DUKE POWER CO /NC/, S-4, 1997-03-13

DUKE POWER CO /NC/
S-4, 1997-03-13
ELECTRIC SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 1997
REGISTRATION NO. 333-

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

DUKE POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NORTH CAROLINA 4911 56-0205520
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)

422 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28242-0001
704-594-0887
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------

RICHARD J. OSBORNE JOHN SPUCHES
SENIOR VICE PRESIDENT AND CHIEF DEWEY BALLANTINE
FINANCIAL OFFICER 1301 AVENUE OF THE AMERICAS
422 SOUTH CHURCH STREET NEW YORK, NEW YORK 10019-6092
CHARLOTTE, NORTH CAROLINA 28242-0001 TELEPHONE NO. 212-259-7700
TELEPHONE NO. 704-382-5159

(NAMES, ADDRESSES, INCLUDING ZIP CODES, AND TELEPHONE NUMBERS,
INCLUDING AREA CODES, OF AGENTS FOR SERVICE)

----------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effectiveness of this Registration
Statement and the satisfaction or waiver of all other conditions to the merger
(the Merger) of a wholly-owned subsidiary of registrant with and into
PanEnergy Corp (PanEnergy) as described in the Agreement and Plan of Merger,
dated as of November 24, 1996, as amended and restated as of March 10, 1997
(the Merger Agreement) attached as Exhibit A to the Joint Proxy Statement-
Prospectus forming part of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]

----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE PRICE(2) FEE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without
par value............. 166,000,000 shares (2) $6,691,077,271 $2,027,600
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Consists of an estimated 158,120,315 shares of registrant's Common Stock
issuable pursuant to the Merger upon the conversion of outstanding shares
of PanEnergy Common Stock and (a) up to 7,407,747 shares of registrant's
Common Stock issuable pursuant to the Merger upon the exercise of
PanEnergy options that are outstanding and unexercised at the effective
time of the Merger (Effective Time) and (b) up to 471,938 shares of
registrant's Common Stock issuable pursuant to the Merger upon the
conversion of the 9% Convertible Senior Subordinated Notes Due December
15, 2004 of PanEnergy (PanEnergy Convertible Notes) outstanding at the
Effective Time.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act of 1933,
as amended (the Securities Act), based on the product of (i) $43.125 (the
average of the high and low prices per share of PanEnergy Common Stock on
March 6, 1997 as reported on the New York Stock Exchange Composite
Transactions Tape) times (ii) 155,155,415 (the number of shares of
PanEnergy Common Stock outstanding and the number of shares of PanEnergy
Common Stock reserved for issuance in each case as of February 28, 1997
upon (a) the exercise of options to purchase PanEnergy Common Stock and
(b) the conversion of PanEnergy Convertible Notes).
(3) Pursuant to Rule 457(b) of the Securities Act, includes the fee of
$1,560,400 previously paid in connection with the filing with the
Commission on January 29, 1997 of the preliminary proxy materials of
registrant (File No. 1-4928) and PanEnergy (File No. 1-8157) relating to
the transactions described herein. Accordingly, an additional filing fee
of $467,200 is required to be paid with the filing of this Registration
Statement.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

DUKE POWER COMPANY

CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION IN JOINT PROXY
ITEM OF FORM S-4 STATEMENT-PROSPECTUS
- -------------------------------------------------- ---------------------------
<S> <C>
A.INFORMATION ABOUT THE TRANSACTION

Item 1--Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus............................. Outside Front Cover Page;
Cross Reference Sheet;
Cover Page

Item 2--Inside Front and Outside Back Cover
Pages of Prospectus.................... Table of Contents;
Available Information;
Incorporation of Certain
Information by Reference;
Inside Front Cover Page

Item 3--Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information.... Summary; Information about
Duke; Information about
PanEnergy

Item 4--Terms of the Transaction............... Summary; The Merger;
Regulatory Matters; The
Merger Agreement;
Description of Duke
Capital Stock;
Comparative Rights of
Duke Shareholders and
PanEnergy Stockholders

Item 5--Pro Forma Financial Information........ Unaudited Pro Forma
Combined Condensed
Financial Data

Item 6--Material Contacts with the Company
Being Acquired......................... The Merger--Background of
the Merger; Reasons for
the Merger;
Recommendations of the
Boards of Directors;
Interests of Certain
Persons in the Merger

Item 7--Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters.............. *

Item 8--Interests of Named Experts and
Counsel................................ Legal Opinions; Experts

Item 9--Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ *

B.INFORMATION ABOUT THE REGISTRANT

Item 10--Information with Respect to S-3
Registrants............................ Incorporation of Certain
Information by Reference;
Description of Duke
Capital Stock;
Comparative Rights of
Duke Shareholders and
PanEnergy Stockholders
</TABLE>
<PAGE>

DUKE POWER COMPANY

CROSS REFERENCE SHEET--(CONTINUED)
<TABLE>
<CAPTION>
CAPTION IN JOINT PROXY
ITEM OF FORM S-4 STATEMENT-PROSPECTUS
- -------------------------------------------------- ---------------------------
<S> <C>
Item 11--Incorporation of Certain Information
by Reference........................... Incorporation of Certain
Information by Reference

Item 12--Information with Respect to S-2 or
S-3 Registrants........................ *

Item 13--Incorporation of Certain Information
by Reference........................... *

Item 14--Information with Respect to
Registrants Other Than S-3 or S-2
Registrants............................ *

C.INFORMATION ABOUT THE COMPANY BEING ACQUIRED

Item 15--Information with Respect to S-3
Companies.............................. Incorporation of Certain
Information by Reference;
Description of PanEnergy
Capital Stock;
Comparative Rights of
Duke Shareholders and
PanEnergy Stockholders
Item 16--Information with Respect to S-2 or
S-3 Companies.......................... *

Item 17--Information with Respect to
Companies Other Than S-3 or S-2
Companies.............................. *

D.VOTING AND MANAGEMENT INFORMATION

Item 18--Information if Proxies, Consents or
Authorizations are to be Solicited..... Cover Page; Incorporation
of Certain Information by
Reference; Summary; The
Duke Meeting; The
PanEnergy Meeting; The
Merger; The Duke
Meeting--Additional
Matters--Election of
Directors; The PanEnergy
Meeting--Additional
Matters--Election of
Directors

Item 19--Information if Proxies, Consents or
Authorizations are not to be
Solicited, or in an Exchange Offer..... *
- --------
* Omitted because item is inapplicable or answer to item is negative.
</TABLE>

<PAGE>

[LOGO OF DUKE POWER APPEARS HERE]
422 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28242

W.H. GRIGG
Chairman of the Board

March 13, 1997

Dear Shareholder:

It is my pleasure to invite you to our annual shareholders meeting, which
will be held on Thursday, April 24, 1997, at 11:00 a.m. in the O.J. Miller
Auditorium in the Electric Center, 526 South Church Street, Charlotte, North
Carolina. At this important meeting, you will be asked to approve (i) the
issuance (the "Stock Issuance") by Duke Power Company ("Duke") of shares of
its common stock, without par value (the "Duke Common Stock"), pursuant to the
terms of the Agreement and Plan of Merger, dated as of November 24, 1996, as
amended and restated as of March 10, 1997 and as such may be further amended
from time to time (the "Merger Agreement"), among Duke, Duke Transaction
Corporation, a Delaware corporation and a wholly-owned subsidiary of Duke
("Duke Transaction"), and PanEnergy Corp, a Delaware corporation
("PanEnergy"), pursuant to which Duke Transaction will be merged with and into
PanEnergy, with PanEnergy being the surviving corporation and becoming a
wholly-owned subsidiary of Duke (the "Merger"), and (ii) the amendment of
Duke's Articles of Incorporation to increase the number of authorized shares
of Duke Common Stock from 300,000,000 to 500,000,000 and to change the name of
Duke to Duke Energy Corporation at the effective time of the Merger (the
"Articles Amendments"). The Stock Issuance and the Articles Amendments are
together called the "Duke Shareholder Matters."

If the Duke Shareholder Matters are approved by the holders of Duke Common
Stock, the Merger Agreement is adopted by the common stockholders of PanEnergy
and the other conditions to the Merger are satisfied or waived, the common
stockholders of PanEnergy will receive 1.0444 shares of Duke Common Stock in
exchange for each of their shares of common stock, par value $1.00, of
PanEnergy (the "PanEnergy Common Stock") and any options to purchase PanEnergy
Common Stock outstanding at the effective time of the Merger will become
options to purchase Duke Common Stock, appropriately adjusted. The shares to
be issued in connection with the Merger would represent approximately 44% of
the shares of Duke Common Stock expected to be outstanding immediately after
the Merger. Assuming timely regulatory approvals, it is expected that the
Merger will be effected in 1997.

Your Board of Directors has carefully considered the terms of the proposed
Merger and the effects of the Merger on the business and prospects of Duke and
is of the opinion that the Merger would be beneficial to Duke and the holders
of Duke Common Stock. Accordingly, your Board of Directors has approved the
Merger Agreement and the transactions contemplated thereby, including the Duke
Shareholder Matters.

A copy of the Merger Agreement and more detailed information concerning the
transactions contemplated thereby, together with financial and other
information concerning the businesses of Duke and PanEnergy, are included in
the enclosed Joint Proxy Statement-Prospectus. I urge you to review this
material carefully.

At the meeting, you will also be asked to consider and vote upon the
election of four directors who will constitute Class III of the Board of
Directors and the ratification of the appointment of independent auditors for
1997.
<PAGE>

YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE DUKE
SHAREHOLDER MATTERS, FOR THE PROPOSED SLATE OF DIRECTORS AND FOR THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS. The Duke Shareholder
Matters will not be effected unless the Merger is consummated. Approval of the
Duke Shareholder Matters by the holders of Duke Common Stock is a condition to
the consummation of the Merger.

There will be no need for any holders of certificates representing shares of
Duke Common Stock to exchange their certificates in connection with the Merger
since such certificates will continue to represent the same number of shares
of Duke Common Stock after the Merger.

Holders of Preferred Stock and Preferred Stock A of Duke (collectively, the
"Duke Preferred Stock") are not entitled to vote in connection with the
Merger. The Duke Preferred Stock will remain outstanding following
consummation of the Merger and the rights and preferences of the Duke
Preferred Stock will not be affected by the Merger.

I hope you can attend the meeting in Charlotte, and I look forward to seeing
you. Whether or not you plan to attend the meeting, please complete, sign and
date the enclosed proxy card and return it as promptly as possible in the
enclosed envelope. If you attend the meeting in person, you may, if you wish,
vote personally on all matters brought before the meeting even if you have
previously returned your proxy.

Your interest and participation are appreciated.

Sincerely,

/s/ SIGNATURE APPEARS HERE

2
<PAGE>

DUKE POWER COMPANY
422 SOUTH CHURCH STREET
CHARLOTTE, NORTH CAROLINA 28242

----------------

NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS

March 13, 1997

To the Holders of Common Stock of
DUKE POWER COMPANY:

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Duke Power
Company will be held in the O.J. Miller Auditorium in the Electric Center, 526
South Church Street, Charlotte, North Carolina, on Thursday, April 24, 1997,
at 11:00 a.m., for the following purposes:

1. To consider and vote upon (i) the issuance by Duke Power Company
("Duke") of shares of its common stock, without par value (the "Duke Common
Stock"), pursuant to the terms of the Agreement and Plan of Merger, dated
as of November 24, 1996, as amended and restated as of March 10, 1997 and
as such may be further amended from time to time, among Duke, Duke
Transaction Corporation, a Delaware corporation and a wholly-owned
subsidiary of Duke ("Duke Transaction"), and PanEnergy Corp, a Delaware
corporation ("PanEnergy"), pursuant to which Duke Transaction will be
merged with and into PanEnergy, with PanEnergy being the surviving
corporation and becoming a wholly-owned subsidiary of Duke (the "Merger"),
and (ii) the amendment of Duke's Articles of Incorporation to increase the
number of authorized shares of Duke Common Stock from 300,000,000 to
500,000,000 and to change the name of Duke to Duke Energy Corporation at
the effective time of the Merger;

2. To elect four directors who will constitute Class III of the Board of
Directors;

3. To ratify the appointment of independent auditors; and

4. To transact such other business, including, without limitation, the
adjournment of the meeting (including an adjournment of the meeting to
obtain a quorum, to solicit additional votes in favor of the first proposal
or to allow for the fulfillment of certain conditions precedent to the
Merger), as may come before the meeting or any postponements or
adjournments thereof.

The Board of Directors of Duke has fixed the close of business on February
28, 1997 as the record date for the determination of holders of Duke Common
Stock entitled to notice of and to vote at the meeting and any adjournments or
postponements thereof.

A proxy card and a Joint Proxy Statement-Prospectus containing more detailed
information with respect to the matters to be considered at the meeting
accompany this notice. Each holder of Duke Common Stock is requested to date,
sign and return the accompanying proxy in the enclosed return envelope, to
which no postage need be affixed if mailed in the United States.

By Order of the Board of Directors,

/s/ ELLEN T. RUFF
ELLEN T. RUFF
Secretary
<PAGE>

[LOGO OF PAN ENERGY APPEARS HERE]
P. O. BOX 1642, HOUSTON, TEXAS 77251-1642

March 13, 1997

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
PanEnergy Corp, on Thursday, April 24, 1997, at 10:00 a.m., at the J.W.
Marriott Hotel, 5150 Westheimer, Houston, Texas.

At the meeting, you will be asked to consider and vote upon an Agreement and
Plan of Merger, dated as of November 24, 1996, as amended and restated as of
March 10, 1997 and as such may be further amended from time to time (the
"Merger Agreement"), by and among Duke Power Company ("Duke"), Duke
Transaction Corporation and PanEnergy Corp ("PanEnergy"), pursuant to which
PanEnergy would combine with Duke by means of the merger described in the
accompanying Joint Proxy Statement-Prospectus (the "Merger"). As a result of
the Merger, each issued and outstanding share of PanEnergy's Common Stock will
be converted into 1.0444 shares of the Common Stock of Duke (the "Exchange
Ratio"). After consummation of the Merger, former stockholders of PanEnergy
will own approximately 44% of the outstanding shares of Duke and Duke will
change its name to Duke Energy Corporation.

Consummation of the Merger is subject to satisfaction of certain conditions,
including adoption of the Merger Agreement by the stockholders of PanEnergy
and the satisfaction of certain regulatory conditions described in the
accompanying Joint Proxy Statement-Prospectus. Assuming timely regulatory
approvals, it is expected that the closing of the Merger will occur sometime
in 1997.

A copy of the Merger Agreement and more detailed information concerning the
transactions contemplated thereby, together with financial and other
information concerning the businesses of PanEnergy and Duke, are included in
the enclosed Joint Proxy Statement-Prospectus. We urge you to review this
material carefully.

The Board of Directors of PanEnergy has received the written opinions of
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman Brothers Inc.,
both dated November 24, 1996 and updated as of the date hereof, that the
Exchange Ratio to be received in the Merger is fair, from a financial point of
view, to the holders of PanEnergy Common Stock. Copies of these opinions are
included in the Joint Proxy Statement-Prospectus. For the reasons set forth in
the accompanying Joint Proxy Statement-Prospectus, your Board of Directors
believes that the transactions contemplated by the Merger Agreement is fair
to, and in the best interests of, PanEnergy and its stockholders, and
recommends that holders of PanEnergy Common Stock vote for adoption of the
Merger Agreement.

At the meeting, you also will be asked to consider and vote upon nominees
for the Board of Directors of PanEnergy. Information about the nominees is
contained in the accompanying Joint Proxy Statement-Prospectus. In addition,
there will be a discussion of the general operations of PanEnergy, described
in its 1996 Annual Report to Stockholders, and stockholders will be offered an
opportunity to ask questions.

We encourage you to participate in this year's Annual Meeting in person or
by mailing your Proxy. Even if you cannot attend the meeting, please return
your Proxy to PanEnergy as soon as possible. To vote, simply place an "X" in
the appropriate box on the enclosed form of Proxy, sign and date it, and mail
it in the self-addressed, postage-paid return envelope.

IF YOU DO NOT RETURN THE PROXY CARD AND DO NOT VOTE AT THE MEETING, IT WILL
HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST THE ADOPTION OF THE MERGER
AGREEMENT. For the Merger Agreement to be adopted, the affirmative vote of a
majority of the outstanding PanEnergy Common Stock entitled to vote is
required. Regardless of the number of shares you hold, your vote is important.
<PAGE>

Promptly after the Merger is consummated, a letter of transmittal will be
mailed to each holder of record of PanEnergy Common Stock, which will include
instructions as to the procedures to be used in exchanging your PanEnergy
Common Stock certificates for Duke Common Stock certificates. Please do not
send your PanEnergy Common Stock certificates at this time.

Sincerely,

/s/ Dennis R. Hendrix /s/ Paul M. Anderson
Dennis R. Hendrix Paul M. Anderson
Chairman of the Board President and
Chief Executive Officer

2
<PAGE>

[LOGO OF PAN ENERGY APPEARS HERE]
P. O. BOX 1642, HOUSTON, TEXAS 77251-1642

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1997

To the Stockholders of PanEnergy Corp:

The 1997 Annual Meeting of Stockholders of PanEnergy Corp will be held at
the J.W. Marriott Hotel, 5150 Westheimer, Houston, Texas, on Thursday, April
24, 1997, at 10:00 a.m., for the purposes of:

1. Considering and voting upon a proposal to adopt an Agreement and Plan
of Merger, dated as of November 24, 1996, as amended and restated as of
March 10, 1997 and as such may be further amended from time to time (the
"Merger Agreement"), by and among Duke Power Company ("Duke"), Duke
Transaction Corporation and PanEnergy Corp ("PanEnergy"), pursuant to which
PanEnergy would combine with Duke (the "Merger"), all as more fully
described in the accompanying Joint Proxy Statement-Prospectus;

2. Electing four directors, constituting the 1997 Class of PanEnergy's
Board of Directors, each to hold office until the earlier to occur of the
effective time of the Merger or the Annual Meeting in the year 2000 or
until a successor shall have been elected and shall have qualified; and

3. Considering and acting upon other matters that properly come before
the meeting.

Stockholders of record on February 28, 1997 are entitled to receive notice
of, and to vote at, the meeting or any postponements or adjournments thereof.
The transfer books of PanEnergy will not be closed. The list showing
stockholders entitled to vote at the meeting will be located in the Office of
the Secretary at PanEnergy's headquarters, 5400 Westheimer Court, Houston,
Texas, for examination for at least 10 days prior to the Annual Meeting.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DO NOT VOTE AT THE MEETING, IN
PERSON OR BY PROXY, IT WILL HAVE THE SAME EFFECT AS IF YOU VOTED AGAINST
ADOPTION OF THE MERGER AGREEMENT.

BY ORDER OF THE BOARD OF DIRECTORS

LOGO
Robert W. Reed
Secretary

Dated: March 13, 1997
Houston, Texas
<PAGE>

DUKE POWER COMPANY
PANENERGY CORP

JOINT PROXY STATEMENT-PROSPECTUS

---------------

ANNUAL MEETING OF SHAREHOLDERS OF ANNUAL MEETING OF STOCKHOLDERS OF
DUKE POWER COMPANY PANENERGY CORP

---------------

APRIL 24, 1997

---------------

This Joint Proxy Statement-Prospectus is being furnished to holders of
Common Stock of Duke Power Company, a North Carolina corporation ("Duke"), in
connection with the solicitation of proxies by the Board of Directors of Duke
(the "Duke Board") to be used at the Annual Meeting of Shareholders of Duke to
be held on Thursday, April 24, 1997, at 11:00 a.m., in the O.J. Miller
Auditorium in the Electric Center, 526 South Church Street, Charlotte, North
Carolina and at any adjournments or postponements thereof (the "Duke
Meeting"). At the Duke Meeting, the holders of Common Stock, without par
value, of Duke (the "Duke Common Stock") will consider and vote upon a
proposal to approve (i) the issuance by Duke (the "Stock Issuance") of shares
of Duke Common Stock pursuant to the terms of the Agreement and Plan of
Merger, dated as of November 24, 1996, as amended and restated as of March 10,
1997 and as such may be further amended from time to time (the "Merger
Agreement"), among Duke, Duke Transaction Corporation, a Delaware corporation
and a wholly-owned subsidiary of Duke ("Duke Transaction"), and PanEnergy
Corp, a Delaware corporation ("PanEnergy"), providing for the merger of Duke
Transaction with and into PanEnergy, with PanEnergy being the surviving
corporation and becoming a wholly-owned subsidiary of Duke (the "Merger"), and
(ii) the amendment of Duke's Articles of Incorporation (the "Duke Articles")
to increase the number of authorized shares of Duke Common Stock from
300,000,000 to 500,000,000 and to change the name of Duke to Duke Energy
Corporation at the effective time of the Merger (the "Articles Amendments").
The Stock Issuance and the Articles Amendments are herein sometimes
collectively termed the "Duke Shareholder Matters." See "THE DUKE MEETING--
Matters to be Considered" and "Recommendations of the Duke Board."

This Joint Proxy Statement-Prospectus is being furnished to holders of
Common Stock of PanEnergy in connection with the solicitation of proxies by
the Board of Directors of PanEnergy (the "PanEnergy Board") to be used at the
Annual Meeting of Stockholders of PanEnergy to be held on Thursday, April 24,
1997, at 10:00 a.m., at the J. W. Marriott Hotel, 5150 Westheimer, Houston,
Texas, and at any adjournments or postponements thereof (the "PanEnergy
Meeting"). At the PanEnergy Meeting, holders of the Common Stock, par value
$1.00 per share, of PanEnergy (the "PanEnergy Common Stock") will consider and
vote upon a proposal to adopt the Merger Agreement. See "THE PANENERGY
MEETING--Matters to be Considered" and "Recommendations of the PanEnergy
Board."

Upon consummation of the Merger, each share of PanEnergy Common Stock issued
and outstanding immediately prior to the effective time of the Merger (the
"Effective Time") will be converted into the right to receive 1.0444 shares of
Duke Common Stock and any options to purchase PanEnergy Common Stock
outstanding at the effective time of the Merger will become options to
purchase Duke Common Stock, appropriately adjusted. Holders of certificates
representing shares of PanEnergy Common Stock will receive cash in lieu of any
fractional shares of Duke Common Stock which they would otherwise be entitled
to receive in the Merger. See "THE MERGER--Conversion of Shares."

The Merger is subject to various conditions, including approval of the Duke
Shareholder Matters by the holders of Duke Common Stock, adoption of the
Merger Agreement by the holders of PanEnergy Common Stock and approval of
certain regulatory authorities. See "THE MERGER AGREEMENT--Conditions to the
Merger" and "REGULATORY MATTERS."

Duke has filed a Registration Statement on Form S-4 under the Securities Act
of 1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission ("SEC") covering up to 166,000,000 shares of Duke Common Stock
issuable in connection with the Merger (including shares underlying options to
purchase PanEnergy Common Stock and shares issuable upon any conversions of
convertible notes of PanEnergy outstanding after the Merger). This Joint Proxy
Statement-Prospectus also constitutes the Prospectus of Duke filed as part of
such Registration Statement.

This Joint Proxy Statement-Prospectus and the form of proxy are first being
mailed to the holders of Duke Common Stock and the holders of PanEnergy Common
Stock on or about March 17, 1997.

THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT-
PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

The date of this Joint Proxy Statement-Prospectus is March 13, 1997.
<PAGE>

This Joint Proxy Statement-Prospectus is also being furnished to holders of
Duke Common Stock and holders of PanEnergy Common Stock for the purpose of
considering and voting upon separate proposals to elect directors for their
respective corporations and, in the case of Duke, to ratify the appointment of
independent auditors. Certain information with respect to these proposals is
being furnished only to the holders of Duke Common Stock or the holders of
PanEnergy Common Stock. See "THE DUKE MEETING--ADDITIONAL MATTERS," which is
included in the Joint Proxy Statement-Prospectus delivered to holders of Duke
Common Stock only, and "THE PANENERGY MEETING--ADDITIONAL MATTERS," which is
included in the Joint Proxy Statement-Prospectus delivered to holders of
PanEnergy Common Stock only.

All information concerning Duke contained in this Joint Proxy Statement-
Prospectus has been furnished by Duke, and all information concerning
PanEnergy has been furnished by PanEnergy.

----------------

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS (WHICH INCLUDES THE MATERIALS APPENDED HERETO) OTHER THAN
THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY DUKE OR PANENERGY. THIS JOINT PROXY
STATEMENT-PROSPECTUS (WHICH INCLUDES THE MATERIALS APPENDED HERETO) DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT-PROSPECTUS (WHICH INCLUDES THE
MATERIALS APPENDED HERETO) NOR ANY DISTRIBUTION OF SECURITIES AS CONTEMPLATED
HEREIN SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF DUKE OR PANENERGY SINCE THE DATE HEREOF, OR
THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.

----------------

THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WITH RESPECT TO DUKE AND PANENERGY THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. DOCUMENTS RELATING TO DUKE (EXCLUDING EXHIBITS THERETO, UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF DUKE
COMMON STOCK, TO WHOM THIS JOINT PROXY STATEMENT-PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST TO ALLEN STEWART, INVESTOR RELATIONS DEPARTMENT, DUKE
POWER COMPANY, P.O. BOX 1005, CHARLOTTE, NORTH CAROLINA 28201-1005, TELEPHONE
(704) 382-3853 OR (800) 488-3853 (TOLL FREE). DOCUMENTS RELATING TO PANENERGY
(EXCLUDING EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF PANENERGY COMMON STOCK, TO WHOM
THIS JOINT PROXY STATEMENT-PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO ROBERT W. REED, SECRETARY, AT 5400 WESTHEIMER COURT, P.O. BOX 1642,
HOUSTON, TEXAS 77251-1642, TELEPHONE (713) 627-5400. ANY REQUESTS FOR
DOCUMENTS SHOULD BE MADE BY APRIL 17, 1997.

----------------

The above matters are discussed in detail in this Joint Proxy Statement-
Prospectus. Shareholders are strongly urged to read and consider this Joint
Proxy Statement-Prospectus carefully in its entirety.

----------------
<PAGE>

TABLE OF CONTENTS

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AVAILABLE INFORMATION.................................................... 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................ 1
SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS.............................. 2
THE COMPANIES.......................................................... 2
Duke................................................................. 2
Duke Transaction..................................................... 2
PanEnergy............................................................ 2
THE MEETINGS........................................................... 2
The Proposals........................................................ 2
Time, Place and Date of Meeting; Record Date......................... 2
Required Vote; Quorum................................................ 3
Revocation of Proxies................................................ 4
THE MERGER............................................................. 4
Conversion of Shares................................................. 4
Exchange Ratio....................................................... 5
Exchange of Certificates............................................. 5
Background of the Merger............................................. 5
Reasons for the Merger............................................... 5
Recommendations of the Boards of Directors........................... 7
Opinions of Financial Advisors....................................... 7
Conditions to Consummation of the Merger............................. 8
Conduct of Business Pending the Merger............................... 9
Right to Terminate or Amend.......................................... 9
Combination of Marketing Ventures.................................... 9
Employee Benefits and Plans.......................................... 10
Interests of Certain Persons in the Merger........................... 10
Indemnification and Insurance........................................ 11
Management and Operations after the Merger........................... 11
Regulatory Matters................................................... 12
Accounting........................................................... 12
Resales of Duke Common Stock......................................... 12
No Dissenters' Rights................................................ 12
Comparison of Shareholder Rights..................................... 12
Certain Federal Income Tax Consequences.............................. 12
Dividends............................................................ 13
Forward-Looking Statements........................................... 13
MARKET PRICE AND DIVIDEND INFORMATION.................................... 14
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
DATA.................................................................... 15
SELECTED HISTORICAL FINANCIAL DATA....................................... 15
SELECTED HISTORICAL FINANCIAL DATA--DUKE POWER COMPANY................... 16
SELECTED HISTORICAL FINANCIAL DATA--PANENERGY CORP....................... 17
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA........... 18
THE DUKE MEETING......................................................... 21
General................................................................ 21
Matters to be Considered............................................... 21
Proxies; Revocation of Proxies......................................... 22
</TABLE>

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<PAGE>

<TABLE>
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<S> <C>
Record Date; Quorum; Voting Rights....................................... 22
Recommendations of the Duke Board........................................ 23
THE PANENERGY MEETING...................................................... 24
General.................................................................. 24
Matters to be Considered................................................. 24
Proxies; Revocation of Proxies........................................... 24
Record Date; Quorum; Voting Rights....................................... 24
Recommendations of the PanEnergy Board................................... 25
INFORMATION ABOUT DUKE..................................................... 26
INFORMATION ABOUT PANENERGY................................................ 26
THE MERGER................................................................. 28
General.................................................................. 28
Background of the Merger................................................. 28
Reasons for the Merger--Duke............................................. 32
Recommendations of the Duke Board........................................ 33
Reasons for the Merger--PanEnergy........................................ 35
Recommendations of the PanEnergy Board................................... 36
Opinions of Financial Advisors to Duke................................... 37
Opinions of Financial Advisors to PanEnergy.............................. 45
Effective Time........................................................... 55
Conversion of Shares..................................................... 55
Exchange of Certificates................................................. 56
Expenses................................................................. 57
PanEnergy Convertible Notes.............................................. 57
Interests of Certain Persons in the Merger............................... 57
Stock Options; Restricted Stock.......................................... 63
Employee Benefits and Plans.............................................. 63
Management and Operations after the Merger............................... 64
Compensation of Executive Officers after the Merger...................... 65
Dividends................................................................ 65
Certain Federal Income Tax Consequences.................................. 66
Accounting............................................................... 68
Stock Exchange Listing................................................... 69
Resales of Duke Common Stock............................................. 69
REGULATORY MATTERS......................................................... 70
HSR Premerger Notification............................................... 70
Federal Power Act........................................................ 70
Public Utility Holding Company Act of 1935............................... 71
Public Utility Regulatory Policies Act................................... 71
Atomic Energy Act........................................................ 71
State Approvals.......................................................... 72
Other.................................................................... 72
THE MERGER AGREEMENT....................................................... 73
General.................................................................. 73
Effective Time........................................................... 73
Representations and Warranties........................................... 73
Conduct of Business Prior to the Effective Time.......................... 73
No Solicitation of Transactions by PanEnergy............................. 75
Conditions to the Merger................................................. 75
Termination; Fees and Expenses........................................... 76
</TABLE>

(ii)
<PAGE>

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Amendment and Waiver..................................................... 77
Combination of Marketing Ventures........................................ 77
DESCRIPTION OF DUKE CAPITAL STOCK.......................................... 79
General.................................................................. 79
Duke Common Stock........................................................ 79
Duke Preferred Stock; Duke Preferred Stock A............................. 79
Duke Preference Stock.................................................... 81
Change of Control........................................................ 82
No Shareholder Rights Plan............................................... 83
Transfer Agent; Registrar................................................ 83
DESCRIPTION OF PANENERGY CAPITAL STOCK..................................... 84
General.................................................................. 84
PanEnergy Common Stock................................................... 84
PanEnergy Preferred Stock................................................ 84
No Stockholder Rights Plan............................................... 84
COMPARATIVE RIGHTS OF DUKE SHAREHOLDERS AND PANENERGY STOCKHOLDERS......... 85
General.................................................................. 85
Authorized Capital....................................................... 85
Amendment of Charter or By-Laws.......................................... 85
Size and Classification of Board of Directors............................ 86
Removal of Directors..................................................... 86
Director Liability; Indemnification...................................... 86
Conflict of Interest Transactions........................................ 87
Special Shareholders Meetings............................................ 87
Voting Rights............................................................ 87
Required Shareholder Votes for Certain Transactions...................... 88
State Anti-Takeover Statutes and Certain Charter Provisions.............. 88
Dividends and Other Distributions........................................ 90
Voluntary Dissolution.................................................... 90
Dissenters' Rights....................................................... 90
Preemptive Rights........................................................ 91
Cumulative Voting Rights................................................. 91
Assessment............................................................... 91
Shareholder Proposal Procedures.......................................... 91
LEGAL OPINIONS............................................................. 92
EXPERTS.................................................................... 92
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA...................... 93
THE DUKE MEETING--ADDITIONAL MATTERS....................................... 106
ELECTION OF DIRECTORS.................................................... 106
Common Stock Ownership of Certain Beneficial Owners and Management..... 110
EXECUTIVE COMPENSATION................................................... 111
Long-Term Incentive Plan--Awards in Last Fiscal Year................... 112
Retirement Plan Information............................................ 112
Compensation Committee Report on Executive Compensation................ 113
Performance Graph...................................................... 116
Directors' Fees........................................................ 116
INFORMATION REGARDING THE BOARD OF DIRECTORS............................. 117
RATIFICATION OF APPOINTMENT OF AUDITORS.................................. 118
</TABLE>

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OTHER BUSINESS.......................................................... 118
Proposals for 1998 Annual Meeting..................................... 118
Annual Report on Form 10-K............................................ 118
THE PANENERGY MEETING--ADDITIONAL MATTERS................................. 106
ELECTION OF DIRECTORS................................................... 106
Information Regarding Nominees for Election as Directors.............. 106
Information Regarding Directors Continuing in Office.................. 107
ADDITIONAL INFORMATION.................................................. 108
Board of Directors Retirement Policy.................................. 108
Information Regarding Advisory Directors.............................. 108
Meetings of the PanEnergy Board and its Committees.................... 109
Security Ownership of Management...................................... 110
Security Ownership of Certain Beneficial Owners....................... 111
Compensation of Directors............................................. 112
Executive Compensation and Other Information.......................... 114
Stock Option/SAR Grants in 1996....................................... 116
Exercises of Stock Options in 1996 and Year-End Option Values......... 117
Employment Contracts, Termination of Employment, and Change in Control
Arrangements......................................................... 118
Pension Plan.......................................................... 119
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION........... 120
STOCKHOLDER RETURN COMPARISON........................................... 124
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................. 125
OTHER MATTERS........................................................... 125
Independent Auditors.................................................. 125
Other Matters Before the Meeting...................................... 125
Stockholder Proposals................................................. 125
</TABLE>

EXHIBITS

EXHIBIT A--AGREEMENT AND PLAN OF MERGER
EXHIBIT B--OPINION OF BARR DEVLIN & CO. INCORPORATED
EXHIBIT C--OPINION OF MORGAN STANLEY & CO. INCORPORATED
EXHIBIT D--OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
EXHIBIT E--OPINION OF LEHMAN BROTHERS INC.
EXHIBIT F--FORM OF AFFILIATE LETTER

(iv)
<PAGE>

AVAILABLE INFORMATION

Duke has filed with the SEC a registration statement on Form S-4 (together
with all amendments and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the Duke Common Stock issuable pursuant to
the Merger Agreement. This Joint Proxy Statement-Prospectus does not contain
all of the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of
the SEC. For further information on the securities offered hereby, reference
is made to the Registration Statement. Statements contained herein concerning
provisions of documents are summaries of those documents and are not
necessarily complete. With reference to each document filed as an exhibit to
the Registration Statement, each such statement is qualified in its entirety
by reference to the copy of the applicable document filed with the SEC.

Duke and PanEnergy are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information
with the SEC.

The reports, proxy statements and other information filed with the SEC by
Duke and PanEnergy can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may be
obtained by mail, at prescribed rates, from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 or accessed
electronically on the SEC's Web site at (http://www.sec.gov). Certain
securities of Duke and PanEnergy are listed on the New York Stock Exchange
("NYSE") and reports, proxy statements and other information concerning Duke
and PanEnergy can be inspected at the NYSE, 20 Broad Street, New York, New
York 10005. The PanEnergy Common Stock is also listed on the Pacific Stock
Exchange ("PSE") and reports, proxy statements and other information
concerning PanEnergy can be inspected at the PSE, 301 Pine Street, San
Francisco, California 94104.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed by Duke with the SEC (File No. 1-4928) are
incorporated by reference into this Joint Proxy Statement-Prospectus:

. Annual Report on Form 10-K for the year ended December 31, 1995.

. Quarterly reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996.

. Current reports on Form 8-K filed on December 9, 1996 and February 10,
1997.

The following documents filed by PanEnergy with the SEC (File No. 1-8157)
are incorporated by reference into this Joint Proxy Statement-Prospectus:

. Annual Report on Form 10-K for the year ended December 31, 1995.

. Quarterly reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996.

. Current reports on Form 8-K filed on September 9, 1996, September 13,
1996, October 10, 1996, December 10, 1996 and February 10, 1997.

All documents filed by Duke or PanEnergy pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities registered under the
Registration Statement shall be deemed to be incorporated by reference herein
and to be part hereof from the date of filing of such documents.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement-Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
is also incorporated or deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Joint Proxy Statement-Prospectus.

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SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS

The following summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information included or incorporated
by reference in this Joint Proxy Statement-Prospectus, and the Exhibits hereto,
including, but not limited to, the Merger Agreement (as currently in effect)
set forth as Exhibit A hereto. Shareholders are urged to read carefully this
Joint Proxy Statement-Prospectus, the Exhibits hereto and the documents
incorporated by reference in their entirety.

THE COMPANIES

DUKE

One of the nation's largest investor-owned electric utilities, Duke is
primarily engaged in the generation, transmission, distribution and sale of
electric energy in the central portion of North Carolina and the western
portion of South Carolina, comprising the area in both states known as the
Piedmont Carolinas. Duke is also engaged, primarily through subsidiaries, in a
variety of diversified operations. Duke's principal executive offices are
located at 422 South Church Street, Charlotte, North Carolina 28242, and its
telephone number at that address is (704) 594-0887. See "INFORMATION ABOUT
DUKE."

DUKE TRANSACTION

Duke Transaction, a wholly-owned subsidiary of Duke, was formed by Duke
solely for the purpose of effecting the Merger. Duke Transaction's principal
executive offices are located at 422 South Church Street, Charlotte, North
Carolina 28242, and its telephone number at that address is (704) 594-0887.

PANENERGY

One of the leading energy services companies in North America, PanEnergy
operates approximately 37,500 miles of natural gas pipeline with deliveries
that account for 12% of the natural gas consumed in the United States. In
addition, PanEnergy is the nation's fourth largest natural gas liquids ("NGL")
producer, the third largest marketer of natural gas in Canada and the United
States and a leading marketer of electricity, liquefied petroleum gases and
related energy services. PanEnergy's principal executive offices are located at
5400 Westheimer Court, Houston, Texas 77056, and its telephone number at that
address is (713) 627-5400. See "INFORMATION ABOUT PANENERGY."

THE MEETINGS

THE PROPOSALS

Duke. At the Duke Meeting, the holders of Duke Common Stock will be asked to
consider and vote upon proposals to (i) approve the Duke Shareholder Matters,
(ii) elect four directors who will constitute Class III of the Duke Board,
(iii) ratify the appointment of Duke's independent auditors and (iv) transact
such other business as may come before the Duke Meeting. See "THE DUKE
MEETING."

PanEnergy. At the PanEnergy Meeting, the holders of PanEnergy Common Stock
will be asked to consider and vote upon proposals to (i) adopt the Merger
Agreement, (ii) elect four directors to the PanEnergy Board and (iii) transact
such other business as may properly come before the PanEnergy Meeting. See "THE
PANENERGY MEETING."

TIME, PLACE AND DATE OF MEETING; RECORD DATE

Duke. The Duke Meeting is scheduled to be held in the O.J. Miller Auditorium
in the Electric Center, 526 South Church Street, Charlotte, North Carolina, at
11:00 a.m., local time, on April 24, 1997. The Duke Board

2
<PAGE>

has fixed the close of business on February 28, 1997 as the record date (the
"Duke Record Date") for the determination of holders of Duke Common Stock
entitled to notice of and to vote at the Duke Meeting.

PanEnergy. The PanEnergy Meeting is scheduled to be held at the J. W.
Marriott Hotel, 5150 Westheimer, Houston, Texas, at 10:00 a.m., local time, on
April 24, 1997. The PanEnergy Board has fixed the close of business on February
28, 1997 as the record date (the "PanEnergy Record Date") for the determination
of holders of PanEnergy Common Stock entitled to notice of and to vote at the
PanEnergy Meeting.

REQUIRED VOTE; QUORUM

Duke. Approval by a majority of the votes cast by holders of Duke Common
Stock is required to approve the Duke Shareholder Matters, provided that the
total vote cast thereon represents a majority of the shares entitled to vote
thereon. A plurality of the votes cast at the Duke Meeting by the holders of
Duke Common Stock entitled to vote thereon is required to elect directors to
the Duke Board. As a consequence, any shares not voted, whether by abstention
or broker non-vote (as defined below), will not be counted as votes cast for
purposes of determining whether the Duke Shareholder Matters have received
sufficient votes for approval, nor will any abstentions or broker non-votes be
counted in the election of directors of Duke. Each share of Duke Common Stock
entitles the holder thereof on the Duke Record Date to one vote on each matter
to be considered at the Duke Meeting. No approval by the holders of outstanding
shares of Duke Preferred Stock or Duke Preferred Stock A is required to approve
the Duke Shareholder Matters, and such holders are not entitled to vote on the
Duke Shareholder Matters.

In order to establish a quorum for the transaction of business at the Duke
Meeting, holders of a majority of the shares that are entitled to vote must be
either (i) present in person or (ii) represented by a valid proxy. Abstentions
will be counted for purposes of determining whether a quorum is present.
Furthermore, shares represented by proxies returned by a broker holding such
shares in nominee or "street" name will be counted for purposes of determining
whether a quorum exists, even if such shares are not voted in matters where
discretionary voting by the broker is not allowed ("broker non-votes").

On the Duke Record Date, 201,589,596 shares of Duke Common Stock were
outstanding and entitled to vote. Directors and executive officers of Duke
beneficially owned 237,318 shares of Duke Common Stock, or less than 1% of the
shares of Duke Common Stock outstanding on such date (not including shares
which were beneficially owned by The Duke Endowment or the Doris Duke Trust
which were deemed to be beneficially owned by Russell M. Robinson, a director
of Duke, in his capacities as a trustee of The Duke Endowment and a trustee of
the Doris Duke Trust). See "THE DUKE MEETING--Record Date; Quorum; Voting
Rights."

