looking statements.
Note to Editors: Today's news release, along with other news about Duke Power
and PanEnergy, is available on the Internet at: http:\\www.dukepower.com AND
http://www.naturalgas.com/pec.
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November 25, 1996
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