CIN Cinergy Corp

Cinergy Corp. (NYSE:CIN) today reported net income for the fourth quarter of 2005 of $190 million, or $0.95 per share on a diluted basis, compared with net income of $146 million, or $0.79 per share on a diluted basis for the fourth quarter of 2004. Full year 2005 net income was $490 million, or $2.46 per share on a diluted basis, compared with net income of $401 million, or $2.18 per share on a diluted basis in 2004. Excluding the impacts of certain adjustments described below, adjusted earnings for the fourth quarter of 2005 were $0.77 per share, compared with $0.71 per share for the fourth quarter of 2004. Adjusted earnings for the full year 2005 were $2.81 per share, compared to $2.42 per share in 2004. "We're very pleased to end the year on a high note," said James E. Rogers, chairman and chief executive officer. "Strong demand growth, even in the face of rising prices, and solid performance from our commercial power and gas businesses were two important factors behind the quarter's results. I'm also proud that we were able to maintain our 2005 ongoing operating and maintenance costs at 2004 levels." Other factors that led to the solid performance in 2005 include: -- Constructive regulatory recovery of the increased costs to generate and deliver reliable service to our customers; -- Strong results from our optimization group, which capitalized on rising fuel and emission allowance prices without compromising the company's future needs; and -- Favorable weather. Unaudited consolidated statements of income for the quarters and years ended December 31, 2005 and 2004, and unaudited consolidated balance sheets as of December 31, 2005 and December 31, 2004 can be found in Schedules 1 and 2, respectively, of this release. Earnings Adjustments Cinergy uses adjusted earnings internally for analysis of performance and for reporting results to the Board of Directors to provide a more meaningful representation of Cinergy's fundamental earnings power. The company also uses adjusted earnings when communicating its earnings outlook to analysts and investors. Reported earnings for the fourth quarter of 2005 were negatively impacted by ($0.01) per share in connection with a change in accounting principle relating to certain asset retirement obligations. The quarter's earnings also reflected the benefit of $0.24 per share resulting from the recognition of a net mark-to-market gain on gas, fuel and power contracts that hedge our gas storage and generation portfolios. These contracts, which are economic hedges, do not meet the accounting requirements to qualify for accrual accounting. Fourth quarter 2005 reported earnings were reduced by ($0.05) per share for severance payments and certain costs incurred in connection with the proposed merger with Duke Energy announced in May 2005. During the quarter, Cinergy completed the sale of a wholly-owned international subsidiary engaged in the generation and sale of heat and electricity, and recorded an impairment charge taken in connection with steps to monetize an investment in a North American energy service business. These investments have been presented as discontinued operations in Cinergy's consolidated statements of income. While these events did not impact the fourth quarter of 2005 results, the full year results include a net contribution of $0.01 per share for discontinued operations. In 2004, reported earnings were impacted in the fourth quarter by net gains from mark-to-market adjustments of $0.06 per share and by a net contribution of $0.02 per share for certain asset sales, impairment write-downs and other charges. Reconciliations of the items above, which are included in reported earnings as determined in accordance with generally accepted accounting principles (GAAP) but excluded from adjusted earnings, can be found in Schedules 3 and 4 of this release. Business Segment Results The Regulated Businesses segment reported adjusted earnings of $0.40 per share in the fourth quarter of 2005 compared with adjusted earnings of $0.45 per share in the same period of 2004. The decrease in earnings was primarily attributable to increased amortization of our Ohio regulatory transition charge and higher depreciation, taxes other than income taxes and financing costs. Increased retail sales partially offset the decrease. Fourth quarter adjusted earnings from the Commercial Businesses segment were $0.39 per share in 2005 compared with adjusted earnings of $0.27 per share from a year earlier. The increase