PanEnergy. The affirmative vote of the holders of a majority of the
outstanding shares of PanEnergy Common Stock is required for the adoption of
the Merger Agreement. In determining whether the requisite number of
affirmative votes has been cast on such proposal, abstentions and broker non-
votes will have the same effect as votes cast against the proposal. A plurality
of the votes cast at the PanEnergy Meeting by the holders of PanEnergy Common
Stock entitled to vote is required to elect directors to the PanEnergy Board.
Each share of PanEnergy Common Stock entitles the holder thereof on the
PanEnergy Record Date to one vote on each matter to be considered at the
PanEnergy Meeting.

In order to establish a quorum for the transaction of business at the
PanEnergy Meeting, holders of a majority of the outstanding shares of PanEnergy
Common Stock must be either (i) present in person or (ii) represented by a
valid proxy. Abstentions will be counted for purposes of determining whether a
quorum is present. Furthermore, shares represented by proxies returned by a
broker holding such shares in nominee or "street" name will be counted for
purposes of determining whether a quorum exists.

On the PanEnergy Record Date, 151,398,234 shares of PanEnergy Common Stock
were outstanding and entitled to vote. Directors, executive officers and
affiliates of PanEnergy beneficially owned approximately 809,207 shares of
PanEnergy Common Stock as of the PanEnergy Record Date, less than 1% of the
shares of

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<PAGE>

PanEnergy Common Stock outstanding on such date. See "THE PANENERGY MEETING--
Record Date; Quorum; Voting Rights."

REVOCATION OF PROXIES

A Duke shareholder who has executed and returned a proxy may revoke it at any
time before it is exercised at the Duke Meeting, and a PanEnergy stockholder
who has executed and returned a proxy may revoke it at any time before it is
exercised at the PanEnergy Meeting.

THE MERGER

The Merger Agreement provides that, following the fulfillment or waiver of
certain conditions to the Merger, Duke Transaction will be merged with and into
PanEnergy and all issued and outstanding shares of PanEnergy Common Stock will
be converted into the right to receive shares of Duke Common Stock as provided
therein. As a result of the Merger, holders of PanEnergy Common Stock will
become holders of Duke Common Stock and PanEnergy will become a wholly-owned
subsidiary of Duke. See "THE MERGER--Conversion of Shares."

Pursuant to the Merger Agreement, a certificate of merger complying with the
requirements of the Delaware General Corporation Law ("DGCL") will be filed
with the Secretary of State of Delaware on the second business day following
the satisfaction or waiver of all conditions to the Merger, or at such other
time and date as Duke, Duke Transaction and PanEnergy agree. The Merger will
become effective at the time of the filing of the certificate of merger with
the Secretary of State of Delaware or at such later time as is specified
therein. The "Effective Time" shall mean the time and date that the Merger
becomes effective. See "THE MERGER AGREEMENT--Effective Time."

CONVERSION OF SHARES

Each share of PanEnergy Common Stock outstanding immediately prior to the
Effective Time will, upon consummation of the Merger, be converted into the
right to receive 1.0444 shares of Duke Common Stock; each option to purchase
PanEnergy Common Stock outstanding at the Effective Time will be assumed by
Duke and become an option to purchase Duke Common Stock, appropriately
adjusted; each award of restricted PanEnergy Common Stock outstanding and not
vested at the Effective Time will be assumed by Duke and such shares of
restricted PanEnergy Common Stock will be exchanged for shares of restricted
Duke Common Stock; and any of the 9% Convertible Senior Subordinated Notes Due
December 15, 2004 of PanEnergy (the "PanEnergy Convertible Notes") outstanding
at the Effective Time will become convertible into shares of Duke Common Stock,
appropriately adjusted, after the Effective Time. The ratio for converting
PanEnergy Common Stock into Duke Common Stock is referred to herein as the
"Exchange Ratio." Based on 151,398,234 shares of PanEnergy Common Stock
outstanding on February 28, 1997, Duke would issue up to 158,120,315 shares of
Duke Common Stock in the Merger, and options to purchase up to 3,305,306 shares
of PanEnergy Common Stock (calculated as of February 28, 1997) would become
options to purchase up to 3,452,062 shares of Duke Common Stock. In addition,
up to 471,938 shares of Duke Common Stock may be issued as a result of
conversions of outstanding PanEnergy Convertible Notes (calculated as of
February 28, 1997). Based on the Exchange Ratio and the capitalization of Duke
and PanEnergy (calculated as of February 28, 1997), holders of Duke Common
Stock and holders of PanEnergy Common Stock would have held approximately 56%
and 44%, respectively, of the aggregate number of shares of Duke Common Stock
that would have been outstanding if the Merger had been consummated as of such
date. See "THE MERGER--Conversion of Shares," "PanEnergy Convertible Notes" and
"Stock Options; Restricted Stock."

No fractional shares of Duke Common Stock will be issued upon the surrender
of certificates representing PanEnergy Common Stock pursuant to the Merger.
Instead, the Merger Agreement provides that holders of certificates
representing shares of PanEnergy Common Stock who otherwise would be entitled
to fractional shares of Duke Common Stock will receive cash (without interest)
as set forth therein. At the Effective Time, all

4
<PAGE>

shares of PanEnergy Common Stock credited to participants' accounts in the
PanEnergy Corp Dividend Reinvestment and Stock Purchase Plan (as such plan may
be amended from time to time, the "PanEnergy DRSPP") will be converted into
Duke Common Stock based on the Exchange Ratio, which will be held in
participants' accounts in the Duke Stock Purchase and Dividend Reinvestment
Plan (as such plan may be amended from time to time, the "Duke DRSPP") from the
Effective Time, subject to the right of any such participant to elect not to
participate therein. Participants in the PanEnergy DRSPP immediately prior to
the Effective Time will retain their interests in any fractional shares of Duke
Common Stock credited to their accounts in the Duke DRSPP. See "THE MERGER--
Conversion of Shares."

Outstanding shares of Duke Common Stock, Duke Preferred Stock and Duke
Preferred Stock A will not be converted or otherwise affected by the Merger and
will remain outstanding after the Merger.

EXCHANGE RATIO

The Exchange Ratio is the product of recommendations to the Boards of Duke
and PanEnergy after arm's-length negotiations between the managements of Duke
and PanEnergy. In determining the fairness of the Exchange Ratio, the Duke
Board had the benefit of advice from its financial advisors, Barr Devlin & Co.
Incorporated ("Barr Devlin") and Morgan Stanley & Co. Incorporated ("Morgan
Stanley"). See "THE MERGER--Opinions of Financial Advisors to Duke." The
PanEnergy Board had the benefit of advice from its financial advisors, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Lehman
Brothers Inc. ("Lehman Brothers"). See "THE MERGER--Opinions of Financial
Advisors to PanEnergy."

EXCHANGE OF CERTIFICATES

As soon as practicable after the Effective Time, Duke or a third-party
exchange agent selected by Duke (in either case, the "Exchange Agent") that is
reasonably satisfactory to PanEnergy will mail a letter of transmittal to each
holder of record of a certificate representing shares of PanEnergy Common Stock
at the Effective Time, with instructions for surrendering certificates
representing shares of PanEnergy Common Stock in exchange for certificates
representing shares of Duke Common Stock. Holders of certificates that prior to
the Effective Time represented shares of PanEnergy Common Stock will not be
entitled to receive any payment of dividends or other distributions declared or
made after the Effective Time on Duke Common Stock with a record date after the
Effective Time or a cash payment for any fractional shares of Duke Common Stock
until such certificates are surrendered for exchange. PanEnergy Common Stock
certificates should not be surrendered until a letter of transmittal and
instructions therefor are received from the Exchange Agent.

BACKGROUND OF THE MERGER

For a description of the background of the Merger, see "THE MERGER--
Background of the Merger."

REASONS FOR THE MERGER

Duke. Duke believes that the Merger will make the combined company the
premier provider of energy products and services in North America and that the
Merger offers significant opportunities for revenue enhancement and strategic
financial benefits to both companies and their shareholders, as well as
benefits to their customers and employees, including:

5
<PAGE>

enabling it to build its marketing strategy on its customers' total energy
needs rather than relying solely on its traditional product offerings.
While Duke and PanEnergy have shared a strategic vision of a total energy
marketplace and each previously had taken significant steps to build its
own power and gas marketing venture, the Merger will afford the combined
company the opportunity to move more quickly into a leadership position.

. Stronger Asset Base. The combined base of electric and gas assets
resulting from the Merger will enhance the marketing of complementary
energy products and services through assured energy supplies, broad
knowledge of all types of energy products and greater credibility with
customers. PanEnergy's participation and expertise in all phases of the
natural gas industry will enable Duke to better understand fuel
management for its generation facilities and the pricing of its
electricity products and services. The combined company will also benefit
from greater combined purchasing power, distribution of general and
administrative costs over a broader range of businesses, and other
economies of scale.

. Greater Diversification. The Merger will result in a combined company
that is more diversified than either company individually, in Duke's case
reducing its dependence upon the electric utility industry. In addition,
the size and stability of the combined company will better enable it to
further diversify its assets and businesses through acquisitions, the
development of new businesses both in the United States and
internationally, the marketing and delivery of new products and services
and the creation of new energy technologies. This capability for greater
diversification will provide the combined company with a broader range of
strategic choices in responding to potential revenue declines that may
occur as a consequence of deregulation and increased competition in the
electric utility industry. In addition, the Merger will permit the
companies to combine the businesses of their power and gas marketing
ventures and coordinate the efforts of other complementary subsidiaries
in a more efficient manner.

. Expanded Management Resources. The Merger will bring together PanEnergy's
management team, which has successfully operated that company during a
period of deregulation, increased competition and rapid change in the gas
industry, with Duke's management team, which has internationally
recognized skills and experience in engineering and strong technical
capabilities in the safe, reliable and efficient delivery of energy
products and services. The entrepreneurial and trading skills of
PanEnergy are also expected to complement Duke's strength in the
operation of electric generation and transmission in a deregulating
market.

In addition to the benefits expected to be derived from the Merger, Duke took
into account the short-term earnings dilution after the Merger, the potential
for a negative effect on its credit rating following the Merger, the additional
cash required to maintain its dividend policy after the Merger, and the
difficulties involved in combining the business and operations of Duke/Louis
Dreyfus, as defined under "Combination of Marketing Ventures," with the
business and operations of PanEnergy Marketing Company, as defined under
"Combination of Marketing Ventures," but concluded that the benefits outweighed
these disadvantages.

PanEnergy. PanEnergy believes that the Merger will make the combined company
the premier provider of energy products and services in North America and that
the Merger offers opportunities for revenue enhancement and significant
strategic financial benefits to both companies and their stockholders, as well
as benefits to their customers and employees, including:

. Platform for Comprehensive Energy Products and Services. By adding Duke's
physical assets, talents and capabilities in the electric industry to
PanEnergy's physical assets, talents and capabilities in the natural gas
industry, the combined company will create a platform to market, trade
and provide physical delivery of complementary energy products and
services on a large scale to all major market areas. The combination will
immediately increase PanEnergy's ability to serve a larger and more
diverse base of customers and offer them customized packages of energy
products and services at competitive prices.

. Industry Leadership. Duke is an excellent, low-cost operator in the
electric utility business with talented leadership, is a leading energy
services company, and is a leading generator of electricity with a name
recognized worldwide. PanEnergy is an industry leader in natural gas and
energy products and services

6
<PAGE>

with experienced entrepreneurial management. Duke and PanEnergy share a
vision that customer choice is the driver of the energy marketplace of the
future and that those companies that define themselves by customers' needs
will be best positioned to be industry leaders and to enhance shareholder
value.

. Growth and Revenue Enhancement. The combined company will be positioned
to achieve revenue enhancement in such areas as power marketing and
trading, gas marketing and trading, generation, risk management, retail
energy marketing and distribution, international and domestic project
development and energy consulting much more quickly than either company
could accomplish individually. The combined company will also benefit
from greater combined purchasing power, distribution of general and
administrative costs over a broader range of businesses, and other
economies of scale.

. Financial Opportunities. The Merger will result in a stronger financial
base and improved access to credit markets for PanEnergy, an increase in
the value of PanEnergy Common Stock and a likely immediate increase in
the quarterly dividends payable to holders of PanEnergy Common Stock.

. Greater Diversification. The Merger will further diversify PanEnergy's
operations and reduce its dependence upon any one sector of the energy
industry.

In addition to the benefits expected to be derived from the Merger, PanEnergy
took into account the risks inherent in Duke's nuclear operations and the
relatively slower earnings growth of electric utilities, but concluded that the
benefits outweighed these disadvantages.

RECOMMENDATIONS OF THE BOARDS OF DIRECTORS

Duke. The Duke Board, by the unanimous vote of all directors present, four
directors being absent, approved the Merger Agreement and the transactions
contemplated thereby, including the Merger and the Duke Shareholder Matters,
and recommends that the holders of Duke Common Stock vote FOR approval of the
Duke Shareholder Matters. The Duke Board provided its approval and
recommendation after consideration of a number of factors, which are described
under the heading "THE MERGER--Recommendations of the Duke Board." In
considering the recommendation of the Duke Board, holders of Duke Common Stock
should be aware that certain members of Duke's management and the Duke Board
have certain interests in the Merger that are in addition to the interests of
holders of Duke Common Stock generally. The Duke Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby, including the Merger and
the Duke Shareholder Matters. See "THE MERGER--Interests of Certain Persons in
the Merger" and "Management and Operations after the Merger."

PanEnergy. The PanEnergy Board, by the unanimous vote of all directors
present, one director being absent, approved the Merger Agreement and the
transactions contemplated thereby, including the Merger, and recommends that
the holders of PanEnergy Common Stock vote to adopt the Merger Agreement. The
PanEnergy Board provided its approval and recommendation after consideration of
a number of factors, which are described under the headings "THE MERGER--
Recommendations of the PanEnergy Board." In considering the recommendation of
the PanEnergy Board, holders of PanEnergy Common Stock should be aware that
certain members of PanEnergy's management and the PanEnergy Board have certain
interests in the Merger that are in addition to the interests of holders of
PanEnergy Common Stock generally. The PanEnergy Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby, including the Merger. See
"THE MERGER--Interests of Certain Persons in the Merger" and "Management and
Operations after the Merger."

OPINIONS OF FINANCIAL ADVISORS

Duke. On November 23, 1996, Barr Devlin and Morgan Stanley rendered to the
Duke Board their oral opinions which were confirmed by delivery of written
opinions dated November 24, 1996 and the date hereof.

7
<PAGE>

Barr Devlin stated in its opinions that, as of the respective dates of its
opinions and based upon the procedures and subject to the assumptions made,
matters considered and the limitations discussed therein, the Exchange Ratio is
fair from a financial point of view to the holders of Duke Common Stock. Morgan
Stanley stated in its opinions that, as of the respective dates of its opinions
and based upon the procedures and subject to the assumptions made, matters
considered and the limitations discussed therein, the Exchange Ratio is fair
from a financial point of view to Duke. Copies of the written opinions of Barr
Devlin and Morgan Stanley dated the date hereof are attached to this Joint
Proxy Statement-Prospectus as Exhibits B and C and should be read carefully in
their entirety. See "THE MERGER--Opinions of Financial Advisors to Duke" and
Exhibits B and C.

PanEnergy. On November 24, 1996, Merrill Lynch and Lehman Brothers rendered
to the PanEnergy Board their oral opinions which were confirmed by delivery of
written opinions dated November 24, 1996 and the date hereof, each to the
effect that, as of the respective dates of their opinions and based upon the
procedures and subject to the assumptions set forth therein, from a financial
point of view, the Exchange Ratio is fair to the holders of PanEnergy Common
Stock. Copies of the written opinions of Merrill Lynch and Lehman Brothers
dated the date hereof are attached to this Joint Proxy Statement-Prospectus as
Exhibits D and E and should be read carefully in their entirety. See "THE
MERGER--Opinions of Financial Advisors to PanEnergy" and Exhibits D and E.

CONDITIONS TO CONSUMMATION OF THE MERGER

The obligations of Duke and PanEnergy to consummate the Merger are subject to
the satisfaction of certain conditions, including the approval of the Duke
Shareholder Matters by the holders of Duke Common Stock and the adoption of the
Merger Agreement by the holders of PanEnergy Common Stock, the absence of any
order or injunction that prevents the consummation of the Merger, the
effectiveness of the Registration Statement, approval of the listing on the
NYSE of the shares of Duke Common Stock to be issued to holders of PanEnergy
Common Stock in connection with the Merger subject only to official notice of
issuance, the receipt of certain governmental approvals pursuant to final
orders that do not impose terms or conditions that would have an effect that
is, or is reasonably likely to be, materially adverse to the business,
operations, assets, financial condition or results of operations of Duke or
PanEnergy, as the case may be, and its Subsidiaries taken as a whole (a
"Material Adverse Effect"), the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), receipt of a letter from each party's auditors that the Merger will
be treated as a pooling of interests, the accuracy of the representations and
warranties of the other party set forth in the Merger Agreement, the material
performance of all agreements required to be performed by the other party under
the Merger Agreement, the receipt by Duke and PanEnergy of an officers'
certificate from the other party stating that the previous two conditions have
been satisfied, the absence of any change in the financial condition, business,
properties or operations of the other party and its Subsidiaries taken as a
whole that would have or be reasonably likely to have a Material Adverse Effect
on the other party, the receipt of a tax opinion of special counsel to
PanEnergy that the Merger will be treated as a reorganization under section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and that
Duke, Duke Transaction and PanEnergy will each be a party to that
reorganization within the meaning of section 368(b) of the Code, the receipt of
a "comfort letter" from the other party's auditors, and, with respect to
PanEnergy, the consummation of certain transactions contemplated by the letter
agreement dated November 24, 1996 among affiliates of Duke and Louis Dreyfus
Corporation relating to the combination of their power and gas marketing
venture with the PanEnergy gas and power marketing venture ("D/LD Letter
Agreement"). The term "Subsidiary," when used with respect to any party, means
any corporation or other organization, whether incorporated or unincorporated,
of which such party directly or indirectly owns or controls at least a majority
of the securities or other interests having by their terms ordinary voting
power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization, or
any organization of which such party is a general partner. Certain of the
conditions to the Merger may be waived by the party entitled to assert the

8
<PAGE>

condition. See "REGULATORY MATTERS," "THE MERGER AGREEMENT--Conditions to the
Merger" and "Combination of Marketing Ventures."

CONDUCT OF BUSINESS PENDING THE MERGER

Duke and PanEnergy have each agreed to, and will cause their respective
Subsidiaries to, undertake or refrain from undertaking certain actions pending
the Merger. In addition, Duke and PanEnergy have agreed to cooperate and
coordinate certain actions with each other. For a summary of the terms of the
Merger Agreement with respect to the conduct of the business of Duke and
PanEnergy pending the Merger, see "THE MERGER AGREEMENT--Conduct of Business
Prior to the Effective Time."

RIGHT TO TERMINATE OR AMEND

The Merger Agreement may be terminated under certain circumstances,
including, by mutual written consent of Duke and PanEnergy; by either the Duke
Board or the PanEnergy Board if the Merger is not consummated by June 30, 1998,
if the requisite approval by the holders of Duke Common Stock is not obtained
at the Duke Meeting, if the requisite approval by the holders of PanEnergy
Common Stock is not obtained at the PanEnergy Meeting or if a federal or state
court or governmental, regulatory or administrative agency or commission issues
an order, decree or ruling or takes any other action restraining, enjoining or
prohibiting the transactions contemplated by the Merger Agreement; by PanEnergy
if, before the approval of the holders of PanEnergy Common Stock is obtained,
the PanEnergy Board determines in the exercise of its good faith judgment as to
its fiduciary duties to its stockholders imposed by law as advised by outside
counsel that such termination is required by reason of an Alternative Proposal
(as defined in "THE MERGER AGREEMENT--No Solicitation of Transactions by
PanEnergy") being made, subject to certain restrictions; by the nonbreaching
party if there occurs a breach of a representation or warranty under the Merger
Agreement that would have or be reasonably likely to have a Material Adverse
Effect on the other party, or if a material breach of any covenant or agreement
under the Merger Agreement occurs that is not cured, if curable, within 30 days
after written notice thereof; or by Duke if the PanEnergy Board withdraws or
modifies in a manner materially adverse to Duke its approval or recommendation
of the Merger Agreement or the Merger or recommends an Alternative Proposal to
the holders of PanEnergy Common Stock. See "THE MERGER AGREEMENT--Termination;
Fees and Expenses."

The Merger Agreement requires that a termination fee of $200 million be paid
by PanEnergy upon termination of the Merger Agreement under certain
circumstances. See "THE MERGER AGREEMENT--Termination; Fees and Expenses."

The Merger Agreement may be amended by the Duke Board and the PanEnergy Board
at any time before or after receipt of the approvals of the holders of Duke
Common Stock and the holders of PanEnergy Common Stock, but after any such
approval no amendment may be made which by law requires the further approval of
such holders without obtaining such approval. Any party to the Merger Agreement
may, to the extent legally allowed, extend the time for the performance of any
of the obligations or other acts of the other parties thereto, waive any
inaccuracies in the representations and warranties made to such party contained
in the Merger Agreement or in any document delivered pursuant thereto, and
waive compliance with any of the agreements or conditions contained in the
Merger Agreement for its benefit. See "THE MERGER AGREEMENT--Amendment and
Waiver."

COMBINATION OF MARKETING VENTURES

Prior to commencement of discussions leading to the Merger, affiliates of
Duke had entered into a venture, Duke/Louis Dreyfus L.L.C. ("Duke/Louis
Dreyfus"), with affiliates of Louis Dreyfus Corporation for the purpose of
pursuing certain businesses, including power and gas marketing. Prior to
commencement of discussions leading to the Merger, affiliates of PanEnergy and
Mobil Corporation had also entered into ventures (referred to collectively as
the "PanEnergy Marketing Company") with scope and business objectives similar
to those of Duke/Louis Dreyfus.

9
<PAGE>

On November 23, 1996, the venturers in PanEnergy Marketing Company agreed
that, upon the consummation of the Merger, the operations of the power and gas
marketing ventures of Duke and PanEnergy would be combined and that Mobil
Corporation would be given the opportunity to maintain its ownership percentage
in the combined venture at 40%.

Prior to the execution of the Merger Agreement, the venturers in Duke/Louis
Dreyfus agreed in the D/LD Letter Agreement that, upon the consummation of the
Merger, the operations of the power and gas marketing ventures of Duke and
PanEnergy would be combined, that the Louis Dreyfus interests would retain a
10% economic interest in the combined venture, that the Louis Dreyfus interests
would have certain rights beginning three years after the Effective Time to
sell their interest in the combined venture to the Duke interests, and that the
Duke interests would have the right beginning in the year 2006 to acquire the
Louis Dreyfus interests in the combined venture.

The obligations of the Duke affiliates and the Louis Dreyfus affiliates under
the D/LD Letter Agreement are subject to consummation of the Merger and certain
other conditions. PanEnergy's obligations under the Merger Agreement are
subject to the consummation of the combination of Duke/Louis Dreyfus with
PanEnergy Marketing Company as contemplated in the D/LD Letter Agreement. See
"THE MERGER AGREEMENT--Combination of Marketing Ventures."

EMPLOYEE BENEFITS AND PLANS

For the period beginning at the Effective Time and ending on the first
anniversary of the Effective Time, PanEnergy employees generally will continue
to receive active employee and retiree benefits under the PanEnergy employee
benefit plans on substantially the same terms and conditions as were in effect
immediately before the Effective Time. PanEnergy's executive benefit plans and
programs as in effect at the Effective Time will continue in effect during such
period without any amendment that could adversely affect PanEnergy employees
who are participants therein as of the Effective Time and PanEnergy employees
will be entitled to severance benefits in amounts and upon terms and conditions
no less favorable than those in effect for such individuals as of the Effective
Time, with certain exceptions for PanEnergy employees who have entered into
employment agreements in connection with the Merger. See "THE MERGER--Employee
Benefits and Plans" and "Interests of Certain Persons in the Merger."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain members of Duke's management, PanEnergy's management, the Duke Board
and the PanEnergy Board, who have interests in the Merger that are in addition
to their respective interests as holders of Duke Common Stock and holders of
PanEnergy Common Stock generally, have participated in the negotiation of the
terms of the Merger Agreement and the transactions contemplated thereby,
including the Merger.

Directorships. The Merger Agreement provides that the Duke Board will, upon
consummation of the Merger, consist of eighteen directors, eleven of whom will
be designated by Duke (which will include Richard B. Priory and William A.
Coley) and seven of whom will be designated by PanEnergy (which will include
Dennis R. Hendrix and Paul M. Anderson). See "Management and Operations after
the Merger."

Employment Agreements. Pursuant to the Merger Agreement, Duke entered into
employment agreements, to become effective upon consummation of the Merger,
with six of its officers, including Richard B. Priory, William A. Coley,
Richard J. Osborne and Ruth G. Shaw. See "THE MERGER--Interests of Certain
Persons in the Merger--Duke Employment Agreements." Pursuant to the Merger
Agreement, PanEnergy also entered into employment agreements, to become
effective upon consummation of the Merger, with six of its officers, including
Paul M. Anderson, James T. Hackett, Fred J. Fowler and Bruce A. Williamson. See
"THE MERGER--Interests of Certain Persons in the Merger--PanEnergy Employment
Agreements."

10
<PAGE>

Vesting of Certain Benefits for PanEnergy Directors and Executive
Officers. Upon consummation of the Merger, certain options to purchase shares
of PanEnergy Common Stock and shares of restricted PanEnergy Common Stock held
by certain PanEnergy directors and executive officers, including those
mentioned under "Employment Agreements," will vest or become unrestricted,
pursuant to the terms of the plans under which they were granted. See "THE
MERGER--Interest of Certain Persons in the Merger," "Stock Options; Restricted
Stock" and "Employee Benefits and Plans."

INDEMNIFICATION AND INSURANCE

To the extent not prohibited by law, all rights of indemnification in favor
of current or former directors or officers of PanEnergy as provided in the
PanEnergy Certificate of Incorporation or the PanEnergy By-Laws for acts or
omissions occurring prior to the Effective Time will continue in full force and
effect from the Effective Time until the expiration of the applicable statute
of limitations with respect to any claims arising out of such acts and
omissions. For a period of not less than six years from the Effective Time,
Duke will cause to be maintained PanEnergy's directors' and officers' insurance
and indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time for directors and officers of PanEnergy
who were covered under such policy as in effect on November 24, 1996, subject
to certain conditions. See "THE MERGER--Interests of Certain Persons in the
Merger."

MANAGEMENT AND OPERATIONS AFTER THE MERGER

Pursuant to the Merger Agreement, the number of directors constituting the
full Duke Board at the Effective Time will be eighteen persons, eleven of whom
will be designated by Duke and seven of whom will be designated by PanEnergy.
It is anticipated that Richard B. Priory (currently President and Chief
Operating Officer of Duke), William A. Coley (currently President of Duke's
Associated Enterprises Group), Dennis R. Hendrix (currently Chairman of the
Board of PanEnergy) and Paul M. Anderson (currently President and Chief
Executive Officer of PanEnergy) will serve as directors of Duke immediately
after the Effective Time. William H. Grigg, Chairman and Chief Executive
Officer of Duke, will retire and resign as a director of Duke immediately prior
to the Effective Time. It is contemplated that one director of Duke and one
director of PanEnergy will additionally retire from the Duke Board in April
1998 if the Merger has been consummated prior to such time and that the number
of directors constituting the full Duke Board will thereafter be sixteen,
except as may be otherwise subsequently determined by the Duke Board.

Pursuant to the Merger Agreement, Richard B. Priory will hold the position of
Chairman of the Board and Chief Executive Officer of Duke and Paul M. Anderson
will hold the position of President and Chief Operating Officer of Duke from
the Effective Time. At the Effective Time, Duke will establish an Office of the
Chief Executive that will exercise executive management over Duke and will
consist of the Chairman of the Board and Chief Executive Officer and the
President and Chief Operating Officer of Duke. The final decision-making
authority in the Office of the Chief Executive will reside with the Chief
Executive Officer of Duke.

Pursuant to the Merger Agreement, the Office of the Chief Executive will
appoint a Policy Committee of senior executive officers of Duke and PanEnergy
at the Effective Time that will, in addition to the Chairman of the Board and
Chief Executive Officer and the President and Chief Operating Officer, consist
of William A. Coley, Richard J. Osborne and Ruth G. Shaw (currently of Duke)
and James T. Hackett and Fred J. Fowler (currently of PanEnergy). The
Management Committee of the Duke Board at the Effective Time will consist of
members of the Duke Board who are officers of Duke. All other Committees of the
Duke Board will have two members designated by PanEnergy and the Chairman of
each Committee of the Duke Board will be a director designated by Duke.

11
<PAGE>

Following the Effective Time, Duke will maintain its corporate offices in
Charlotte, North Carolina, and will have significant operations in Houston,
Texas. PanEnergy and its subsidiaries will continue their respective operations
as direct or indirect subsidiaries of Duke. See "THE MERGER--Management and
Operations after the Merger."

REGULATORY MATTERS

The approvals of the North Carolina Utilities Commission ("NCUC"), The Public
Service Commission of South Carolina ("PSCSC") and the Federal Energy
Regulatory Commission ("FERC") and certain other consents from, or
notifications to, governmental agencies are required to consummate the Merger.
The waiting period under the HSR Act has terminated. See "REGULATORY MATTERS."

ACCOUNTING

Pursuant to the Merger Agreement, the Merger is intended to be accounted for
as a pooling of interests under generally accepted accounting principles
("GAAP"). It is a condition to the consummation of the Merger that Duke and
PanEnergy receive letters from their respective auditors that the Merger will
qualify for pooling of interests accounting treatment. See "THE MERGER--
Accounting."

RESALES OF DUKE COMMON STOCK

Shares of Duke Common Stock received in the Merger will be freely
transferable by the holders thereof except for those shares held by holders who
may be deemed to be "affiliates" (generally including directors, certain
executive officers and ten percent or more stockholders) of PanEnergy under
applicable federal securities laws. See "THE MERGER--Resales of Duke Common
Stock."

NO DISSENTERS' RIGHTS

Dissenters' rights are not available to holders of Duke Common Stock or
holders of PanEnergy Common Stock in connection with, or as a result of, the
matters to be acted upon, respectively, at the Duke Meeting and the PanEnergy
Meeting. See "THE DUKE MEETING--Record Date; Quorum; Voting Rights," "THE
PANENERGY MEETING--Record Date; Quorum; Voting Rights" and "COMPARATIVE RIGHTS
OF DUKE SHAREHOLDERS AND PANENERGY STOCKHOLDERS--Dissenters' Rights."

COMPARISON OF SHAREHOLDER RIGHTS

Holders of PanEnergy Common Stock who receive Duke Common Stock in the Merger
will become holders of Duke Common Stock and will have certain rights as Duke
shareholders that are different from those they had as PanEnergy stockholders.
For a comparison of certain provisions of the Duke Articles, the Duke By-Laws
and North Carolina corporate law governing the rights of holders of Duke Common
Stock with the PanEnergy Certificate of Incorporation, the PanEnergy By-Laws
and Delaware corporate law governing the rights of holders of PanEnergy Common
Stock, see "COMPARATIVE RIGHTS OF DUKE SHAREHOLDERS AND PANENERGY
STOCKHOLDERS."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Merger is intended to qualify for federal income tax purposes as a
reorganization within the meaning of section 368(a) of the Code. Assuming the
Merger so qualifies, in general, no gain or loss will be recognized for federal
income tax purposes by holders of PanEnergy Common Stock who exchange their
PanEnergy Common Stock for Duke Common Stock pursuant to the Merger except that
(i) gain or loss may be recognized to the extent of cash received in lieu of
fractional shares of Duke Common Stock and (ii) gain may be recognized

12
<PAGE>

by certain non-U.S. holders of PanEnergy Common Stock that own or have owned,
actually or constructively, more than 5% of PanEnergy Common Stock. In
addition, a holder of PanEnergy Common Stock may be deemed to receive a
dividend to the extent that PanEnergy pays, on behalf of such holder, any
"transfer taxes" imposed on such holder by virtue of the Merger. A condition to
the Merger is the receipt by PanEnergy of an opinion from LeBoeuf, Lamb, Greene
& MacRae, L.L.P., that the Merger qualifies, for federal income tax purposes,
as a reorganization within the meaning of section 368(a) of the Code, and that
Duke, Duke Transaction and PanEnergy will each be a party to that
reorganization within the meaning of section 368(b) of the Code. See "THE
MERGER--Certain Federal Income Tax Consequences."

DIVIDENDS

It is presently anticipated that the current $2.12 per share annual dividend
will be maintained on Duke Common Stock following consummation of the Merger,
subject to evaluation from time to time by the Duke Board based on Duke's
results of operations, financial condition, capital requirements, future
business prospects, regulatory environment and such other business
considerations as the Duke Board shall deem relevant. However, no assurance can
be given that such dividend rate will remain unchanged, and Duke reserves the
right to increase or decrease the dividend on the Duke Common Stock as may be
required by law or contract or as may be determined by the Duke Board, in its
discretion, to be advisable. See "THE MERGER--Dividends."

FORWARD-LOOKING STATEMENTS

This Joint Proxy Statement-Prospectus includes forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Although each of Duke and PanEnergy believes that its
expectations are based on reasonable assumptions, no assurance can be given
that actual results may not differ materially from those in the forward-looking
statements herein for reasons that include: the speed and degree to which
competition enters the electric and natural gas industries; state and federal
legislative and regulatory initiatives that increase competition, affect cost
and investment recovery and have an impact on rate structures; the economic
climate and industrial, commercial and residential growth in the service
territories of Duke and PanEnergy; the weather and other natural phenomena; the
timing and extent of changes in commodity prices and interest rates; conditions
of the capital markets and equity markets; growth in opportunities for
subsidiaries of Duke and PanEnergy; and the ability of Duke and PanEnergy to
achieve the goals described in "THE MERGER--Reasons for the Merger," in each
case during the periods covered by the forward-looking statements.

13
<PAGE>

MARKET PRICE AND DIVIDEND INFORMATION

The Duke Common Stock is traded on the NYSE under the symbol "DUK" and the
PanEnergy Common Stock is traded on the NYSE and the PSE under the symbol
"PEL". The following table sets forth, for the periods indicated, the high and
low sale prices for the Duke Common Stock and PanEnergy Common Stock, as
reported on the NYSE Composite Transactions Tape, and the cash dividends
declared on shares of Duke Common Stock and PanEnergy Common Stock during those
periods. For current price information, holders of Duke Common Stock and
holders of PanEnergy Common Stock are urged to consult publicly available
sources. No assurance can be given as to the market price of Duke Common Stock
or PanEnergy Common Stock at, or in the case of Duke Common Stock, after, the
Effective Time.

<TABLE>
<CAPTION>
DUKE COMMON PANENERGY COMMON
STOCK PRICES ($) STOCK PRICES ($) PANENERGY
----------------- DUKE CASH ----------------- CASH
HIGH LOW DIVIDENDS ($) HIGH LOW DIVIDENDS ($)
-------- -------- ------------- -------- -------- -------------
(PER SHARE) (PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter......... 43 35 3/4 0.47 25 1/2 20 5/8 0.210
Second Quarter........ 37 32 7/8 0.47 22 1/4 18 1/4 0.210
Third Quarter......... 39 7/8 35 1/2 0.49 23 1/2 19 1/2 0.210
Fourth Quarter........ 42 1/8 38 0.49 23 5/8 19 1/2 0.210
1995
First Quarter......... 40 3/4 37 3/8 0.49 23 1/4 18 3/4 0.210
Second Quarter........ 42 3/4 38 1/4 0.49 25 7/8 22 7/8 0.225
Third Quarter......... 43 3/4 40 0.51 27 1/2 23 3/8 0.225
Fourth Quarter........ 47 7/8 43 1/8 0.51 28 7/8 24 3/8 0.225
1996
First Quarter......... 53 46 7/8 0.51 31 5/8 26 3/4 0.225
Second Quarter........ 51 1/2 45 3/4 0.51 33 1/2 30 5/8 0.240
Third Quarter......... 51 3/8 45 3/4 0.53 35 1/4 31 0.240
Fourth Quarter........ 49 1/8 43 3/8 0.53 46 1/4 34 5/8 0.240
1997
First Quarter (through
March 12)............ 48 43 5/8 (1) 47 1/4 42 1/4 (2)
</TABLE>
- --------
(1) On January 28, 1997, the Duke Board declared a quarterly dividend of $.53
per share on Duke Common Stock payable March 17, 1997 to shareholders of
record on February 14, 1997.

(2) On January 22, 1997, the PanEnergy Board declared a quarterly dividend of
$.24 per share on PanEnergy Common Stock payable March 15, 1997 to
stockholders of record on February 14, 1997.

On November 22, 1996, the last trading day prior to public announcement of
the execution of the Merger Agreement, and on March 12, 1997, the closing sale
prices per share, as reported on the NYSE Composite Transactions Tape, of Duke
Common Stock and PanEnergy Common Stock and the equivalent per share price of
PanEnergy Common Stock were as follows:

<TABLE>
<CAPTION>
NOVEMBER 22, 1996 MARCH 12, 1997
----------------- --------------
<S> <C> <C>
Duke Common Stock.............................. $47.875 $43.875
PanEnergy Common Stock......................... 42.250 43.250
Equivalent PanEnergy Per Share Price........... 50.000 45.823
</TABLE>

The Equivalent PanEnergy Per Share Price at each specified date represents the
closing sale price of a share of Duke Common Stock on such date multiplied by
the Exchange Ratio.

14
<PAGE>

SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

The summary below sets forth selected historical financial and market data
and selected unaudited pro forma financial data. The financial statements
should be read in conjunction with the historical consolidated financial
statements and related notes thereto of Duke and PanEnergy, incorporated herein
by reference, and in conjunction with the unaudited pro forma combined
condensed financial statements and related notes thereto of Duke Energy
included elsewhere in this Joint Proxy Statement-Prospectus. See "Unaudited Pro
Forma Combined Condensed Financial Data."

SELECTED HISTORICAL FINANCIAL DATA

The selected historical financial data of Duke and PanEnergy for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992, set forth below, have been
derived from audited financial statements. The selected historical market data
of each of Duke and PanEnergy for the dates indicated are based on the closing
sale prices of Duke Common Stock and PanEnergy Common Stock as reported on the
NYSE Composite Transactions Tape for such dates. The Aggregate Market
Capitalization represents the product of the closing sale prices on such dates
multiplied by the number of outstanding shares on such dates.

15
<PAGE>

DUKE POWER COMPANY

SELECTED HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues.... 4,758.0 4,676.6 4,489.0 4,466.2 4,122.5
Operating Expenses.... 3,395.8 3,327.6 3,309.2 3,258.4 3,087.4
--------- --------- --------- --------- ---------
Operating Income...... 1,362.2 1,349.0 1,179.8 1,207.8 1,035.1
Interest Expense and
Other Income......... (156.6) (168.1) (143.9) (171.4) (223.0)
--------- --------- --------- --------- ---------
Income Before Income
Taxes................ 1,205.6 1,180.9 1,035.9 1,036.4 812.1
Income Taxes.......... 475.7 466.4 397.0 410.0 304.0
--------- --------- --------- --------- ---------
Net Income............ 729.9 714.5 638.9 626.4 508.1
Dividends on
Preferred and
Preference Stock... 44.2 48.9 49.7 52.4 56.4
--------- --------- --------- --------- ---------
Earnings for Common... 685.7 665.6 589.2 574.0 451.7
========= ========= ========= ========= =========
Earnings per Common
Share................ 3.37 3.25 2.88 2.80 2.21
Dividends Declared per
Common Share......... 2.08 2.00 1.92 1.84 1.76
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets.......... 13,469.7 13,358.5 12,862.2 12,293.6 11,012.8
========= ========= ========= ========= =========
Capitalization
Long-Term Debt...... 3,538.1 3,711.4 3,567.1 3,285.4 3,288.1
Preferred Stock
With Sinking Fund
Requirements..... 234.0 234.0 279.5 281.0 279.5
Without Sinking
Fund
Requirements..... 450.0 450.0 500.0 500.0 500.0
Common Stockholders'
Equity............. 4,888.7 4,785.2 4,532.8 4,337.7 4,150.6
--------- --------- --------- --------- ---------
Total Capitalization
(Excluding Short-Term
Debt)................ 9,110.8 9,180.6 8,879.4 8,404.1 8,218.2
========= ========= ========= ========= =========
Book Value per Common
Share................ 24.25 23.36 22.13 21.17 20.26
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
MARKET DATA--COMMON
STOCK
Aggregate Market
Capitalization....... 9,324.0 9,708.2 7,812.8 8,683.7 7,403.0
Closing Market Price
per Share............ 46.25 47.38 38.13 42.38 36.13
Ratio of Market Value
to Book Value........ 1.91x 2.03x 1.72x 2.00x 1.78x
</TABLE>

See accompanying Notes to Selected Historical and Unaudited Pro Forma Combined
Condensed Financial Data.

