Duke Energy and Progress Energy to Merge

Duke Energy (NYSE: DUK) and ProgressEnergy, Inc. (NYSE: PGN) announced today that both companies’ boards ofdirectors have unanimously approved a definitive merger agreement tocombine the two companies in a stock-for-stock transaction. The combined company, to be called Duke Energy, will be the country’s largestutility, with:

· Approximately $65 billion in enterprise value and $37 billion in market capitalization

· The country’s largest regulated customer base, providing service toapproximately 7.1 million electric customers in six regulated serviceterritories North Carolina, South Carolina, Florida, Indiana, Kentuckyand Ohio

· Approximately 57 gigawatts of domestic generating capacity from adiversified mix of coal, nuclear, natural gas, oil and renewableresources

· The largest regulated nuclear fleet in the country.

“Our industry is entering a building phase where we must invest in anarray of new technologies to reduce our environmental footprints andbecome more efficient,” said Jim Rogers, chairman, president and chiefexecutive officer of Duke Energy. “By merging our companies, we can dothat more economically for our customers, improve shareholder value andcontinue to grow.

“Combining Duke Energy and Progress Energy creates a utility withgreater financial strength and enhanced ability to meet our challengeshead-on,” Rogers continued.

“This combination of two outstanding companies is a natural fit,” saidBill Johnson, chairman, president and chief executive officer ofProgress Energy. “It makes clear strategic sense and creates exceptional value for our shareholders. Together, we can leverage our bestpractices to achieve even higher levels of safety, operationalexcellence and customer satisfaction, and save money for customers bycombining our fuel purchasing power and the dispatch of our generatingplants. 

“This merger also provides predictable earnings and cash flows tosupport our dividend payments to shareholders,” Johnson added.  

Terms
Under the merger agreement, Progress Energy’s shareholders will receive2.6125 shares of common stock of Duke Energy in exchange for each shareof Progress Energy common stock. Based on Duke Energy’s closing shareprice on Jan. 7, 2011, Progress Energy shareholders would receive avalue of $46.48 per share, or $13.7 billion in total equity value. 

Duke Energy also will assume approximately $12.2 billion in ProgressEnergy net debt. The transaction price represents a 7.1percent premiumto the unaffected closing stock price of Progress Energy on Jan. 5,2011, and a 3.9 percent premium to the closing stock price of ProgressEnergy on Jan. 7, 2011. 

The transaction price also represents a 6.6 percent premium to theaverage closing stock price of Progress Energy over the last 20 tradingdays ending Jan. 5, 2011, and a 6.4 percent premium over the last 20trading days ending Jan. 7, 2011. 

Following completion of the merger, officials anticipate Duke Energyshareholders will own approximately 63 percent of the combined companyand Progress Energy shareholders will own approximately 37 percent on afully diluted basis.

The combination is anticipated to be accretive to Duke Energy’s adjusted earnings in the first year after closing. 

Based on Duke Energy’s current quarterly cash dividend of 24.5 cents per common share, Progress Energy shareholders would receive an approximate 3 percent dividend increase.

Duke Energy expects to effect a reverse stock split immediately prior to closing, and, as a result, the exchange ratio will be appropriatelyadjusted at that time to reflect the reverse split.

Structure, Organization & Leadership
When the merger is completed, Rogers will become executive chairman ofthe new organization. In this role, Rogers will advise the CEO onstrategic matters, play an active role in government relations and serve as the company’s lead spokesperson on energy policy.

Johnson will become president and chief executive officer of the new company.

Both Rogers and Johnson will serve on the board of directors of thecombined company, which will be composed of 18 members, with 11designated by Duke Energy’s board of directors and seven designated byProgress Energy’s board of directors.

The combined company will be headquartered in Charlotte and will maintain substantial operations in Raleigh. 

Until the merger has received all necessary approvals and has closed,the companies will continue to operate as separate entities. 

Customers will see no change in their current electric utility companies including: Progress Energy Carolinas and Progress Energy Florida andDuke Energy Carolinas, Duke Energy Indiana, Duke Energy Ohio, DukeEnergy Kentucky, Commercial Power, Duke Energy Generation Services andDuke Energy International.

Approvals & Timing
Completion of the merger is conditioned upon, among other things, theapproval of the shareholders of both companies, as well as expiration or termination of any applicable waiting period under theHart-Scott-Rodino Antitrust Improvements Act of 1976.

Other necessary regulatory filings include: Federal Energy RegulatoryCommission (FERC), Nuclear Regulatory Commission (NRC), North CarolinaUtilities Commission (NCUC) and South Carolina Public Service Commission (SCPSC). 

The companies also will provide information regarding the merger totheir other state regulators: the Florida Public Service Commission,Indiana Utility Regulatory Commission, Kentucky Public ServiceCommission and Ohio Public Utilities Commission. 

The companies are targeting a closing by the end of 2011.

Advisors
J.P. Morgan served as lead financial advisor and provided a fairnessopinion to Duke Energy, and BofA Merrill Lynch also provided a fairnessopinion to Duke Energy. Lazard Frères served as lead financial advisorand provided a fairness opinion to Progress Energy, and Barclays Capital also served as a financial advisor and provided a fairness opinion toProgress Energy. Wachtell, Lipton, Rosen & Katz served as legalcounsel for Duke Energy. Hunton & Williams LLP served as legalcounsel for Progress Energy. 
 

About Duke Energy
Duke Energy is one of the largest electric power holding companies inthe United States.  Its regulated utility operations serve approximately 4 million customers located in five states in the Southeast andMidwest, representing a population of approximately 11 million people.  Its commercial power and international business segments own and operate diverse power generation assets in North America and Latin America,including a growing portfolio of renewable energy assets in the UnitedStates.  Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: www.duke-energy.com.

About Progress Energy
Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is aFortune 500 energy company with about 22,000 megawatts of generationcapacity and approximately $10 billion in annual revenues.  ProgressEnergy includes two major electric utilities that serve about 3.1million customers in the Carolinas and Florida.  The company has earnedthe Edison Electric Institute’s Edison Award, the industry’s highesthonor, in recognition of its operational excellence, and was the firstutility to receive the prestigious J.D. Power and Associates Founder’sAward for customer service.  The company is pursuing a balanced strategy for a secure energy future, which includes aggressive energy-efficiency programs, investments in renewable energy technologies and astate-of-the-art electricity system.  Progress Energy celebrated acentury of service in 2008. Visit the company’s website at www.progress-energy.com.