in earnings was primarily due to higher margins realized through price increases on existing long-term power agreements and through power and gas trading activities. The Power Technology and Infrastructure Services segment reported an adjusted ($0.02) per share loss for the fourth quarter of 2005, as compared to an adjusted ($0.01) per share loss from the prior year. Complete details of fourth quarter and full year 2005 results compared to 2004 can be found in Schedules 5 through 8 of this release. Other Activities In the fourth quarter, the Duke/Cinergy merger was approved by state regulatory commissions in Ohio, Kentucky and South Carolina, as well as the Federal Energy Regulatory Commission. Agreements have been reached with certain intervening parties in Indiana and North Carolina, and votes by shareholders of both companies are expected in March 2006. The merger is expected to close in the first half of 2006. In December, the Public Utilities Commission of Ohio approved the first electric distribution base rate increase for The Cincinnati Gas & Electric Co. in more than 10 years. The increase of $51.5 million, or approximately four percent, in annual revenues took effect in January 2006. The Kentucky Public Service Commission approved an increase of $8.1 million in The Union Light, Heat and Power Co.'s base rates for natural gas distribution service. Approximately $4.5 million of the approved increase reflects revenue which had already been recovered through a tracking mechanism. The KPSC also renewed the tracking mechanism for costs associated with the accelerated gas main replacement program. PSI Energy Inc. reached a settlement with the Indiana Office of Utility Consumer Counselor and the PSI Industrial Group on the company's environmental compliance plan. The environmental construction program will further reduce PSI's power plant emissions in response to new federal environmental rules to improve air quality. PSI is seeking Indiana Utility Regulatory Commission approval of the settlement and expects a commission decision in the first half of 2006. Cinergy Corp. has a balanced, integrated portfolio consisting of two core businesses: regulated operations and commercial businesses. Cinergy's regulated public utilities in Ohio, Indiana, and Kentucky serve 1.5 million electric customers and about 500,000 gas customers. In addition, its regulated operations own 8,100 megawatts of generation. Cinergy's competitive commercial businesses have 5,200 megawatts of generating capacity with a profitable balance of stable existing customer portfolios, new customer origination, marketing and trading, and industrial-site cogeneration. Cinergy's integrated businesses make it a Midwest leader in providing both low-cost generation and reliable electric and gas service. 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 Energy 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 Energy 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 Energy 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. (Registration No. 333-126318), which includes a preliminary prospectus and a preliminary joint proxy statement of Duke Energy and Cinergy, and other materials have been filed with the SEC and are publicly available. WE URGE INVESTORS TO READ THE DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS WHEN IT BECOMES AVAILABLE AND THESE OTHER MATERIALS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT DUKE ENERGY, CINERGY, DUKE ENERGY HOLDING CORP. AND THE PROPOSED TRANSACTION. Investors will be able to obtain free copies of the joint proxy statement-prospectus as well as other filed documents containing information about Duke Energy and Cinergy at http://www.sec.gov, the SEC's Web site. Free copies of Duke Energy's SEC filings are also available on Duke Energy's Web site at http://www.duke-energy.com/investors/, and free copies of Cinergy's SEC filings are also available on Cinergy's Web site at http://www.cinergy.com. Participants in the Solicitation Duke Energy, Cinergy and their respective executive officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from Duke Energy's or Cinergy's stockholders with respect to the proposed transaction. Information regarding the officers and directors of Duke Energy 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. -0- *T CINERGY CORP. Schedule 1 CONSOLIDATED STATEMENTS OF INCOME For the Periods Ended December 31, 2005 and 2004 (unaudited) (dollars in thousands, except per share