16
<PAGE>

PANENERGY CORP

SELECTED HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues.... 7,575.6 5,018.1 4,626.0 4,318.1 3,887.1
Operating Expenses.... 6,779.2 4,298.8 3,999.8 3,810.2 3,232.8
--------- --------- --------- --------- ---------
Operating Income...... 796.4 719.3 626.2 507.9 654.3
Interest Expense and
Other Income......... (207.0) (217.9) (239.6) (217.4) (316.6)
--------- --------- --------- --------- ---------
Income Before Minority
Interest and Income
Taxes................ 589.4 501.4 386.6 290.5 337.7
Minority Interest..... 6.2 -- -- -- --
Income Taxes.......... 222.1 197.8 161.4 118.9 135.7
--------- --------- --------- --------- ---------
Income Before
Extraordinary Item... 361.1 303.6 225.2 171.6 202.0
Extraordinary Item,
Net of Tax........... (16.7) -- -- -- --
--------- --------- --------- --------- ---------
Net Income............ 344.4 303.6 225.2 171.6 202.0
Dividends on
Preferred and
Preference Stock... -- -- -- -- --
--------- --------- --------- --------- ---------
Earnings for Common... 344.4 303.6 225.2 171.6 202.0
========= ========= ========= ========= =========
Earnings per Common
Share
Before Extraordinary
Item............... 2.39 2.03 1.51 1.21 1.50
Net Income.......... 2.28 2.03 1.51 1.21 1.50
Dividends Declared per
Common Share......... 0.945 0.885 0.84 0.80 0.80
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets.......... 8,485.2 7,509.4 7,381.0 7,423.8 7,635.9
========= ========= ========= ========= =========
Capitalization
Long-Term Debt...... 1,947.0 2,091.6 2,363.7 2,085.5 2,604.8
Preferred Stock
With Sinking Fund
Requirements..... -- -- -- -- 10.8
Without Sinking
Fund
Requirements..... -- -- -- -- --
Common Stockholders'
Equity............. 2,452.5 2,227.3 2,035.2 1,879.4 1,556.8
--------- --------- --------- --------- ---------
Total Capitalization
(Excluding Short-Term
Debt)................ 4,399.5 4,318.9 4,398.9 3,964.9 4,172.4
========= ========= ========= ========= =========
Book Value per Common
Share................ 16.23 14.83 13.65 12.73 11.47
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
MARKET DATA--COMMON
STOCK
Aggregate Market
Capitalization....... 6,799.5 4,187.6 2,944.7 3,505.5 2,273.0
Closing Market Price
per Share............ 45.00 27.88 19.75 23.75 16.75
Ratio of Market Value
to Book Value........ 2.77x 1.88x 1.45x 1.87x 1.46x
</TABLE>

See accompanying Notes to Selected Historical and Unaudited Pro Forma Combined
Condensed Financial Data.

17
<PAGE>

SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

The following selected unaudited pro forma combined condensed financial data
combines the historical consolidated balance sheets and statements of income of
Duke and PanEnergy, including their respective subsidiaries, after giving
effect to the Merger, assuming the Merger had been effective for all periods
presented. These statements are prepared on the basis of accounting for the
Merger as a pooling of interests and are based on the assumptions set forth in
the notes thereto. The following information is not necessarily indicative of
the financial position or operating results that would have occurred had the
Merger been consummated on the dates as of which, or at the beginning of the
periods for which, the Merger is being given effect, nor is it necessarily
indicative of future operating results or financial position. See "Unaudited
Pro Forma Combined Condensed Financial Data."

18
<PAGE>

DUKE ENERGY CORPORATION

SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues.............................. 12,333.6 9,694.7 9,115.0
Operating Expenses.............................. 10,175.0 7,626.4 7,309.0
-------- -------- --------
Operating Income................................ 2,158.6 2,068.3 1,806.0
Interest Expense and Other Income............... (363.6) (386.0) (383.5)
-------- -------- --------
Income Before Minority Interest and Income Tax-
es............................................. 1,795.0 1,682.3 1,422.5
Minority Interest............................... 6.2 -- --
Income Taxes.................................... 697.8 664.2 558.4
-------- -------- --------
Income Before Extraordinary Item................ 1,091.0 1,018.1 864.1
Extraordinary Item, Net of Tax.................. (16.7) -- --
-------- -------- --------
Net Income...................................... 1,074.3 1,018.1 864.1
Dividends on Preferred and Preference Stock..... 44.2 48.9 49.7
-------- -------- --------
Earnings for Common............................. 1,030.1 969.2 814.4
======== ======== ========
Earnings per Common Share
Before Extraordinary Item....................... 2.90 2.68 2.26
Net Income...................................... 2.85 2.68 2.26
Dividends Declared per Common Share............. 1.57 1.50 1.44
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA
Total Assets.................................... 21,954.9 20,867.9 20,243.2
======== ======== ========
Capitalization
Long-Term Debt.................................. 5,485.1 5,803.0 5,930.8
Preferred Stock
With Sinking Fund Requirements................. 234.0 234.0 279.5
Without Sinking Fund Requirements.............. 450.0 450.0 500.0
Common Stockholders' Equity..................... 7,341.2 7,012.5 6,568.0
-------- -------- --------
Total Capitalization (Excluding Short-Term
Debt).......................................... 13,510.3 13,499.5 13,278.3
======== ======== ========
Book Value per Common Share..................... 20.43 N/A N/A
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
PRO FORMA PER SHARE DATA
Duke Energy Corporation
Earnings per Common Share....................... 2.85 2.68 2.26
Cash Dividends Declared per Common Share........ 1.57 1.50 1.44
Book Value per Common Share..................... 20.43 N/A N/A
DUKE ENERGY PRO FORMA EQUIVALENT PER SHARE
DATA IMPUTED TO EXISTING SHAREHOLDERS
PanEnergy Corp Shareholders
Earnings per Common Share....................... 2.98 2.80 2.36
Cash Dividends Declared per Common Share........ 1.64 1.57 1.50
Book Value per Common Share..................... 21.34 N/A N/A
Duke Power Company Shareholders
Earnings per Common Share....................... 2.85 2.68 2.26
Cash Dividends Declared per Common Share........ 1.57 1.50 1.44
Book Value per Common Share..................... 20.43 N/A N/A
</TABLE>

See accompanying Notes to Selected Historical and Unaudited Pro Forma Combined
Condensed Financial Data.

19
<PAGE>

NOTES TO SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL DATA

1. Pro forma common share amounts give effect to the conversion of each
outstanding share of PanEnergy Common Stock into 1.0444 shares of Duke Common
Stock, as provided in the Merger Agreement.

2. Certain revenues, expenses, assets and liabilities of PanEnergy have been
reclassified to conform with the presentation utilized by Duke. The effects of
accounting policy differences are immaterial and have not been adjusted in the
selected unaudited pro forma combined condensed financial data.

3. On August 1, 1996, a venture was formed that combined the marketing
operations of PanEnergy with those of Mobil Corporation. PanEnergy operates and
owns 60% of the new marketing venture which conducts business as PanEnergy
Trading and Market Services, L.L.C. in the United States and as PanEnergy
Marketing L.P. in Canada (together, PanEnergy Marketing Company). During 1996,
PanEnergy also acquired Mobil Corporation's interest in certain natural gas
gathering, processing and related assets for approximately $300 million.

4. On November 24, 1996, affiliates of Duke entered into the D/LD Letter
Agreement with affiliates of Louis Dreyfus Corporation. The D/LD Letter
Agreement provides that the operations, assets and liabilities of Duke/Louis
Dreyfus will be merged into, contributed to, or otherwise acquired by PanEnergy
Marketing Company at or prior to the Effective Time. Following the combination
of the marketing businesses, Louis Dreyfus Electric will have an economic
interest entitling it to 10% of the net income of the combined marketing
businesses. The affiliates of Mobil Corporation will be given the opportunity,
following consummation of the Merger, to maintain their ownership percentage at
40% of the combined venture. Accordingly, Duke Energy will control 60% of the
voting rights and, as a result, the unaudited pro forma combined condensed
financial statements reflect 100% ownership less the minority interest
associated with Mobil Corporation. The same treatment was not given to the
Louis Dreyfus Electric economic interest because the adjustments to the
unaudited pro forma combined condensed financial data are immaterial.

5. On December 15, 1994, a wholly-owned subsidiary of PanEnergy merged with
Associated Natural Gas Corporation, now PanEnergy Natural Gas Corporation
(PanEnergy Natural Gas), on a tax-free, stock-for-stock basis (28.4 million
shares were issued which were valued at $830 million). As a result, PanEnergy
Natural Gas became a wholly-owned PanEnergy subsidiary and the merger was
accounted for under the pooling of interests method of accounting for a
business combination.

6. The data assumes that the business combination was completed prior to the
periods presented. Pro forma equivalent and pro forma per share amounts give
effect to the conversion of each outstanding share of PanEnergy Common Stock
into 1.0444 shares of Duke Common Stock. Pro forma dividends declared per
common share reflect the historical dividends declared by PanEnergy and Duke
divided by the pro forma average number of shares of Duke Energy Common Stock
outstanding. The pro forma average number of outstanding shares of Common Stock
of Duke Energy was calculated by multiplying the average number of outstanding
shares during the year of PanEnergy Common Stock by the Exchange Ratio and this
figure was then added to the average number of outstanding shares during the
year of Duke Common Stock.

20
<PAGE>

THE DUKE MEETING

GENERAL

This Joint Proxy Statement-Prospectus is first being mailed to holders of
Duke Common Stock on or about March 17, 1997 and is accompanied by the Notice
of Annual Meeting and a form of proxy that is solicited by the Duke Board for
use at the Duke Meeting to be held on April 24, 1997, at 11:00 a.m., local
time, in the O.J. Miller Auditorium in the Electric Center, 526 South Church
Street, Charlotte, North Carolina, and at any adjournments or postponements
thereof.

MATTERS TO BE CONSIDERED

At the Duke Meeting, holders of Duke Common Stock will be asked to consider
and vote upon proposals to (i) approve the Duke Shareholder Matters, (ii)
elect four directors who will constitute Class III of the Duke Board, (iii)
ratify the appointment of Duke's independent auditors and (iv) transact such
other business as may come before the Duke Meeting.

Duke Shareholder Matters. Approval by the holders of Duke Common Stock of
the Stock Issuance is required by the NYSE because the number of shares of
Duke Common Stock to be issued in the Merger is expected to exceed 20% of the
shares of Duke Common Stock outstanding immediately prior to the Stock
Issuance.

The Articles Amendment increasing the number of authorized shares of Duke
Common Stock from 300,000,000 to 500,000,000 will enable Duke to have a
sufficient number of shares for the Stock Issuance. If the Merger is
consummated, Duke estimates that up to 166,000,000 shares of Duke Common Stock
would be required for issuance in connection with the Merger (including the
shares of Duke Common Stock issuable upon exercise of PanEnergy stock options
outstanding at the Effective Time and the shares of Duke Common Stock issuable
upon any conversions of PanEnergy Convertible Notes outstanding after the
Effective Time). The increase in the number of authorized shares of Duke
Common Stock that is part of the Duke Shareholder Matters will not be effected
unless the Merger is consummated.

While Duke has no present intention of issuing any of the shares sought to
be authorized that are not required to be issued in connection with the
Merger, Duke believes that the availability of additional authorized shares
would provide it with the ability to respond to future business needs and
opportunities. The additional authorized shares would be available for
issuance by Duke from time to time after the Effective Time without further
action or authorization by shareholders (except as required by law or by a
national securities exchange) in connection with possible investment
opportunities, acquisitions of assets and other companies or for other
corporate purposes as determined by the Duke Board. Such other corporate
purposes might include raising additional capital funds through offerings of
shares of Duke Common Stock or of equity or debt securities convertible into
or exchangeable for Duke Common Stock, and the issuance of shares of Duke
Common Stock in connection with the Duke DRSPP (or any successor plan) and the
employee benefit plans and executive compensation plans of Duke and its
subsidiaries. If such additional authorized shares are issued to other than
existing holders of Duke Common Stock, the percentage interest of such holders
in Duke would be reduced. Although the existence or issuance of authorized but
unissued shares of Duke capital stock could, under certain circumstances, have
an anti-takeover effect, Duke has no present intention to issue such shares
for anti-takeover purposes. See also "DESCRIPTION OF DUKE CAPITAL STOCK--
Change of Control."

The Articles Amendment changing the name of Duke to Duke Energy Corporation
at the Effective Time will provide Duke with a corporate name that more
accurately reflects the combined businesses of Duke and PanEnergy.

The holders of Duke Common Stock may also be asked to vote upon a proposal
to adjourn or postpone the Duke Meeting, which adjournment or postponement
could be used for the purpose, among other things, of allowing additional time
for the soliciting of additional votes to approve the Duke Shareholder
Matters. The Duke

21
<PAGE>

Shareholder Matters will not be effected unless the Merger is consummated.
Approval of the Duke Shareholder Matters by the holders of Duke Common Stock
is a condition to the consummation of the Merger.

Additional Matters. At the Duke Meeting, holders of Duke Common Stock will
also be asked to vote upon proposals for the election of the directors who
will constitute Class III of the Duke Board, ratification of the appointment
of Duke's independent auditors and such other business as may come before the
Duke Meeting.

PROXIES; REVOCATION OF PROXIES

The accompanying form of proxy may be used by a holder of Duke Common Stock
whether or not such holder attends the Duke Meeting in person. The proxy may
be revoked by such holder at any time prior to its use at the Duke Meeting.
There is no specific procedure or requirement under the Duke Articles, the
Duke By-Laws or North Carolina law with respect to how proxies may be revoked.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before such proxies are exercised, will be voted
in the manner specified therein. If no directions are given, the proxies will
be voted FOR the Duke Shareholder Matters, FOR the proposed slate of directors
and FOR the ratification of the appointment of independent auditors and at the
discretion of the persons named in such proxies on any other matter that may
come before the Duke Meeting.

The entire cost of soliciting the proxies from holders of Duke Common Stock
will be borne by Duke; provided, however, that Duke and PanEnergy have each
agreed to pay one-half of the printing, mailing and filing costs of this Joint
Proxy Statement-Prospectus and related materials. In addition to the
solicitation of the proxies by mail, Duke will request banks, brokers and
other record holders to send proxies and proxy material to the beneficial
owners of Duke Common Stock and secure their voting instructions. Duke will
reimburse such record holders for their reasonable expenses in so doing. Duke
has also made arrangements with Georgeson & Company, Inc. to assist it in
soliciting proxies and has agreed to pay $20,000 plus expenses for such
services. If necessary, Duke may also use several of its officers and regular
employees, who will not be specially compensated, to solicit proxies from
holders of Duke Common Stock, either personally or by telephone, telegram,
facsimile, special delivery letter or by other means.

RECORD DATE; QUORUM; VOTING RIGHTS

The Duke Board has fixed February 28, 1997 as the record date (the "Duke
Record Date") for determination of holders of Duke Common Stock entitled to
notice of and to vote at the Duke Meeting. Accordingly, only holders of record
at the close of business on that date of Duke Common Stock will be entitled to
notice of and to vote at such Meeting. The number of outstanding shares of
Duke Common Stock entitled to vote at the Duke Meeting is 201,589,596. In
order to establish a quorum for the Duke Meeting, a majority of the votes
entitled to be cast must be either present in person or represented by valid
proxy. Abstentions and broker non-votes will be counted for purposes of
determining whether a quorum exists at the Duke Meeting.

Each share of Duke Common Stock entitled to vote at the Duke Meeting
entitles its holder to one vote. Approval by a majority of the votes cast by
holders of Duke Common Stock is required to approve the Duke Shareholder
Matters, provided that the total vote cast thereon represents a majority of
the shares entitled to vote thereon. Directors will be elected by a plurality
of the votes cast by the holders of Duke Common Stock entitled to vote at the
Duke Meeting. "Plurality" means that the individuals who receive the largest
number of votes cast are elected as directors up to the maximum number of
directors to be chosen at the meeting. Any shares not voted, whether by
abstention or broker non-vote, will not be counted as votes cast for purposes
of determining whether the Duke Shareholder Matters have received sufficient
votes for approval, nor will any abstentions or broker non-votes be counted in
the election of directors of Duke. No approval by the holders of Duke
Preferred Stock or Duke Preferred Stock A is required to approve the Duke
Shareholder Matters, and such holders are not entitled to vote on the Duke
Shareholder Matters.

On the Duke Record Date, 237,318 shares of Duke Common Stock, or less than
1% of the shares of Duke Common Stock outstanding and entitled to vote at the
Duke Meeting, were beneficially owned by directors and executive officers of
Duke (not including 10,706,853 shares of Duke Common Stock beneficially owned
by The

22
<PAGE>

Duke Endowment or the Doris Duke Trust which were deemed to be beneficially
owned by Russell M. Robinson, a director of Duke, in his capacities as a
trustee of The Duke Endowment and a trustee of the Doris Duke Trust). It is
currently expected that each such director and executive officer of Duke will
vote the shares of Duke Common Stock beneficially owned by him (with the
exception of the shares beneficially owned by The Duke Endowment or the Doris
Duke Trust which Mr. Robinson is deemed to beneficially own but which will be
voted by the boards of trustees of such trusts) for approval of the Duke
Shareholder Matters. On the Duke Record Date, no person or entity beneficially
owned more than 5% of the Duke Common Stock and no directors or executive
officers of PanEnergy beneficially owned any shares of Duke Common Stock.

Holders of Duke Common Stock do not have dissenters' rights under the NCBCA
with respect to the Duke Shareholder Matters.

RECOMMENDATIONS OF THE DUKE BOARD

The Duke Board has approved the Merger Agreement and the transactions
contemplated thereby, including the Duke Shareholder Matters, by the unanimous
vote of all directors present. The Duke Board believes that approval of the
Duke Shareholder Matters is in the best interests of Duke and the holders of
Duke Common Stock and recommends that such holders vote FOR the Duke
Shareholder Matters. See "THE MERGER--Reasons for the Merger."

THE DUKE BOARD RECOMMENDS THAT THE HOLDERS OF DUKE COMMON STOCK VOTE FOR THE
DUKE SHAREHOLDER MATTERS, FOR THE PROPOSED SLATE OF DUKE DIRECTORS AND FOR THE
RATIFICATION OF DUKE'S INDEPENDENT AUDITORS.

23
<PAGE>

THE PANENERGY MEETING

GENERAL

This Joint Proxy Statement-Prospectus is first being mailed to holders of
PanEnergy Common Stock on or about March 17, 1997, and is accompanied by the
Notice of Annual Meeting and a form of proxy that is solicited by the
PanEnergy Board for use at the Annual Meeting of Stockholders (the "PanEnergy
Meeting") to be held on April 24, 1997, at 10:00 a.m., local time, at the J.
W. Marriott Hotel, 5150 Westheimer, Houston, Texas and at any adjournments or
postponements thereof.

MATTERS TO BE CONSIDERED

At the PanEnergy Meeting, holders of PanEnergy Common Stock will be asked to
consider and vote upon proposals to (i) adopt the Merger Agreement, (ii) elect
four directors to the PanEnergy Board and (iii) transact such other business
as may properly come before the PanEnergy Meeting.

PROXIES; REVOCATION OF PROXIES

The accompanying form of proxy may be used by a holder of PanEnergy Common
Stock whether or not such holder attends the PanEnergy Meeting in person. The
proxy may be revoked by such holder at any time prior to its use at the
PanEnergy Meeting. There is no specific procedure or requirement under the
PanEnergy Certificate of Incorporation, the PanEnergy By-Laws or Delaware law
with respect to how proxies may be revoked. All shares represented by valid
proxies received pursuant to this solicitation, and not revoked before such
proxies are exercised, will be voted in the manner specified therein. If no
directions are given, the proxies will be voted FOR the adoption of the Merger
Agreement, FOR the proposed slate of directors and at the discretion of the
persons named in such proxies on any other matter that may properly come
before the PanEnergy Meeting.

The entire cost of soliciting the proxies from holders of PanEnergy Common
Stock will be borne by PanEnergy; provided, however, that PanEnergy and Duke
have each agreed to pay one-half of the printing, mailing and filing costs of
this Joint Proxy Statement-Prospectus and related materials. In addition to
the solicitation of the proxies by mail, PanEnergy will request banks, brokers
and other record holders to send proxies and proxy material to the beneficial
owners of PanEnergy Common Stock and secure their voting instructions.
PanEnergy will reimburse such record holders for their reasonable expenses in
so doing. PanEnergy has also made arrangements with Corporate Investor
Communications, Inc. to assist it in soliciting proxies and has agreed to pay
$11,000 plus expenses for such services. If necessary, PanEnergy may also use
several of its officers and regular employees, who will not be specially
compensated, to solicit proxies from holders of PanEnergy Common Stock, either
personally or by telephone, telegram, facsimile, special delivery letter or by
other means.

RECORD DATE; QUORUM; VOTING RIGHTS

Pursuant to the PanEnergy By-Laws, the PanEnergy Board has fixed February
28, 1997 as the record date (the "PanEnergy Record Date") for determination of
holders of PanEnergy Common Stock entitled to notice of and to vote at the
PanEnergy Meeting. Accordingly, only holders of record at the close of
business on that date of PanEnergy Common Stock will be entitled to notice of
and to vote at such Meeting. The number of outstanding shares of PanEnergy
Common Stock entitled to vote at the PanEnergy Meeting is 151,398,234. In
order to establish a quorum for the PanEnergy Meeting, a majority of the votes
entitled to be cast must be represented in person or by a valid proxy.
Abstentions from voting and broker non-votes will be counted for purposes of
determining whether a quorum exists at the PanEnergy Meeting.

Each share of PanEnergy Common Stock entitled to vote at the PanEnergy
Meeting entitles its holder to one vote. Votes cast by proxy or in person at
the PanEnergy Meeting will be tabulated by the independent election inspectors
appointed for the PanEnergy Meeting. The proposal to adopt the Merger
Agreement will

24
<PAGE>

require for approval the affirmative vote of a majority of the outstanding
shares of PanEnergy Common Stock entitled to vote at the PanEnergy Meeting.
Directors will be elected by a plurality of the votes of the shares present in
person or by proxy at the PanEnergy Meeting and entitled to vote. Any other
matters will be determined by the affirmative vote of the majority of the
shares present in person or represented by proxy at the meeting and entitled
to vote. If no voting direction is indicated on the proxy card, the shares
will be considered votes FOR adoption of the Merger Agreement and FOR the
election of the nominees for director. Proxy cards that are not signed or that
are not returned are treated as not voted for any purpose. With respect to the
proposal to adopt the Merger Agreement, abstentions and broker non-votes will
have the same effect as voting against the proposal. PanEnergy knows of no
proposal to be considered at the PanEnergy Meeting other than those set forth
in the Notice of Annual Meeting.

On the PanEnergy Record Date, 809,207 shares of PanEnergy Common Stock, or
less than 1% of the shares of PanEnergy Common Stock outstanding and entitled
to vote at the PanEnergy Meeting, were beneficially owned by directors and
executive officers of PanEnergy. It is currently expected that each such
director and executive officer of PanEnergy will vote the shares of PanEnergy
Common Stock owned beneficially by him or her for adoption of the Merger
Agreement. On the PanEnergy Record Date, 7,700,000 shares, constituting
approximately 5.09% of the issued and outstanding shares of PanEnergy Common
Stock on that date, were owned by Sonatrach Petroleum Investment Corp., B.V.,
and 9,465,386 shares, constituting approximately 6.30% of the issued and
outstanding shares of PanEnergy Common Stock on that date, were owned by the
Employees' Savings Plan of PanEnergy Corp and Participating Affiliates (the
"PanEnergy Savings Plan"). Each participant in the PanEnergy Savings Plan has
voting rights with respect to the shares of PanEnergy Common Stock credited to
his or her account under such plan. No directors or executive officers of Duke
beneficially owned any shares of PanEnergy Common Stock on the PanEnergy
Record Date.

Holders of PanEnergy Common Stock do not have dissenters' rights under the
DGCL with respect to the proposal to adopt the Merger Agreement.

RECOMMENDATIONS OF THE PANENERGY BOARD

The PanEnergy Board has approved the Merger Agreement and the transactions
contemplated thereby by the unanimous vote of those present. The PanEnergy
Board believes that adoption of the Merger Agreement is in the best interests
of PanEnergy and the holders of PanEnergy Common Stock and recommends that
such holders vote FOR the adoption thereof. See "THE MERGER--Reasons for the
Merger."

THE PANENERGY BOARD RECOMMENDS THAT THE HOLDERS OF PANENERGY COMMON STOCK
VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND FOR THE PROPOSED SLATE OF
PANENERGY DIRECTORS.

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INFORMATION ABOUT DUKE

Duke is primarily engaged in the generation, transmission, distribution and
sale of electric energy in the central portion of North Carolina and the
western portion of South Carolina, comprising the area in both states known as
the Piedmont Carolinas. Its service area, approximately two-thirds of which
lies in North Carolina, covers about 20,000 square miles with an estimated
population of 5,100,000 and includes a number of cities, of which the largest
are Charlotte, Greensboro, Winston-Salem and Durham in North Carolina and
Greenville and Spartanburg in South Carolina. Duke supplies electric service
directly to approximately 1,800,000 residential, commercial and industrial
customers in more than 200 cities, towns and unincorporated communities.
Electricity is sold at wholesale to incorporated municipalities and to several
public and private utilities. In addition, sales are made through contractual
arrangements to wholesale municipal or cooperative customers of Duke who have
purchased portions of the Catawba Nuclear Station. Duke's wholly-owned
subsidiary, Nantahala Power and Light Company, supplies electric service
directly to approximately 53,000 mostly residential customers in five counties
in western North Carolina. Duke is also engaged in diversified operations,
most of which are organized in separate subsidiaries, through business units
that are part of Duke's Associated Enterprises Group.

For more information about Duke, reference is made to Duke's most recent
Annual Report on Form 10-K, which is incorporated herein by reference. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE." Duke has filed a Current Report on Form 8-K dated February 10,
1997 which contains its audited consolidated financial statements together
with the notes to the financial statements and Management's Discussion and
Analysis of Results of Operations and Financial Condition for the year ended
December 31, 1996. Such Current Report is incorporated herein by reference.

INFORMATION ABOUT PANENERGY

PanEnergy operates approximately 37,500 miles of natural gas pipeline with
deliveries that account for 12% of the natural gas consumed in the United
States. In addition, PanEnergy is the nation's fourth largest natural gas
liquids ("NGL") producer, the third largest marketer of natural gas in Canada
and the United States and a leading marketer of electricity, liquefied
petroleum gases and related energy services.

PanEnergy's Natural Gas Transmission Group operates one of the nation's
largest networks of interstate natural gas pipelines through subsidiaries
Texas Eastern Transmission Corporation, Algonquin Gas Transmission Company,
Panhandle Eastern Pipe Line Company and Trunkline Gas Company. Principal
markets include the Mid-Atlantic, New England and Midwest states. Canadian
reserves are accessed through third-party connections with Northern Border
Pipeline Company's system, in which PanEnergy owns a 6% interest.

PanEnergy's Energy Services Group operates in three primary areas. Field
Services, the nation's fourth largest NGL producer, conducts supply-area
natural gas gathering, processing, storage and intrastate pipeline
transportation and also markets NGLs and helium. Gas and Power Services
provides energy marketing services, including gas and power marketing,
comprehensive energy management services and financial products. This group is
North America's third largest natural gas marketer through PanEnergy Marketing
Company in which affiliates of PanEnergy hold a 60% interest and affiliates of
Mobil Corporation own a 40% interest. The Crude Oil unit provides supply-area
crude oil and NGL pipeline and truck transportation, plus crude oil marketing
services.

Other PanEnergy interests include wholly-owned domestic and international
energy-development companies. PanEnergy also owns a major liquefied natural
gas ("LNG") import terminal and two LNG tankers. In addition, PanEnergy holds
interests in the Midland Cogeneration Venture Limited Partnership ("MCV");
TEPPCO Partners, L.P., one of the largest products pipelines in the United
States; Altra Energy Technologies, L.L.C., a world leader in energy
information management and software, and National Methanol Company, a
chemical-grade methanol plant and MTBE (methyl tertiary butyl ether) complex,
which is located in Saudi Arabia.

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<PAGE>

For more information about PanEnergy, reference is made to PanEnergy's most
recent Annual Report on Form 10-K, which is incorporated herein by reference.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE." PanEnergy has filed a Current Report on Form 8-K dated February
10, 1997 which contains its audited consolidated financial statements together
with the notes to the financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1996. Such Current Report is incorporated herein by reference.

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THE MERGER
(PROPOSAL 1)

GENERAL

The Duke Board, by the unanimous vote of all directors present, four
directors being absent, approved the Merger Agreement and the transactions
contemplated thereby, including the Merger and the Duke Shareholder Matters.
The PanEnergy Board, by the unanimous vote of all directors present, one
director being absent, approved the Merger Agreement and the transactions
contemplated thereby, including the Merger. The Duke Board believes that the
terms of the Merger are fair and in the best interests of Duke and the holders
of Duke Common Stock and the PanEnergy Board believes that the terms of the
Merger are fair and in the best interests of PanEnergy and the holders of
PanEnergy Common Stock. The Duke Board recommends that the holders of Duke
Common Stock vote to approve the Duke Shareholder Matters and the PanEnergy
Board recommends that the holders of PanEnergy Common Stock vote to adopt the
Merger Agreement.

This section of the Joint Proxy Statement-Prospectus describes certain
aspects of the Merger, as proposed, including certain provisions of the Merger
Agreement. The following description of the Merger does not purport to be
complete and is qualified in its entirety by reference to the Merger
Agreement, which is attached as Exhibit A to this Joint Proxy Statement-
Prospectus and is incorporated herein by reference. All holders of Duke Common
Stock and all holders of PanEnergy Common Stock are urged to read the Merger
Agreement carefully in its entirety.

BACKGROUND OF THE MERGER

During its annual strategic planning process in 1995, Duke prepared an
analysis of the energy industry, including the natural gas industry. This
analysis reflected the emergence of a national market for energy products and
services in which demands for energy in the forms of electricity and gas are
increasingly being met by vendors who have the ability to supply both, and
concluded that a significant competitive advantage would result from the
ability to provide total energy solutions to customers. The analysis also
suggested that engaging in natural gas operations could give Duke a
competitive advantage in the total energy market. After extensive research,
Duke's management determined that midstream natural gas operations (gathering
and processing, pipeline, storage and marketing) best complemented Duke's
existing electric capabilities. Such operations would provide assets,
technical expertise and marketing skills to complement Duke's generation
expertise and its evolving competency in energy services. Duke thus concluded
that midstream natural gas operations would help it realize its goal of being
the premier provider of energy products and services in North America.

Beginning in April 1995, Duke studied publicly available information on
numerous natural gas companies to determine if these companies had operations
that would complement Duke's operations and began focusing on mergers and
acquisitions as a key element in pursuing Duke's strategic goals. In May 1996,
Duke's management identified PanEnergy as a company whose midstream natural
gas operations and strategic goals appeared to be very complementary to those
of Duke, and who did not have operations (such as exploration and production
or distribution) that Duke considered incompatible with its overall strategic
plan. See "Reasons for the Merger."

During the 1995-96 time period, PanEnergy had also recognized that the gas
and electricity industries were converging and analyzed extensive industry
data and engaged in discussions with several electric utilities to determine
whether there was a strategic fit between such companies and PanEnergy.

On July 22, 1996, at the time of a board meeting of Associated Electric and
Gas Insurance Services Ltd. in Toronto, William H. Grigg, Chairman and Chief
Executive Officer of Duke, and PanEnergy's Vice Chairman, George Mazanec,
generally discussed the future of the electricity and gas industries and the
possibility that Duke and PanEnergy could work together in exploring areas of
mutual interest.

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<PAGE>

At a regularly scheduled meeting of the Duke Board held on July 28, 1996, a
presentation was made by a representative of Barr Devlin on the nature of,
reasons for and implications of the convergence of the electric and natural
gas industries. Management also made presentations which provided a strategic
overview of PanEnergy as an example of the kinds of capabilities in the
midstream natural gas business that might be acquired by Duke and identified
other possible opportunities. Thereafter, the Duke Board had an in-depth
discussion concerning mergers and acquisitions and expressed interest in the
potential benefits of a business combination with a company with midstream
natural gas operations.

Because a combination with PanEnergy might involve changes in the power and
gas marketing business of Duke/Louis Dreyfus, Mr. Grigg advised William Louis-
Dreyfus, Chairman of Louis Dreyfus Corporation, in a telephone conference on
July 31, 1996, of the potential for discussions between Duke and PanEnergy.

On August 19, 1996, senior representatives of PanEnergy, including Paul M.
Anderson, its President and Chief Executive Officer, and Mr. Grigg and Richard
B. Priory, President and Chief Operating Officer of Duke, and other senior
representatives of Duke met in Memphis, Tennessee and discussed the future of
the electric utility and gas industries. At this meeting, the possibility of a
business combination of the companies was also discussed.

Duke and PanEnergy entered into a confidentiality agreement on August 30,
1996. Pursuant to such agreement, the two companies began exchanging
confidential information to determine the desirability of a combination.

On September 5, 1996 and again on September 12, 1996, representatives of
Duke and PanEnergy met to exchange information regarding the operations,
strategies and visions for the future of their respective companies and to
discuss the benefits of a potential business combination. A meeting was
subsequently held on September 19, 1996 between Mr. Grigg and Mr. Anderson to
discuss organizational issues relating to a possible combination of Duke and
PanEnergy.

PanEnergy retained the law firm of LeBoeuf, Lamb, Greene & MacRae, L.L.P. on
September 11, 1996 to act as special counsel in connection with a possible
strategic combination with Duke.

At a regularly scheduled meeting on September 24, 1996, Mr. Grigg reported
on the status of the discussions with PanEnergy to the Finance Committee of
the Duke Board, briefly apprised the Duke Board of such discussions and was
encouraged to proceed.

Duke engaged Barr Devlin on September 26, 1996, on a retainer basis, to act
as a consultant to Duke in connection with Duke's strategic planning process.
Barr Devlin was selected because of its knowledge of the gas and electric
industries.

On September 27, 1996, representatives of Duke and PanEnergy met in
Charlotte to review potential opportunities and synergies resulting from a
strategic combination. At the end of the meeting, it was decided that the
parties would form working teams, investigate the hiring of additional outside
advisors and exchange internal financial projections.

Dennis R. Hendrix, Chairman of the PanEnergy Board, met on September 30,
1996 in Charlotte with Mr. Grigg to discuss various aspects of a potential
combination of the companies.

During the period from October 7 through October 11, 1996, representatives
from Duke and PanEnergy met in Houston to discuss valuation and business
operations of both companies, with a representative of Barr Devlin
participating at the meetings from October 7 through October 9. The PanEnergy
representatives presented a detailed overview of key business units and their
strategies and financial projections. On October 11, 1996, there was an in-
depth discussion among certain of such representatives with respect to the
financial and operating characteristics of, and concerns relating to, the
pipeline, gathering and processing, and marketing businesses of PanEnergy.
Following these discussions, a financial and strategic analysis was prepared
by the Duke representatives and discussions were held regarding the financial
and strategic fit of the two companies. These discussions continued during the
remainder of October and November 1996.

On October 15, 1996, representatives of Barr Devlin met with senior
management of Duke/Louis Dreyfus to discuss the rationale for a combination of
Duke and PanEnergy. Later that day, Mr. Grigg met in New York

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<PAGE>

with Mr. Louis-Dreyfus and advised him of the status of the discussions. Mr.
Louis-Dreyfus encouraged Mr. Grigg to continue consideration of a possible
combination with PanEnergy.

On October 16, 1996, representatives from Morgan Stanley met with Mr. Grigg
in New York to discuss generally the convergence of the electric and natural
gas industries. At that meeting, Mr. Grigg mentioned, without identifying the
company involved, that Duke was considering an acquisition and asked about
Morgan Stanley's availability as a possible financial advisor.

PanEnergy's senior management team, led by Mr. Anderson, met in Charlotte on
October 17 and 18, 1996 with Duke's senior management team. The management
teams evaluated strategic and organizational compatibility. At this meeting,
an overview of Duke's business units and regulatory status was provided to
members of the PanEnergy senior management team.

On October 18, 1996, PanEnergy retained Merrill Lynch and Lehman Brothers to
act as its financial advisors. Merrill Lynch and Lehman Brothers were selected
because of their familiarity with PanEnergy and their experience and expertise
in the electric and gas industries.

The PanEnergy Board met at a regularly scheduled meeting held on October 23,
1996 at which presentations by PanEnergy management were made concerning
strategic transactions, including a potential business combination of
PanEnergy and Duke. The PanEnergy Board authorized continued discussions with
Duke and a due diligence investigation.

On October 24, 1996, Mr. Priory and Mr. Anderson met in Houston to discuss
governance issues involved in combining the two companies. The meeting also
included discussions of management succession after the Merger, executive
compensation issues and analysis of and strategy for utilizing the management
resources in both companies. Mr. Priory also met with members of the senior
management of PanEnergy to discuss certain aspects of PanEnergy's operations.

The Duke Board met at a regularly scheduled meeting held on October 29,
1996, at which presentations by Duke's management were made concerning a
possible business combination of Duke and PanEnergy. At the conclusion of the
meeting, Duke's management was authorized to continue discussions with
PanEnergy and to engage in a due diligence investigation. Later that day,
Duke's management advised Barr Devlin and Morgan Stanley that they had been
selected as financial advisors to Duke in connection with a possible merger
with PanEnergy. Barr Devlin and Morgan Stanley were selected because of their
familiarity with Duke and their experience and expertise in the electric and
gas industries.

On October 30, 1996, Duke retained Dewey Ballantine to act as special
counsel in connection with the proposed merger with PanEnergy and on November
1, 1996, PanEnergy retained Wachtell, Lipton, Rosen & Katz to act as special
counsel in connection with a possible merger with Duke.

Representatives of PanEnergy met with representatives of Mobil Corporation
on November 7, 1996 to discuss the implications of a PanEnergy business
combination with Duke for PanEnergy Marketing Company. Telephone discussions
between PanEnergy and Mobil Corporation representatives to discuss the terms
and conditions of a possible combination of the gas and power marketing
businesses of Duke/Louis Dreyfus and PanEnergy Marketing Company were held
frequently through November 23, 1996.

On November 8, 1996, representatives of PanEnergy and its advisors met in
New York with representatives of Duke and its advisors. The parties commenced
negotiations on the terms of the Merger Agreement and other transaction
documents and discussed the details of the proposed business combination.
Beginning on November 9, 1996, representatives of Duke and representatives of
PanEnergy and their respective advisors conducted due diligence investigations
with respect to one another.

The Finance Committee of the Duke Board met at a special meeting held on
November 11, 1996 in Columbia, South Carolina to consider valuation, dividend
policy and other issues relating to the proposed combination. Following the
meeting, Duke management was urged to develop and provide additional
information concerning PanEnergy.

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<PAGE>

On November 12, 1996, senior management representatives of Duke/Louis
Dreyfus met in Houston with senior management representatives of Duke and
PanEnergy to discuss the characteristics of the marketing businesses of
Duke/Louis Dreyfus and PanEnergy Marketing Company.

On the evening of November 12, 1996, the Duke senior management team was
briefed by Duke's financial advisors on matters pertaining to structure,
valuation analysis, financial impact, creditworthiness and the possibility of
competing bids in a combination with PanEnergy. On November 13, 1996, the
preliminary conclusions of the financial advisors were included in a series of
presentations made to the Duke Board during a special telephone meeting. These
presentations included discussion of a proposed dividend policy and its
implications for Duke.

On November 14, 1996, representatives of Duke met with representatives of
Louis Dreyfus Corporation in Charlotte to discuss the terms and conditions of
a combination of the marketing businesses of Duke/Louis Dreyfus and PanEnergy
Marketing Company.

The PanEnergy Board held a special meeting on November 17, 1996 during which
management and its advisors further discussed the strategic rationale for the
Merger, presented an overview of Duke's business and operations, gave a
preliminary financial review, and reviewed the status of the due diligence
process. As a part of this process, the PanEnergy Board received an extensive
briefing on Duke's nuclear operations and heard preliminary presentations from
PanEnergy's financial advisors. Mr. Grigg, Mr. Priory and Steve C. Griffith,
Jr., Vice Chairman and General Counsel of Duke, then joined the PanEnergy
Board in executive session to present Duke's reasons for the proposed
combination and its belief that the transaction would add value for holders of
Common Stock of both companies.

On November 21, 1996, representatives of Duke met again with representatives
of Louis Dreyfus Corporation in Charlotte for further discussions regarding
the terms and conditions of a combination of the marketing businesses of
Duke/Louis Dreyfus and PanEnergy Marketing Company. On the same day, Duke's
financial advisors met with PanEnergy's financial advisors in New York to
discuss pricing issues and negotiations with respect to provisions in the
Merger Agreement continued in New York and via conference calls to Charlotte.

At a special meeting on November 22, 1996, the Duke Board (with one director
not participating) heard presentations from Duke's management and financial
advisors with respect to the strategic benefits of the Merger and related
financial considerations. The Board was advised of the greater rates of growth
of earnings possible through the proposed transaction and of the significant
value that would be provided to holders of Duke Common Stock. Duke's
management and financial advisors also pointed out that it was anticipated
that there would be earnings dilution within the range of 4% to 6% during the
first calendar year after the Effective Time and lesser dilution during the
second calendar year after the Effective Time, followed by accretion
thereafter. They also discussed the potential for a negative effect on Duke's
credit ratings following the Merger, the additional cash required to maintain
the dividend policy of Duke after the Merger and the status of the
negotiations concerning Duke/Louis Dreyfus. Messrs. Hendrix and Anderson then
addressed the Duke Board in executive session. The Duke Board also heard
presentations with respect to the due diligence investigation undertaken by
Duke's management and its advisors with particular focus on environmental
matters, procedures and controls relating to trading activities by PanEnergy
and potential liabilities associated with natural gas pipeline operations. The
Duke Board was also advised by counsel concerning the terms of the Merger
Agreement and certain regulatory aspects of the Merger.

Thereafter, the Duke Board deliberated at length about the advice it had
received and the possible impact of the Merger on Duke's shareholders,
customers and employees. Since negotiations between Duke and PanEnergy had not
been completed, it was determined that the meeting would be reconvened by a
telephone conference call during the weekend of November 23 should the
proposed transaction be ready for consideration at that time.

On November 22, 1996, the PanEnergy Board (with three directors not
participating) held a special telephone meeting during which it heard
presentations from senior management of PanEnergy on the status of
negotiations and ongoing financial due diligence.

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<PAGE>

On the evening of November 22, 1996, Messrs. Grigg and Anderson agreed to
recommend the Exchange Ratio to their respective Boards. Representatives of
PanEnergy also met in Charlotte that evening with representatives of Duke to
continue discussion of the terms and conditions of a combination of the
marketing businesses of Duke/Louis Dreyfus and PanEnergy Marketing Company.

On November 23, 1996, the Duke Board reconvened by telephone (with four
directors not participating) and reviewed the results of the negotiations the
day before between Mr. Grigg and Mr. Anderson. The Duke Board then received
Barr Devlin's oral opinion that, as of such date, the Exchange Ratio was fair
from a financial point of view to the holders of Duke Common Stock and Morgan
Stanley's oral opinion that, as of such date, the Exchange Ratio was fair from
a financial point of view to Duke. After further discussion, the Duke Board
authorized the execution and delivery of the Merger Agreement, took such
action as required to approve the Duke Shareholder Matters and recommended the
approval of the Duke Shareholder Matters by the holders of Duke Common Stock.

Messrs. Grigg and Anderson had telephone conversations during the course of
November 23, 1996 regarding the terms and conditions of the combination of the
marketing businesses of Duke/Louis Dreyfus and PanEnergy Marketing Company and
certain other matters. Later that day, representatives of Duke and
representatives of Louis Dreyfus Corporation generally agreed upon the terms
and conditions of such combination. At the same time, representatives of
PanEnergy and of Mobil Corporation also reached agreement with respect to such
combination and further agreed that the Mobil Corporation affiliates would be
given the opportunity to maintain their ownership percentage in the combined
marketing company at 40%.

On November 24, 1996, the PanEnergy Board met (with one director not
participating). After reviewing the results of PanEnergy's due diligence
investigation of Duke, reviewing the material terms of the Merger Agreement
and other transaction documents, receiving a briefing by management and
advisors of PanEnergy concerning Duke's nuclear operations, considering the
benefits and concerns for the holders of PanEnergy Common Stock that could
result from the Merger, and receiving Merrill Lynch's and Lehman Brothers'
oral opinions that, as of such date, the Exchange Ratio was fair from a
financial point of view to the holders of PanEnergy Common Stock, the
PanEnergy Board authorized the execution and delivery of the Merger Agreement
and recommended its adoption by the holders of PanEnergy Common Stock.

Prior to execution of the Merger Agreement, senior management
representatives of Duke and Louis Dreyfus Corporation executed the D/LD Letter
Agreement pursuant to which the business and operations of Duke/Louis Dreyfus
would be combined with the business and operations of PanEnergy Marketing
Company.

On the evening of November 24, 1996, the Merger Agreement and other
transaction documents were executed and delivered. Before the commencement of
trading on the NYSE on November 25, 1996, Duke and PanEnergy issued a joint
press release announcing the execution of a definitive Merger Agreement and
the proposed Merger.

REASONS FOR THE MERGER--DUKE

The electric utility industry has been undergoing dramatic structural change
for several years. This rapid evolution has been marked by the Energy Policy
Act of 1992 and the issuance by FERC in 1996 of Orders 888 and 889, which
further opened the transmission systems of electric utilities to use by third
parties. To better compete in this changing and more competitive environment,
Duke has increasingly emphasized the development of energy marketing skills as
a significant means by which its expertise in electric generation and energy
services can be delivered to customers.

Duke believes that the Merger will make the combined company the premier
provider of energy products and services in North America and that the Merger
offers significant opportunities for revenue enhancement and strategic
financial benefits to both companies and their shareholders, as well as
benefits to their customers and employees, including:

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<PAGE>

. Convergence of Gas and Electricity. The Merger will enable the combined
company to offer customers a full range of energy products and services.
The natural gas assets, experience and expertise of PanEnergy will
complement the electricity assets, experience and expertise of Duke,
giving the combined company improved capabilities in the delivery of a
complete range of energy products and services and enabling it to build
its marketing strategy on its customers' total energy needs rather than
relying solely on its traditional product offerings. While Duke and
PanEnergy have shared a strategic vision of a total energy marketplace
and each had previously taken significant steps to build its own power
and gas marketing venture, the Merger will afford the combined company
the opportunity to move more quickly into a leadership position.

In addition to the benefits expected to be derived from the Merger, Duke took
into account the short-term earnings dilution after the Merger, the potential
for a negative effect on its credit rating following the Merger, the
additional cash required to maintain its dividend policy after the Merger, and
the difficulties involved in combining the business and operations of
Duke/Louis Dreyfus with the business and operations of PanEnergy Marketing
Company, but concluded that the benefits outweighed these disadvantages.

RECOMMENDATIONS OF THE DUKE BOARD

The Duke Board believes that the Merger is advisable and in the best
interests of Duke and its shareholders, customers and employees and offers
Duke better prospects for the future than would be available if Duke were to
remain a stand-alone entity.

In its deliberations with respect to the Merger, the Duke Board considered
the material financial consequences of the proposed transaction, including
earnings dilution, the potential negative impact on credit ratings of Duke's
debt securities, the additional cash required to maintain Duke's dividend
policy after the Merger and the financial characteristics of the combined
company . The Duke Board also reviewed issues arising out of the due diligence
investigation of PanEnergy, including environmental matters, procedures and
controls

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<PAGE>

relating to trading activities of PanEnergy, and potential liabilities
associated with natural gas pipeline operations. The Duke Board also
considered the following factors: (i) Duke's and PanEnergy's respective
businesses, operations, assets, management, geographic location and prospects;
(ii) current industry, economic, market and regulatory conditions and trends
which encourage consolidation to create new business strategies and earnings
growth; (iii) opportunities for enhanced relationships with customers arising
out of the ability of the combined company to meet customers' total energy
needs; (iv) the competitive marketing advantages afforded by the ability to
offer both electric and gas services as a result of the Merger; (v) the
greater diversification capability and expanded management resources of the
combined company; (vi) Duke's and PanEnergy's strategic fit and compatible
visions of the future of the energy business; (vii) the terms and conditions
relating to combining the businesses and operations of Duke/Louis Dreyfus and
PanEnergy Marketing Company; (viii) the fact that the Merger will be treated
as a pooling of interests for accounting purposes; (ix) the opinion of Duke's
financial advisors that the Exchange Ratio is fair, from a financial point of
view, to Duke and to the holders of Duke Common Stock; and (x) the ability to
successfully consummate the Merger, including, in particular, the ability to
obtain required regulatory approvals on a timely basis. See "THE MERGER--
Background of the Merger" and "Reasons for the Merger--Duke" and "THE MERGER
AGREEMENT--Combination of Marketing Ventures."

The foregoing discussion of the information and factors considered by the
Duke Board is not intended to be exhaustive but includes the material factors
considered by the Duke Board. In reaching its determination to approve the
Merger and recommend approval of the Duke Shareholder Matters, the Duke Board
did not assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors.
Throughout its deliberations, the Duke Board received the advice of special
counsel.

In light of the considerations set forth above in "THE MERGER--Reasons for
the Merger--Duke," the Duke Board believes that the Merger presents an
excellent strategic opportunity for Duke. The Duke Board also believes that,
particularly in light of the strategic fit and compatibility of their visions
of the future of the energy business, PanEnergy is the best company among
likely candidates for a business combination involving Duke.

Approval by the holders of Duke Common Stock of the Stock Issuance is
required by the NYSE because the number of shares of Duke Common Stock to be
issued in the Merger is expected to exceed 20% of the shares of Duke Common
Stock outstanding immediately prior to the Stock Issuance.

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<PAGE>

Although the existence or issuance of authorized but unissued shares of Duke
capital stock could, under certain circumstances, have an anti-takeover
effect, Duke has no present intention to issue such shares for anti-takeover
purposes. See also "DESCRIPTION OF DUKE CAPITAL STOCK--Change of Control."

THE DUKE BOARD, BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, HAS APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER AND THE DUKE SHAREHOLDER MATTERS, AND RECOMMENDS THAT THE HOLDERS OF
DUKE COMMON STOCK VOTE TO APPROVE THE DUKE SHAREHOLDER MATTERS.

In considering the recommendation of the Duke Board with respect to the Duke
Shareholder Matters, holders of Duke Common Stock should be aware that certain
members of Duke's management and the Duke Board have certain interests in the
Merger that are in addition to the interests of holders of Duke Common Stock
generally. The Duke Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby, including the Merger and the Duke Shareholder Matters.
See "Interests of Certain Persons in the Merger" and "Management and
Operations after the Merger."

REASONS FOR THE MERGER--PANENERGY

The natural gas and electric industries have been undergoing a fundamental
transformation toward increased competition over the past several years,
initiated, in the case of the natural gas industry, as a result of the
issuance by FERC in 1991 of Order 636, which further deregulated the natural
gas business and created a more competitive environment in the natural gas
industry. The electric industry has been experiencing a similar transformation
as it moves to a more competitive environment resulting from the adoption of
the Energy Policy Act of 1992, the issuance by FERC of Orders 888 and 889 in
1996 and other initiatives.

PanEnergy believes transformation of the natural gas and electric industries
has initiated a convergence of the two industries. As regulatory barriers
break down, energy consumers are seeing--and demanding--a wider selection of
energy products and services at more competitive prices. In order to prosper
and remain competitive, PanEnergy believes that companies such as PanEnergy
must offer a wide variety of energy services across various energy forms at
competitive prices.

To develop the variety of energy products and services demanded by its
customers and to further its growth goals, PanEnergy determined that it would
benefit from access to electric markets and related assets and industry
knowledge on a much greater scale than it had developed to date. With this in
mind, PanEnergy established a greater presence in the electric industry as a
key corporate objective.

PanEnergy believes that the Merger will make the combined company the
premier provider of energy products and services in North America and that the
Merger offers significant strategic financial benefits to both companies and
their stockholders, as well as benefits to their customers and employees,
including:

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recognized worldwide. PanEnergy is an industry leader in natural gas and
energy products and services with experienced, entrepreneurial management.
Duke and PanEnergy share a vision that customer choice is the driver of the
energy marketplace of the future and that those companies that define
themselves by customers' needs will be best positioned to be industry
leaders and to enhance shareholder value.

. Financial Opportunities. The Merger will result in a stronger financial
base and improved access to credit markets for PanEnergy, an increase in
the value of PanEnergy Common Stock and a likely immediate increase in
dividends payable to former holders of PanEnergy Common Stock after the
Effective Time.

. Greater Diversification. The Merger will further diversify PanEnergy's
operations and reduce its dependence upon any one sector of the energy
industry.

RECOMMENDATIONS OF THE PANENERGY BOARD

The PanEnergy Board believes that the Merger is advisable and in the best
interests of PanEnergy, and that the terms of the Merger are in the best
interests of the holders of PanEnergy Common Stock and offer the holders of
PanEnergy Common Stock better prospects for the future than would be available
if PanEnergy were to remain a stand-alone entity.

In its deliberations with respect to the Merger, the PanEnergy Board
considered the following factors: (i) PanEnergy's and Duke's respective
businesses, operations, assets, management, geographic location and prospects;
(ii) current industry, economic, market and regulatory conditions and trends
which encourage consolidation to create new business strategies and earnings
growth; (iii) opportunities for enhanced relationships with customers arising
out of the ability of the combined company to meet customers' total energy
needs; (iv) PanEnergy's and Duke's strategic fit and compatible corporate
cultures and visions of the future of the energy business; (v) the financial
resources of the combined company; (vi) the due diligence investigation of
Duke's operations, including its nuclear operations; (vii) the likelihood that
the Merger will be treated as a reorganization under section 368(a) of the
Code and that the Merger will be treated as a pooling of interests for
accounting purposes; (viii) the opinion of PanEnergy's financial advisors that
the Exchange Ratio is fair, from a financial point of view, to the holders of
PanEnergy Common Stock; (ix) the ability to successfully consummate the
Merger, including, in particular, the ability to obtain required regulatory
approvals on a timely basis; (x) the terms and conditions of the Merger
Agreement, which provide for substantially reciprocal representations,
warranties and conditions to closing; and (xi) a comparison of the benefits of
the Merger with remaining a stand-alone midstream gas company, entering into
marketing alliances with third parties or acquiring electric utility assets.
The PanEnergy Board also considered the risks inherent in Duke's nuclear
operations and the relatively slower earnings growth of electric utilities.
See "THE MERGER--Background of the Merger" and "Reasons for the Merger--
PanEnergy" and "THE MERGER AGREEMENT--Combination of Marketing Ventures."

The foregoing discussion of the information and factors considered by the
PanEnergy Board is not intended to be exhaustive but includes the material
factors considered by the PanEnergy Board. In reaching its determination to
approve the Merger and recommend the adoption of the Merger Agreement by the
holders of Common Stock of PanEnergy, the PanEnergy Board did not assign any
relative or specific weights to the

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foregoing factors, and individual directors may have given differing weights
to different factors. Throughout its deliberations, the PanEnergy Board
received the advice of special counsel.

In light of the considerations set forth above and in "THE MERGER--Reasons
for the Merger--PanEnergy," the PanEnergy Board believes that the Merger
presents an excellent strategic opportunity for PanEnergy. The PanEnergy Board
also believes that, particularly in light of the compatibility of the
corporate cultures and visions of the future of the energy business, Duke is
the best company among likely candidates for a business combination involving
PanEnergy.

THE PANENERGY BOARD, BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, HAS
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
BELIEVES THAT THE TERMS OF THE MERGER ARE IN THE BEST INTEREST OF THE HOLDERS
OF PANENERGY COMMON STOCK AND RECOMMENDS THAT THE HOLDERS OF PANENERGY COMMON
STOCK VOTE TO ADOPT THE MERGER AGREEMENT.

In considering the recommendation of the PanEnergy Board with respect to the
Merger Agreement, holders of PanEnergy Common Stock should be aware that
certain members of PanEnergy's management and the PanEnergy Board have certain
interests in the Merger that are in addition to the interests of holders of
PanEnergy Common Stock generally. The PanEnergy Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby, including the Merger. See
"Interests of Certain Persons in the Merger" and "Management and Operations
after the Merger."

OPINIONS OF FINANCIAL ADVISORS TO DUKE

Barr Devlin. On November 1, 1996, Duke entered into an engagement letter
with Barr Devlin pursuant to which Barr Devlin was retained to act as Duke's
financial advisor in connection with a potential business combination with
PanEnergy. Barr Devlin has delivered its written opinions to the Duke Board,
dated November 24, 1996 and the date of this Joint Proxy Statement-Prospectus,
to the effect that, on and as of the dates of such opinions, and based upon
assumptions made, matters considered and limits of the review, as set forth in
the opinions, the Exchange Ratio was and is fair, from a financial point of
view, to the holders of Duke Common Stock. A COPY OF THE OPINION OF BARR
DEVLIN DATED THE DATE HEREOF IS ATTACHED TO THIS JOINT PROXY STATEMENT-
PROSPECTUS AS EXHIBIT B AND IS INCORPORATED HEREIN BY REFERENCE. THE NOVEMBER
24, 1996 OPINION IS SUBSTANTIALLY IDENTICAL TO THE OPINION ATTACHED HERETO.
HOLDERS OF DUKE COMMON STOCK ARE URGED TO READ CAREFULLY THE OPINION DATED THE
DATE HEREOF IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND THE
LIMITS OF THE REVIEW UNDERTAKEN BY BARR DEVLIN.

In connection with rendering its opinion dated the date of this Joint Proxy
Statement-Prospectus, Barr Devlin (i) reviewed the Annual Reports, Forms 10-K
and the related financial information for the three-year period ended December
31, 1995, and the Forms 10-Q and the related unaudited financial information
for the quarterly periods ended March 31, 1996, June 30, 1996 and September
30, 1996, for Duke; (ii) reviewed the Annual Reports, Forms 10-K and the
related financial information for the three-year period ended December 31,
1995, and the Forms 10-Q and the related unaudited financial information for
the quarterly periods ended March 31, 1996, June 30, 1996 and September 30,
1996, for PanEnergy and certain of its subsidiaries; (iii) reviewed certain
other filings with the SEC and other regulatory authorities made by Duke,
PanEnergy and certain of PanEnergy's subsidiaries during the last three years,
including proxy statements, FERC Forms 1 and 2, Forms 8-K and registration
statements; (iv) reviewed certain internal information, including financial
forecasts, relating to the business, earnings, capital expenditures, cash
flow, assets and prospects of Duke and PanEnergy furnished to Barr Devlin by
Duke and PanEnergy; (v) conducted discussions with members of senior
management of Duke and PanEnergy concerning their respective businesses,
regulatory environments, prospects, strategic objectives and possible
operating and administrative synergies and other benefits which might be
realized for the benefit of Duke following the Merger; (vi) reviewed the
historical market prices and trading activity for shares of Duke Common Stock
and PanEnergy Common Stock and compared them with those of certain publicly
traded companies deemed by Barr Devlin to be relevant; (vii) compared the
results of operations of Duke and

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<PAGE>

PanEnergy with those of certain companies deemed by Barr Devlin to be
relevant; (viii) compared the proposed financial terms of the Merger with the
financial terms of certain business combinations deemed by Barr Devlin to be
relevant; (ix) analyzed the respective contributions in terms of assets,
earnings, cash flow and shareholders' equity of Duke and PanEnergy to Duke
following the Merger; (x) analyzed the valuation of shares of Duke Common
Stock and PanEnergy Common Stock using various valuation methodologies deemed
by Barr Devlin to be appropriate; (xi) considered the pro forma
capitalization, earnings and cash flow of Duke following the Merger; (xii)
compared the pro forma capitalization ratios, earnings per share, dividends
per share and payout ratio of Duke following the Merger with each of the
corresponding current and projected values for Duke and PanEnergy on a stand-
alone basis; (xiii) reviewed the Merger Agreement; (xiv) reviewed the
Registration Statement, including this Joint Proxy Statement-Prospectus; and
(xv) reviewed such other studies, conducted such other analyses, considered
such other financial, economic and market criteria, performed such other
investigations and took into account such other matters as Barr Devlin deemed
necessary or appropriate for purposes of its opinion.

In preparing its opinions, Barr Devlin relied, without independent
verification, on the accuracy and completeness of all financial and other
information publicly available or otherwise furnished or made available to it
by Duke and PanEnergy, and upon the assurances of management of Duke and
PanEnergy that they were not aware of any facts that would make such
information inaccurate or misleading. With respect to the financial
projections of Duke and PanEnergy (including, without limitation, projected
synergies), Barr Devlin relied upon assurances of management of Duke and
PanEnergy that such projections were reasonably prepared and reflected the
best currently available estimates and judgments of the respective management
of Duke and PanEnergy as to the future financial performance of Duke and
PanEnergy, as the case may be, and as to the projected outcomes of legal,
regulatory and other contingencies. Barr Devlin was not provided with and did
not undertake an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Duke or PanEnergy, nor did Barr
Devlin make any physical inspection of the properties or assets of Duke or
PanEnergy.

In arriving at its opinions, Barr Devlin assumed that the Merger will be
treated for federal income tax purposes as a reorganization of the type
described in section 368(a) of the Code and the regulations thereunder. In
addition, Barr Devlin has assumed that the Merger will qualify as a pooling of
interests for financial accounting purposes. Barr Devlin's opinions are based
upon general financial, stock market and other conditions and circumstances as
they existed and could be evaluated, and the information made available to it,
as of the respective dates of the opinions. Barr Devlin's opinions are
directed to the Duke Board and the fairness of the Exchange Ratio from a
financial point of view, do not address any other aspect of the Merger and do
not constitute a recommendation to any holder of Duke Common Stock as to how
such holder should vote at the Duke Meeting. Although Barr Devlin evaluated
the fairness of the Exchange Ratio from a financial point of view to the
holders of Duke Common Stock, the specific Exchange Ratio was determined by
Duke and PanEnergy through arm's-length negotiations. Duke did not place any
limitations upon Barr Devlin with respect to the procedures followed or
factors considered by Barr Devlin in rendering its opinions.

Barr Devlin has advised Duke that, in its view, the preparation of a
fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of those
methods to the particular circumstances, and, therefore, such an opinion is
not readily susceptible to summary description. Furthermore, in arriving at
its fairness opinions, Barr Devlin did not attribute any particular weight to
any analysis or factor considered by it, nor did Barr Devlin ascribe a
specific range of fair values to Duke; rather, Barr Devlin made its
determination as to the fairness of the Exchange Ratio on the basis of
qualitative judgments as to the significance and relevance of each of the
financial and comparative analyses and factors described below. Accordingly,
notwithstanding the separate factors summarized below, Barr Devlin believes
that its analyses must be considered as a whole and that considering any
portions of these analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the evaluation
process underlying its opinions. In its analyses, Barr Devlin made many
assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond Duke's and
PanEnergy's control. Any estimates in these analyses do not necessarily
indicate actual values or predict

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<PAGE>

future results or values, which may be significantly more or less favorable
than as set forth therein. In addition, analyses relating to the value of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold.

In connection with rendering its opinions dated November 24, 1996 and the
date hereof, and preparing its various written and oral presentations to the
Duke Board, Barr Devlin performed a variety of financial and comparative
analyses and considered a variety of factors of which the material analyses
and factors are summarized below. While this summary describes the material
analyses performed and factors considered, it does not purport to be a
complete description of the analyses performed or factors considered by Barr
Devlin. Barr Devlin derived implied exchange ratios for Duke Common Stock and
PanEnergy Common Stock based upon what these analyses, when considered in
light of the judgment and experience of Barr Devlin, suggested about the
relative values of the respective Common Stocks. Barr Devlin's opinions are
based upon its consideration of the collective results of all such analyses,
together with the other factors referred to in its opinions. Because each
share of Duke Common Stock will remain outstanding, unchanged, as one share of
Duke Common Stock, these implied exchange ratios can be compared to the 1.0444
shares of Duke Common Stock that each share of PanEnergy Common Stock will
ultimately be converted into pursuant to the Merger. In connection with its
opinion dated the date hereof, Barr Devlin performed certain procedures to
update its analyses made for its November 24, 1996 opinion and reviewed with
the managements of Duke and PanEnergy the assumptions upon which such analyses
were based. The results of such analyses were substantially the same as those
for the November 24, 1996 opinion of Barr Devlin.

Stock Trading History. Barr Devlin reviewed the performance of the per share
market prices and trading volumes of Duke Common Stock and PanEnergy Common
Stock and compared such per share market price movements to movements in (i)
the Dow Jones Utility Index, (ii) the Standard and Poor's 500 Composite Index
and (iii) an index of the Pipeline Comparable Companies (as defined below) to
provide perspective on the current and historical stock price performance of
Duke and PanEnergy relative to one another and selected market indices. Barr
Devlin also calculated the ratio of the per share weekly closing market price
of PanEnergy to the per share weekly closing market price of Duke for the
period November 26, 1993 to November 22, 1996. This analysis showed that over
this three-year period PanEnergy Common Stock traded at a price as high as
0.883 times, as low as 0.488 times and at an average of 0.608 times the then-
current per share market price of Duke Common Stock. For the 12-month period
ended November 22, 1996, PanEnergy Common Stock traded at an average of 0.667
times the then-current per share market price of Duke Common Stock. This
analysis was utilized to provide historical background for the manner in which
the public trading market had valued Duke and PanEnergy in absolute terms and
relative to each other.

Discounted Cash Flow Analysis. To determine an implied exchange ratio based
upon a discounted cash flow ("DCF") analysis, Barr Devlin prepared and
reviewed the results of unleveraged DCF analyses for both Duke and PanEnergy,
assuming that Duke and PanEnergy performed in accordance with the operating
and financial projections provided by their respective managements for the
period 1996 through 2001 (the "Projection Period"), as revised by Barr Devlin
to reflect certain adjustments it deemed appropriate. The purpose of the DCF
analysis was to determine the present value of each of Duke and PanEnergy. To
calculate the present value, the projected unleveraged free cash flows for
each year during the Projection Period, together with the estimated value of
the business in the final year of the Projection Period, were discounted to
the present. Barr Devlin estimated terminal values for Duke and PanEnergy by
applying multiples to (i) the projected earnings before interest and taxes
("EBIT") in 2001, (ii) the projected earnings before interest, taxes,
depreciation and amortization ("EBITDA") in 2001, (iii) the projected book
value of common equity as of year-end 2001 and (iv) the projected net income
for 2001. The multiples applied were based on analyses of the corresponding
multiples of certain public companies comparable to Duke and PanEnergy. For
the purposes of these analyses, the terminal multiple ranges used for Duke
were 9.5x - 10.5x with respect to EBIT, 6.5x - 7.0x with respect to EBITDA,
1.50x - 1.80x with respect to book value and 12.5x - 13.5x with respect to net
income; the terminal multiple ranges used for PanEnergy were 11.0x - 12.5x
with respect to EBIT, 7.0x - 9.0x with respect to EBITDA, 1.75x - 2.50x with
respect to book value and 14.0x - 18.0x with respect to net income. The cash
flow

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<PAGE>

streams and terminal values were then discounted to present value using
discount rates that ranged from 7.5% to 8.5% for Duke and 8.75% to 9.75% for
PanEnergy. This analysis produced reference values of $44.25 to $51.86 per
share in the case of Duke and $41.11 to $54.68 per share in the case of
PanEnergy. The implied range of exchange ratios resulting from these reference
values was 0.793 to 1.236, with a midpoint value of 0.997.

Barr Devlin also prepared a DCF analysis for PanEnergy by estimating
terminal values for each of PanEnergy's business segments and applying
multiples to (i) the respective projected EBIT in 2001 and (ii) the respective
projected EBITDA in 2001. The multiples applied were based on analyses of the
corresponding multiples of certain public companies comparable to the
particular industry in which each business segment operates. The terminal
multiples used ranged from 4.0x - 18.0x with respect to EBIT and 3.0x - 12.0x
with respect to EBITDA, while the discount rates ranged from 7.6% to 16.0%.
For PanEnergy, this analysis produced reference values of $44.07 to $62.06 per
share. The implied range of exchange ratios resulting from these reference
values was 0.850 to 1.402, with a midpoint value of 1.104.

Comparable Transaction Analysis. Barr Devlin reviewed certain proposed or
completed transactions involving natural gas pipeline ("Pipeline") and natural
gas gathering, natural gas liquids processing and natural gas marketing
("GPM") companies deemed by Barr Devlin to be comparable to PanEnergy
(collectively, the "Comparable Transactions"). The Comparable Transactions
involved companies possessing general business, operating and financial
characteristics representative of companies in industries in which PanEnergy
operates. The Pipeline Comparable Transactions included El Paso Natural Gas
Company/Tenneco Energy, The Williams Companies, Inc./Kern River Gas
Transmission Company, The Williams Companies, Inc./Transco Energy Company,
Panhandle Eastern Corporation/Texas Eastern Corporation and Transco Energy
Company/Texas Gas Transmission Corporation. The GPM Comparable Transactions
included Tejas Gas Corporation/Transok, Inc., El Paso Natural Gas
Company/Eastex Energy Inc., Atlanta Gas Light Company/Sonat Marketing Company,
LG&E Energy Corp./Hadson Corporation, Panhandle Eastern Corporation/Associated
Natural Gas Corporation, Natural Gas Clearinghouse/Trident NGL Holding, Inc.,
Red Cedar Gathering Company/WestGas Gathering, Inc., Associated Natural Gas
Corporation/Grand Valley Gas Company, NOVA Corporation/Natural Gas
Clearinghouse, Eastex Energy Inc./Heath Petra Resources, Inc., Tenneco
Inc./EnTrade Corporation, LG&E Energy Corp. & British Gas public limited
company/Natural Gas Clearinghouse, DEKALB Energy Company/Natural Gas
Clearinghouse and Apache Corporation & Noble Affiliates, Inc./Natural Gas
Clearinghouse.

Barr Devlin calculated the "implied total consideration" (defined as the sum
of the implied equity consideration plus the liquidation value of preferred
stock, the principal amount of debt, capitalized lease obligations and
minority interests, minus cash and option proceeds, if any) for each of the
Comparable Transactions as a multiple of each company's respective latest 12-
month EBIT and EBITDA, and applied such multiples to the actual and projected
financial results for the relevant PanEnergy business segments. For PanEnergy,
this analysis produced reference values of $34.21 to $49.54 per share.
Comparing such values to the stock price for Duke of $47.875 as of November
22, 1996 resulted in an implied range of exchange ratios of 0.715 to 1.035,
with a midpoint value of 0.875.

Because the reasons for and circumstances surrounding each of the Comparable
Transactions analyzed were diverse and because of the inherent differences
between the operations of Duke, PanEnergy and the companies in the selected
transactions, Barr Devlin believed that a purely quantitative comparable
transaction analysis would not be particularly meaningful in the context of
the Merger. Barr Devlin believed that an appropriate use of a comparable
transaction analysis in this instance would involve qualitative judgments
concerning differences between the characteristics of these transactions and
the Merger which would affect the relative values of Duke and PanEnergy.

Publicly Traded Comparable Company Analysis. Using publicly available
information, Barr Devlin compared selected financial information and ratios
for Duke with the corresponding financial information and ratios for a group
of electric or electric and gas utilities (or their holding companies) deemed
by Barr Devlin to be comparable to Duke (the "Electric Comparable Companies");
Barr Devlin also compared selected financial

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information and ratios for PanEnergy with corresponding financial information
and ratios for a group of Pipeline and GPM companies deemed by Barr Devlin to
be comparable to PanEnergy (the "Pipeline Comparable Companies" and "GPM
Comparable Companies," respectively). The Electric, Pipeline and GPM
Comparable Companies (collectively, the "Comparable Companies") were selected
on the basis of being companies which possessed general business, operating
and financial characteristics representative of companies in industries in
which Duke and PanEnergy operate. The Electric Comparable Companies included
Baltimore Gas and Electric Company, Carolina Power & Light Company, Dominion
Resources, Inc., Edison International, FPL Group, Inc., Northern States Power
Company, The Southern Company, Union Electric Company and Wisconsin Energy
Corporation. The Pipeline Comparable Companies included The Coastal
Corporation, The Columbia Gas System, Inc., Consolidated Natural Gas Company,
El Paso Natural Gas Company, Enron Corp., Sonat Inc., TransCanada PipeLines
Limited and The Williams Companies, Inc. The GPM Comparable Companies included
Aquila Gas Pipeline Corporation, NGC Corporation, Tejas Gas Corporation, TPC
Corporation and Western Gas Resources, Inc.

In evaluating the current market values of Duke Common Stock and PanEnergy
Common Stock, Barr Devlin determined ranges of multiples for selected
financial ratios for the Comparable Companies, including (i) the market value
of outstanding common stock as a multiple of (a) net income available to
common stock for the latest 12-month period ended September 30, 1996 (the "LTM
Period"), (b) projected net income available to common stock for the 12-month
period ended December 31, 1996, (c) after-tax cash flow from operations for
the LTM Period and (d) book value of common equity for the most recently
available fiscal quarter ended September 30, 1996; and (ii) the "aggregate
market value" (defined as the sum of the market value of common stock, plus
the liquidation value of preferred stock, the principal amount of debt,
capitalized lease obligations and minority interests, minus cash and cash
equivalents) as a multiple of (a) EBIT for the LTM Period and (b) EBITDA for
the LTM Period. This analysis produced reference values of $41.42 to $48.12
per share in the case of Duke and $31.14 to $41.47 per share in the case of
PanEnergy. The implied range of exchange ratios resulting from these reference
values was 0.647 to 1.001, with a midpoint value of 0.811.

Barr Devlin also evaluated the projected year-end market values of shares of
Duke Common Stock and PanEnergy Common Stock for the years 1997 through 1999.
These projected year-end market values were based on selected ranges of
multiples for the Comparable Companies and (i) net income available to common
stock, (ii) after-tax cash flow from operations, (iii) book value of common
equity and (iv) dividends on common stock. The implied range of exchange
ratios resulting from these market values was 0.752 to 1.216, with a midpoint
value of 0.984.

Because of the inherent differences between the operations of Duke,
PanEnergy and the Comparable Companies, Barr Devlin believed that a purely
quantitative comparable company analysis would not be particularly meaningful
in the context of the Merger. Barr Devlin believed that an appropriate use of
a comparable company analysis in this instance would involve qualitative
judgments concerning differences between the characteristics of the Comparable
Companies, Duke and PanEnergy. Moreover, Barr Devlin observed that comparable
company analysis does not reflect the potential incremental value to Duke of a
controlling interest in PanEnergy or expected synergies, among other factors
incidental to the Merger.

Contribution Analysis. Barr Devlin calculated the relative contribution of
Duke and PanEnergy to Duke following the Merger with respect to (i) net income
available to common stock, (ii) after-tax cash flow from operations, (iii)
book value of common equity, (iv) EBIT and (v) EBITDA, for each of the years
1996 through 2000. These contribution indices yielded implied exchange ratios
ranging from 0.695 to 0.813, with a midpoint value of 0.754.

Pro Forma Merger Analysis. Barr Devlin analyzed certain pro forma effects to
the holders of Duke Common Stock resulting from the Merger, based on the
Exchange Ratio, for the period 1998 through 2001. This analysis was based on
the respective forecasts of the managements of Duke and PanEnergy, as revised
by Barr Devlin to reflect certain adjustments it deemed appropriate, including
adjustment for certain assumed synergies.

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The analysis showed modest dilution to holders of Duke Common Stock in
earnings per share in 1998, essentially no dilution in 1999, slight accretion
in 2000 and meaningful accretion thereafter.

Barr Devlin was selected as Duke's financial advisor because Barr Devlin and
principals of Barr Devlin have a long history of association in the investment
banking and electric and gas utility industries. Barr Devlin is a privately
held investment banking firm specializing in strategic and merger advisory
services to the electric and gas utility industries, the energy industry and
selected other industries. In this capacity, Barr Devlin and principals of
Barr Devlin have been involved as advisors in numerous transactions and
advisory assignments in the electric, gas and energy industries and are
constantly engaged in the valuation of businesses and securities in those
industries.

Pursuant to the terms of Barr Devlin's engagement, Duke has agreed to pay
Barr Devlin for its services in connection with the Merger (i) an initial
financial advisory progress fee of $3,333,333 payable upon execution of the
Merger Agreement; (ii) a second financial advisory progress fee of $3,333,333
payable upon approval by the holders of Duke Common Stock of the Duke
Shareholder Matters; and (iii) a transaction fee of $10,000,000 payable upon
consummation of the Merger. All financial advisory progress fees will be
credited against any transaction fee payable to Barr Devlin. Duke has agreed
to reimburse Barr Devlin for its out-of-pocket expenses, including fees and
expenses of legal counsel and other advisors engaged with the consent of Duke,
and to indemnify Barr Devlin against certain liabilities, including
liabilities under the federal securities laws, relating to or arising out of
its engagement.

Morgan Stanley. On October 29, 1996, Morgan Stanley was retained by Duke to
act as its financial advisor in connection with the Merger. Morgan Stanley is
an internationally recognized investment banking firm and was selected by Duke
based on Morgan Stanley's experience and expertise. In connection with Morgan
Stanley's engagement, Duke requested that Morgan Stanley evaluate the fairness
of the Exchange Ratio from a financial point of view to Duke. On November 23,
1996, Morgan Stanley rendered to the Duke Board an oral opinion, and rendered
a written opinion on November 24, 1996, to the effect that, as of such date
and based on and subject to certain matters stated therein, the Exchange Ratio
was fair from a financial point of view to Duke. Morgan Stanley subsequently
confirmed its opinion of November 23, 1996 by delivery of a written opinion
dated the date hereof.

THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED AS OF THE DATE OF
THIS JOINT PROXY STATEMENT- PROSPECTUS, WHICH SETS FORTH, AMONG OTHER THINGS,
THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT C TO THIS JOINT PROXY
STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF DUKE
COMMON STOCK ARE URGED TO, AND SHOULD, READ THIS OPINION CAREFULLY IN ITS
ENTIRETY. MORGAN STANLEY'S OPINION ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE
RATIO FROM A FINANCIAL POINT OF VIEW TO DUKE, AND IT DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF DUKE COMMON STOCK AS TO HOW TO VOTE AT THE DUKE MEETING. THE SUMMARY
OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY STATEMENT-
PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.

In arriving at this opinion, Morgan Stanley: (i) reviewed certain publicly
available financial statements and other information of PanEnergy; (ii)
reviewed certain internal financial statements and other financial and
operating data concerning PanEnergy prepared by the management of PanEnergy;
(iii) analyzed certain financial projections prepared by the management of
PanEnergy; (iv) discussed the past and current operations and financial
condition and the prospects of PanEnergy with senior executives of PanEnergy;
(v) reviewed certain publicly available financial statements and other
information of Duke; (vi) reviewed certain internal financial statements and
other financial and operating data concerning Duke prepared by the management
of Duke; (vii) analyzed certain financial projections prepared by the
management of Duke; (viii) discussed the past and current operations and
financial condition and the prospects of Duke with senior executives of Duke,
and analyzed the pro forma impact of the Merger on Duke's earnings per share,
consolidated capitalization and financial ratios; (ix) reviewed the reported
prices and trading activity for the PanEnergy Common Stock and the Duke Common
Stock; (x) compared the financial performance of PanEnergy and the prices and
trading activity of the PanEnergy

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Common Stock and the Duke Common Stock with that of certain other comparable
publicly traded companies and their securities; (xi) reviewed the financial
terms, to the extent publicly available, of certain comparable acquisition
transactions; (xii) reviewed and discussed with the senior managements of Duke
and PanEnergy the strategic rationale for the Merger and the synergies and
other benefits of the Merger to Duke; (xiii) participated in discussions and
negotiations among representatives of PanEnergy and Duke and their financial
and legal advisors; (xiv) reviewed the Merger Agreement and certain related
documents; and (xv) performed such other analyses and considered such other
factors as Morgan Stanley deemed appropriate.

In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to
the financial projections, Morgan Stanley assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance of Duke and PanEnergy. Morgan
Stanley also relied upon, without independent verification, estimates by the
management of Duke of the cost savings and other synergies arising from the
Merger. In addition, Morgan Stanley assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement,
including, among other things, that the Merger will be accounted for as a
pooling-of-interests business combination in accordance with U.S. generally
accepted accounting principles. Morgan Stanley's opinion is necessarily based
on economic, market and other conditions as in effect on, and the information
made available to Morgan Stanley as of, the date hereof.

The following is a brief summary of certain analyses performed by Morgan
Stanley and reviewed with the Duke Board on November 22, 1996 in connection
with Morgan Stanley's presentation and opinion to the Duke Board on such date:

Comparable Publicly Traded Company Analysis. As part of its analysis, Morgan
Stanley compared certain financial information of PanEnergy with that of a
group of publicly traded natural gas pipeline companies including: El Paso
Natural Gas Company, The Coastal Corporation, Enron Corp. and The Williams
Companies (collectively, the "Pipeline Comparables") and natural gas gathering
and processing companies including: Western Gas Resources, Tejas Gas
Corporation, NGC Corporation and TPC Corporation (collectively, the "GGP
Comparables"). Such financial information included price to last twelve months
("LTM") ended June 30, 1996, forecasted 1996 and forecasted 1997 earnings
multiples, price to LTM ended June 30, 1996 EBlT multiples and price to LTM
ended June 30, 1996, forecasted 1996 and forecasted 1997 EBITDA multiples.
Morgan Stanley noted that, based on a compilation of earnings projections by
securities research analysts as of November 2, 1996, the Pipeline Comparables
and the GGP Comparables traded in a range of 13.0 to 46.1 times and 14.3 to
65.3 times historical LTM earnings, respectively, 16.1 to 19.5 times and 14.3
to 27.8 times 1996 forecasted earnings, respectively, and 14.2 to 17.3 times
and 10.8 to 21.1 times 1997 forecasted earnings, respectively. The Pipeline
Comparables and the GGP Comparables traded in a range of 10.6 to 27.5 times
and 14.4 to 28.0 times historical LTM EBIT, respectively, 7.8 to 14.7 times
and 7.6 to 16.6 times historical LTM EBITDA, respectively, 7.4 to 12.4 times
and 7.3 to 17.4 times 1996 forecasted EBITDA, respectively, and 7.0 to 11.1
times and 6.9 to 16.3 times 1997 forecasted EBITDA, respectively.

No company utilized in the comparable company analysis as a comparison is
identical to PanEnergy. In evaluating the Comparable Companies, Morgan Stanley
made judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of PanEnergy, such as the impact of competition
on the business of PanEnergy and the industry generally, industry growth and
the absence of any adverse material change in the financial condition and
prospects of PanEnergy or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using comparable company data.

After adding an acquisition premium of 20% to the implied trading range,
which is consistent with certain other Precedent Convergence Transactions (as
defined below) involving certain electric utilities and natural gas companies,
Morgan Stanley calculated per share values for PanEnergy of $44.00 to $55.00.
Based on Duke's closing share price of $47.875 on November 22, 1996, it would
imply an exchange ratio range of 0.92x to 1.15x.

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Using publicly available information for purposes of this analysis, Morgan
Stanley reviewed the following proposed or completed transactions involving an
electric utility and natural gas company: Puget Sound Power & Light's
acquisition of Washington Energy, Texas Utilities Company's acquisition of
ENSERCH Corporation, Enron Corp.'s acquisition of Portland General, Houston
Industries' acquisition of NorAm Energy and Enova Corporation's acquisition of
Pacific Enterprises (the "Precedent Convergence Transactions").

Discounted Cash Flow Analysis. Morgan Stanley performed an illustrative
discounted cash flow analysis of PanEnergy, based on certain financial
projections provided by the management of PanEnergy for the period 1996
through 2001, in order to estimate the present value of the unlevered free
cash flow that may be generated by PanEnergy. Unlevered free cash flows were
calculated as net income available to common stockholders plus the aggregate
of preferred stock dividends, depreciation and amortization, deferred taxes,
and other non-cash expenses and after-tax net interest expense less the sum of
capital expenditures and investment in non-cash working capital. Morgan
Stanley calculated terminal values by applying a perpetual growth rate to an
unlevered cash flow in fiscal 2001 and the cash-flow streams and terminal
values were then discounted to the present using a range of discount rates of
8.0% to 12.5% representing an estimated range of the weighted average cost of
capital for PanEnergy. Based on this analysis, Morgan Stanley calculated per
share values for PanEnergy ranging from $50.00 to $61.00. Based on Duke's
closing share price of $47.875 on November 22, 1996, it would imply an
exchange ratio range of 1.04x to 1.27x.