amounts) ---------------------------------------------------------------------- Quarter Ended Year To Date ---------------------- ----------------------- 2005 2004 2005 2004 ----------- ---------- ----------- ----------- Operating Revenues Electric $1,118,974 $849,260 $4,070,972 $3,510,525 Gas 340,013 259,090 816,781 783,316 Other 169,724 94,741 522,095 333,988 ----------- ---------- ----------- ----------- Total Operating Revenues 1,628,711 1,203,091 5,409,848 4,627,829 Operating Expenses Fuel, emission allowances and purchased power 466,654 307,528 1,535,088 1,233,311 Gas purchased 218,555 137,359 513,690 428,087 Costs of fuel resold 145,664 77,450 443,132 280,891 Operation and maintenance 349,670 304,333 1,348,554 1,230,618 Depreciation 129,780 124,810 510,438 453,765 Taxes other than income taxes 62,894 49,625 272,009 253,934 ----------- ---------- ----------- ----------- Total Operating Expenses 1,373,217 1,001,105 4,622,911 3,880,606 Operating Income 255,494 201,986 786,937 747,223 Equity in Earnings of Unconsolidated Subsidiaries 8,571 30,154 33,777 48,249 Miscellaneous Income (Expense) - Net 16,968 7,695 51,001 (3,577) Interest Expense 73,733 65,659 283,353 275,000 Preferred Dividend Requirement of Subsidiary Trust - - - - Preferred Dividend Requirements of Subsidiaries 324 858 2,643 3,432 ----------- ---------- ----------- ----------- Income Before Taxes 206,976 173,318 585,719 513,463 Income Taxes 15,137 26,860 95,597 103,064 ----------- ---------- ----------- ----------- Income Before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles 191,839 146,458 490,122 410,399 Discontinued operations, net of tax 858 (32) 2,575 (9,531) Cumulative effect of changes in accounting principles, net of tax (3,044) - (3,044) - ----------- ---------- ----------- ----------- Net Income $189,653 $146,426 $489,653 $400,868 Average Common Shares Outstanding - Basic 199,557 183,455 198,199 180,965 Earnings Per Common Share - Basic Income before discontinued operations and cumulative effect of changes in accounting principles $0.96 $0.81 $2.47 $2.27 Discontinued operations, net of tax 0.00 - 0.01 (0.05) Cumulative effect of changes in accounting principles, net of tax (0.01) - (0.01) - ----------- ---------- ----------- ----------- Net Income $0.95 $0.81 $2.47 $2.22 Average Common Shares Outstanding - Diluted 200,324 186,369 199,172 183,531 Earnings Per Common Share - Diluted Income before discontinued operations and cumulative effect of changes in accounting principles $0.96 $0.79 $2.46 $2.23 Discontinued operations, net of tax 0.00 - 0.01 (0.05) Cumulative effect of changes in accounting principles, net of tax (0.01) - (0.01) - ----------- ---------- ----------- ----------- Net Income $0.95 $0.79 $2.46 $2.18 Cash Dividends Declared Per Common Share - $0.47 $1.92 $1.88 Note: Prior year data has been reclassified to conform with current year presentation. CINERGY CORP. Schedule 2 CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) ---------------------------------------------------------------------- December 31 December 31 2005 2004 ------------ ------------ ASSETS Current Assets Cash and cash equivalents $146,056 $162,526 Notes receivable, current 287,502 214,513 Accounts receivable less accumulated provision for doubtful accounts of $4,767 at December 31, 2005, and $5,059 at December 31, 2004 1,415,209 1,036,119 Fuel, emission allowances, and supplies 589,152 442,951 Energy risk management current assets 991,252 381,146 Prepayments and other 408,975 173,203 ------------ ------------ Total current assets 3,838,146 2,410,458 Property, Plant, and Equipment - at Cost Utility plant in service 10,714,000 10,076,468 Construction work in progress 501,294 333,687 ------------ ------------ Total utility plant 11,215,294 10,410,155 Non-regulated property, plant, and equipment 4,775,570 4,549,128 Accumulated depreciation 5,477,782 5,147,556 ------------ ------------ Net property, plant, and equipment 10,513,082 9,811,727 Other Assets Regulatory assets 1,069,854 1,030,333 Investments in unconsolidated subsidiaries 479,466 513,675 Energy risk management non- current assets 306,959 138,787 Notes receivable, non-current 171,325 193,857 Other investments 128,150 125,367 Goodwill and intangible assets 169,081 118,619 Restricted funds held in trust 301,800 358,006 Other 185,062 117,870 ------------ ------------ Total other assets 2,811,697 2,596,514 Assets of Discontinued Operations 34,215 163,618 Total Assets $17,197,140 $14,982,317 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $1,922,867 $1,344,780 Accrued taxes 219,469 217,106 Accrued interest 64,725 54,473 Notes payable and other short- term obligations 923,600 948,327 Long-term debt due within one year 352,589 219,967 Energy risk management current liabilities 1,010,585 310,741 Other 193,323 168,734 ------------ ------------ Total current liabilities 4,687,158 3,264,128 Non-current Liabilities Long-term debt 4,393,442 4,227,475 Deferred income taxes 1,523,070 1,587,557 Unamortized investment tax credits 90,852 99,723 Accrued pension and other postretirement benefit costs 729,221 688,277 Regulatory liabilities 546,047 557,419 Energy risk management non- current liabilities 338,514 127,340 Other 250,822 219,439 ------------ ------------ Total non-current liabilities 7,871,968 7,507,230 Liabilities of Discontinued Operations 28,876 32,219 Total Liabilities 12,588,002 10,803,577 Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 31,743 62,818 Common Stock Equity Common stock - $0.01 par value; authorized shares - 600,000,000; issued shares - 199,707,338 at December 31, 2005 and 187,653,506 at December 31, 2004; outstanding shares - 199,565,684 at December 31, 2005 and 187,524,229 at December 31, 2004 1,997 1,877 Paid-in capital 2,982,625 2,559,715 Retained earnings 1,721,716 1,613,340 Treasury shares at cost - 141,654 at December 31, 2005, and 129,277 shares at December 31, 2004 (4,823) (4,336) Accumulated other comprehensive income (loss) (124,120) (54,674) ------------ ------------ Total common stock equity 4,577,395 4,115,922 Total Liabilities and Shareholders' Equity $17,197,140 $14,982,317 Note: Prior year data has been reclassified to conform with current year presentation. Schedule 3 CINERGY CORP. RECONCILIATION OF GAAP EPS TO ADJUSTED EPS - 2005 (unaudited) ---------------------------------------------------------------------- ---------------------------------------------------------------------- Q1 Q2 Q3 Q4 Total ---------------------------------------------------------------------- Regulated Businesses ---------------------------------------------------------------------- EPS As Reported $0.39 $0.24 $0.46 $0.36 $1.45 Special Items: Merger and Severance Costs - 0.03 0.02 0.04 0.09 ---------------------------------------------------------------------- EPS Adjusted $0.39 $0.27 $0.48 $0.40 $1.54 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Commercial Businesses ---------------------------------------------------------------------- EPS As Reported $0.23 $0.02 $0.20 $0.61 $1.06 Discontinued Operations (0.01) (0.01) 0.01 - (0.01) Cumulative Effect of a Change in Accounting Principle - - - 0.01 0.01 Special Items: Merger and Severance Costs - 0.03 0.02 0.01 0.06 Mark-to-Market Effect on Asset Hedges(1) 0.12 0.04 0.27 (0.24) 0.19 ---------------------------------------------------------------------- EPS Adjusted $0.34 $0.08 $0.50 $0.39 $1.31 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Power Technology & Infrastructure Services ---------------------------------------------------------------------- EPS As Reported $(0.02) $(0.01) $- $(0.02) $(0.05) Special Items: Merger and Severance Costs - 0.01 - - 0.01 ---------------------------------------------------------------------- EPS Adjusted $(0.02) $- $- $(0.02) $(0.04) ---------------------------------------------------------------------- ---------------------------------------------------------------------- Cinergy Corp. ---------------------------------------------------------------------- EPS As Reported $0.60 $0.25 $0.66 $0.95 $2.46 Discontinued Operations (0.01) (0.01) 0.01 - (0.01) Cumulative Effect of a Change in Accounting Principle - - - 0.01 0.01 Special Items 0.12 0.11 0.31 (0.19) 0.35 ---------------------------------------------------------------------- EPS Adjusted $0.71 $0.35 $0.98 $0.77 $2.81 ---------------------------------------------------------------------- (1) Represents the mark-to-market impact of contracts used in Cinergy's economic hedging of its excess unregulated generation portfolio and its natural gas storage portfolio. The economic value of these portfolios is subject to market fluctuations and, as such, the hedging process involves both purchases and sales. Because these generation assets and gas storage contracts are accounted for under the accrual method of accounting, the Company believes that excluding the impact of mark-to-market changes from reported earnings better matches the contract with the settlement period of the position it is hedging. These amounts will be recognized