Analysis of Selected Precedent Transactions. Using publicly available
information, Morgan Stanley reviewed the financial terms of the following
proposed or completed transactions constituting acquisitions in the natural
gas industry: Tejas Gas Corporation's acquisition of Transok (CSW Corp.), LG&E
Energy Corporation's acquisition of Hadson Corporation and El Paso Natural Gas
Company's acquisition of Tenneco Energy. In addition, Morgan Stanley reviewed
the Precedent Convergence Transactions. For the transactions in the natural
gas industry, the LTM EBITDA multiple ranged from 8.5 to 9.9 times and the LTM
Earnings Multiple ranged from 4.2 to 23.6 times. Based on this analysis,
Morgan Stanley calculated per share values for PanEnergy ranging from $38.00
to $48.00. Based on Duke's closing share price of $47.875 on November 22,
1996, it would imply an exchange ratio range of 0.79x to 1.00x.

No transaction utilized in the precedent transaction analysis is identical
to the Merger. In evaluating the precedent transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond PanEnergy's control, such as the impact of competition on the
business of PanEnergy and the industry generally, industry growth and the
absence of any adverse material change in the financial condition and
prospects of PanEnergy or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using precedent transaction data.

Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the Merger on Duke's earnings per share ("EPS") for the fiscal years
ended 1998 through 2000. The analysis was performed utilizing stand-alone
earnings estimated for the fiscal years ended 1998 through 2000 for Duke and
PanEnergy based on certain financial projections prepared by the respective
management of each company taking into account the cost savings and revenue
enhancements expected to be derived from the Merger as estimated by Duke and
PanEnergy. The Merger will be mildly dilutive to Duke's earnings in the first
two years after the consummation of the Merger and accretive thereafter.

In connection with its written opinion dated as of the date of this Joint
Proxy Statement-Prospectus, Morgan Stanley confirmed the appropriateness of
its reliance on the analyses used to render its November 24, 1996 opinion by
performing procedures to update certain of such analyses and by reviewing the
assumptions upon which such analyses were based and the factors considered in
connection therewith. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, Morgan Stanley considered the results
of all of its analyses as a whole and did not attribute any particular weight
to any particular analysis or factor considered by it. Furthermore, selecting
any portions of Morgan Stanley's analyses, without considering all analyses,
would create an incomplete view of the process

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underlying its opinion. In addition, Morgan Stanley may have deemed various
assumptions more or less probable than other assumptions, so that the ranges
of valuations resulting for any particular analysis described above should not
be taken to be Morgan Stanley's view of the actual value of PanEnergy.

In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Duke and PanEnergy. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
value, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of Morgan Stanley's
analysis of the fairness of the Exchange Ratio from a financial point of view
to Duke and were provided to the Duke Board in connection with the delivery of
Morgan Stanley's written opinion dated November 24, 1996 confirming its oral
opinion of November 23, 1996. The analyses do not purport to be appraisals or
to reflect the prices at which PanEnergy might actually be sold. In arriving
at its opinion, Morgan Stanley assumed that in connection with the receipt of
all the necessary regulatory and governmental approvals for the proposed
Merger, no restriction will be imposed that would have a material adverse
effect on the contemplated benefits expected to be derived in the proposed
Merger. In addition, as described above, Morgan Stanley's opinion and
presentation to the Duke Board was one of many factors taken into
consideration by the Duke Board in making its determination to approve the
Merger. Consequently, the Morgan Stanley analyses described above should not
be viewed as determinative of the opinion of the Duke Board or the view of the
management of PanEnergy with respect to the value of PanEnergy or of whether
the Duke Board or the management of PanEnergy would have been willing to agree
to a different exchange ratio.

As part of its investment banking business, Morgan Stanley is regularly
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwriting, senior loans, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuation for estate, corporate and other purposes. In the
ordinary course of its business, Morgan Stanley and its affiliates may
actively trade the debt and equity securities and senior loans of Duke and
PanEnergy for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In the past, Morgan Stanley and its affiliates have provided financing
services for Duke and PanEnergy and have received fees for the rendering of
these services.

Morgan Stanley has been retained by Duke to act as financial advisor to Duke
with respect to the Merger. Pursuant to a letter agreement dated November 20,
1996 between Duke and Morgan Stanley, Morgan Stanley is entitled to (i) an
advisory fee for its time and efforts expended in connection with the
engagement, which is payable in the event the transaction is not consummated,
(ii) an exposure fee of $3,333,333 which became payable upon the execution of
an agreement between Duke and PanEnergy and (iii) a transaction fee equal to
$10,000,000, which is payable as follows: one-third upon the execution of a
definitive agreement, one-third upon the approval of the Duke Shareholder
Matters by the holders of Duke Common Stock and one-third upon closing of the
transaction ("Transaction Fee"). Any advisory or exposure fee paid or payable
to Morgan Stanley will be credited against the Transaction Fee. Duke has also
agreed to reimburse Morgan Stanley for its expenses, and to indemnify Morgan
Stanley and its affiliates against certain liabilities and expenses, including
liabilities under federal securities laws.

OPINIONS OF FINANCIAL ADVISORS TO PANENERGY

Merrill Lynch. Merrill Lynch has acted as financial advisor to PanEnergy in
connection with the Merger and has assisted the PanEnergy Board in its
examination of the fairness, from a financial point of view, of the Exchange
Ratio. As described herein, Merrill Lynch's opinion dated November 24, 1996
(together with the related presentations) to the PanEnergy Board was only one
of the many factors taken into consideration by the PanEnergy Board in making
its determination to approve the Merger Agreement.

On November 24, 1996, Merrill Lynch delivered its oral opinion to the
PanEnergy Board (subsequently confirmed in writing as of such date and as of
the date of this Joint Proxy Statement-Prospectus) to the effect

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that as of such date and based upon and subject to certain matters stated
therein, the Exchange Ratio was fair to the holders of PanEnergy Common Stock
from a financial point of view.

THE FULL TEXT OF MERRILL LYNCH'S WRITTEN OPINION DATED THE DATE OF THIS
JOINT PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON REVIEW UNDERTAKEN, IS ATTACHED AS
EXHIBIT D TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN
BY REFERENCE. MERRILL LYNCH'S OPINION IS DIRECTED TO THE PANENERGY BOARD AND
ADDRESSES THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW.
IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR ANY RELATED TRANSACTION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF PANENERGY COMMON
STOCK AS TO HOW SUCH HOLDER SHOULD VOTE AT THE PANENERGY MEETING. THE SUMMARY
OF THE OPINION OF MERRILL LYNCH SET FORTH IN THIS JOINT PROXY STATEMENT-
PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.

In connection with its opinion, Merrill Lynch reviewed drafts of the Merger
Agreement, the D/LD Letter Agreement and certain publicly available business,
stock market and financial information relating to PanEnergy and Duke. Merrill
Lynch also reviewed certain other information, including financial forecasts,
provided to Merrill Lynch by PanEnergy and Duke and met with the respective
managements of PanEnergy and Duke to discuss the businesses and prospects of
PanEnergy and Duke. Merrill Lynch also considered certain financial and stock
market data of PanEnergy and Duke and compared that data with similar data for
other publicly held companies in businesses similar to those of PanEnergy and
Duke and considered, to the extent publicly available, the financial terms of
certain other business combinations that recently have been proposed or
effected. Merrill Lynch also considered such other information, financial
studies, analyses and investigations and financial, economic and market
criteria that Merrill Lynch deemed relevant.

In connection with its review, Merrill Lynch did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by Merrill Lynch and assumed and relied upon the
accuracy and completeness of all such information. With respect to the
financial forecasts, Merrill Lynch assumed that such forecasts were reasonably
prepared and reflect the best currently available estimates and judgments of
the managements of PanEnergy and Duke as to the future financial performance
of PanEnergy and Duke, respectively. In addition, Merrill Lynch did not make
an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of PanEnergy or Duke, nor was Merrill Lynch
furnished with any such evaluations or appraisals. Merrill Lynch assumed that
the Merger will qualify for pooling of interests accounting treatment and as a
tax-free transaction to the stockholders of PanEnergy and Duke. With respect
to the estimates of potential synergies furnished by PanEnergy, Merrill Lynch
assumed that such estimates have been reasonably prepared and reflect the best
currently available estimates and judgments of the management of PanEnergy as
to the expected synergies of the Merger. Merrill Lynch also assumed that the
final form of the Merger Agreement and the D/LD Letter Agreement did not
differ materially from the drafts reviewed by Merrill Lynch. Merrill Lynch's
opinion was necessarily based on information available to it and on general
economic, financial, stock market, monetary and other conditions as they
existed and could be evaluated on the date of its opinion. Merrill Lynch
expressed no opinion as to what the value of the Duke Common Stock actually
would be when issued to the holders of PanEnergy Common Stock pursuant to the
Merger or the prices at which the Duke Common Stock would trade subsequent to
the Merger. Although Merrill Lynch evaluated the consideration to be received
by the holders of PanEnergy Common Stock from a financial point of view,
Merrill Lynch was not requested to, and did not, recommend the specific
consideration payable in the Merger. In connection with the preparation of its
opinion, Merrill Lynch was not authorized by PanEnergy or the PanEnergy Board
to solicit, and did not solicit, third-party indications of interest for an
acquisition of all or any part of PanEnergy.

In preparing its opinion for the PanEnergy Board, Merrill Lynch performed a
variety of financial and comparative analyses, including those described
below. The summary of analyses performed by Merrill Lynch as set forth below
does not purport to be a complete description of the analyses underlying
Merrill Lynch's opinion. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to partial or summary

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description. No company, business or transaction used in such analyses as a
comparison is identical to Duke, Pan Energy or the Merger, nor is an
evaluation of the results of such analyses entirely mathematical; rather, it
involves complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions being analyzed. The estimates contained in such analyses and the
ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses, companies or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.

In arriving at its opinion, Merrill Lynch made qualitative judgments as to
the significance and relevance of each analysis and factor considered by it.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create an incomplete view of the
processes underlying such analyses and its opinion. In its analyses, Merrill
Lynch made numerous assumptions with respect to Duke, PanEnergy, industry
performance, and with respect to regulatory, general business, economic,
market and financial conditions, as well as other matters, many of which are
beyond the control of Duke and PanEnergy, and involve the application of
complex methodologies and educated judgments.

The following is a summary of certain financial and comparative analyses
performed by Merrill Lynch in arriving at its November 24, 1996 opinion and
presented to the PanEnergy Board. Merrill Lynch derived implied exchange
ratios for PanEnergy Common Stock and Duke Common Stock based upon the
relative values suggested by these analyses, in light of the judgment and
experience of Merrill Lynch. The Merrill Lynch opinion is based upon Merrill
Lynch's consideration of the collective results of all such analyses, together
with the other factors referred to in its opinion letter. In the Merger, each
issued and outstanding share of PanEnergy Common Stock will be converted into
the right to receive 1.0444 shares of Duke Common Stock. In concluding that
the Exchange Ratio was fair, from a financial point of view, to holders of
PanEnergy Common Stock and in its discussions with the PanEnergy Board,
Merrill Lynch compared the Exchange Ratio to each range of implied exchange
ratios set forth below, which were derived from the analyses performed by
Merrill Lynch, and noted that the Exchange Ratio was generally consistent with
the ranges of such implied exchange ratios. The implied exchange ratios
derived by Merrill Lynch were as follows: (i) contribution analysis (0.69 to
0.80); (ii) comparable transactions analysis (0.81 to 1.10); (iii) comparable
company trading analysis (0.78 to 1.04); (iv) discounted cash flow analysis
(0.86 to 1.03) and (v) merger premium analysis (0.97 to 1.15). Certain of the
implied exchange ratios were computed using $48 7/8 as the price per share of
Duke Common Stock, based on the trading price of the Duke Common Stock
immediately prior to the November 24 meeting of the PanEnergy Board.

Contribution Analysis. In order to determine an implied exchange ratio range
based upon contribution analysis, Merrill Lynch calculated the contribution of
each of PanEnergy and Duke to the net income to common shareholders of the pro
forma combined company using certain projections provided by the respective
managements of PanEnergy and Duke for the LTM period, 1996, 1997 and 1998. The
analysis of net income to common stockholders yielded implied exchange ratios
for PanEnergy Common Stock to Duke Common Stock of 0.69 for the LTM period,
0.70 for 1996, 0.73 to 0.78 for 1997 and 0.72 to 0.80 for 1998.

Utilizing the contribution analysis, Merrill Lynch calculated an implied
exchange ratio range of 0.69 to 0.80.

Analysis of Selected Comparable Acquisitions. Merrill Lynch also reviewed
publicly available information relating to certain merger and acquisition
transactions in respect of companies with primarily natural gas and energy
services operations. With respect to PanEnergy, Merrill Lynch examined
multiples of the consideration paid for the common equity and the value of the
indebtedness assumed in each of the transactions to, among other measures,
such acquired companies' EBITDA and EBIT, and examined multiples of the value
of the common equity in each of the transactions to net income.

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The transactions in the natural gas and energy services industry that
Merrill Lynch reviewed were Transco Energy Company's acquisition of Texas Gas
Transmission Corporation (December 1988), Panhandle Eastern Corporation's
acquisition of Texas Eastern Corporation (February 1989), Koch Industries'
acquisition of United Gas Pipeline Corp. (December 1992), KN Energy's
acquisition of American Oil and Gas Corporation (March 1994), The Williams
Companies, Inc.'s acquisition of Transco Energy Company (May 1995), Tejas Gas
Corporation's acquisition of Transok Inc. (June 1996), El Paso Natural Gas
Company's proposed acquisition of Tenneco Energy, Houston Industries' proposed
acquisition of NorAm Energy, Texas Utilities Company's proposed acquisition of
ENSERCH Corporation and Pacific Enterprises' proposed merger with Enova
Corporation (the "Comparable Transactions").

In order to determine an implied exchange ratio range based on Comparable
Transactions analysis, Merrill Lynch (i) compared the offer value (defined to
be consideration paid for the common equity) in each of the Comparable
Transactions as a multiple of the then publicly available LTM net income to
common shareholders (the "Net Income Multiple") and (ii) compared the
transaction value (defined to be the offer value plus the liquidation value of
preferred stock plus the principal amount of debt less cash) for each of the
Comparable Transactions as a multiple of the then publicly available (a) LTM
EBITDA (the "EBITDA Multiple") and (b) LTM EBIT (the "EBIT Multiple"), to the
corresponding multiples for the Merger. The results of the foregoing were: (i)
the Net Income Multiple resulted in a range of implied exchange ratios of 0.81
to 1.04, (ii) the EBITDA Multiple resulted in a range of implied exchange
ratios of 0.87 to 1.02 and (iii) the EBIT Multiple resulted in a range of
implied exchange ratios of 0.99 to 1.10.

Utilizing the Comparable Transactions analysis, Merrill Lynch calculated an
implied exchange ratio range of 0.81 to 1.10.

Because the reasons for, and circumstances surrounding, each of the
transactions analyzed were so diverse and due to the inherent differences
between the operations and financial conditions of PanEnergy and the selected
companies, Merrill Lynch believes that a purely quantitative comparable
transaction analysis would not be dispositive in the context of the Merger.
Merrill Lynch further believes that an appropriate use of a comparable
transaction analysis in this instance involves qualitative judgments
concerning the differences between the characteristics of these transactions
and the Merger that would affect the value of the acquired companies and
businesses and PanEnergy, which judgments are reflected in Merrill Lynch's
opinion.

Analysis of Selected Publicly Traded Comparable Companies. Using publicly
available information, Merrill Lynch compared selected historical stock,
financial and operating ratios for PanEnergy with corresponding data and
ratios of certain similar publicly traded companies. These companies were
selected by Merrill Lynch from the universe of possible companies based upon
Merrill Lynch's views as to the comparability of financial and operating
characteristics of these companies to PanEnergy and Duke. With respect to each
such analysis, Merrill Lynch made such comparisons among the following
companies: Coastal Corporation, Columbia Gas System, Inc., Consolidated
Natural Gas Company, El Paso Natural Gas Company, Enron Corp., KN Energy,
Inc., Questar Corporation, Sonat Inc. and The Williams Companies, Inc. (the
"Comparable Companies").

In order to determine an implied exchange ratio range based upon an analysis
of comparable publicly traded companies, Merrill Lynch compared the market
value of PanEnergy Common Stock as a multiple of (i) estimated 1996 EPS (the
"1996 EPS Ratio") and (ii) estimated 1997 EPS (the "1997 EPS Ratio") to the
corresponding ratios for each of the Comparable Companies. The earnings
estimates were obtained from IBES, a data service which monitors and publishes
a compilation of earnings estimates produced by selected research analysts on
companies of interest to investors. Additionally, Merrill Lynch compared the
market capitalization of PanEnergy as a multiple of estimated 1997 EBITDA (the
"1997 EBITDA Ratio") and estimated 1997 EBIT (the "1997 EBIT Ratio") to the
corresponding ratios for each of the Comparable Companies. Merrill Lynch
determined that the appropriate trading multiples for the Comparable Companies
were 16.5x-18.5x, 15.0x-17.0x, 7.5x-8.0x, and 10.0x-11.0x for 1996 estimated
net income, 1997 estimated net income, 1997 estimated EBITDA and 1997 EBIT,
respectively. Such multiples were applied to PanEnergy's forecast of each
respective financial measure,

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providing the following implied exchange ratios: (i) the 1996 EPS Ratio
resulted in a range of implied exchange ratios of 0.78 to 0.88; (ii) the 1997
EPS Ratio resulted in a range of implied exchange ratios of 0.82 to 0.93;
(iii) the 1997 EBITDA Ratio resulted in a range of implied exchange ratios of
0.93 to 1.01; and (iv) the 1997 EBIT Ratio resulted in a range of implied
exchange ratios of 0.92 to 1.04.

Using publicly available information, Merrill Lynch compared selected
historical stock, financial and operating ratios for Duke with corresponding
data and ratios of certain similar publicly traded companies. Such similar
companies included American Electric Power, Carolina Power & Light, Central
and South West, Dominion Resources, Edison International, FPL Group, Pacific
Gas and Electric, Southern Company and Texas Utilities. Merrill Lynch examined
(i) the market value of Duke's and each comparable company's common stock,
(ii) the ratio of price to estimated net income for 1996 and 1997 and (iii)
dividend yield. Merrill Lynch noted that (i) Duke's price to 1996 estimated
earnings ratio was 14.1x compared to an average of 12.7x for the comparable
companies; (ii) Duke's price to 1997 estimated earnings ratio was 13.4x
compared to an average of 12.6x for the comparable companies; and (iii) Duke's
dividend yield was 4.4% compared to an average of 5.3% for the comparable
companies.

Utilizing the foregoing analysis, Merrill Lynch calculated an implied
exchange ratio of 0.78 to 1.04.

Because of the inherent differences among the operations of PanEnergy and
the selected Comparable Companies, Merrill Lynch believes that a purely
quantitative comparable company analysis would not be dispositive in the
context of the Merger. Merrill Lynch further believes that an appropriate use
of a comparable company analysis in this instance involves qualitative
judgments concerning differences among the financial and operating
characteristics of PanEnergy and the selected Comparable Companies, which
judgments are reflected in Merrill Lynch's opinion.

Discounted Cash Flow Analysis. In order to determine an implied exchange
ratio range based upon discounted cash flow analysis ("DCF Analysis"), Merrill
Lynch performed DCF Analyses for each of PanEnergy and Duke using projections
provided to Merrill Lynch by the respective managements of PanEnergy and Duke
and calculated ranges of value per share for PanEnergy Common Stock and Duke
Common Stock.

The PanEnergy and Duke DCF Analyses were based upon the discount to present
value, assuming discount rates ranging from 9% to 11% for PanEnergy and 8% to
10% for Duke of (i) their respective projected free cash flows for the years
1997 through 2001, and (ii) their respective 2001 value based upon a range of
multiples for PanEnergy from 15.0x to 17.0x projected 2001 net income, and for
Duke from 12.0x to 14.0x projected 2001 net income. Based on these analyses,
Merrill Lynch calculated a range of value for PanEnergy Common Stock of $34.84
per share to $51.13 per share and for Duke Common Stock of $39.31 per share to
$50.54 per share.

Utilizing DCF Analysis, Merrill Lynch calculated an implied exchange ratio
range of 0.86 to 1.03.

Merger Premium Analysis. In order to determine an implied exchange ratio
range based upon merger premium analysis ("Merger Premium Analysis"), Merrill
Lynch examined the premiums paid for target company shares in certain mergers
over the pre-announcement stock prices of such target companies and calculated
ranges of value for PanEnergy Common Stock.

Merrill Lynch examined premiums paid over pre-announcement stock prices one
day prior to announcement, one week prior to announcement and four weeks prior
to announcement (i) in all public merger transactions and all stock merger
transactions over $5 billion for the periods 1994 to present, 1995 to present
and 1996 to present; (ii) fourteen selected electric utility transactions; and
(iii) eight selected natural gas transactions. In the aggregate, such
examinations indicated a range of merger premiums of between 15.0% and 30.0%
to be indicative. Merrill Lynch applied such range to the market price of
PanEnergy Common Stock and calculated an implied exchange ratio range of 0.97
to 1.15.

Purchase Price Analysis and Stock Trading History. Merrill Lynch performed
analyses relating to the consideration to be received by the holders of the
PanEnergy Common Stock assuming various prices for the

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Duke Common Stock. Merrill Lynch also examined the history of trading prices
and volume for the PanEnergy Common Stock and the Duke Common Stock and
various historical information relating to such common stocks.

Pro Forma Merger Analysis. Merrill Lynch analyzed certain pro forma effects
which could result from the Merger, based on financial forecasts provided by
PanEnergy's management for PanEnergy's 1997 and 1998 fiscal years and
financial forecasts provided by Duke's management for Duke's 1997 and 1998
fiscal years. Merrill Lynch was advised by the management of PanEnergy that
the Merger will be accounted for as a "pooling" under generally accepted
accounting principles. Management of PanEnergy also provided Merrill Lynch
with projections of certain synergies estimated to result from the Merger.
This analysis indicated that the Merger would be dilutive to the forecasted
earnings per share of Duke for its 1997 and 1998 fiscal years and accretive to
PanEnergy stockholders on a relative basis for 1997 and 1998.

Other Factors and Analyses. In the course of preparing its opinion, Merrill
Lynch performed certain other analyses and reviewed certain other matters,
including, among other things, (i) historical and expected trading
characteristics of the PanEnergy Common Stock and the Duke Common Stock; (ii)
financing considerations relating to the Merger and (iii) pro forma
capitalization of the combined company.

Merrill Lynch is an internationally recognized investment banking firm and,
as a part of its investment banking business, is regularly engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions. The PanEnergy Board selected Merrill Lynch as its financial
advisor because of Merrill Lynch's experience and expertise and because it is
familiar with PanEnergy and its business.

Pursuant to the terms of Merrill Lynch's engagement, PanEnergy has agreed to
pay Merrill Lynch for its financial advisory services in connection with the
Merger fees payable as follows: (i) a fee of $100,000, payable upon the
signing of Merrill Lynch's engagement letter; (ii) a fee of $3,400,000,
payable upon the execution of the Merger Agreement; (iii) a fee of $3,500,000,
payable upon the adoption of the Merger Agreement by the holders of the
PanEnergy Common Stock; and (iv) a fee of $7,000,000, payable on closing of
the Merger. PanEnergy also has agreed to reimburse Merrill Lynch for its out-
of-pocket expenses, including the fees and expenses of legal counsel and any
other advisor retained by Merrill Lynch, and to indemnify Merrill Lynch
against certain liabilities, including liabilities under the federal
securities laws, or to contribute to payments Merrill Lynch may be required to
make in respect thereof.

In the ordinary course of business, Merrill Lynch and its affiliates may
actively trade the equity securities of PanEnergy and Duke for their own
account and for accounts of customers and, accordingly, may at any time hold a
long or short position in such securities. Merrill Lynch has in the past
provided financial services to PanEnergy and Duke, for which it received
customary compensation.

Lehman Brothers. In October of 1996, PanEnergy engaged Lehman Brothers to
act as a financial advisor in connection with the Merger. PanEnergy instructed
Lehman Brothers, in its role as a financial advisor, to evaluate the fairness,
from a financial perspective, to the holders of PanEnergy Common Stock of the
Exchange Ratio offered to such holders in the Merger, and in such regard, to
conduct such investigations as Lehman Brothers deemed appropriate for such
purposes. On November 24, 1996, Lehman Brothers delivered its oral opinion to
the PanEnergy Board (subsequently confirmed in writing as of such date) to the
effect that as of such date and based upon and subject to certain matters
stated therein, the Exchange Ratio offered to the holders of the PanEnergy
Common Stock in the Merger was fair from a financial point of view. Lehman
Brothers subsequently confirmed its opinion of November 24, 1996 by delivery
of a written opinion dated the date hereof.

THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS, DATED THE DATE
HEREOF, WHICH SETS FORTH THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND
LIMITATIONS UPON THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS
OPINION, IS INCLUDED AS EXHIBIT E TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND
IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING IS A SUMMARY OF LEHMAN
BROTHERS' OPINION AND THE METHODOLOGY LEHMAN BROTHERS USED TO RENDER ITS
FAIRNESS OPINION.

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No limitations were imposed by PanEnergy on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. Lehman Brothers was not requested to and did not make any
recommendation to the PanEnergy Board as to the form or amount of the
consideration to be received by PanEnergy in the Merger, which was determined
through arm's-length negotiations between Duke and PanEnergy. In arriving at
its opinion, Lehman Brothers did not ascribe an absolute specific value to
PanEnergy but made its determination as to the fairness, from a financial
point of view, of the consideration to be received by the holders of PanEnergy
Common Stock in the Merger on the basis of the financial and comparative
analyses described below. Lehman Brothers' opinion is for the use and benefit
of the PanEnergy Board and was rendered to the PanEnergy Board in connection
with its consideration of the Merger. Lehman Brothers' opinion does not
constitute a recommendation to any holder of PanEnergy Common Stock as to how
such holder should vote with respect to the Merger. Lehman Brothers was not
requested to opine as to, and its opinion does not address, PanEnergy's
underlying business decision to proceed with or effect the Merger.

In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i) the
Merger Agreement and the specific terms of the Merger, (ii) a draft of a
letter agreement among Louis Dreyfus Energy Corp., Louis Dreyfus Electric
Power Inc., Duke Energy Marketing Corp. and Duke Energy Corp. dated November
24, 1996, (iii) publicly available information concerning Duke and PanEnergy
that Lehman Brothers believed to be relevant to its analysis, (iv) financial
and operating information with respect to the business, operations and
prospects of Duke furnished to Lehman Brothers by Duke, (v) financial and
operating information with respect to the business, operations and prospects
of PanEnergy furnished to Lehman Brothers by PanEnergy, (vi) a trading history
of Duke Common Stock from November 1, 1991 to the present and a comparison of
that trading history with those of other companies that Lehman Brothers deemed
relevant, (vii) a trading history of PanEnergy Common Stock from November 1,
1991 to the present and a comparison of that trading history with those of
other companies that Lehman Brothers deemed relevant, (viii) a comparison of
the historical financial results and present financial condition of Duke with
those of other companies that Lehman Brothers deemed relevant, (ix) a
comparison of the historical financial results and present financial condition
of PanEnergy with those of other companies that Lehman Brothers deemed
relevant, (x) estimates prepared by management of PanEnergy relating to the
cost savings, operating synergies and other strategic benefits expected to
result from a combination of the businesses of Duke and PanEnergy, (xi) the
potential pro forma impact on Duke and PanEnergy of the Merger, including the
estimated increase in the dividend to be paid to holders of the PanEnergy
Common Stock following the Merger, and (xii) a comparison of the financial
terms of the Merger with the financial terms of certain other recent
transactions that Lehman Brothers deemed relevant. In addition, Lehman
Brothers has had discussions with the managements of Duke and PanEnergy
concerning their respective businesses, operations, assets, financial
conditions and prospects and undertook such other studies, analyses and
investigations as Lehman Brothers deemed appropriate.

In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by
Lehman Brothers without assuming any responsibility for independent
verification of such information. With respect to the financial projections of
Duke, PanEnergy and the combined company following consummation of the Merger,
upon advice of the managements of Duke and PanEnergy, Lehman Brothers assumed
that such projections had been reasonably prepared on a basis reflecting the
then best currently available estimates and judgments of the managements of
the respective companies as to the future financial performance of the
respective companies, and that Duke and PanEnergy would perform, and that the
combined company will perform, substantially in accordance with such
projections. In arriving at its opinion, Lehman Brothers did not conduct a
physical inspection of the properties and facilities of Duke or PanEnergy and
did not make or obtain any evaluations or appraisals of the assets or
liabilities of Duke or PanEnergy. In addition, Lehman Brothers was not
authorized to solicit, and did not solicit, any proposals or offers from any
third party with respect to a merger or business combination with, or the
purchase of all or a part of the business of, PanEnergy. Lehman Brothers'
opinion necessarily was based upon market, economic and other conditions as
they existed on, and could be evaluated as of, the date of its opinion letter.

In connection with rendering its opinion, Lehman Brothers performed certain
financial, comparative and other analyses as described below. The preparation
of a fairness opinion involves various determinations as to

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the most appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its fairness opinion, Lehman Brothers
did not attribute any particular weight to any analysis or factor considered
by it, but rather made qualitative judgments as to the significance and
relevance of each analysis and factor. Accordingly, Lehman Brothers believes
that its analyses must be considered as a whole and that considering any
portion of such analyses and of the factors considered, without considering
all analyses and factors, could create a misleading or incomplete view of the
process underlying the opinion. In its analyses, Lehman Brothers made numerous
assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
PanEnergy or Duke. Any estimates contained in the analyses are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than as set forth therein. In
addition, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.

Valuation Analysis. Lehman Brothers prepared valuations of both PanEnergy
and Duke. The valuations of the separate businesses were analyzed before the
consideration of any cost savings or operating synergies resulting from the
Merger. In determining valuation, Lehman Brothers used the following
methodologies: DCF Analysis, comparable transactions analysis and comparable
company trading analysis. Each of these methodologies was used to generate a
reference enterprise value range for both PanEnergy and Duke. The enterprise
value range for each company was adjusted for appropriate on and off balance
sheet assets and liabilities to arrive at a common equity value range (in
aggregate dollars and dollars per common share) for each company. The per
share equity value ranges were then used to evaluate the Exchange Ratio in the
Merger (1.0444 shares of Duke per share of PanEnergy). The implied exchange
ratio ranges derived using the various valuation methodologies described above
all supported the conclusion that the Exchange Ratio offered to holders of
PanEnergy Common Stock in the Merger is fair from a financial point of view.
The various valuation analyses are summarized below:

(i) DCF Analysis-Lehman Brothers prepared an after-tax cash flow model for
both PanEnergy and Duke utilizing information and projections provided by
both companies. With respect to the PanEnergy DCF, Lehman Brothers used
discount rates of 10%-12% and terminal value EBITDA multiples of 7.0x-8.0x.
The discount rates were based on Lehman Brothers' review of the financial
terms of similar transactions in the interstate gas pipeline and gas
gathering, processing and marketing ("GPM") sectors. The terminal value
multiples were selected based on the trading multiples of similar publicly
traded companies and the multiples from recent completed or proposed
acquisitions of similar assets and companies. With respect to Duke, Lehman
Brothers used discount rates of 8%-10% and terminal EBIT multiples of 9.0x-
10.0x. The discount rates were based on Lehman Brothers' review of the
financial terms of similar transactions in the electric utility industry.
The terminal value multiples were selected based on the current trading
multiples of similar publicly traded companies and the multiples from
recent acquisitions of similar companies.

This methodology yielded valuations for PanEnergy and Duke that imply a
range of exchange ratios of 0.71 to 1.08 shares of Duke per share of
PanEnergy.

(ii) Comparable Transactions Analysis--With respect to PanEnergy, Lehman
Brothers reviewed certain publicly available information on selected
interstate gas pipeline and GPM company transactions which took place from
June of 1994 to November of 1996, including Houston Industries/NorAm, El
Paso/Tenneco, Texas Utilities/ENSERCH, Williams/Transco, Tejas Gas/Transok,
NGC/Chevron, NGC/Trident, Panhandle Eastern/Associated Natural Gas, and KN
Energy/American Oil & Gas. For each transaction, relevant transaction
multiples were analyzed including (a) the common equity purchase price
divided by LTM and projected net income and (b) the total purchase price
(equity purchase price plus any assumed obligations) divided by LTM and
projected EBITDA. The appropriate LTM and projected net income multiple
ranges were determined to be 18.0x-22.0x and 15.0x-19.0x, respectively. The
appropriate LTM and projected EBITDA multiple ranges were determined to be
8.0x-10.0x and 7.5x-9.0x, respectively. These multiple

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ranges were generally toward the high end of comparable interstate gas
pipeline transactions and toward the low end of selected GPM company
transactions.

With respect to Duke, Lehman Brothers reviewed certain publicly available
information on selected electric utility transactions which took place or
were announced from January of 1995 to November of 1996, including Ohio
Edison/Centerior Energy, Enron/Portland General, Western Resources/Kansas
City Power & Light, Puget Sound/Washington Energy, Baltimore Gas &
Electric/Potomac Electric Power, Public Service of Colorado/Southwestern
Public Service Company, Union Electric/NIPSCO and Northern States
Power/Wisconsin Energy. For each transaction, relevant transaction
multiples were analyzed including (i) the common equity purchase price
divided by LTM net income and (ii) the common equity purchase price divided
by book value. The appropriate LTM net income multiple range was determined
to be 13.0x-15.2x and the appropriate book value multiple range was
determined to be 1.7x-2.2x.

This methodology yielded valuations for PanEnergy and Duke that imply a
range of exchange ratios of 0.85 to 1.07 shares of Duke per share of
PanEnergy.

Because the market conditions, rationale and circumstances surrounding each
of the transactions analyzed were specific to each transaction and because
of the inherent differences between the businesses, operations and
prospects of PanEnergy and Duke and the acquired businesses analyzed,
Lehman Brothers believed that it was inappropriate to, and therefore did
not, rely solely on the quantitative results of the analysis and,
accordingly, also made qualitative judgments concerning differences between
the characteristics of these transactions and the Merger that would affect
the acquisition values of PanEnergy and Duke and such acquired companies.

(iii) Comparable Company Trading Analysis--With respect to PanEnergy,
Lehman Brothers reviewed the public stock market trading multiples for
selected interstate gas pipeline companies and GPM companies including
Coastal, El Paso, Enron, Williams, KN Energy, NGC Corporation and Tejas
Gas. Using publicly available information, Lehman Brothers calculated and
analyzed the common equity market value multiples of certain historical and
projected financial criteria (such as net income and cash flow from
operations) and the adjusted capitalization multiples of certain historical
and projected financial criteria (such as EBITDA and EBIT). The adjusted
capitalization of each company was obtained by adding its long-term debt to
the sum of the market value of its common equity, the value of its
preferred stock (market value if publicly traded, liquidation value if not)
and the book value of any minority interest minus its cash balance. Lehman
Brothers placed the most emphasis on net income and EBITDA multiples. The
appropriate LTM and projected net income multiple ranges were determined to
be 18.0x-21.0x and 15.0x-17.5x, respectively. The appropriate LTM and
projected EBITDA multiple ranges were determined to be 8.0x-9.0x and 7.0x-
8.5x, respectively.

With respect to Duke, Lehman Brothers reviewed the public stock market
trading multiples for selected large capitalization electric utilities with
nuclear exposure including Dominion Resources, Entergy, Peco Energy, PP&L
Resources, Public Service Enterprises, Texas Utilities and Union Electric.
Using publicly available information, Lehman Brothers calculated and
analyzed the common equity market value multiples of certain historical and
projected financial criteria (such as net income and book value) and the
adjusted capitalization multiples of certain historical and projected
financial criteria (such as EBITDA and EBIT). Lehman Brothers placed the
most emphasis on net income and EBIT multiples. The appropriate LTM and
projected net income multiple ranges were determined to be 13.0x-13.5x and
11.5x-12.5x, respectively. The appropriate LTM and projected EBIT multiple
ranges were determined to be 9.0x-9.5x and 8.5x-9.0x, respectively.

This methodology yielded valuations for PanEnergy and Duke that imply a
range of exchange ratios of 0.95 to 1.07 shares of Duke per share of
PanEnergy.

Because of the inherent differences between the businesses, operations and
prospects of PanEnergy and Duke and the businesses, operations and
prospects of the companies included in the comparable company groups,
Lehman Brothers believed that it was inappropriate to, and therefore did
not, rely solely on the quantitative results of the analysis and,
accordingly, also made qualitative judgments concerning differences

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between the financial and operating characteristics of PanEnergy and Duke
and companies in the comparable company groups that would affect the public
trading values of PanEnergy and Duke and such comparable companies.

Contribution Analysis. Lehman Brothers analyzed the relative income
statement contribution of PanEnergy and Duke to the combined entity based on
1996 and 1997 projected financial data and assuming no cost savings or
synergies. The analysis indicates that PanEnergy will contribute approximately
34% - 37% of the combined company's earnings and cash flow in 1996 and 1997,
but will be receiving a significantly higher percentage of the combined
company's equity (approximately 45%) implying that the exchange ratio offered
to holders of PanEnergy Common Stock is fair from a financial point of view.
The primary shortcoming of this analysis is that it treats all cash flow and
earnings the same regardless of expected growth rates or upside potential.
PanEnergy's historical and projected growth profile has been and is expected
to continue to be significantly higher than that of Duke.

Pro Forma Merger Consequences Analysis. Lehman Brothers also prepared a pro
forma merger model which incorporates PanEnergy's and Duke's financial
projections for the years 1997 through 2001 as well as the companies'
estimates of future cost savings and synergies resulting from the Merger.
Lehman Brothers then compared the earnings of PanEnergy on a stand-alone basis
to the earnings attributable to PanEnergy's interest in the pro forma combined
entity. Lehman Brothers also compared PanEnergy's current dividend per share
to the pro forma dividend per share post-combination. In all years, the Merger
is significantly accretive to PanEnergy's earnings. On the other hand, the
Merger is dilutive to Duke's earnings in 1997 and 1998 and neutral to
accretive thereafter. The Merger will also more than double PanEnergy's
dividend per share. Again, the pro forma merger consequences analysis suggests
that the Exchange Ratio is fair to the holders of PanEnergy Common Stock from
a financial point of view.

Lehman Brothers is an internationally recognized investment banking firm
engaged in, among other things, the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and
unlisted securities, private placements, and valuations for corporate and
other purposes. The PanEnergy Board selected Lehman Brothers because of its
expertise, reputation and familiarity with PanEnergy and because its
investment banking professionals have substantial experience in transactions
comparable to the Merger.

Lehman Brothers has previously rendered certain financial advisory and
investment banking services to PanEnergy, for which it has received customary
compensation. Pursuant to the terms of an engagement letter agreement, dated
November 1, 1996, between Lehman Brothers and PanEnergy, PanEnergy paid Lehman
Brothers an initial financial advisory fee of $100,000. In addition, PanEnergy
has agreed to pay Lehman Brothers a transaction fee of at least $3.5 million
(less the $100,000 initial financial advisory fee) payable 25% upon signing of
a definitive agreement (which portion has been paid), 25% upon the adoption of
the Merger Agreement by the holders of PanEnergy Common Stock and 50% (less
the $100,000 initial financial advisory fee) upon the successful completion of
the Merger. In addition, PanEnergy has agreed to reimburse Lehman Brothers for
its reasonable expenses (including, without limitation, professional and legal
fees and disbursements) incurred in connection with its engagement, and to
indemnify Lehman Brothers and certain related persons against certain
liabilities in connection with its engagement, including certain liabilities
that may arise under the federal securities laws. Lehman Brothers also has
performed various investment banking services for Duke in the past and has
received customary fees for such services.

In the ordinary course of its business, Lehman Brothers actively trades in
the debt and equity securities of PanEnergy and Duke for its own account and
for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.

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EFFECTIVE TIME

The Merger Agreement provides that, following the fulfillment or waiver of
certain conditions to the Merger, Duke Transaction will be merged with and
into PanEnergy and all issued and outstanding shares of PanEnergy Common Stock
will be converted into the right to receive shares of Duke Common Stock as
provided therein. As a result of the Merger, holders of PanEnergy Common Stock
will become holders of Duke Common Stock and PanEnergy will become a wholly-
owned subsidiary of Duke. See "Conversion of Shares" and "THE MERGER
AGREEMENT--General."

Pursuant to the Merger Agreement, a certificate of merger complying with the
requirements of the DGCL will be filed with the Secretary of State of Delaware
on the second business day following the satisfaction or waiver of all
conditions to the Merger, or at such other time and date as Duke, Duke
Transaction and PanEnergy agree. The Merger will become effective at the time
of the filing of the certificate of merger with the Secretary of State of
Delaware or at such later time as is specified therein. See "THE MERGER
AGREEMENT--Effective Time."

CONVERSION OF SHARES

At the Effective Time, pursuant to the Merger Agreement:

(i) Each share of PanEnergy Common Stock outstanding immediately prior to
the Effective Time will be converted into the right to receive 1.0444
shares of Duke Common Stock;

(ii) Each option to purchase PanEnergy Common Stock that is outstanding
at the Effective Time will be assumed by Duke and will be exercisable upon
the same terms as under the applicable PanEnergy stock option plan and
option agreement, except that such option will become an option to purchase
Duke Common Stock, appropriately adjusted;

(iii) Each award of restricted PanEnergy Common Stock outstanding and not
vested at the Effective Time will be assumed by Duke and such shares of
restricted PanEnergy Common Stock will be exchanged for shares of
restricted Duke Common Stock; and

(iv) Each outstanding PanEnergy Convertible Note will remain outstanding
after the Merger unless prepaid or converted.

Based on 151,398,234 shares of PanEnergy Common Stock outstanding on
February 28, 1997, Duke would issue up to 158,120,315 shares of Duke Common
Stock in the Merger, and options to purchase up to 3,305,306 shares of
PanEnergy Common Stock (calculated as of February 28, 1997) would become
options to purchase up to 3,452,062 shares of Duke Common Stock. In addition,
up to 471,938 shares of Duke Common Stock may be issued as a result of
conversions of outstanding PanEnergy Convertible Notes (calculated as of
February 28, 1997). Based on the Exchange Ratio and the capitalization of Duke
and PanEnergy (calculated as of February 28, 1997), holders of Duke Common
Stock and holders of PanEnergy Common Stock would have held approximately 56%
and 44%, respectively, of the aggregate number of shares of Duke Common Stock
that would have been outstanding if the Merger had been consummated as of such
date.

No fractional shares of Duke Common Stock will be issued upon the surrender
for exchange of certificates of PanEnergy Common Stock. Pursuant to the Merger
Agreement, a holder of a certificate representing shares of PanEnergy Common
Stock who would otherwise be entitled to a fractional share of Duke Common
Stock will be entitled to receive a cash payment in lieu of such fractional
share in an amount equal to the product of such fraction multiplied by the
average of the closing price per share of Duke Common Stock on the NYSE
Composite Transactions Tape for the ten business days prior to and including
the last business day on which PanEnergy Common Stock was traded on the NYSE,
without any interest thereon.

Each of Duke and PanEnergy has a dividend reinvestment and stock purchase
plan in effect as of the date hereof (i.e., the Duke DRSPP and the PanEnergy
DRSPP). The Duke DRSPP provides, among other things, for

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those shareholders who participate, that dividends on Duke Common Stock will
be used to purchase shares of Duke Common Stock at market value (calculated as
set forth therein) on a quarterly basis. The Duke DRSPP also permits
participants to invest in additional shares of Duke Common Stock through
optional cash payments, within certain dollar limitations, at the market price
(calculated as set forth therein) of Duke Common Stock, on any of 12 monthly
investment dates each year. The Duke DRSPP credits whole shares and fractional
shares of Duke Common Stock to participants' accounts, with dividends being
credited on fractional shares. The Duke DRSPP will continue in effect after
the Merger. It is anticipated that the PanEnergy DRSPP will be terminated at
the Effective Time, that all shares of PanEnergy Common Stock credited to
participants' accounts in the PanEnergy DRSPP will be converted into Duke
Common Stock at the Effective Time based on the Exchange Ratio, that such
accounts will be held in the Duke DRSPP from the Effective Time, subject to
the right of any participant to elect not to participate therein, and that
participants in the PanEnergy DRSPP immediately prior to the Effective Time
will retain their interests in any fractional shares of Duke Common Stock
received pursuant to the Merger in exchange for shares of PanEnergy Common
Stock credited to their accounts in the PanEnergy DRSPP.

Shares of Duke capital stock (including Duke Common Stock) issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding after the Merger.

The Merger Agreement provides that if, before the Effective Time, the
outstanding shares of Duke Common Stock or PanEnergy Common Stock are changed
into a different number or class as a result of a stock split, reverse stock
split, stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or similar transaction, an appropriate adjustment will be
made to the Exchange Ratio.

Because the Exchange Ratio is fixed and because the market prices of Duke
Common Stock and PanEnergy Common Stock may fluctuate, the value of the shares
of Duke Common Stock that holders of PanEnergy Common Stock receive in the
Merger may increase or decrease prior to, and, with respect to Duke Common
Stock, following, the Merger.

EXCHANGE OF CERTIFICATES

The Merger Agreement provides that, as soon as practicable after the
Effective Time, the Exchange Agent will mail to each holder of record of a
certificate or certificates that, immediately prior to the Effective Time,
represented outstanding shares of PanEnergy Common Stock (each herein
sometimes called a "Certificate" and collectively herein sometimes called the
"Certificates") that were converted into the right to receive shares of Duke
Common Stock, as described above, (i) a letter of transmittal (specifying that
delivery shall be effected, and risk of loss and title to any Certificate
shall pass, only upon delivery of such Certificate to the Exchange Agent) and
(ii) instructions for effecting the surrender of Certificates in exchange for
certificates representing shares of Duke Common Stock and cash in lieu of any
fractional shares. There will be no need for any holders of certificates
representing shares of Duke Common Stock to exchange their certificates in
connection with the Merger since such certificates will continue to represent
the same number of shares of Duke Common Stock after the Merger.

Upon surrender of a Certificate to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
shall require, the holder of such Certificate shall be entitled, pursuant to
the terms of the Merger Agreement, to receive in exchange therefor a
certificate representing the number of whole shares of Duke Common Stock that
such holder has the right to receive under the Merger Agreement and a check
representing (i) the amount of cash in lieu of any fractional shares and (ii)
any unpaid dividends and distributions which such holder is entitled to
receive. Until surrendered, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
a certificate representing shares of Duke Common Stock and cash in lieu of any
fractional shares of Duke Common Stock.

The Merger Agreement provides that no dividends or other distributions
declared or made after the Effective Time on Duke Common Stock with a record
date after the Effective Time will be paid to the holder of any

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unsurrendered Certificate with respect to the shares of Duke Common Stock
represented thereby, and no cash payment in lieu of fractional shares will be
made to any such holder until such Certificate is surrendered. After such
surrender, subject to applicable law, there will be paid to such holder,
without interest, the unpaid dividends and distributions and any cash payment
in lieu of a fractional share to which such holder is entitled.

HOLDERS OF DUKE COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES TO THE
EXCHANGE AGENT. HOLDERS OF PANENERGY COMMON STOCK SHOULD NOT SEND IN THEIR
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY RECEIVE INSTRUCTIONS FROM THE
EXCHANGE AGENT.

EXPENSES

Duke and PanEnergy agreed in the Merger Agreement that, with certain
exceptions specified in the Merger Agreement (see "THE MERGER AGREEMENT--
Termination; Fees and Expenses"), all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby will be
paid by the party incurring such expenses, except that those expenses incurred
in connection with printing, filing and mailing of this Joint Proxy Statement-
Prospectus and the Registration Statement and filings under the HSR Act will be
shared equally by Duke and PanEnergy.

PANENERGY CONVERTIBLE NOTES

As of the PanEnergy Record Date, PanEnergy had outstanding $10,000,000 in
principal amount of PanEnergy Convertible Notes that are presently convertible
at a conversion price of $22.13 per share into a maximum of 451,875 shares of
PanEnergy Common Stock. From and after the Effective Time, the holders of
PanEnergy Convertible Notes will have the right to convert their PanEnergy
Convertible Notes into the number of shares of Duke Common Stock receivable by
a holder of the number of shares of PanEnergy Common Stock into which the
PanEnergy Convertible Notes might have been converted immediately prior to the
Merger. Thus, a holder of $1,000,000 principal amount of PanEnergy Convertible
Notes, which prior to the Effective Time would have been convertible at the
current conversion price into 45,187 whole shares of PanEnergy Common Stock,
would be entitled after the Merger to convert the PanEnergy Convertible Notes
into 47,193 shares of Duke Common Stock (plus cash for any fractional share),
which number of shares is the number of whole shares of Duke Common Stock that
a holder of 45,187 shares of PanEnergy Common Stock would have received upon
conversion of his or her shares in the Merger based on the Exchange Ratio. The
number of shares of Duke Common Stock that a holder of PanEnergy Convertible
Notes may acquire upon conversion of the PanEnergy Convertible Notes after the
Merger will be subject to adjustment in accordance with the anti-dilution
provisions applicable to the PanEnergy Convertible Notes.

No gain or loss should be recognized for federal income tax purposes as a
result of the PanEnergy Convertible Notes becoming convertible into shares of
Duke Common Stock. Any conversion of a PanEnergy Convertible Note into Duke
Common Stock after the consummation of the Merger will, however, likely be a
taxable transaction to a holder of such PanEnergy Convertible Note for federal
income tax purposes. Holders of PanEnergy Convertible Notes are strongly urged
to consult their tax advisors to determine the particular United States
federal, state, local or foreign income or other tax consequences to them of
the PanEnergy Convertible Notes becoming convertible into shares of Duke Common
Stock and of the conversion of a PanEnergy Convertible Note into Duke Common
Stock after the consummation of the Merger.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain members of Duke's management, PanEnergy's management, the Duke Board
and the PanEnergy Board have interests in the Merger that are in addition to
their interests as holders of Duke Common Stock and holders of PanEnergy Common
Stock generally and have participated in the negotiation of the terms of the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Certain executive officers and members of the Duke Board and the
PanEnergy Board will be executive officers and/or members of the Duke Board
after the Effective Time. Duke and PanEnergy have also entered into employment
agreements with certain of such executive officers and directors, which
agreements will become effective at the Effective Time. Certain executive
officers and members of the PanEnergy Board may also be entitled to receive
benefits as a

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result of the Merger under the terms of benefit plans and agreements
maintained by PanEnergy. In addition, Duke has agreed to provide insurance and
indemnification for executive officers and directors of PanEnergy after the
Effective Time.

PanEnergy Employment Agreements. Pursuant to the Merger Agreement, Duke,
PanEnergy and Paul M. Anderson, and PanEnergy and each of Messrs. Fowler,
Gatewood, Hackett, Mogg and Williamson, entered into employment agreements
dated as of November 24, 1996 (the "PanEnergy Employment Agreements") which
will become effective at the Effective Time and remain in effect for a two-
year period or such longer period as may be mutually agreed upon by the
parties thereto (the "Employment Period"). The PanEnergy Employment Agreements
supersede all prior agreements, understandings or commitments between
PanEnergy and the executives with respect to the terms and conditions of their
employment with PanEnergy or any successor thereto. The principal terms and
conditions of these agreements are described below.

The Anderson Employment Agreement provides that Mr. Anderson will serve as
Chief Operating Officer and President of Duke, a member of the Office of the
Chief Executive Officer and a member of the Duke Policy Committee, a committee
of senior executive managers designated by the Office of the Chief Executive
Officer. The Anderson Employment Agreement further provides that during the
Employment Period, Mr. Anderson will receive an annual base salary of no less
than $700,000 (his current base salary), an annual bonus opportunity set at a
target level of no less than 70% of Mr. Anderson's base salary and a
supplementary salary payment in the event that Mr. Anderson becomes subject to
North Carolina taxes such that the amount of Mr. Anderson's after-tax
compensation is no less than the amount he would have received absent the
imposition of North Carolina taxes. In addition, Mr. Anderson will be entitled
to receive annual option and/or restricted stock awards the aggregate value of
which, in any year, will be equal to the sum of Mr. Anderson's base salary and
target bonus opportunity in the year in which the award is made. Pursuant to
the Anderson Employment Agreement, Duke will also provide Mr. Anderson
deferred compensation payable upon the later of Mr. Anderson's termination of
employment or his attainment of the age of 55, accruing at a monthly rate of
$83,334, plus interest, for each of the twenty-four months following the
Effective Time. The Anderson Employment Agreement prohibits Mr. Anderson from
disclosing or using certain confidential information while employed by Duke
and at any time thereafter. The Anderson Employment Agreement also provides
that Duke will indemnify Mr. Anderson to the fullest extent permitted by law
for any claims against him in connection with his service to Duke.

If Mr. Anderson's employment terminates before the end of the Employment
Period (except in the case of termination for Cause or Disability as defined
in the Anderson Employment Agreement), Mr. Anderson will be entitled to the
following: (i) a lump-sum payment aggregating accrued obligations (such as
unpaid salary and a pro-rata portion of his target bonus opportunity) to Mr.
Anderson; and (ii) retirement benefits, including qualified defined benefit
retirement benefits, excess or supplemental retirement benefits, and welfare
benefits, as if Mr. Anderson had reached early retirement age as of the date
of termination of his employment. In the event that compensation payments to
Mr. Anderson would subject him to excise tax under section 4999 of the Code,
Duke will reduce such payments if and to the extent it would maximize Mr.
Anderson's after-tax compensation.

The Fowler Employment Agreement provides that Mr. Fowler will serve as
President of Duke Energy Transmission Services and as a member of the Duke
Policy Committee during the Employment Period. The Fowler Employment Agreement
further provides that, during the Employment Period, Mr. Fowler will receive a
base salary at least equal to the base salary he received for the twelve-month
period prior to the Effective Time (e.g., $260,000 was paid as base salary to
Mr. Fowler in 1996), a supplementary salary payment in the event that Mr.
Fowler becomes subject to North Carolina taxes such that Mr. Fowler's after-
tax compensation is no less than the amount he would have received absent the
imposition of North Carolina taxes and an annual bonus opportunity set at a
target level of no less than 50% of Mr. Fowler's base salary. In addition, Mr.
Fowler will be entitled to receive annual option and/or restricted stock
awards the aggregate fair market value of which, in any year, will be no less
than 55% of the sum of Mr. Fowler's base salary and target bonus opportunity
in the year in which the award is made. The Fowler Employment Agreement
prohibits Mr. Fowler from disclosing or using certain confidential information
while employed by PanEnergy and at any time thereafter. The Fowler

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Employment Agreement also provides that PanEnergy will indemnify Mr. Fowler to
the fullest extent permitted by law for any claims against him in connection
with his service to PanEnergy.

If, during the Employment Period, PanEnergy terminates Mr. Fowler's
employment for any reason other than Cause or Disability (as defined in the
Fowler Employment Agreement), or Mr. Fowler terminates his employment for Good
Reason (as defined in the Fowler Employment Agreement), Mr. Fowler will be
entitled to the following: (i) a lump-sum payment aggregating (a) accrued
obligations (such as unpaid salary and a pro-rata portion of his target bonus
opportunity) to Mr. Fowler, (b) an amount equal to two times Mr. Fowler's most
recent annual compensation (including target bonus opportunity), and (c) an
amount equal to the excess of (1) the actuarial present value of the
retirement benefits which Mr. Fowler would receive assuming he continued
employment with PanEnergy for two years over (2) the actuarial present value
of Mr. Fowler's actual retirement benefits; and (ii) continued employee
welfare benefits for two years. In the event that compensation payments to Mr.
Fowler would subject him to excise tax under section 4999 of the Code,
PanEnergy will reduce such payments so that no portion will be subject to the
excise tax.

The Gatewood Employment Agreement provides that Mr. Gatewood will serve as
President and Chief Executive Officer of PanEnergy Marketing Company during
the Employment Period. The Gatewood Employment Agreement further provides
that, during the Employment Period, Mr. Gatewood will receive a base salary at
least equal to the base salary he received for the twelve-month period prior
to the Effective Time (e.g., $220,000 was paid as base salary to Mr. Gatewood
in 1996) and an annual bonus opportunity set at a target level of no less than
40% of Mr. Gatewood's base salary. In addition, Mr. Gatewood will be entitled
to receive annual option and/or restricted stock awards the aggregate fair
market value of which, in any year, will be no less than 45% of the sum of Mr.
Gatewood's base salary and target bonus opportunity in the year in which the
award is made. The Gatewood Employment Agreement prohibits Mr. Gatewood from
disclosing or using certain confidential information while employed by
PanEnergy and at any time thereafter. The Gatewood Employment Agreement also
provides that PanEnergy will indemnify Mr. Gatewood to the fullest extent
permitted by law for any claims against him in connection with his service to
PanEnergy.

If, during the Employment Period, PanEnergy terminates Mr. Gatewood's
employment for any reason other than Cause or Disability (as defined in the
Gatewood Employment Agreement), or Mr. Gatewood terminates his employment for
Good Reason (as defined in the Gatewood Employment Agreement), Mr. Gatewood
will be entitled to the following: (i) a lump-sum payment aggregating (a)
accrued obligations (such as unpaid salary and a pro-rata portion of his
target bonus opportunity) to Mr. Gatewood, (b) an amount equal to two times
Mr. Gatewood's most recent annual compensation (including target bonus
opportunity), and (c) an amount equal to the excess of (1) the actuarial
present value of the retirement benefits which Mr. Gatewood would receive
assuming he continued employment with PanEnergy for two years over (2) the
actuarial present value of Mr. Gatewood's actual retirement benefits; and
(ii) continued employee welfare benefits for two years. In the event that
compensation payments to Mr. Gatewood would subject him to excise tax under
section 4999 of the Code, PanEnergy will reduce such payments so that no
portion will be subject to the excise tax.

The Hackett Employment Agreement provides that Mr. Hackett will serve as
President of Duke Energy Services, the division that will comprise all non-
regulated energy business units of Duke and PanEnergy, and as a member of the
Duke Policy Committee during the Employment Period. The Hackett Employment
Agreement further provides that, during the Employment Period, Mr. Hackett
will receive a base salary at least equal to the base salary he received for
the twelve-month period prior to the Effective Time (e.g., $350,000 was paid
as base salary to Mr. Hackett in 1996) and an annual bonus opportunity set at
a target level of no less than 55% of Mr. Hackett's base salary. In addition,
Mr. Hackett will be entitled to receive annual option and/or restricted stock
awards the aggregate fair market value of which, in any year, will be no less
than 80% of the sum of Mr. Hackett's base salary and target bonus opportunity
in the year in which the award is made. The Hackett Employment Agreement
prohibits Mr. Hackett from disclosing or using certain confidential
information while employed by PanEnergy and at any time thereafter. The
Hackett Employment Agreement also provides that PanEnergy will indemnify Mr.
Hackett to the fullest extent permitted by law for any claims against him in
connection with his service to PanEnergy.

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If, during the Employment Period, PanEnergy terminates Mr. Hackett's
employment for any reason other than Cause or Disability (as defined in the
Hackett Employment Agreement), or Mr. Hackett terminates his employment for
Good Reason (as defined in the Hackett Employment Agreement), Mr. Hackett will
be entitled to the following: (i) a lump-sum payment aggregating (a) accrued
obligations (such as unpaid salary and a pro-rata portion of his target bonus
opportunity) to Mr. Hackett, (b) an amount equal to three times Mr. Hackett's
most recent annual compensation (including target bonus opportunity), and (c)
an amount equal to the excess of (1) the actuarial present value of the
retirement benefits which Mr. Hackett would receive assuming he continued
employment with PanEnergy for three years over (2) the actuarial present value
of Mr. Hackett's actual retirement benefits; and (ii) continued employee
welfare benefits for three years. In the event that the vesting of certain
shares of Restricted Stock granted to Mr. Hackett by PanEnergy would be
subject to the excise tax under section 4999 of the Code, PanEnergy will make
a payment to Mr. Hackett such that after the payment of all income and excise
taxes, Mr. Hackett will be in the same after-tax position as if no excise tax
under section 4999 of the Code had been imposed. With respect to any other
payments that would subject Mr. Hackett to such excise tax, PanEnergy will (a)
reduce such payments so that payments to Mr. Hackett do not exceed the amount
which would be characterized as a "parachute payment" under section 280G of
the Code (if his Restricted Stock had not vested) and (b) if, after such
reduction, payments to Mr. Hackett remain subject to the excise tax under
section 4999 of the Code, make a payment to Mr. Hackett such that after the
payment of all income and excise taxes, Mr. Hackett will be in the same after-
tax position as if no excise tax under section 4999 had been imposed.

The Mogg Employment Agreement provides that, Mr. Mogg will serve as
President and Chief Executive Officer of PanEnergy Field Services, Inc. during
the Employment Period. The Mogg Employment Agreement further provides that,
during the Employment Period, Mr. Mogg will receive a base salary at least
equal to the base salary he received for the twelve-month period prior to the
Effective Time (e.g., $230,000 was paid as base salary to Mr. Mogg in 1996)
and an annual bonus opportunity set at a target level of no less than 40% of
Mr. Mogg's base salary. In addition, Mr. Mogg will be entitled to receive
annual stock option and/or restricted stock awards the aggregate fair market
value of which, in any year, will be no less than 45% of the sum of Mr. Mogg's
base compensation and target bonus opportunity in the year in which the award
is made. The Mogg Employment Agreement prohibits Mr. Mogg from disclosing or
using certain confidential information while employed by PanEnergy and at any
time thereafter. The Mogg Employment Agreement also provides that PanEnergy
will indemnify Mr. Mogg to the fullest extent permitted by law for any claims
against him in connection with his service to PanEnergy.

If, during the Employment Period, PanEnergy terminates Mr. Mogg's employment
for any reason other than Cause or Disability (as defined in the Mogg
Employment Agreement) or Mr. Mogg terminates his employment for Good Reason
(as defined in the Mogg Employment Agreement), Mr. Mogg will be entitled to
the following: (i) a lump-sum payment aggregating (a) accrued obligations
(such as unpaid salary and a pro-rata portion of his target bonus opportunity)
to Mr. Mogg, (b) an amount equal to two times Mr. Mogg's most recent annual
compensation (including target bonus opportunity), and (c) an amount equal to
the excess of (1) the actuarial present value of the retirement benefits which
Mr. Mogg would receive assuming he continued employment with PanEnergy for two
years over (2) the actuarial present value of Mr. Mogg's actual retirement
benefits; and (ii) continued employee welfare benefits for two years. In the
event that compensation payments to Mr. Mogg would subject him to excise tax
under section 4999 of the Code, PanEnergy will reduce such payments so that no
portion will be subject to the excise tax.

The Williamson Employment Agreement provides that Mr. Williamson will serve
as Vice President, Business Development for Duke Energy Services during the
Employment Period. The Williamson Employment Agreement further provides that,
during the Employment Period, Mr. Williamson will receive a base salary at
least equal to the base salary he received for the twelve-month period prior
to the Effective Time (e.g., $160,000 was paid as base salary to Mr.
Williamson in 1996) and an annual bonus opportunity set at a target level of
no less than 35% of Mr. Williamson's base salary. In addition, Mr. Williamson
will be entitled to receive annual stock option and/or restricted stock awards
the aggregate fair market value of which, in any year, will be no less than
40% of the sum of Mr. Williamson's base salary and target bonus opportunity in
the year in which the

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award is made. The Williamson Employment Agreement prohibits Mr. Williamson
from disclosing or using certain confidential information while employed by
PanEnergy and at any time thereafter. The Williamson Employment Agreement also
provides that PanEnergy will indemnify Mr. Williamson to the fullest extent
permitted by law for any claims against him in connection with his service to
PanEnergy.

If, during the Employment Period, PanEnergy terminates Mr. Williamson's
employment for a reason other than Cause or Disability (as defined in the
Williamson Employment Agreement), or Mr. Williamson terminates his employment
for Good Reason (as defined in the Williamson Employment Agreement), Mr.
Williamson will be entitled to the following: (i) a lump-sum payment
aggregating (a) accrued obligations (such as unpaid salary and a pro-rata
portion of his target bonus opportunity) to Mr. Williamson, (b) an amount
equal to two times Mr. Williamson's most recent annual compensation (including
target bonus opportunity), and (c) an amount equal to the excess of (1) the
actuarial present value of the retirement benefits which Mr. Williamson would
receive assuming he continued employment with PanEnergy for two years over (2)
the actuarial present value of Mr. Williamson's actual retirement benefits;
and (ii) continued employee welfare benefits for two years. In the event that
compensation payments to Mr. Williamson would subject him to excise tax under
section 4999 of the Code, PanEnergy will reduce such payments so that no
portion will be subject to the excise tax.

PanEnergy Stock Options; Restricted Stock. At the Effective Time, all rights
with respect to PanEnergy Common Stock pursuant to PanEnergy stock options
granted prior to January 22, 1997 and outstanding at such time under the
PanEnergy stock option plans, whether or not then exercisable, will accelerate
and be converted into and become rights with respect to shares of Duke Common
Stock, and all restrictions upon PanEnergy restricted stock granted by
PanEnergy prior to January 22, 1997 will lapse. All such stock options and
restricted stock were granted under plans that were in effect more than two
years prior to the beginning of discussions leading to the execution of the
Merger Agreement. See also "Stock Options; Restricted Stock."

As of January 28, 1997, executive officers of PanEnergy held the following
unvested options to purchase PanEnergy Common Stock and shares of restricted
PanEnergy Common Stock which will vest or become unrestricted at the Effective
Time as a result of the Merger:

<TABLE>
<CAPTION>
VALUE AT JANUARY 28,
1997 OF OPTIONS
NUMBER OF UNVESTED NUMBER OF RESTRICTED AND RESTRICTED STOCK
OPTIONS WHICH BECOME SHARES WHICH BECOME WHICH VEST OR BECOME
EXERCISABLE AT THE UNRESTRICTED AT THE UNRESTRICTED AT THE
NAME EFFECTIVE TIME EFFECTIVE TIME EFFECTIVE TIME($)(1)
---- -------------------- -------------------- --------------------
<S> <C> <C> <C>
Paul M. Anderson........ 75,000 25,000 2,218,750
James T. Hackett........ 33,334 60,000 3,432,513
George L. Mazanec....... -- -- --
D. H. Anderson.......... -- -- --
Carl B. King............ 14,667 2,750 396,120
Fred J. Fowler.......... 13,000 1,200 329,650
Paul F. Ferguson, Jr. .. 10,668 -- 233,696
James W. Hart, Jr. ..... 2,200 -- 47,475
Dennis R. Hendrix....... -- -- --
Sandra P. Meyer......... 5,067 -- 111,951
Steven M. Roverud....... 13,000 -- 274,000
Bruce A. Williamson..... 4,668 -- 97,152
</TABLE>
- --------
(1) Value is based on the closing sale price for PanEnergy Common Stock on the
NYSE Composite Transactions Tape on January 28, 1997, less, in the case of
options, the weighted average per share exercise price. For a recent quote
of the closing sale price of PanEnergy Common Stock, see "MARKET PRICE AND
DIVIDEND INFORMATION."

As a result of the Merger, all unvested options under the 1989 Non-Employee
Directors' Stock Option Plan will vest at the Effective Time. On January 28,
1997, each of the non-employee directors of PanEnergy had 1,000

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<PAGE>

unvested options under the plan having a value of $14,125 each (calculated as
indicated in (1) above), which will vest at the Effective Time.

Other Benefit Plans and Agreements. A change in control will be deemed to
have occurred under each of the following PanEnergy employee benefit plans at
the Effective Time. PanEnergy is unable to determine the cost, if any, of the
benefits payable under these plans as a result of the change in control.

. The PanEnergy Executive Severance Program covers certain named
individuals, including PanEnergy executive officers Fred J. Fowler, James
W. Hart, Jr. and Carl B. King. Upon certain terminations of employment
within three years of the Effective Time, the program will provide the
terminated employee with a lump-sum benefit equal to two and one-half times
the terminated employee's average compensation for the five years preceding
the change in control, continuation of certain benefits for two and one-
half years and enhanced retirement benefits.

. The PanEnergy Change in Control Severance Pay Plan covers all non-union
employees of PanEnergy and certain of its affiliates who are not covered
under individual employment agreements providing for severance benefits or
under the PanEnergy Executive Severance Program, including executive
officers Paul F. Ferguson, Jr., D. H. Anderson, Sandra P. Meyer, Steven M.
Roverud and Bruce A. Williamson. Upon certain terminations of employment
within three years of the Effective Time, the plan will provide the
terminated employee with a lump-sum benefit equal to one-half of one
month's compensation for each year of service or part thereof and one
month's compensation for each $10,000 of annual compensation or part
thereof (with a maximum benefit equal to two years' compensation) and
continuation of certain benefits for six months.

. The PanEnergy Retirement Income Plan covers non-union employees of
PanEnergy and certain of its affiliates, including all executive officers
of PanEnergy other than Mr. Hendrix. Under the plan, upon certain
terminations within three years of the Effective Time, an employee who has
five years of vesting service but has not attained the age of 55 will be
entitled to benefit payments with less than full actuarial reductions for
early commencement.

. The PanEnergy Non-Employee Directors' Retirement Plan covers non-
employee directors of PanEnergy. The plan provides that upon a change in
control, a non-employee director will be deemed to have accrued the full
benefit accruable under the plan, which is equal to 6% of the director's
annual retainer for each year of service until the director reaches his or
her retirement age, up to a maximum of ten years of service.

Duke Employment Agreements. Pursuant to the Merger Agreement, Duke entered
into employment agreements dated as of November 24, 1996 (the "Duke Employment
Agreements") with six of its officers to serve in the positions hereinafter
specified at Duke following the Merger, namely: Richard B. Priory (Chairman
and Chief Executive Officer), William A. Coley (President of Duke Power
Company, the division of Duke that will comprise the regulated electric
utility following the Merger), Richard J. Osborne (Senior Vice President and
Chief Financial Officer), Ruth G. Shaw (Senior Vice President, Corporate
Resources and Chief Administrative Officer), Michael S. Tuckman (Senior Vice
President, Nuclear Generation) and David L. Hauser (Vice President,
Procurement Services and Materials).

Each Duke Employment Agreement is for a term of two years commencing at the
Effective Time and provides for an annual base salary that is at least equal
to the executive's annual base salary for the twelve-month period prior to the
Effective Time (e.g., Messrs. Priory, Coley, Osborne, Tuckman and Hauser and
Ms. Shaw were paid $476,509, $378,947, $253,200, $248,400, $193,100 and
$246,000, respectively, as base salary in 1996). Each Duke Employment
Agreement also provides for an annual bonus calculated as a percentage of
annual base salary, with a target percentage at least equal to the executive's
target percentage for 1996, payable upon the executive's achievement of
performance goals established by the Compensation Committee of the Duke Board.
Each executive will be entitled to participate in all long-term incentive
plans, savings, retirement and

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<PAGE>

welfare benefit plans on the same basis as other peer executives of Duke. In
the event the executive's employment is terminated for "good reason" by the
executive or without "cause" by Duke (both as defined in the Duke Employment
Agreements), the executive will be entitled to receive a lump-sum severance
payment equal to the product of three times (two times in the case of Mr.
Hauser) the executive's annual base salary and target bonus. In addition, for
three years (two years in the case of Mr. Hauser) following the executive's
date of termination for "good reason" or without "cause" by Duke, the
executive will be entitled to continued coverage under the medical, life
insurance and other welfare benefit plans of Duke. In the event that any of
the payments or benefits provided for in the relevant Duke Employment
Agreement would constitute a "parachute payment" (as defined in section
280G(b)(2) of the Code), the executive may elect to reduce such payments or
benefits so that the excise tax imposed by section 4999 of the Code would not
apply. Each Duke Employment Agreement contains a restrictive covenant that
prohibits the executive from disclosing or using certain confidential
information while employed by Duke and at any time thereafter. Each Duke
Employment Agreement provides that Duke will indemnify the executive to the
fullest extent permitted by law for any claims against the executive in
connection with his or her service to Duke.

Indemnification and Insurance. The Merger Agreement provides that, to the
extent not prohibited by law, all rights of indemnification in favor of
current or former directors or officers of PanEnergy as provided in the
PanEnergy Certificate of Incorporation or the PanEnergy By-Laws for acts or
omissions occurring prior to the Effective Time will continue in full force
and effect from the Effective Time until the expiration of the applicable
statute of limitations with respect to any claims arising out of such acts and
omissions. The Merger Agreement also provides that for a period of not less
than six years from the Effective Time, Duke will cause to be maintained
PanEnergy's directors' and officers' insurance and indemnification policy to
the extent that it provides coverage for events occurring prior to the
Effective Time for directors and officers of PanEnergy who were covered under
such policy as in effect on November 24, 1996 so long as the annual premium
would not be in excess of 200% of the last annual premium paid prior to
November 24, 1996 (the "Maximum Premium"). If the existing insurance expires,
is terminated or is cancelled during such six-year period, PanEnergy, as the
surviving corporation in the Merger, has agreed in the Merger Agreement to use
all reasonable efforts to obtain as much insurance for the remaining period
for an annualized premium not in excess of the Maximum Premium as may be
obtained on terms no less advantageous to the covered persons than provided in
the existing policy.

STOCK OPTIONS; RESTRICTED STOCK

The Merger Agreement provides that each option granted by PanEnergy to
acquire PanEnergy Common Stock that is outstanding at the Effective Time will
remain outstanding after the Effective Time, will be assumed by Duke and will
be exercisable upon the same terms and conditions as under the applicable
PanEnergy stock option plan and option agreement, except that such stock
option will be exercisable for such whole number of shares of Duke Common
Stock (rounded down) into which the shares of PanEnergy Common Stock subject
to such option immediately prior to the Effective Time would have been
converted and the option price per share will be appropriately adjusted.
Pursuant to the Merger Agreement, no payment will be made for fractional
interests upon exercise of any such option.

The Merger Agreement also provides that each award of restricted PanEnergy
Common Stock outstanding and not vested at the Effective Time will remain
outstanding after the Effective Time, will be assumed by Duke and such shares
of restricted PanEnergy Common Stock will be exchanged for shares of
restricted Duke Common Stock in such number as such shares of PanEnergy Common
Stock would have been converted in the Merger.

EMPLOYEE BENEFITS AND PLANS

The Merger Agreement provides that, for the period beginning at the
Effective Time and ending on the first anniversary of the Effective Time,
PanEnergy Employees (as hereinafter defined) will continue to receive active
employee and retiree benefits under the PanEnergy Benefit Plans (as defined in
the Merger Agreement)

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<PAGE>

(regardless of any transfer of employment to Duke or any affiliate of Duke) on
substantially the same terms and conditions as were in effect immediately
before the Effective Time, subject to certain limitations provided in the
Merger Agreement. The Merger Agreement also provides that PanEnergy's
executive benefit plans and programs as in effect at the Effective Time will
continue in effect during such period without any amendment that could
adversely affect PanEnergy Employees who are participants therein as of the
Effective Time and that PanEnergy Employees will be entitled to severance
benefits in amounts and upon terms and conditions no less favorable than those
in effect for such individuals as of the Effective Time, with certain
exceptions for the PanEnergy Employees who entered into the PanEnergy
Employment Agreements. "PanEnergy Employees" means individuals who are, as of
the Effective Time, employees of PanEnergy and its Subsidiaries or former
employees of PanEnergy and its Subsidiaries entitled to present or future
benefits according to the provisions of any PanEnergy Benefit Plan as of the
Effective Time.

For all purposes under the employee benefit plans and programs applicable to
PanEnergy Employees at any time following the Effective Time, all service by
PanEnergy Employees with, and all compensation of PanEnergy Employees from,
PanEnergy or any of its Subsidiaries before the Effective Time will, pursuant
to the Merger Agreement, be treated in the same manner as service with and
compensation from Duke and its Subsidiaries before the Effective Time, except,
among other things, to the extent that such treatment would result in a
duplication of benefits.

With respect to each PanEnergy Benefit Plan under which the delivery of
PanEnergy Common Stock is required after the Effective Time, Duke agreed in
the Merger Agreement to take all corporate action necessary or appropriate to
provide for the issuance or purchase in the open market of Duke Common Stock
in lieu of PanEnergy Common Stock, as applicable pursuant to such plans, and
to use all reasonable efforts to maintain in effect securities registration
statements required with respect to such plans.

At the Effective Time, a "change in control" as defined in Duke's Stock
Incentive Plan will have occurred and the restrictions upon 3,000 shares of
restricted Duke Common Stock issued under that plan to an officer of Duke will
lapse.

MANAGEMENT AND OPERATIONS AFTER THE MERGER

Pursuant to the Merger Agreement, the number of directors constituting the
full Duke Board at the Effective Time will be eighteen persons, allocated as
equally as possible among the three classes of the Duke Board, eleven of whom
will be designated by Duke (each a "Duke Director") and seven of whom will be
designated by PanEnergy (each a "PanEnergy Director"). It is anticipated that
Messrs. Priory and Coley of Duke and Messrs. Hendrix and Paul M. Anderson of
PanEnergy will serve as directors of Duke immediately after the Effective
Time. Mr. Grigg will retire and resign as a director immediately prior to the
Effective Time. Pursuant to the Merger Agreement, the remaining nine Duke
Directors will be the persons serving as directors of Duke immediately prior
to the Effective Time. PanEnergy has not determined which individuals, in
addition to Messrs. Hendrix and Anderson, will be designated to serve as
directors of Duke immediately after the Effective Time. The Merger Agreement
states that it is contemplated that one Duke Director and one PanEnergy
Director will retire from the Duke Board in April 1998 if the Merger has been
consummated prior to such time and that the number of directors constituting
the full Duke Board will thereafter be sixteen, except as may be otherwise
subsequently determined by the Duke Board. The Merger Agreement provides that
the Duke Board at the Effective Time will consist of the persons designated by
Duke and the persons designated by PanEnergy prior to the Effective Time;
provided that if, prior to the Effective Time, any such designee declines or
is unable to serve, Duke or PanEnergy, as the case may be, will designate
another person to serve in such person's stead.

The Merger Agreement provides that Mr. Priory will hold the position of
Chairman of the Board and Chief Executive Officer of Duke and Mr. Anderson
will hold the position of President and Chief Operating Officer of Duke from
the Effective Time; provided that if, prior to the Effective Time, Mr. Priory
declines or is unable to serve as Chairman of the Board and Chief Executive
Officer, Duke will designate another person to serve in his

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stead, and if, prior to the Effective Time, Mr. Anderson declines or is unable
to serve as President and Chief Operating Officer, PanEnergy will designate
another person to serve in his stead. Pursuant to the Merger Agreement, Duke
will establish at the Effective Time an Office of the Chief Executive that
will exercise executive management over Duke following the Merger and will
consist of the Chief Executive Officer and the President and Chief Operating
Officer of Duke, with the final decision-making authority in the Office of the
Chief Executive residing with the Chief Executive Officer of Duke.

Pursuant to the Merger Agreement, the Office of the Chief Executive will
appoint a Policy Committee of senior executive officers of Duke and PanEnergy
at the Effective Time that will, in addition to the Chairman of the Board and
Chief Executive Officer and the President and Chief Operating Officer, consist
of William A. Coley, Richard J. Osborne and Ruth G. Shaw (currently of Duke)
and James T. Hackett and Fred J. Fowler (currently of PanEnergy). The Merger
Agreement also provides that the Management Committee of the Duke Board at the
Effective Time will consist of the members of the Duke Board who are officers
of Duke. At the Effective Time, pursuant to the Merger Agreement, all other
Committees of the Duke Board will have two members designated by PanEnergy and
the Chairman of each Committee of the Duke Board will be a Duke Director.

Following the Effective Time, Duke will maintain its corporate offices in
Charlotte, North Carolina, and will have significant operations in Houston,
Texas. PanEnergy and its subsidiaries will continue their respective
operations as direct or indirect subsidiaries of Duke.

COMPENSATION OF EXECUTIVE OFFICERS AFTER THE MERGER

Subject to the terms of the relevant Duke Employment Agreements and the
relevant PanEnergy Employment Agreements, the form and amount of compensation
to be paid to the executive officers of Duke after the Effective Time have not
yet been determined. The Duke Board will rely on its Compensation Committee
composed of nonemployee directors to recommend the form and amount of
compensation to be paid to Duke's executive officers after the Effective Time.

It is anticipated that, when the Compensation Committee meets to determine
such compensation, which meeting is not expected to occur until after the
Effective Time, the Compensation Committee will generally adhere to
compensation policies which reflect the belief that (i) Duke must attract and
retain individuals of outstanding ability and motivate and reward such
individuals for sustained performance, (ii) a substantial portion of an
executive's compensation should be at risk based upon that executive's
performance and that of the corporation, and (iii) within these parameters,
levels of compensation should generally be in line with that offered by
comparable corporations to executives and should reflect increases in
responsibilities of such executives. Subject to the terms of the relevant Duke
Employment Agreements and the relevant PanEnergy Employment Agreements, the
type and amount of compensation to be paid by Duke on an ongoing basis to its
executive officers after the Effective Time will be entirely discretionary and
within the subjective judgment of the Compensation Committee. See "THE
MERGER--Interests of Certain Persons in the Merger."

For information concerning the compensation paid to the Chief Executive
Officer and the other four most highly compensated executive officers of each
of Duke and PanEnergy for the 1995 fiscal year, see the 1996 proxy statements
for Duke and PanEnergy, the relevant portions of which are incorporated by
reference into the Annual Report of Duke on Form 10-K and the Annual Report of
PanEnergy on Form 10-K, for the year ended December 31, 1995, respectively.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."

DIVIDENDS

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no assurance can be given that such dividend rate will remain unchanged, and
Duke reserves the right to increase or decrease the dividend on the Duke
Common Stock as may be required by law or contract or as may be determined by
the Duke Board, in its discretion, to be advisable.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following general discussion summarizes the material federal income tax
consequences of the Merger to certain holders of PanEnergy Common Stock who
receive Duke Common Stock in the Merger and is based upon the Code, the
applicable Treasury Department regulations thereunder, judicial authority and
current administrative rulings and practice, all as in effect as of the date
hereof. Future legislation, regulations, administrative rulings or court
decisions could significantly change such authorities either prospectively or
retroactively. Except for the discussion of transfer taxes below, the
following discussion does not address the consequences of the Merger under
state, local or foreign law nor does the discussion address all aspects of
federal income taxation that may be important to a holder of PanEnergy Common
Stock in light of such holder's particular circumstances or to holders of
PanEnergy Common Stock subject to special rules including, without limitation,
financial institutions, insurance companies, tax-exempt entities, dealers in
securities, persons who acquired PanEnergy Common Stock pursuant to the
exercise of an employee option (or otherwise as compensation) or persons
holding PanEnergy Common Stock as part of an integrated investment (including
a "straddle") comprised of shares of PanEnergy Common Stock and one or more
other positions. This discussion assumes that holders of PanEnergy Common
Stock hold their respective shares as capital assets within the meaning of
section 1221 of the Code.

No ruling from the Internal Revenue Service (the "IRS") concerning the
federal income tax consequences of the Merger will be requested. It is a
condition to the Merger that PanEnergy receive an opinion from LeBoeuf, Lamb,
Greene & MacRae, L.L.P., that the Merger qualifies, for federal income tax
purposes, as a reorganization within the meaning of section 368(a) of the
Code, and that Duke, Duke Transaction and PanEnergy will each be a party to
that reorganization within the meaning of section 368(b) of the Code. The
opinion will be based upon (i) certain assumptions set forth therein and (ii)
representations by the managements of PanEnergy and Duke. The opinion referred
to above neither binds nor precludes the IRS from adopting a contrary position
and no assurance can be given that contrary positions will not be successfully
asserted by the IRS or adopted by a court if the issues are litigated.