through adjusted earnings when the contracts ultimately settle. Approximately 75% of the remaining mark-to-market value of these contracts is expected to settle in the first quarter of 2006. Schedule 4 CINERGY CORP. RECONCILIATION OF GAAP EPS TO ADJUSTED EPS - 2004 (unaudited) ---------------------------------------------------------------------- ---------------------------------------------------------------------- Q1 Q2 Q3 Q4 Total ---------------------------------------------------------------------- Regulated Businesses ---------------------------------------------------------------------- EPS As Reported $0.44 $0.19 $0.32 $0.45 $1.40 Special Items: CIN-10 Implementation Costs and Other Charges - 0.03 - - 0.03 ---------------------------------------------------------------------- EPS Adjusted $0.44 $0.22 $0.32 $0.45 $1.43 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Commercial Businesses ---------------------------------------------------------------------- EPS As Reported $0.25 $0.17 $0.24 $0.29 $0.95 Discontinued Operations (0.01) 0.03 0.03 - 0.05 Special Items: CIN-10 Implementation Costs and Other Charges - 0.01 0.01 0.04 0.06 Mark-to-Market Effect on Asset Hedges(1) (0.05) 0.02 0.07 (0.06) (0.02) ---------------------------------------------------------------------- EPS Adjusted $0.19 $0.23 $0.35 $0.27 $1.04 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Power Technology & Infrastructure Services ---------------------------------------------------------------------- EPS As Reported $(0.12) $(0.04) $(0.06) $0.05 $(0.17) Special Items: Asset Sales, Impairment Write- downs and Other Charges - Net 0.11 0.02 0.05 (0.06) 0.12 ---------------------------------------------------------------------- EPS Adjusted $(0.01) $(0.02) $(0.01) $(0.01) $(0.05) ---------------------------------------------------------------------- ---------------------------------------------------------------------- Cinergy Corp. ---------------------------------------------------------------------- EPS As Reported $0.57 $0.32 $0.50 $0.79 $2.18 Discontinued Operations (0.01) 0.03 0.03 - 0.05 Special Items 0.06 0.08 0.13 (0.08) 0.19 ---------------------------------------------------------------------- EPS Adjusted $0.62 $0.43 $0.66 $0.71 $2.42 ---------------------------------------------------------------------- For 2004, the Regulated and Commercial segments have each been restated from prior presentations to reflect the reclassification of PSI's off-system sales from the Commercial Businesses to the Regulated Businesses. (1) Represents the mark-to-market impact of contracts used in Cinergy's economic hedging of its excess unregulated generation portfolio and its natural gas storage portfolio. The economic value of these portfolios is subject to market fluctuations and, as such, the hedging process involves both purchases and sales. Because these generation assets and gas storage contracts are accounted for under the accrual method of accounting, the Company believes that excluding the impact of mark-to-market changes from reported earnings better matches the contract with the settlement period of the position it is hedging. These amounts will be recognized through adjusted earnings when the contracts ultimately settle. This adjustment was not reflected as a special item when 2004 results were reported. Schedule 5 CINERGY CORP. BUSINESS SEGMENT SUMMARY INFORMATION For the Quarter Ended December 31 (unaudited) (dollars in thousands, except per share amounts) ---------------------------------------------------------------------- 2005 2004 ---- ---- Regulated Businesses -------------------- Net Income $72,656 $84,830 Earnings Per Share - diluted $0.36 $0.45 Operational Statistics: Electric Retail MWh Sales and Transportation 13,195,097 12,546,022 Gas Retail Mcf Sales and Transportation 27,659,249 26,195,228 Electric Customers (End of Period) 1,580,299 1,566,693 Gas Customers (End of Period) 513,723 511,123 Commercial Businesses --------------------- Net Income $119,706 $52,519 Earnings Per Share - diluted $0.61 $0.29 Operational Statistics: Electricity Trading Volumes (MWhs) 45,634,940 48,780,860 Physical and Financial Gas Trading (Bcf/d) 34.2 53.9 Power Technology & Infrastructure Services ------------------------------------------ Net Income $(2,709) $9,078 Earnings Per Share - diluted $(0.02) $0.05 For 2004, the Regulated and Commercial segments have each been restated from prior presentations to reflect the reclassification of PSI's off-system sales from the Commercial Businesses to the Regulated Businesses. Schedule 6 CINERGY CORP. BUSINESS SEGMENT EARNINGS DRIVER ANALYSIS For the Quarter Ended December 31, 2005 (unaudited) ---------------------------------------------------------------------- Regulated Businesses -------------------- Earnings Per Share - diluted - 2004 (Adjusted(1)) $0.45 Weather 0.02 Electric and gas sales volumes 0.07 Price Increases 0.02 Regulatory deferrals 0.02 Regulatory transition charge amortization (0.06) Operation and maintenance (0.02) Depreciation (0.02) Taxes other than income taxes (0.05) Financing and dilution (0.04) Other - net 0.01 ---------- Earnings Per Share - diluted - 2005 (Adjusted(1)) $0.40 ========== Commercial Businesses --------------------- Earnings Per Share - diluted - 2004 (Adjusted(1)) $0.27 Electric sales volumes 0.02 Price increases 0.10 Fuel costs (0.03) Power marketing, trading and origination 0.03 Gas marketing, trading and origination 0.02 Financing and dilution (0.05) Other - net 0.03 ---------- Earnings Per Share - diluted - 2005 (Adjusted(1)) $0.39 ========== Power Technology & Infrastructure Services ------------------------------------------ Earnings Per Share - diluted - 2004 (Adjusted(1)) ($0.01) Results of investments (0.01) ---------- Earnings Per Share - diluted - 2005 (Adjusted(1)) ($0.02) ========== For 2004, the Regulated and Commercial segments have each been restated from prior presentations to reflect the reclassification of PSI's off-system sales from the Commercial Businesses to the Regulated Businesses. (1) See Schedules 3 and 4 for a reconciliation to the most comparable GAAP measure. Schedule 7 CINERGY CORP. BUSINESS SEGMENT SUMMARY INFORMATION For the Year Ended December 31 (unaudited) (dollars in thousands, except per share amounts) ---------------------------------------------------------------------- 2005 2004 ---- ---- Regulated Businesses -------------------- Net Income $289,046 $258,049 Earnings Per Share - diluted $1.45 $1.40 Operational Statistics: Electric Retail MWh Sales and Transportation 54,553,124 52,655,549 Gas Retail Mcf Sales and Transportation 88,705,134 91,012,963 Electric Customers (End of Period) 1,580,299 1,566,693 Gas Customers (End of Period) 513,723 511,123 Commercial Businesses --------------------- Net Income $209,981 $173,896 Earnings Per Share - diluted $1.06 $0.95 Operational Statistics: Electricity Trading Volumes (MWhs) 196,657,188 185,148,553 Physical and Financial Gas Trading (Bcf/d) 43.0 51.6 Power Technology & Infrastructure Services ------------------------------------------ Net Income $(9,374) $(31,077) Earnings Per Share - diluted $(0.05) $(0.17) For 2004, the Regulated and Commercial segments have each been restated from prior presentations to reflect the reclassification of PSI's off-system sales from the Commercial Businesses to the Regulated Businesses. Schedule 8 CINERGY CORP. BUSINESS SEGMENT EARNINGS DRIVER ANALYSIS For the Year Ended December 31, 2005 (unaudited) ---------------------------------------------------------------------- Regulated Businesses -------------------- Earnings Per Share - diluted - 2004 (Adjusted(1)) $1.43 Weather 0.16 Electric and gas sales volumes 0.10 Price increases 0.25 Other margins 0.02 Regulatory deferrals 0.08 Regulatory transition charge amortization (0.15) Operation and maintenance (0.07) Depreciation (0.12) Taxes other than income taxes (0.05) Financing and dilution (0.17) Other - net 0.06 Earnings Per Share - diluted - 2005 (Adjusted(1)) $1.54 ========== Commercial Businesses --------------------- Earnings Per Share - diluted - 2004 (Adjusted(1)) $1.04 Weather 0.03 Electric sales volumes 0.04 Price increases 0.20 Fuel costs (0.12) Optimization activities 0.28 Operation and maintenance (0.03) Power marketing, trading and origination 0.03 Gas marketing, trading and origination (0.06) Financing and dilution (0.07) Other - net (0.03) Earnings Per Share - diluted - 2005 (Adjusted(1)) $1.31 ========== Power Technology & Infrastructure Services ------------------------------------------ Earnings Per Share - diluted - 2004 (Adjusted(1)) ($0.05) Results of investments 0.01 ---------- Earnings Per Share - diluted - 2005 (Adjusted(1)) ($0.04) ========== For 2004, the Regulated and Commercial segments have each been restated from prior presentations to reflect the reclassification of PSI's off-system sales from the Commercial Businesses to the Regulated Businesses. (1) See Schedules 3 and 4 for a reconciliation to the most comparable GAAP measure. *T