As used herein, the term "U.S. Holder" means a holder of PanEnergy Common
Stock that is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate, and, for taxable years beginning on or before December 31, 1996, in
general any trust, the income of which is subject to United States federal
income taxation regardless of its source, or (iv) for taxable years beginning
after December 31, 1996, any trust if a court within the United States is able
to exercise primary supervision over the administration of such trust and one
or more United States fiduciaries have the authority to control all
substantial decisions of such trust. A "Non-U.S. Holder" means a holder of
PanEnergy Common Stock that is not a U.S. Holder.

THE FOLLOWING IS A SUMMARY OF CERTAIN MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER, WITHOUT REFERENCE TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF ANY PARTICULAR HOLDER OF PANENERGY COMMON STOCK. IN ADDITION,
EXCEPT FOR THE DISCUSSION OF TRANSFER TAXES BELOW, THIS DISCUSSION DOES NOT
ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF
THE MERGER. THIS DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES OF ANY
TRANSACTION OTHER THAN THE MERGER. ACCORDINGLY, EACH HOLDER OF PANENERGY
COMMON STOCK IS STRONGLY URGED TO CONSULT WITH SUCH HOLDER'S TAX ADVISOR TO
DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN INCOME
OR OTHER TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.

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Exchange of PanEnergy Common Stock Solely for Duke Common Stock. Except as
discussed below under "Foreign Investment in Real Property Tax Act ("FIRPTA")
Tax Applicable to Certain Non-U.S. Holders" and "Cash Received in Lieu of
Fractional Shares of Duke Common Stock," no gain or loss will be recognized
for federal income tax purposes by holders of PanEnergy Common Stock who
exchange their PanEnergy Common Stock for Duke Common Stock pursuant to the
Merger. Except with respect to certain Non-U.S. Holders of PanEnergy Common
Stock who are subject to the FIRPTA Tax (as defined below), the aggregate tax
basis of Duke Common Stock received as a result of the Merger will be the same
as the holder's aggregate tax basis in the PanEnergy Common Stock surrendered
in the exchange (reduced by any tax basis allocable to fractional shares
exchanged for cash) and the holding period of the Duke Common Stock received
will include the holding period of the PanEnergy Common Stock surrendered
therefor.

Foreign Investment in Real Property Tax Act ("FIRPTA") Tax Applicable to
Certain Non-U.S. Holders. A Non-U.S. Holder of PanEnergy Common Stock that
owns or has owned more than 5% of the PanEnergy Common Stock during the
shorter of (i) the five-year period preceding the Effective Time and (ii) the
period during which such Non-U.S. Holder held its PanEnergy Common Stock (the
"Testing Period"), will be subject to U.S. federal income tax at regular
graduated rates pursuant to section 897 of the Code (the "FIRPTA Tax") on any
gain realized in connection with such Non-U.S. Holder's exchange of PanEnergy
Common Stock for Duke Common Stock pursuant to the Merger if PanEnergy is or
has been a "United States real property holding company" (a "USRPHC") during
the Testing Period and (i) with respect to such Non-U.S. Holder, the Duke
Common Stock received pursuant to the Merger is not a "United States real
property interest" (a "USRPI") or (ii) certain filing requirements are not
satisfied. For purposes of determining whether any Non-U.S. Holder has owned
more than 5% of the PanEnergy Common Stock at any time during the Testing
Period, ownership is determined by applying the constructive ownership rules
of section 318 of the Code as modified by section 897(c)(6)(C) of the Code.
Generally, the constructive ownership rules of section 318 of the Code treat a
stockholder as owning (i) shares owned by certain relatives, related
corporations, partnerships, estates or trusts, and (ii) shares the stockholder
has an option to acquire.

A corporation generally is characterized as a USRPHC if the fair market
value of its interests in United States real property equals or exceeds 50% of
the sum of the fair market value of its worldwide real property interests plus
its other assets used or held for use in a trade or business. PanEnergy, with
respect to itself, Duke, with respect to itself prior to the Effective Time,
and Duke and PanEnergy, with respect to Duke immediately after the Effective
Time, believe that it is likely that each such corporation would be
characterized as a USRPHC. Duke Common Stock will be a USRPI with respect to a
Non-U.S. Holder if (i) such holder receives more than 5% of the Duke Common
Stock in the Merger and (ii) Duke is a USRPHC immediately after the Effective
Time.

A Non-U.S. Holder subject to the FIRPTA Tax will realize (and recognize)
gain equal to the excess of (i) the sum of the amount of any cash received and
the fair market value of the Duke Common Stock received in the Merger over
(ii) the holder's tax basis in the PanEnergy Common Stock exchanged therefor.
Loss generally may not be recognized in connection with the exchange. The
aggregate tax basis of Duke Common Stock received as a result of the Merger
will equal the Duke Common Stock's fair market value on the day the Merger is
consummated. The holding period of the Duke Common Stock received will begin
the day after the Merger is consummated.

Neither Duke nor PanEnergy will be required to, nor will they, withhold any
amount with respect to any FIRPTA Tax from the consideration received by any
Non-U.S. Holder pursuant to the Merger. A Non-U.S. Holder subject to the
FIRPTA Tax will be required to (i) file a U.S. federal income tax return
reporting the gain subject to the FIRPTA Tax as income effectively connected
with the conduct of a trade or business within the United States taxable at
graduated rates on a net basis and (ii) pay any FIRPTA Tax due upon the filing
of such return or, depending on the circumstances, earlier through estimated
tax payments. An exemption from the FIRPTA Tax or a reduced tax rate may be
available under certain U.S. income tax treaties. Non-U.S. Holders are
strongly urged to consult their tax advisors to determine the possible
application of the FIRPTA Tax (including the situation where Non-U.S. Holders
own or have owned Duke Common Stock prior to the Effective Time) and
availability of an exemption or tax reduction under an applicable U.S. income
tax treaty.

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Cash Received in Lieu of Fractional Shares of Duke Common Stock. No
fractional shares of Duke Common Stock will be issued upon the surrender for
exchange of certificates representing shares of PanEnergy Common Stock. The
payment of cash to a holder of PanEnergy Common Stock in lieu of a fractional
share interest in Duke Common Stock will be treated as if the fractional share
had been distributed as part of the exchange and then redeemed by Duke. The
cash payment will be treated as having been received as a distribution in
payment for the Duke Common Stock hypothetically redeemed as provided in
section 302 of the Code and generally should result in the recognition of
capital gain or loss measured by the difference between the amount of cash
received and the portion of the tax basis of the share of PanEnergy Common
Stock allocable to such fractional share interest. Such capital gain or loss
will be long-term capital gain or loss if such share of PanEnergy Common Stock
has been held for more than one year at the Effective Time.

Transfer Taxes. Certain state and local taxing authorities (e.g., New York
State) may impose certain taxes on the direct or indirect transfer of an
interest in real property (including leases) located within such jurisdiction
("Transfer Taxes"). Transfer Taxes may also be imposed in connection with
certain direct or indirect ownership changes of an entity owning a real
property interest located within such jurisdiction. Duke and PanEnergy
anticipate that Transfer Taxes will be incurred by holders of PanEnergy Common
Stock as a result of the Merger. In accordance with the Merger Agreement,
PanEnergy will declare a special dividend (the "Special Dividend") to the
holders of PanEnergy Common Stock in an amount equal to the amount of any
Transfer Taxes that may be incurred by the holders of PanEnergy Common Stock,
and, in satisfaction of the Special Dividend, PanEnergy will pay such Transfer
Taxes on behalf of the holders of PanEnergy Common Stock. No money will be
distributed with respect to the Special Dividend. PURSUANT TO THE MERGER
AGREEMENT, THE HOLDERS OF PANENERGY COMMON STOCK WILL BE DEEMED TO HAVE (I)
AUTHORIZED PANENERGY TO FILE ANY TAX RETURNS RELATING TO TRANSFER TAXES AND
PAY ANY TRANSFER TAXES ARISING IN CONNECTION WITH THE MERGER AND (II) AGREED
TO BE BOUND BY THE VALUES AND ALLOCATIONS ESTABLISHED BY PANENERGY ON ANY SUCH
TAX RETURNS. Although the total amount of the Transfer Taxes payable by
PanEnergy with respect to the Merger has not been finally determined,
PanEnergy believes that the distribution which the holders of PanEnergy Common
Stock will be deemed to receive with respect to those Transfer Taxes will not
exceed $.01 per share of PanEnergy Common Stock.

For federal income tax purposes, the payment of Transfer Taxes by PanEnergy
generally should be treated as a distribution by PanEnergy to each holder of
PanEnergy Common Stock taxable to such holder as a dividend. Any income taxes
owing on account of such deemed distribution will be the responsibility of the
holders of PanEnergy Common Stock. Each holder of PanEnergy Common Stock is
urged to consult with such holder's tax advisor to determine the particular
United States federal, state, local or foreign income or other tax
consequences to such holder resulting from PanEnergy's payment of any Transfer
Taxes.

Reporting Requirements. Each holder of PanEnergy Common Stock that receives
Duke Common Stock in the Merger will be required to retain records and file
with such holder's federal income tax return a statement setting forth certain
facts relating to the Merger.

Backup Withholding. Unless an exemption applies under the applicable law and
regulations, the Exchange Agent may be required to withhold, and, if required,
will withhold, 31% of any cash payments to a holder of PanEnergy Common Stock
in the Merger unless such holder provides the appropriate form. A U.S. Holder
should complete and sign the Substitute Form W-9 enclosed with the letter of
transmittal sent by the Exchange Agent, so as to provide the information
(including the U.S. Holder's taxpayer identification number) and certification
necessary to avoid backup withholding, unless an applicable exemption exists
and is proved in a manner satisfactory to Duke and the Exchange Agent, if
other than Duke. Non-U.S. Holders should forward a completed and signed Form
W-8 to the Exchange Agent to avoid backup withholding.

ACCOUNTING

The Merger is designed to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the
recorded assets and liabilities of Duke and PanEnergy will be carried forward
to the consolidated financial statements of Duke Energy at their recorded
amounts; income of Duke Energy will include income of Duke and PanEnergy for
the entire fiscal year in which the Merger occurs; and

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the reported income of the separate corporations will be combined and restated
as income for prior periods of Duke Energy. The receipt by Duke of a letter
from Deloitte & Touche LLP and by PanEnergy of a letter from KPMG Peat Marwick
LLP, their respective independent accountants, stating that the transaction
will qualify as a pooling of interests, is a condition to the consummation of
the Merger. The receipt of a "comfort letter" dated the Closing Date by Duke
from PanEnergy's independent auditors, KPMG Peat Marwick LLP, and the receipt
of a "comfort letter" dated the Closing Date by PanEnergy from Duke's
independent auditors, Deloitte & Touche LLP, in each case in connection with
the procedures undertaken by such accounting firm with respect to the
financial statements and other financial information of Duke and its
Subsidiaries (in the case of Duke) or PanEnergy and its Subsidiaries (in the
case of PanEnergy) contained in the Registration Statement and such other
matters as are customarily included in comfort letters relating to
transactions similar to the Merger, are also conditions to the consummation of
the Merger. Such comfort letters are to be restricted in their use to the
respective managements of Duke and PanEnergy for purposes of satisfying
certain covenants and certain conditions set forth in the Merger Agreement and
are not part of the Registration Statement. See "THE MERGER AGREEMENT--
Conditions to the Merger" and "UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL DATA."

Representatives of Deloitte & Touche LLP are expected to be present at the
Duke Meeting and representatives of KPMG Peat Marwick LLP are expected to be
present at the PanEnergy Meeting and to be available to respond to questions,
and will have an opportunity to make a statement if they desire to do so.

STOCK EXCHANGE LISTING

The Merger Agreement provides for the filing of, and Duke will file, a
listing application with the NYSE covering the shares of Duke Common Stock to
be issued pursuant to the Merger. The obligations of Duke and PanEnergy to
effect the Merger are subject to the condition that the shares of Duke Common
Stock to be issued to holders of PanEnergy Common Stock in connection with the
Merger be approved for listing on the NYSE, subject only to official notice of
issuance.

RESALES OF DUKE COMMON STOCK

The Duke Common Stock to be issued to holders of PanEnergy Common Stock in
connection with the Merger has been registered under the Securities Act. All
shares of Duke Common Stock received by holders of PanEnergy Common Stock upon
consummation of the Merger will be freely transferable by those holders of
PanEnergy Common Stock who are not deemed to be "Affiliates" (as defined under
the Securities Act but generally including executive officers, directors and
ten percent or more stockholders) of PanEnergy.

Pursuant to the Merger Agreement, PanEnergy has agreed to use all reasonable
efforts to cause each person identified by PanEnergy as an Affiliate (for
purposes of Rule 145 of the rules and regulations of the SEC under the
Securities Act ("Rule 145") and for purposes of qualifying the Merger for
pooling of interests accounting treatment) of PanEnergy at the PanEnergy
Record Date to deliver to Duke a written agreement (an "Affiliate Letter")
that such person will not sell, pledge, transfer or otherwise dispose of any
Duke Common Stock issued to him or her pursuant to the Merger, except pursuant
to an effective registration statement or in compliance with Rule 145 or an
exemption from the registration requirements of the Securities Act, and will
not sell, transfer or otherwise dispose of any such Duke Common Stock or any
other capital stock of Duke until after such time as financial results
covering at least thirty days of post-merger operations of the combined entity
have been published by Duke. Pursuant to the Merger Agreement, certificates
representing shares of PanEnergy Common Stock surrendered for exchange by any
person who is an Affiliate of PanEnergy for purposes of Rule 145(c) under the
Securities Act will not be exchanged for certificates representing shares of
Duke Common Stock, nor will any other shares of PanEnergy Common Stock owned
by such person be converted into shares of Duke Common Stock, until PanEnergy
has received an Affiliate Letter from such person. The stock certificates
representing Duke Common Stock issued to such Affiliates in the Merger will
bear a legend with respect to the applicable Rule 145 restrictions. Pursuant
to the Merger Agreement, each Affiliate Letter shall be substantially in the
form of Exhibit F hereto.

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REGULATORY MATTERS

While the parties believe that they will receive the requisite regulatory
approvals and clearances for the Merger that are summarized below, there can
be no assurance as to the timing of such approvals or clearances or the
ability of the parties to obtain such approvals and clearances on satisfactory
terms or otherwise. It is a condition to the obligation of PanEnergy to
consummate the Merger that Duke obtain certain required regulatory approvals
pursuant to final orders on terms and conditions which would not have a
Material Adverse Effect on Duke or a Material Adverse Effect on PanEnergy as
the surviving corporation in the Merger. There can be no assurance that any
such approvals will not contain terms or conditions which cause such approvals
to fail to satisfy such condition to the consummation of the Merger.

HSR PREMERGER NOTIFICATION

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Act"), and the rules and regulations thereunder, provide that certain
transactions (including the Merger) may not be consummated until certain
information has been submitted to the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and specified HSR Act waiting period requirements have
been satisfied. Duke and PanEnergy filed notifications under the HSR Act on
December 20, 1996 and December 23, 1996, respectively. The waiting period
under the HSR Act relating to these filings was terminated on January 22,
1997. The termination of the HSR Act waiting period does not preclude the
Antitrust Division or the FTC from challenging the Merger on antitrust
grounds. There can be no assurance that such a challenge, if made, would not
be successful. Neither Duke nor PanEnergy believes that the Merger will
violate Federal antitrust laws. If the Merger is not consummated within twelve
months after the termination of the initial HSR Act waiting period, Duke and
PanEnergy would be required to submit new information to the Antitrust
Division and the FTC, and a new HSR Act waiting period would have to expire or
be earlier terminated before the Merger could be consummated. A stockholder of
PanEnergy who will receive in excess of $15 million of Duke Common Stock as a
result of the exchange of shares contemplated by the Merger filed a
notification under the HSR Act on December 30, 1996. The waiting period
relating to such filing was terminated on January 23, 1997.

FEDERAL POWER ACT

Section 203 of the Federal Power Act requires FERC approval before a public
utility can sell, lease or otherwise dispose of all its jurisdictional
facilities, or any part thereof having a value in excess of $50,000, or merge
or consolidate such facilities, directly or indirectly, with those of any
other person, or purchase, acquire, or take any security of any other public
utility. Because PanEnergy has subsidiary power marketers that are considered
"public utilities" and own "jurisdictional facilities" under the Federal Power
Act, FERC's approval under Section 203 is required before Duke and PanEnergy
may consummate the Merger. Section 203 provides that FERC is required to grant
its approval if the merger is found to be "consistent with the public
interest."

FERC has stated in a recent Policy Statement that, in analyzing a merger
under Section 203, it will evaluate the following criteria: (i) the effect of
the merger on competition in wholesale electric power markets, utilizing an
initial screening approach derived from the Department of Justice/Federal
Trade Commission Horizontal Merger Guidelines to determine if a merger will
result in an increase in an applicant's market power; (ii) the effect of the
merger on the applicants' ratepayers; and (iii) the effect of the merger on
state and federal regulation of the applicants. Duke and PanEnergy jointly
filed a Section 203 application seeking approval of the Merger with FERC on
February 3, 1997. In its application, Duke has included an undertaking that
its wholesale customers subject to FERC jurisdiction would not be affected by
costs attributable to the Merger and that rates to such customers through
December 31, 2000 would not exceed the levels in effect on December 31, 1996.
FERC is expected to rule on the application during 1997.

Duke and its power-marketing affiliates are authorized by FERC to sell
electric power at wholesale in interstate commerce at market-based rates.
PanEnergy's power-marketing affiliates have similar authorizations from FERC.
These authorizations were predicated in part on FERC's findings that Duke and
the power-

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marketing affiliates of Duke and PanEnergy lack market power over the
generation and transmission of electric energy and, therefore, could not sell
electric power at prices above competitive levels. As a condition of the power
marketer authorizations, Duke and the power-marketing affiliates of Duke and
PanEnergy are required to report any changes in status that could result in a
change in the facts FERC relied upon in approving market-based rates. Pursuant
to this requirement, Duke and the power-marketing affiliates of Duke and
PanEnergy filed notifications of a "change in status" with FERC on December 20,
1996. These notifications informed FERC of the Merger Agreement and advised
FERC that Duke and the power-marketing affiliates of both Duke and PanEnergy
would not deal with one another except under specified circumstances during the
pendency of the Merger.

Pending FERC approval of the Merger under Section 203 and related action
under Section 205, the authorizations under which Duke and the power-marketing
affiliates of both Duke and PanEnergy engage in market-based sales are expected
to remain effective. The necessary filings will be made with FERC to allow the
combined Duke and PanEnergy power-marketing affiliates to continue to engage in
wholesale power transactions at market-based rates.

PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

Duke is a holding company exempt from all provisions of the Public Utility
Holding Company Act of 1935 (the "1935 Act") except Section 9(a)(2) thereof
under Section 3(a)(2) pursuant to Rule 2 of the 1935 Act. Following the Merger,
Duke will continue to claim an exemption from all provisions of the 1935 Act
except Section 9(a)(2) thereof under Section 3(a)(2) pursuant to Rule 2 of the
1935 Act. PanEnergy is neither a holding company nor a public utility company
within the meaning of the 1935 Act.

PUBLIC UTILITY REGULATORY POLICIES ACT

The Public Utility Regulatory Policy Act of 1978 and related regulations
("PURPA") require that electric utility companies purchase power from
Qualifying Facilities, as defined therein ("QFs"), and create an exemption from
regulation as an electric utility company under the 1935 Act for QFs. One of
the criteria that must be satisfied in order to qualify as a QF under PURPA is
that no more than 50% of the ownership interests in a QF may be directly or
indirectly held by electric utility companies and electric utility holding
companies (each as defined therein). PanEnergy owns an indirect interest
equaling 14% of MCV, which owns a QF, and 32.5% of the outstanding stock of
United American Energy Corp. ("UAEC"), which owns several QFs. Following the
Merger, PanEnergy will be a wholly-owned subsidiary of Duke, which is an
electric utility company. As a result, unless PanEnergy takes the actions
described below, the 50% electric utility ownership limitation may be exceeded
in the case of the QFs owned by MCV and UAEC. In order for these facilities to
maintain their QF status, PanEnergy may be required to sell its interests in
MCV and/or UAEC to unaffiliated third parties that are not electric utility
companies or electric utility holding companies prior to consummation of the
Merger or may be required to otherwise restructure its ownership interest to
avoid exceeding the 50% utility ownership limitations. In the case of MCV, if
PanEnergy is unable to sell or restructure its interest prior to the Effective
Time, PanEnergy's interest is subject to forfeiture.

Duke, through affiliates, owns interests in two QFs. Under FERC's regulations
Duke will be required to give FERC notice of the change in the name of the
ultimate owner of those QFs that will result from the Merger.

ATOMIC ENERGY ACT

Duke holds various licenses issued by the Nuclear Regulatory Commission
("NRC") to own and operate the Oconee, McGuire and Catawba nuclear generating
facilities. Under the Atomic Energy Act and NRC regulations, nuclear licensees
must seek and obtain prior NRC consent for any changes that would constitute a
transfer of an NRC license, directly or indirectly, through transfer of control
of the license to any person. Additionally, the NRC has expressed concern over
the potential of certain mergers to affect the basis for prior NRC decisions
related to financial qualifications as an NRC licensee. Duke does not believe
that the Merger

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would constitute a transfer of control of its NRC licenses or that the Merger
will affect the basis for prior NRC decisions relating to its financial
qualifications as an NRC licensee. Duke has requested confirmation that the
NRC concurs with its belief.

Since the name appearing on Duke's nuclear licenses will need to be changed
to Duke Energy Corporation after the Merger, Duke plans to submit the
necessary information to the NRC to effect this modification.

STATE APPROVALS

Duke. Duke is subject to the jurisdiction of the North Carolina Utilities
Commission (the "NCUC") and The Public Service Commission of South Carolina
(the "PSCSC"). Duke filed applications with these commissions on December 19,
1996 seeking approval for the Merger and the Stock Issuance.

Duke's applications with the NCUC and the PSCSC maintained that the
transaction will combine the financial strengths of both companies and will
ultimately benefit Duke's customers by providing Duke with greater business
risk diversification and a broader asset base. Duke attested that the effect
of the business combination on Duke's consolidated financial condition, and on
its ability to thrive in a rapidly changing and increasingly competitive
energy environment, will be positive and will benefit Duke's North Carolina
and South Carolina customers. Duke contended that the purposes of the issuance
of securities set forth in the applications are lawful objects within the
corporate purposes of Duke and will be within the limits of authority set
forth in the Duke Articles. The applications stated that the issuance of
securities will be compatible with the public interest, will be necessary and
appropriate for, and consistent with, the proper performance by Duke of its
service to the public as a utility, or not impair its ability to perform that
service, and will be reasonably necessary and appropriate for such purpose.

The Attorney General of North Carolina and the Carolina Utility Customer
Association, an organization of North Carolina industrial utility customers,
each intervened in the NCUC proceeding. The South Carolina Consumer Advocate
intervened in the PSCSC proceeding. A hearing before the NCUC relating to
Duke's application is scheduled to be held on March 18 and 19, 1997. Testimony
was received by the PSCSC relating to Duke's application on March 6, 1997.

Duke has entered into stipulations for approval of its applications with the
Public Staff of the NCUC and with the South Carolina Consumer Advocate. The
stipulations contain certain conditions that, among other things, are
generally designed to ensure: (i) that the rates of Duke's retail electric and
water customers will not be affected by any costs of, or increased costs
attributable to, the Merger or by any commitments made by Duke in other
jurisdictions relating to the Merger, (ii) that such customers receive their
fair allocable share of any future economic benefits realized as a result of
the Merger, (iii) that Duke's future conduct of business with its subsidiaries
and affiliates, and its allocation of costs among itself and its subsidiaries
and affiliates, do not lessen competition or adversely impact retail rates,
(iv) that Duke will not seek to increase its retail rates through the year
2000 except to reflect substantial financial impacts of governmental action
affecting the industry generally, or a segment thereof, including Duke, or
major expenditures attributable to force majeure events, and (v) that North
Carolina's regulatory jurisdiction will not be diminished by preemption, to
the detriment of retail customers, should Duke in the future engage in an
action that causes it to cease to be exempt from registration under the 1935
Act. These stipulations do not bind either the NCUC or the PSCSC, each of
which will render its order at some time after hearings on the respective
applications are held.

PanEnergy. PanEnergy is not a public utility subject to regulation as such
by any state.

OTHER

Additional consents from and notifications to governmental agencies may be
required in connection with the Merger. At the present time, neither Duke nor
PanEnergy anticipates any difficulties in obtaining such consents or
furnishing such notifications.

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THE MERGER AGREEMENT

The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Exhibit A hereto and is incorporated herein by
reference. See also "THE MERGER--Conversion of Shares," "Exchange of
Certificates," "Interests of Certain Persons in the Merger," "Stock Options;
Restricted Stock," "Employee Benefits and Plans," "Management and Operations
after the Merger" and "Resales of Duke Common Stock" for summaries of certain
other provisions of the Merger Agreement. All such summaries are qualified in
their entirety by reference to the Merger Agreement.

GENERAL

The Merger Agreement provides that, following the approval of the Duke
Shareholder Matters by the holders of Duke Common Stock, the adoption of the
Merger Agreement by the holders of PanEnergy Common Stock and the satisfaction
or waiver of the other conditions to the Merger, including obtaining the
requisite regulatory approvals, Duke Transaction will be merged with and into
PanEnergy, as the result of which PanEnergy will become a wholly-owned
subsidiary of Duke.

EFFECTIVE TIME

If the Duke Shareholder Matters are approved by the holders of Duke Common
Stock, the Merger Agreement is adopted by the holders of PanEnergy Common
Stock and the other conditions to the Merger are satisfied or waived, the
closing of the Merger will take place on the second business day immediately
following the date on which the last of the conditions referred to below under
"Conditions to the Merger" is fulfilled or waived, or at such other date as
Duke and PanEnergy may agree.

A certificate of merger complying with the requirements of the DGCL will be
filed with the Secretary of State of Delaware on the closing date of the
Merger (the "Closing Date"). The Merger will become effective at the time of
filing of such certificate of merger with the Secretary of State of Delaware
or at such later time as is specified therein.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains representations and warranties by each of Duke
and PanEnergy relating to, among other things, (a) organization and similar
corporate matters; (b) capital structure; (c) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters; (d) required regulatory and other approvals; (e) compliance with
applicable laws; (f) no violations or defaults under any governing documents,
any agreements, instruments or obligations or any order, injunction, decree,
statute, rule or regulation, with certain exceptions; (g) reports and
financial statements filed with the SEC and the accuracy of information
contained therein; (h) absence of certain changes or events, including any
event or condition that could reasonably be expected to have a Material
Adverse Effect on such party; (i) litigation; (j) material accuracy of
information supplied by each of Duke and PanEnergy for use in the Registration
Statement, of which this Joint Proxy Statement-Prospectus forms a part; (k) no
undisclosed material liabilities; (l) tax matters; (m) employee benefits and
labor matters; (n) environmental matters; (o) regulatory proceedings; (p)
regulation as a utility; (q) the required vote, in the case of Duke, with
respect to the Duke Shareholder Matters and, in the case of PanEnergy, with
respect to adoption of the Merger Agreement; (r) accounting matters; (s) lack
of applicability of certain anti-takeover statutes and charter provisions with
respect to PanEnergy; (t) opinions of such party's financial advisors; (u)
insurance; (v) neither PanEnergy nor any of its Subsidiaries beneficially
owning any shares of Duke Common Stock and neither Duke nor any of its
Subsidiaries beneficially owning any shares of PanEnergy Common Stock; (w)
properties owned and leased, and easements, franchises and licenses held; (x)
futures trading and fixed price exposure; and (y) with respect to Duke,
nuclear operations.

CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME

Pursuant to the Merger Agreement, Duke and PanEnergy have each agreed that,
during the period from November 24, 1996 until the Effective Time, except as
permitted by the Merger Agreement or as otherwise

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consented to in writing by the other party, it will (and will cause each of its
Subsidiaries to), among other things: (a) carry on its businesses in the
ordinary course consistent with past practice or in accordance with the capital
budget of Duke delivered to PanEnergy (the "Duke Capital Budget") or the
capital budget and business plan of PanEnergy and its Subsidiaries delivered to
Duke (the "PanEnergy Capital Budget"), as the case may be, and use all
commercially reasonable efforts to preserve specified arrangements so that its
goodwill and ongoing businesses are not materially impaired at the Effective
Time; (b) not declare or pay any dividends on or make other distributions in
respect of any of its capital stock, other than dividends payable by a
Subsidiary of a party to such party or its wholly-owned Subsidiaries, dividends
of less than wholly-owned Subsidiaries consistent with past practice, with
respect to Duke, regular dividends required to be paid on any series of Duke
Preferred Stock or Duke Preferred Stock A, and regular quarterly cash dividends
to be paid on such party's Common Stock not in excess in any fiscal year of the
dividends for the prior fiscal year increased at a rate consistent with past
practice and, in the case of Duke, not less than the dividends for its prior
fiscal year, subject to certain exceptions; (c) not repurchase or redeem any of
its capital stock, voting debt or other voting securities, or securities
convertible into, or rights, warrants, calls, subscriptions or options to
acquire, any of its capital stock, voting debt or other voting securities or
effect certain other changes in its capitalization, subject to certain
exceptions, including in connection with certain stock and benefit plans, as
required by the terms of any such securities outstanding on November 24, 1996,
and, in the case of Duke, repurchases of Duke Common Stock pursuant to the Duke
Stock Repurchase Program; (d) not issue, sell, dispose of or encumber any of
its capital stock, voting debt or other voting securities, or any securities
convertible into, or rights, warrants, calls, subscriptions or options to
acquire, any of its capital stock, voting debt or other voting or convertible
securities, subject to certain exceptions, including (i) issuances of capital
stock by Subsidiaries of a party to such party or its wholly-owned
Subsidiaries; (ii) issuances under such party's stock plans, in the case of
PanEnergy, made in the ordinary course of business consistent with past
practice; and (iii) with respect to PanEnergy, issuances upon any conversions
of PanEnergy Convertible Notes; (e) not amend its charter or by-laws, except,
with respect to Duke, as contemplated by the Merger Agreement; (f) not engage
in acquisitions as to which, with respect to PanEnergy, the total consideration
is in excess of $100 million individually (or in respect of a series of related
transactions) or $200 million in the aggregate, and, with respect to Duke, the
total consideration is in excess of $200 million individually (or in respect of
a series of related transactions) or $500 million in the aggregate (reduced by
the aggregate amount of Subsidiary capital expenditures that are not
acquisitions), subject to certain additional limitations; (g) with certain
exceptions, not make any capital expenditures in excess of the aggregate amount
budgeted by Duke or PanEnergy in the Duke Capital Budget or the PanEnergy
Capital Budget, as the case may be, and, in the case of Duke's Subsidiaries, in
excess of $200 million individually (or in respect of a series of related
capital expenditures) or $500 million in the aggregate; (h) not sell, lease,
encumber or otherwise dispose of any of its assets, other than dispositions as
to which, with respect to PanEnergy, the aggregate market value is not in
excess of $50 million individually (or in respect of a series of related
transactions) or $100 million in the aggregate (exclusive of like-kind
exchanges with an aggregate market value not in excess of $100 million) or,
with respect to Duke, the aggregate market value is not in excess of $150
million individually (or in respect of a series of related transactions) or
$200 million in the aggregate (exclusive of like-kind exchanges with an
aggregate market value not in excess of $200 million); (i) not incur
indebtedness for money borrowed or guarantee any such indebtedness, subject to
certain exceptions, including long-term indebtedness incurred in connection
with the refinancing of existing indebtedness either at its stated maturity or
at a lower cost of funds and any additional indebtedness in an amount not to
exceed, with respect to PanEnergy, $1.2 billion and, with respect to Duke, $2
billion, which, in the case of short-term indebtedness, does not exceed 75% of
the committed facilities of such party and its Subsidiaries; (j) not enter into
any material operating lease or create any mortgages, liens or encumbrances on
its property in connection with any indebtedness not permitted under the Merger
Agreement; (k) subject to certain specified exceptions, not increase the amount
of, or accelerate the payment or vesting of, any benefit or amount payable
under, any employee benefit plan or any other contract, agreement, commitment,
arrangement or other plan or policy providing for compensation or benefits to
any former, present or future director, officer or employee of such party or
any of its Subsidiaries or increase the compensation or fringe benefits or
otherwise extend, expand or enhance the engagement, employment or any related
rights of any such person, except for normal increases in the ordinary course
of business consistent with past practice; (l) subject to certain limitations,
not enter into, implement or amend any plan, policy, employment agreement,

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severance agreement or other agreement or arrangement providing for any form
of benefits or other compensation to any such person, other than in the
ordinary course of business consistent with past practice; (m) not engage in
any activity which would cause a change in the status of such party or any of
its subsidiaries under the 1935 Act or, in the case of PanEnergy, impair
Duke's exemption under the 1935 Act following the Merger; (n) not make any
changes in accounting methods which would be required to be disclosed under
the rules and regulations of the SEC, other than as required by law, rule,
regulation or GAAP; (o) not take any action to prevent Duke from accounting
for the Merger as a pooling of interests; (p) not take any action that would
or would be reasonably likely to adversely affect the status of the Merger as
a reorganization under section 368(a) of the Code; (q) not propose, authorize
or announce a plan of liquidation, dissolution, merger, consolidation,
restructuring or other reorganization, subject to certain exceptions; (r)
consult with the other party before implementing any changes in its rates,
charges, or standards of service or accounting (other than pass-through or
tracking rate charges under existing tariffs or rate schedules) and make such
filings only in the ordinary course consistent with past practice; (s)
maintain in effect all material existing permits; (t) not discharge or satisfy
any material claims, liabilities or obligations, subject to certain
exceptions, including prepayment of PanEnergy Convertible Notes; (u) maintain
its insurance in customary amounts against customary risks and losses; (v) not
modify or terminate any of certain material contracts or agreements except in
the ordinary course of business consistent with past practice or waive,
release or assign any material rights or claims thereunder; (w) inform the
other party of the progress of any material claim, action, proceeding or
controversy regarding taxes and consult with the other party before entering
into any settlements or compromises relating thereto; and (x) not take or fail
to take any other action which would be reasonably expected to prevent or
materially impede or delay the Merger. The Merger Agreement provides for a
Transition Committee comprised of one person designated by Duke and one person
designated by PanEnergy to examine how best to organize, manage and integrate
the businesses of Duke after the Effective Time.

NO SOLICITATION OF TRANSACTIONS BY PANENERGY

The Merger Agreement provides that neither PanEnergy nor its Subsidiaries
will, and PanEnergy will direct and use reasonable efforts to cause its
officers, directors, employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer with respect to an Alternative
Proposal (as defined below) or engage in any negotiations concerning, or
provide any non-public information to, or have any discussions with any person
relating to an Alternative Proposal, or otherwise facilitate any attempt to
implement an Alternative Proposal, except that the PanEnergy Board may furnish
information (pursuant to an appropriate confidentiality letter) or enter into
discussions with any person or entity that makes an unsolicited bona fide
proposal or offer to the PanEnergy stockholders to acquire PanEnergy, but only
to the extent that the PanEnergy Board determines in good faith upon the
advice of outside counsel that such action is required for the PanEnergy Board
to comply with its fiduciary duties to stockholders imposed by law. The Merger
Agreement provides, among other things, that PanEnergy will immediately notify
Duke of receipt of any such inquiries or proposals or requests for
information. "Alternative Proposal" means any merger, acquisition,
consolidation, reorganization, share exchange, tender offer, exchange offer or
similar transaction involving PanEnergy or any of PanEnergy's Significant
Subsidiaries (as defined in Rule 405 under the Securities Act) or any proposal
or offer to acquire in any manner, directly or indirectly, a substantial
equity interest in or a substantial portion of the assets of PanEnergy or any
of PanEnergy's Significant Subsidiaries. In the event that the PanEnergy Board
determines to accept an Alternative Proposal, PanEnergy must provide Duke with
at least three days' prior written notice thereof during which time Duke may
make, and PanEnergy shall in good faith consider, a counterproposal thereto.

CONDITIONS TO THE MERGER

The respective obligations of Duke and PanEnergy to effect the Merger are
subject to the following conditions, among others: (a) the Duke Shareholder
Matters shall have been approved by the holders of Duke Common Stock and the
Merger Agreement shall have been adopted by the holders of PanEnergy Common
Stock; (b) no order or injunction shall be in effect that prohibits the
consummation of the transactions contemplated by

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the Merger Agreement; (c) the Registration Statement shall have become
effective and shall not be the subject of a stop order or proceeding seeking a
stop order; (d) the Duke Common Stock to be issued to holders of PanEnergy
Common Stock in connection with the Merger shall have been approved for listing
on the NYSE, subject only to official notice of issuance; (e) the receipt by
each of Duke and PanEnergy of the opinion of its independent auditors that the
Merger will be treated as a pooling of interests under applicable accounting
standards; (f) the waiting period under the HSR Act having expired or been
terminated; (g) certain governmental consents, authorizations, orders, permits
and approvals (or registrations, declarations or filings) shall have been
obtained or made pursuant to Final Orders (as defined in the Merger Agreement)
and certain required regulatory approvals shall have been obtained by the other
party pursuant to Final Orders which do not impose terms or conditions which
would have a Material Adverse Effect on Duke or on PanEnergy as the surviving
corporation in the Merger; (h) there shall have occurred no change in the
financial condition, business, properties or operations of Duke or PanEnergy
and its respective Subsidiaries, taken as a whole, that would or would be
reasonably likely to have a Material Adverse Effect on Duke or on PanEnergy, as
the case may be; (i) the performance in all material respects of all agreements
required to be performed by the other on or prior to the Closing Date under the
Merger Agreement; (j) the accuracy of the representations and warranties of the
other set forth in the Merger Agreement as of the Closing Date; (k) the receipt
of a certificate of the Chief Executive Officer and Chief Financial Officer of
the other, stating that the conditions set forth in (i) and (j) have been
satisfied; (l) the receipt of the opinion of special counsel to PanEnergy to
the effect that the Merger will be treated as a reorganization under section
368(a) of the Code and that Duke, Duke Transaction and PanEnergy will each be a
party to that reorganization within the meaning of section 368(b) of the Code;
(m) with respect to PanEnergy, certain transactions specified in the D/LD
Letter Agreement shall have been consummated; (n) receipt of a "comfort letter"
from the other's auditors relating to such matters as are customarily included
in comfort letters relating to transactions similar to the Merger; and (o) all
necessary approvals under state securities laws relating to the Duke Common
Stock to be issued in connection with the Merger shall have been received.
Certain of the conditions to the Merger may be waived by the party entitled to
assert the condition.

TERMINATION; FEES AND EXPENSES

The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time by mutual written consent of Duke and PanEnergy.
The Merger Agreement may also be terminated and the Merger abandoned, by the
Duke Board or the PanEnergy Board (a) if the Merger is not consummated by June
30, 1998; provided, however, that the right to terminate the Merger Agreement
shall not be available to any party that breached in any material respect its
obligations under the Merger Agreement in a manner that proximately contributed
to the failure to consummate the Merger by that date; (b) if the required
shareholder approval of either party shall not have been obtained at the
meeting of such shareholders or at any adjournment thereof, or, with respect to
PanEnergy, the PanEnergy Meeting shall not have been convened prior to June 30,
1998; or (c) if a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement; provided
that the party seeking to terminate the Merger Agreement has used all
reasonable efforts to remove such injunction, order or decree; by PanEnergy,
(d) upon not less than three days' notice to Duke prior to the earlier of the
public announcement of a recommendation of an Alternative Proposal by the
PanEnergy Board or of PanEnergy's termination of the Merger Agreement, if,
before the adoption of the Merger Agreement by the holders of PanEnergy Common
Stock is obtained, the PanEnergy Board determines in the exercise of its good
faith judgment as to its fiduciary duties to its stockholders imposed by law as
advised by outside counsel that termination is required by reason of such
Alternative Proposal being made; by the non-breaching party, (e) if there shall
have been a breach of any representation or warranty contained in the Merger
Agreement on the part of the other which would have or would be reasonably
likely to have a Material Adverse Effect on such other party, or if any
material breach of any covenant or agreement contained in the Merger Agreement
occurs, which shall not have been cured, if curable, within 30 days after
written notice thereof; or by Duke, (f) if the PanEnergy Board withdraws or
modifies its approval or recommendation of the Merger Agreement or the Merger
in a manner materially adverse to Duke or recommends an Alternative Proposal to
its stockholders.

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If an Alternative Proposal is made and the Merger Agreement is terminated
pursuant to clause (b) (with respect to PanEnergy only), (d), (e) (with
respect to a breach by PanEnergy only) or (f) as specified in the preceding
paragraph, and at the time of such termination the Alternative Proposal shall
not have been rejected by the PanEnergy Board and withdrawn by the person
making the Alternative Proposal, then PanEnergy shall pay to Duke on the day
of such termination a fee of $200 million (exclusive of expenses). The Merger
Agreement provides that if PanEnergy fails to pay the termination fee when
due, PanEnergy will pay Duke's costs and expenses in connection with any
action taken to collect payment, together with interest on the amount of the
fee at the rate of 8% per annum from the date such fee was required to be
paid.

Except as set forth above, all costs and expenses incurred in connection
with the Merger Agreement shall be paid by the party incurring such costs and
expenses, except that expenses incurred in connection with the printing,
filing and mailing of this Joint Proxy Statement-Prospectus and the
Registration Statement and the filing fee under the HSR Act shall be shared
equally by Duke and PanEnergy.

AMENDMENT AND WAIVER

The Merger Agreement may be amended by the parties thereto pursuant to
action taken by their respective Boards of Directors, at any time before or
after the requisite approvals by the holders of Duke Common Stock or the
holders of PanEnergy Common Stock have been obtained, but after any such
approval, no such amendment may be made which by law requires the further
approval of such holders without obtaining such further approval. Any party to
the Merger Agreement may, to the extent legally allowed, extend the time for
the performance of any of the obligations or other acts of the other parties
thereto, waive any inaccuracies in the representations and warranties made to
such party contained in the Merger Agreement or in any document delivered
pursuant thereto, and waive compliance with any of the agreements or
conditions contained in the Merger Agreement for its benefit.

COMBINATION OF MARKETING VENTURES

Simultaneously with execution of the Merger Agreement, affiliates of Duke
entered into the D/LD Letter Agreement with affiliates of Louis Dreyfus
Corporation, providing for the combination of the marketing businesses of
Duke/Louis Dreyfus and PanEnergy Marketing Company.

Each of Duke and PanEnergy, prior to commencement of discussions leading to
the Merger, had established joint venture arrangements for the marketing of
natural gas and electric products and services. Duke Energy Marketing Corp., a
wholly-owned subsidiary of Duke ("Duke Energy Marketing"), entered into an
exclusive agreement with Louis Dreyfus Electric Power Inc. ("Louis Dreyfus
Electric") to form Duke/Louis Dreyfus, to engage in power and gas marketing
activities in North America. Affiliates of PanEnergy entered into agreements
with affiliates of Mobil Corporation to form PanEnergy Marketing Company, for
gas and power marketing in the United States and Canada. The D/LD Letter
Agreement provides that the operations, assets and liabilities of Duke/Louis
Dreyfus will be merged into, contributed to, or otherwise acquired by
PanEnergy Marketing Company at or prior to the Effective Time. Following the
combination of the marketing businesses, Louis Dreyfus Electric will have an
economic interest entitling it to 10% of the net income of the combined
marketing businesses.

The D/LD Letter Agreement also provides that Louis Dreyfus Electric shall be
entitled to require Duke Energy Marketing to purchase its 10% economic
interest (i) at any time between the third and fourth anniversaries of the
Effective Time at a price equal to the greater of 10% of the appraised fair
market value of the combined marketing businesses or $150 million, and (ii) at
any time between the fifth and sixth anniversaries of the Effective Time at a
price equal to the greater of 10% of the appraised fair market value of the
combined marketing businesses or $250 million. After April 1, 2006, Louis
Dreyfus Electric shall be entitled to require Duke Energy Marketing to
purchase, and Duke Energy Marketing shall be entitled to require Louis Dreyfus
Electric to sell to Duke Energy Marketing, the Louis Dreyfus Electric interest
at a price equal to 10% of the appraised fair market value of the combined
marketing businesses.

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Prior to execution of the Merger Agreement, the venturers in PanEnergy
Marketing Company also agreed that the operations of the ventures of Duke and
PanEnergy would be combined upon the consummation of the Merger and that
affiliates of Mobil Corporation would be given the opportunity to maintain
their ownership percentage at 40% in the combined marketing businesses.

The parties' obligations under the D/LD Letter Agreement are subject to
consummation of the Merger and certain other conditions, and PanEnergy's
obligations under the Merger Agreement are subject to consummation of the
combination of the Duke/Louis Dreyfus business with the business of PanEnergy
Marketing Company as contemplated in the D/LD Letter Agreement.

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DESCRIPTION OF DUKE CAPITAL STOCK

GENERAL

The authorized capital stock of Duke is divided into four classes: Duke
Common Stock, Duke Preferred Stock (par value $100 per share), Duke Preferred
Stock A (par value $25 per share) and Duke Preference Stock (par value $100
per share). The number of authorized shares of Duke Common Stock, Duke
Preferred Stock, Duke Preferred Stock A and Duke Preference Stock is
300,000,000, 12,500,000, 10,000,000 and 1,500,000, respectively, and will be
500,000,000, 12,500,000, 10,000,000 and 1,500,000, respectively, from and
after the Effective Time if the Duke Shareholder Matters are approved and the
Merger is consummated. As of the date hereof, there are outstanding twelve
series of Preferred Stock, five series of Duke Preferred Stock A and no series
of Duke Preference Stock. As of February 28, 1997, 5,240,000 shares of Duke
Preferred Stock were issued and outstanding, 6,400,000 shares of Duke
Preferred Stock A were issued and outstanding and no shares of Duke Preference
Stock were issued and outstanding. The Duke Preferred Stock, Duke Preferred
Stock A and Duke Preference Stock together are hereinafter sometimes called
the "Duke Preferred Stocks."

The following statements are summaries of certain provisions with respect to
the Duke Common Stock and the Duke Preferred Stocks that are contained in the
Duke Articles and the Duke By-Laws. Reference is made to each such document,
which is incorporated by reference in the Registration Statement of which this
Joint Proxy Statement-Prospectus is a part, for a full and complete statement
of the provisions thereof, and the following statements are qualified in their
entirety by such reference.

DUKE COMMON STOCK

Dividend Rights. Dividends may be paid on the Duke Common Stock as
determined by the Duke Board out of funds legally available therefor but only
if full dividends on all outstanding series of the Duke Preferred Stocks for
the then current and all prior dividend periods and any required sinking fund
payments with respect to any outstanding series of such securities have been
paid or provided for.

Voting Rights. The holders of the Duke Common Stock have exclusive voting
rights, except as set forth in "Duke Preferred Stock; Duke Preferred Stock A"
and in "Duke Preference Stock" below or as otherwise provided by law, on the
basis of one vote per share.

Liquidation Rights. The holders of the Duke Common Stock are entitled in
liquidation to share ratably in the assets of Duke after required preferential
payments to the holders of the Duke Preferred Stocks.

Other Provisions. The holders of the Duke Common Stock have no cumulative
voting rights, no preemptive rights and no conversion rights. The Duke Common
Stock is not subject to redemption or to any calls or assessments and is not
entitled to the benefit of any sinking fund provisions.

DUKE PREFERRED STOCK; DUKE PREFERRED STOCK A

The Duke Preferred Stock ranks equally with the Duke Preferred Stock A with
no preference or priority of the Duke Preferred Stock over the Duke Preferred
Stock A or of the Duke Preferred Stock A over the Duke Preferred Stock and is
senior to both the Duke Preference Stock and the Duke Common Stock with
respect to dividends and distribution of assets upon liquidation, dissolution
or winding up of Duke.

Issuance in Series. The authorized and unissued shares of the Duke Preferred
Stock and the Duke Preferred Stock A may be issued in one or more series from
time to time, upon such consideration (not less than the par value thereof),
upon such terms, and in such manner, and with such variations as to dividend
rates (or method of calculation thereof), dividend payment dates, terms of
redemption (at prices not less than the par value thereof), sinking fund
provisions and conversion rights as may be determined by the Duke Board. All
series of the Duke Preferred Stock rank equally and are alike in all respects,
except for the variations between series expressly provided for in the Duke
Articles. All series of the Duke Preferred Stock A rank equally and are alike
in all respects, except for the variations between series expressly provided
for in the Duke Articles.

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Dividend Rights. The holders of the Duke Preferred Stock, together with the
holders of the Duke Preferred Stock A, are entitled to receive, when and as
declared by the Duke Board, dividends at the annual rate (or at the rate
determined pursuant to the applicable method of calculation thereof) for the
particular series, cumulative from and after the date of issuance thereof,
before any dividends are set apart for or paid on the Duke Preference Stock or
the Duke Common Stock.

If dividends are declared or paid on the Duke Preferred Stock or the Duke
Preferred Stock A in an amount less than the full cumulative dividends payable
at such time upon all shares of Duke Preferred Stock and Duke Preferred Stock
A outstanding, such dividends shall be divided among the different series of
the Duke Preferred Stock and the Duke Preferred Stock A outstanding in
proportion to the aggregate amounts that would be distributable if full
cumulative dividends were simultaneously declared and paid thereon at such
time without regard to the applicable dividend payment dates.

Voting Rights. Unless otherwise provided by law or except as indicated
below, holders of the Duke Preferred Stock and holders of the Duke Preferred
Stock A have no voting rights with respect to the election of directors of
Duke or otherwise.

Whenever dividends on any part of the Duke Preferred Stock or of the Duke
Preferred Stock A are in arrears in an amount equivalent to the aggregate
dividends required to be paid on such Duke Preferred Stock or such Duke
Preferred Stock A in any period of 12 calendar months, the holders of the Duke
Preferred Stock as a class have the exclusive right to elect a majority of the
full Duke Board, and the holders of the Duke Preferred Stock A as a class have
the exclusive right to elect two directors, which rights cease, however, when
all accrued and unpaid dividends on the Duke Preferred Stock and the Duke
Preferred Stock A have been paid in full.

Without the authorizing vote of the holders of two-thirds of the outstanding
Duke Preferred Stock, voting as a class, Duke may not change any of the
express terms of the Duke Preferred Stock in a manner prejudicial to the
holders thereof, provided that, if any such change would be prejudicial to the
holders of one or more but not all series of the Duke Preferred Stock, only
the affirmative vote of the holders of two-thirds of the total number of
outstanding shares of all series so affected is required. Without the
authorizing vote of the holders of two-thirds of the outstanding Duke
Preferred Stock A, voting as a class, Duke may not change any of the express
terms of the Duke Preferred Stock A in a manner prejudicial to the holders
thereof, provided that, if any such change would be prejudicial to the holders
of one or more but not all series of the Duke Preferred Stock A, only the
affirmative vote of the holders of two-thirds of the total number of
outstanding shares of all series so affected is required.

Without the authorizing vote of the holders of two-thirds of the outstanding
Duke Preferred Stock, voting as a class, and the authorizing vote of the
holders of two-thirds of the outstanding Duke Preferred Stock A, voting as a
class, Duke may not

(a) issue additional Duke Preferred Stock in excess of 250,000 shares or
Duke Preferred Stock A in excess of 1,000,000 shares, or shares of any
other class of stock having rights in the distribution of the earnings or
assets of Duke prior to or on a parity with those of the Duke Preferred
Stock or of the Duke Preferred Stock A, or any obligations convertible into
or evidencing the right to purchase any of such shares of stock, unless,
after giving effect thereto, (i) the net earnings of Duke available for
dividends on the Duke Preferred Stock and on the Duke Preferred Stock A for
any 12 consecutive calendar months within the 15 calendar months preceding
the month in which the additional shares shall be issued shall have been at
least twice the dividend requirements for a 12-month period upon the entire
amount of the Duke Preferred Stock and the Duke Preferred Stock A and all
such other stock ranking prior to or on a parity with the Duke Preferred
Stock and the Duke Preferred Stock A, and (ii) the total net assets of Duke
at a date not more than 90 days prior to the date on which the proposed
stock is to be issued shall equal at least twice the aggregate amount
payable upon the involuntary liquidation of Duke to the holders of the Duke
Preferred Stock and of the Duke Preferred Stock A and all such other stock
ranking prior to or on a parity with the Duke Preferred Stock and the Duke
Preferred Stock A;

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(b) create, or increase the authorized number of shares of, any stock
having preferential rights in the distribution of earnings or assets of
Duke prior to or on a parity with those of the outstanding Duke Preferred
Stock or of the outstanding Duke Preferred Stock A; or

(c) sell or exchange all or substantially all of the property or assets
of Duke, or merge or consolidate with another corporation or corporations
(other than subsidiaries of Duke), except where such merger or
consolidation shall have been ordered or authorized by FERC or any
succeeding regulatory authority.

Liquidation Rights. In the event of any liquidation or dissolution or
distribution of the assets of Duke, the holders of the Duke Preferred Stock
are entitled, before any amount is payable to the holders of the Duke
Preference Stock or the Duke Common Stock, to receive (a) $105 per share if
such action is voluntary and (b) $100 per share if such action is involuntary,
plus in each case the amount of any accrued and unpaid dividends thereon, and
the holders of the Duke Preferred Stock A are entitled, before any amount is
payable to the holders of the Duke Preference Stock or the Duke Common Stock,
to receive (a) $26.25 per share if such action is voluntary and (b) $25 per
share if such action is involuntary, plus in each case the amount of any
accrued and unpaid dividends thereon.

Redemption Provisions. The Duke Preferred Stock and the Duke Preferred Stock
A are redeemable in whole or in part on any dividend date at the option of
Duke, on not less than 30 days' notice by mail, at the applicable redemption
price fixed for the particular series, plus all accrued and unpaid dividends
thereon to the redemption date.

Other Provisions. The shares of outstanding Duke Preferred Stock and
outstanding Duke Preferred Stock A are fully paid and nonassessable. The
holders of the outstanding Duke Preferred Stock and outstanding Duke Preferred
Stock A have no preemptive or conversion rights. The Duke 7.72% Preferred
Stock A, 1992 Series, and the Duke 6.375% Preferred Stock A, 1993 Series, are
listed on the NYSE. No other series of Duke Preferred Stock or Duke Preferred
Stock A is listed on a national securities exchange.

DUKE PREFERENCE STOCK

The Duke Preference Stock is junior to the Duke Preferred Stock and the Duke
Preferred Stock A and senior to the Duke Common Stock with respect to
dividends and distribution of assets upon liquidation, dissolution or winding
up of Duke.

Issuance in Series. The authorized and unissued shares of the Duke
Preference Stock may be issued in one or more series from time to time, with
such designation and number of shares and with such variations as to annual
dividend rate, terms of redemption, terms of any applicable sinking fund,
amount payable upon liquidation, dissolution or winding up of Duke and
conversion rights as may be determined by the Duke Board.

Dividend Rights. Subject to the prior rights of the Duke Preferred Stock and
the Duke Preferred Stock A, each series of Duke Preference Stock will be
entitled to receive, if declared by the Duke Board, and before any dividends
are paid on the Duke Common Stock, cumulative cash dividends at such rate as
may be fixed by the Duke Board for such series.

Voting Rights. Except as otherwise required by law, holders of Duke
Preference Stock will not have voting rights with respect to the election of
directors of Duke or otherwise except as follows: Whenever six quarterly
dividends (whether or not consecutive) payable on any series of the Duke
Preference Stock are in arrears or any applicable sinking fund payments are in
default, such holders, voting as a class without regard to series, will be
entitled, until all dividends and sinking fund obligations in default have
been paid in full or satisfied, to elect two directors of Duke. Also, the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of the Duke Preference Stock, voting as a class without regard to
series, will be necessary for the creation of, or any increase in the
authorized amount of, any class of stock of Duke ranking as to dividends or
distribution of assets prior to the Duke Preference Stock and for any
amendment of the Duke Articles materially affecting the Duke Preference Stock.
The affirmative vote of the holders of at least two-thirds of the outstanding
shares of any

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series of the Duke Preference Stock will be necessary to approve any amendment
of the Duke Articles which adversely affects such series without having the
same effect on all series of the Duke Preference Stock. The affirmative vote of
the holders of at least a majority of the outstanding shares of the Duke
Preference Stock, voting as a class without regard to series, will be necessary
for an increase in the authorized amount of the Duke Preference Stock or for
the creation, or an increase in the authorized amount, of any additional class
of stock of Duke ranking as to dividends or distribution of assets equally with
the Duke Preference Stock.

Liquidation Rights. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of Duke, the holders of each series of Duke
Preference Stock will be entitled to receive, subject to the prior payment in
full of the amounts payable in such event to the holders of the Duke Preferred
Stock and the holders of the Duke Preferred Stock A and before any distribution
is made to the holders of the Duke Common Stock, the distributive amount fixed
by the Duke Board at the time of creating such series, which shall include
dividends accrued thereon.

Redemption Provisions. Duke will be permitted to redeem, pursuant to the
provisions of any applicable sinking fund or otherwise, any series of Duke
Preference Stock, or any part thereof, upon such terms and at such prices as
the Duke Board may fix at the time it creates such series. No shares of the
Duke Preference Stock, however, may be redeemed or purchased by Duke if any
dividends on the Duke Preference Stock are in arrears or any applicable sinking
fund payments are in default unless all shares of the Duke Preference Stock
then outstanding are redeemed or purchased.

Other Provisions. The holders of the Duke Preference Stock have no preemptive
rights. No shares of Duke Common Stock may be purchased or otherwise acquired
by Duke if any dividends on the Duke Preference Stock are in arrears or any
applicable sinking fund payments are in default. If so provided by the Duke
Board, a series of Duke Preference Stock may be convertible into Duke Common
Stock upon terms fixed by the Duke Board.

CHANGE OF CONTROL

The Duke Articles provide for a classified board of directors consisting of
three classes. Each class consists, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Duke Board. At each
annual meeting of Duke shareholders, successors to the class of directors whose
term expires at that annual meeting are elected for a three-year term and until
their respective successors are elected and qualified.

Certain provisions of the Duke Articles require a greater than majority vote
of Duke's shareholders. Under the Duke Articles the affirmative vote of at
least 80% of the combined voting power of the then outstanding shares of stock
of all classes of Duke entitled to vote generally in the election of directors,
voting together as a single class, is required to alter, amend or repeal any of
the provisions, including the percentage vote requirement, of the Article of
the Duke Articles that classifies the Duke Board into three classes, specifies
the minimum and maximum size of the Duke Board, provides that directors may be
removed only for cause, provides that newly created directorships and vacancies
on the Duke Board may be filled only by the remaining directors and provides
that no decrease in the number of directors constituting the Duke Board may
shorten the term of any incumbent director.

The provisions authorizing the Duke Board to issue the Duke Preferred Stocks
without shareholder approval, the classified Duke Board and the provisions
requiring a greater than majority vote of Duke's shareholders in certain
instances could have the effect of delaying, deferring or preventing a change
in control of Duke or the removal of existing management. The increased
authorized shares of Duke Common Stock that would result if the Duke
Shareholder Matters are approved by the holders of Duke Common Stock could also
be used to make a takeover attempt more difficult, such as by using the shares
to make a counteroffer for the shares of a bidder or by selling shares to
dilute a bidder's voting power. As of this time, Duke is unaware of any effort
to accumulate shares of Duke Common Stock or to obtain control of Duke by means
of a merger, tender offer, solicitation in opposition to management or
otherwise. See also "THE DUKE MEETING--Matters to be Considered."

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NO SHAREHOLDER RIGHTS PLAN

Duke has no shareholder rights plan.

TRANSFER AGENT; REGISTRAR

Duke serves as transfer agent and First Union National Bank of North
Carolina, Charlotte, North Carolina serves as registrar for the Duke Common
Stock and Duke Preferred Stocks.

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DESCRIPTION OF PANENERGY CAPITAL STOCK

GENERAL

The authorized capital stock of PanEnergy consists of 300,000,000 shares of
PanEnergy Common Stock and 3,000,000 shares of preferred stock, par value
$1.00 per share (the "PanEnergy Preferred Stock"). The following statements
are summaries of certain provisions with respect to PanEnergy Common Stock and
PanEnergy Preferred Stock that are contained in the PanEnergy Certificate of
Incorporation and the PanEnergy By-Laws. The description of the material
aspects of the PanEnergy capital stock set forth herein does not purport to be
complete and is qualified in its entirety by reference to (i) the PanEnergy
Certificate of Incorporation and the PanEnergy By-Laws and (ii) applicable
statutory and other law.

PANENERGY COMMON STOCK

Dividend Rights. Dividends may be paid on the PanEnergy Common Stock as
determined by the PanEnergy Board out of funds legally available therefor but
only if dividends on the PanEnergy Preferred Stock at the time outstanding
shall have been paid in full for all past dividend periods or declared and set
apart for payment.

Voting Rights. Subject to the voting rights of the holders of any issued and
outstanding PanEnergy Preferred Stock and subject to the DGCL, holders of
PanEnergy Common Stock will be entitled to one vote per share on each matter
submitted to a vote at a meeting of the stockholders of PanEnergy.

Liquidation Rights. The holders of PanEnergy Common Stock are entitled in
liquidation to share ratably in the assets of PanEnergy after any required
preferential payments to the holders of any issued and outstanding PanEnergy
Preferred Stock have been made.

Other Provisions. The holders of PanEnergy Common Stock have no cumulative
voting rights and no preemptive rights. The PanEnergy Common Stock is not
subject to redemption or to further calls or assessments.

PANENERGY PREFERRED STOCK

The Certificate of Incorporation of PanEnergy provides that PanEnergy
Preferred Stock may be issued in one or more series as the PanEnergy Board may
from time to time determine and provides that the PanEnergy Board may, by
resolution, fix for each series of PanEnergy Preferred Stock the rights and
preferences of such series, including, without limitation, dividend
preferences, voting rights and preferences upon liquidation, subject to the
limitations of the DGCL and the PanEnergy Certificate of Incorporation. No
shares of PanEnergy Preferred Stock are now outstanding.

NO STOCKHOLDER RIGHTS PLAN

PanEnergy has no stockholder rights plan.

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COMPARATIVE RIGHTS OF DUKE SHAREHOLDERS
AND PANENERGY STOCKHOLDERS

GENERAL

PanEnergy is a Delaware corporation, subject to the provisions of the DGCL.
Duke is a North Carolina corporation, subject to the provisions of the NCBCA.
Holders of PanEnergy Common Stock who receive shares of Duke Common Stock in
the Merger will become holders of Duke Common Stock. The rights of such
holders as holders of Duke Common Stock will then be governed by the Duke
Articles, the Duke By-Laws and the NCBCA.

Set forth below are the material differences between the rights of a holder
of PanEnergy Common Stock under the PanEnergy Certificate of Incorporation,
the PanEnergy By-Laws and the DGCL, on the one hand, and the rights of a
holder of Duke Common Stock under the Duke Articles, the Duke By-Laws and the
NCBCA, on the other hand.

The following summary does not reflect any rules of the NYSE that may apply
to Duke or PanEnergy in connection with the matters discussed. This summary
does not purport to be a complete discussion of, and is qualified in its
entirety by reference to, the DGCL, the NCBCA and the constituent documents of
each corporation.

AUTHORIZED CAPITAL

PanEnergy. PanEnergy's authorized capital stock is set forth under
"DESCRIPTION OF PANENERGY CAPITAL STOCK--General."

Duke. Duke's authorized capital stock is set forth under "DESCRIPTION OF
DUKE CAPITAL STOCK--General."

AMENDMENT OF CHARTER OR BY-LAWS

PanEnergy. Under the DGCL, unless a greater vote is required by the
PanEnergy Certificate of Incorporation, an amendment to the PanEnergy
Certificate of Incorporation requires the approval of the PanEnergy Board and
the approval of the majority of stockholders entitled to vote thereon, voting
as classes only if required by the DGCL. The PanEnergy Certificate of
Incorporation requires a greater than majority vote in the following
instances: (i) modifications to the anti-takeover provisions contained in the
PanEnergy Certificate of Incorporation require the affirmative vote of the
holders of 80% of the outstanding shares of capital stock entitled to vote for
the election of directors, (ii) modifications to the provisions in the
PanEnergy Certificate of Incorporation relating to stockholder action require
the affirmative vote of the holders of 75% of the outstanding shares of
capital stock entitled to vote for the election of directors, and (iii)
modifications to the provisions in the PanEnergy Certificate of Incorporation
relating to amendment of the PanEnergy By-Laws require the affirmative vote of
the holders of 75% of the outstanding shares of capital stock entitled to vote
for the election of directors. Pursuant to the PanEnergy By-Laws, the By-Laws
may be amended by (i) the affirmative vote of the holders of not less than 75%
of the issued and outstanding stock entitled to vote at a regular or special
meeting, or (ii) the affirmative vote of a majority of directors then in
office.

Duke. In accordance with the NCBCA, an amendment to the Duke Articles
generally requires the recommendation of the Duke Board and the approval of
either a majority of all shares entitled to vote thereon or a majority of the
votes cast thereon, depending on the nature of the amendment. An amendment
must be approved by a majority of all shares entitled to vote thereon if the
amendment creates dissenters' rights. In accordance with North Carolina law,
the Duke Board may condition its submission of the proposed amendment on any
basis. Pursuant to the Duke By-Laws, an amendment to the Duke By-Laws
generally requires the approval of a majority of the directors then holding
office. Under certain circumstances, the approval of the holders of at least
two-thirds, or in some cases a majority, of the outstanding shares of Duke
Preferred Stock, Duke Preferred Stock A and/or Duke Preference Stock may be
required to amend the Duke Articles. In addition,

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certain amendments to the Duke Articles require the approval of at least 80%
of the combined voting power of the then outstanding shares of stock of all
classes of Duke entitled to vote generally in the election of directors,
voting together as a single class. See "DESCRIPTION OF DUKE CAPITAL STOCK--
Change of Control."

SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS

PanEnergy. The size of the PanEnergy Board is determined by the PanEnergy
Board; provided that, pursuant to the PanEnergy By-Laws, the number of
directors constituting the PanEnergy Board may not be less than three. The
number of directors of the PanEnergy Board is currently set at twelve.
Pursuant to the PanEnergy By-Laws, the PanEnergy Board is divided into three
classes, with one class being elected annually for a three-year term.

Duke. The size of the Duke Board is determined by the Duke Board; provided
that, pursuant to the Duke Articles and the Duke By-Laws, the number of
directors constituting the Duke Board may not be less than twelve nor more
than twenty-four; and provided, further, that no decrease in the number of
directors may shorten the term of any director then in office and that newly
created directorships and vacancies on the Duke Board may be filled only by
the remaining directors, except that holders of Duke Preferred Stocks may
elect directors under certain circumstances. The number of directors on the
Duke Board is currently thirteen but will be increased to eighteen at the
Effective Time if the Merger is consummated. Pursuant to the Duke Articles and
the Duke By-Laws, the Duke Board is divided into three classes, each as nearly
as possible equal in number as the others, with the classes being elected for
staggered three-year terms. Pursuant to the Duke Articles, the affirmative
vote of at least 80% of the combined voting power of the then outstanding
shares of stock of all classes of Duke entitled to vote generally in the
election of directors, voting together as a single class, is required to
alter, amend or repeal any of the provisions, including the percentage vote
requirement, of the Duke Article that classifies the Duke Board into three
classes, specifies the minimum and maximum size of the Duke Board, provides
that newly created directorships and vacancies on the Duke Board may be filled
only by the remaining directors and provides that no decrease in the number of
directors constituting the Duke Board may shorten the term of any incumbent
director. See "DESCRIPTION OF DUKE CAPITAL STOCK--Change of Control."

REMOVAL OF DIRECTORS

PanEnergy. Pursuant to the DGCL, directors of PanEnergy may be removed only
for cause, and only by the affirmative vote of the holders of a majority of
shares then entitled to vote at an election of directors.

Duke. Except for directors elected under specified circumstances by holders
of any class of stock having a preference over Duke Common Stock as to
dividends or upon liquidation, directors of Duke may be removed only for
cause. Pursuant to the Duke Articles, the affirmative vote of at least 80% of
the combined voting power of the then outstanding shares of stock of all
classes of Duke entitled to vote generally in the election of directors,
voting together as a single class, is required to alter, amend or repeal any
of the provisions, including the percentage vote requirement, of the Duke
Article that requires that directors of Duke may be removed only for cause.

DIRECTOR LIABILITY; INDEMNIFICATION

PanEnergy. The PanEnergy By-Laws provide that PanEnergy will indemnify, to
the fullest extent possible pursuant to applicable law, any person against
liability and expenses arising from any action in which such person is a party
by reason of the fact that such person was a director, officer or employee of
PanEnergy. The DGCL does not permit indemnification of directors with respect
to (i) breaches of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, (iii) the payment of
unlawful dividends or unlawful stock repurchases or redemptions, or (iv)
transactions in which the director received an improper personal benefit.

Duke. The Duke By-Laws provide that Duke will indemnify, to the fullest
extent permitted by law, any person who is or was a director, officer,
employee or agent of Duke against liability and expenses incurred by

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such person in connection with any action, suit or proceeding arising out of
such person's status as a director, officer, employee or agent of Duke.
Sections 55-8-50 through 55-8-58 of the NCBCA contain specific provisions
relating to indemnification of directors and officers of North Carolina
corporations. In general, the statute provides that: (i) a corporation must
indemnify a director or officer who is wholly successful in his defense of a
proceeding to which he is a party because of his status as such, unless limited
by the articles of incorporation; and (ii) a corporation may indemnify a
director or officer if he is not wholly successful in such defense, if it is
determined as provided in the statute that the director or officer meets a
certain standard of conduct, provided that when a director or officer is liable
to the corporation, the corporation may not indemnify him. The statute also
permits a director or officer of a corporation who is a party to a proceeding
to apply to the courts for indemnification, unless the articles of
incorporation provide otherwise, and the court may order indemnification under
certain circumstances set forth in the statute. The statute further provides
that a corporation may in its articles of incorporation or bylaws or by
contract or resolution provide indemnification in addition to that provided by
the statute, subject to certain conditions set forth in the statute.

The Duke Articles provide that a director of Duke shall not be personally
liable for monetary damages for breach of fiduciary duty except to the extent
that such exemption from liability or limitation thereof is not permitted under
the North Carolina General Statutes. The NCBCA does not permit the elimination
of liability with respect to (i) acts or omissions the director knew or
believed were clearly in conflict with the best interests of Duke, (ii) any
liability under the NCBCA for unlawful distributions by Duke, or (iii) any
transaction from which the director derived an improper personal benefit.

CONFLICT OF INTEREST TRANSACTIONS

PanEnergy. The DGCL generally permits transactions involving a corporation
and an interested director of that corporation if: (i) the material facts as to
the director's interest in the transaction are disclosed and the transaction is
approved by a majority of shares entitled to vote thereon; (ii) the material
facts as to the director's interest in the transaction are disclosed and a
majority of disinterested directors of the board of directors authorizes the
transaction; or (iii) the transaction is fair to the corporation. The DGCL
allows loans to officers and employees whenever, in the judgment of the
directors, such loan may reasonably be expected to benefit the corporation.

Duke. North Carolina law generally permits transactions involving a North
Carolina corporation and an interested director of that corporation if: (i) the
material facts of the transaction and the director's interest are disclosed and
a majority of shares held by disinterested shareholders entitled to vote
thereon authorizes, approves or ratifies the transaction; (ii) the material
facts are disclosed and a majority of disinterested directors of the board of
directors (or a committee of the board of directors) authorizes, approves or
ratifies the transaction; or (iii) the transaction is fair to the corporation.
North Carolina law prohibits loans to directors or the guaranteeing of their
obligations by a North Carolina corporation unless approved by a majority vote
of disinterested shareholders or unless the corporation's board of directors
determines that the loan or guarantee benefits the corporation and either
approves the specific loan or guarantee or a general plan of loans and
guarantees by the corporation.

SPECIAL SHAREHOLDERS MEETINGS

PanEnergy. PanEnergy's By-Laws provide that special meetings of stockholders
may be called by the Secretary of PanEnergy at the written request of the Chief
Executive Officer or of a majority of the directors then in office.
Stockholders may not call a special meeting of stockholders.

Duke. A special meeting of shareholders may be called at any time by the Duke
Board, the Chairman of the Board or the President of Duke. Written notice
stating the time, place and purpose of the meeting shall be delivered not less
than ten nor more than sixty days prior to the date of the shareholders
meeting.

VOTING RIGHTS

PanEnergy. Pursuant to the PanEnergy By-Laws, each PanEnergy stockholder
shall be entitled to one vote for each share of stock having voting power held
by him. Unless the vote of a greater number is required by law or the PanEnergy
Certificate of Incorporation, the vote of a majority of shares voted on any
matter at a meeting

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of PanEnergy stockholders at which a quorum is present is the act of the
stockholders on the matter. A majority of the shares of PanEnergy capital
stock entitled to vote, represented in person or by proxy, constitutes a
quorum at any meeting of PanEnergy stockholders. The PanEnergy Certificate of
Incorporation provides that no action required to be taken or which may be
taken at any annual or special meeting of stockholders may be taken by written
consent, without a meeting.

Duke. Each outstanding share of Duke capital stock entitled to vote shall be
entitled to one vote on each matter submitted to a vote at a meeting of Duke
shareholders. Pursuant to the Duke By-Laws, except in the election of
directors, the vote of a majority of shares voted on any matter at a meeting
of Duke shareholders at which a quorum is present is the act of the
shareholders on the matter, unless the vote of a greater number is required by
law or by the Duke Articles. Directors are elected by plurality vote. A
majority of the shares of Duke capital stock entitled to vote, represented in
person or by proxy, constitutes a quorum at a meeting of Duke shareholders.
See also "DESCRIPTION OF DUKE CAPITAL STOCK--Duke Common Stock--Voting
Rights," "Duke Preferred Stock; Duke Preferred Stock A--Voting Rights," "Duke
Preference Stock--Voting Rights" and "Change of Control."

REQUIRED SHAREHOLDER VOTES FOR CERTAIN TRANSACTIONS

PanEnergy. The DGCL requires that amendments to a corporation's certificate
of incorporation, certain types of mergers, sales of all or substantially all
of a corporation's assets or voluntary dissolutions be approved by the holders
of a majority of the voting shares of the corporation. The PanEnergy
Certificate of Incorporation and PanEnergy By-Laws contain no provisions that
would alter the DGCL's voting requirements, except as set forth in
"COMPARATIVE RIGHTS OF DUKE SHAREHOLDERS AND PANENERGY STOCKHOLDERS--Amendment
of Charter or By-Laws--PanEnergy."

Duke. The NCBCA requires that an amendment to a corporation's articles of
incorporation (if such amendment gives rise to dissenters' rights), certain
types of mergers, a share exchange, a sale of all or substantially all of the
corporation's assets or a voluntary dissolution be approved by the holders of
a majority of the votes entitled to vote thereon, unless a greater vote is
required by the corporation's articles or as otherwise provided by law. The
Duke Articles and the Duke By-Laws contain no provisions that would alter the
statute's voting requirements, except those set forth in "DESCRIPTION OF DUKE
CAPITAL STOCK--Duke Preferred Stock; Duke Preferred Stock A--Voting Rights,"
"Duke Preference Stock--Voting Rights" and "Change of Control."

STATE ANTI-TAKEOVER STATUTES AND CERTAIN CHARTER PROVISIONS

PanEnergy. Section 203 of the DGCL prohibits a Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for
three years following the date that such person becomes an interested
stockholder. With certain exceptions, an "interested stockholder" is a person
or group who owns 15% or more of the corporation's outstanding voting stock
(including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
15% or more of such voting stock at any time within the previous three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include (i) mergers with or caused by the interested stockholder,
(ii) sales or other dispositions to the interested stockholder (except
proportionately with the other stockholders) of assets of the corporation or a
subsidiary equal to 10% or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock, (iii) the issuance
or transfer by the corporation or a subsidiary of stock of the corporation or
such subsidiary to the interested stockholder (except for transfers which do
not increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock), or (iv) receipt by
the interested stockholder (except proportionately as a stockholder), directly
or indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.

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The three-year moratorium imposed on business combinations by Section 203
does not apply if:

(i) prior to the date on which such stockholder becomes an interested
stockholder the board of directors approves either the business combination
or the transaction which resulted in the person becoming an interested
stockholder;

(ii) the interested stockholder owns at least 85% of the corporation's
voting stock upon consummation of the transaction which made him an
interested stockholder (excluding from the 85% calculation shares owned by
directors who are also officers of the target corporation and shares held
by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or

(iii) on or after the date such person becomes an interested stockholder,
the board approves the business combination and it is also approved at a
stockholder meeting by 66 2/3% of the voting stock not owned by the
interested stockholder.

In addition, the PanEnergy Certificate of Incorporation contains provisions,
similar in many respects to the provisions of Section 203 of the DGCL,
requiring an affirmative vote of 80% of the holders of PanEnergy voting stock
to approve certain transactions with related persons. This supermajority
voting requirement does not apply if (i) a majority of the PanEnergy Board
consists of directors who were members of the PanEnergy Board prior to the
time the related person became a related person and the transaction is
approved by the affirmative vote of at least two-thirds of such directors; or
(ii) the transaction is a merger and all of the following conditions are
satisfied:

(a) per share consideration received by the holders of PanEnergy Common
Stock is at least equal in value to the highest amount of consideration
paid by the related person for a share of PanEnergy Common Stock within one
year prior to the date such related person became a related person;

(b) after the transaction which resulted in such related person becoming
a related person and prior to the consummation of the merger, the related
person shall not have become the beneficial owner of any additional shares
of voting capital stock of PanEnergy; and

(c) prior to the consummation of such merger, the related person shall
not have received the benefit of any loans provided by PanEnergy or caused
any material change in PanEnergy's business or equity capital structure.

Duke. North Carolina has two anti-takeover statutes: the Shareholder
Protection Act and the Control Share Acquisition Act.

The Shareholder Protection Act requires the affirmative vote of the holders
of 95% of the voting shares of a public corporation, such as Duke, to approve
a "business combination" of the corporation with any other entity that
beneficially owns, directly or indirectly, 20% or more of the corporation's
stock or has in the past been a 20% owner and still is an affiliate of the
corporation. A "business combination" includes any merger or consolidation of
a corporation with or into any other corporation, or the sale or lease of all
or any substantial part of the corporation's assets to, or any payment, sale
or lease to the corporation or any subsidiary thereof in exchange for
securities of the corporation of any assets (except assets having an aggregate
fair market value of less than $5,000,000) of any other entity. The
Shareholder Protection Act provides that the 95% vote requirement will not
apply if all of certain "fair price" provisions and all of certain procedural
provisions are satisfied. In some cases, however, these provisions may be
difficult to satisfy. Duke's directors have no authority under the Shareholder
Protection Act to waive the high vote requirement for specific transactions.
The Shareholder Protection Act can function as a deterrent in certain hostile
acquisition transactions. In addition, the breadth of the statutory provisions
and the inability of a board of directors to exempt a transaction from the
application of the statute could in some cases prevent the completion of
certain transactions that would be deemed desirable by the board of directors
and by a significant majority of shareholders.

Duke also is subject to the North Carolina Control Share Acquisition Act.
The Control Share Acquisition Act restricts the voting rights of a person who
acquires "control shares" in a covered corporation, such as Duke. Control
shares are shares that, when added to all other shares of the covered
corporation beneficially owned by a

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person, would entitle that person to voting power in the election of directors
that is equal to or greater than any of the following levels of voting power:
(i) one-fifth of all voting power; (ii) one-third of all voting power; or
(iii) a majority of all voting power. Under the statute, the control shares
acquired have no voting rights unless the "disinterested shareholders" grant
voting rights to those shares. The disinterested shareholders are all
shareholders other than the acquiring person and employee-directors of the
covered corporation. If an interested shareholder acquires a majority of the
outstanding shares of the corporation and is granted voting rights by the
disinterested shareholders, the Control Share Acquisition Act provides that
all shareholders, other than such interested shareholders, have the right to
require the corporation to redeem their shares for a price not less than the
highest price per share paid by the acquiring interested person in the control
share acquisition.

Because no block of Duke Common Stock of sufficient size is either held or
being acquired pursuant to the Merger, the Shareholder Protection Act and the
Control Share Acquisition Act will not apply to the Merger.

DIVIDENDS AND OTHER DISTRIBUTIONS

PanEnergy. Pursuant to the DGCL, PanEnergy may declare and pay dividends out
of surplus or, if there is no surplus, out of net profits for the fiscal year
in which the dividend is declared and/or for the preceding fiscal year as long
as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, PanEnergy may, under
the DGCL, redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation.

Duke. Under North Carolina law, Duke generally may make dividends or other
distributions to its shareholders unless after the distribution either: (i)
Duke would not be able to pay its debts as they become due in the usual course
of business; or (ii) Duke's assets would be less than the sum of its
liabilities plus the amount that would be needed to satisfy the preferential
dissolution rights of shareholders whose preferential rights are superior to
those receiving the distribution. See "DESCRIPTION OF DUKE CAPITAL STOCK--Duke
Common Stock--Dividend Rights," "Duke Preferred Stock; Duke Preferred Stock
A--Dividend Rights" and "Duke Preference Stock--Dividend Rights."

VOLUNTARY DISSOLUTION

PanEnergy. The DGCL provides that PanEnergy may be dissolved if the
PanEnergy Board proposes dissolution and a majority of the shares of PanEnergy
entitled to vote thereon approves the dissolution.

Duke. North Carolina law provides that Duke may be dissolved if the Duke
Board proposes dissolution and a majority of the shares of Duke entitled to
vote thereon approves. In accordance with the NCBCA, the Duke Board may
condition its submission of a proposal for dissolution on any basis.

DISSENTERS' RIGHTS

PanEnergy. Section 262 of the DGCL provides for appraisal rights only in the
case of a merger or consolidation of the corporation where the petitioning
stockholder does not consent to the transaction. No appraisal rights are
available where the corporation is to be the surviving corporation and a vote
of its stockholders is not required under Section 251(f) or (g) of the DGCL.
There also are no appraisal rights, unless otherwise provided in a
corporation's certificate of incorporation, for shares of stock listed on a
national securities exchange or held by more than 2,000 holders of record,
unless such stockholders would be required to accept anything other than (i)
shares of stock of the surviving corporation, (ii) shares of another
corporation so listed or held by such number of holders of record, (iii) cash
in lieu of fractional shares of such stock or (iv) any combination thereof.
Unless otherwise provided in a corporation's certificate of incorporation,
under Delaware law stockholders are not entitled to appraisal rights upon a
sale of all or substantially all of the assets of the corporation not made in
the usual and regular course of its business.

PanEnergy stockholders have no dissenters' rights with respect to the
Merger.

90
<PAGE>

Duke. The NCBCA generally provides dissenters' rights for mergers and certain
share exchanges, sales of all or substantially all of a corporation's assets
(other than sales that are in the usual and regular course of business and
certain liquidations and court-ordered sales), certain amendments to the
articles of incorporation that materially and adversely affect rights in
respect of dissenters' shares and any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation, bylaws or a
resolution of the board of directors entitles shareholders to dissent.

Since Duke is not a party to the Merger, Duke shareholders have no
dissenters' rights with respect to the Merger.

PREEMPTIVE RIGHTS

PanEnergy. The PanEnergy stockholders do not have preemptive rights. Thus, if
additional shares of PanEnergy Common Stock were issued, the current holders of
PanEnergy Common Stock would own a proportionately smaller interest in a larger
amount of outstanding common stock to the extent that they do not participate
in the additional issuance.

Duke. The Duke shareholders do not have preemptive rights. Thus, if
additional shares of Duke Common Stock, Duke Preferred Stock, Duke Preferred
Stock A or Duke Preference Stock were issued, the current holders of such
shares, to the extent that they do not participate in the additional issuance,
would own proportionately smaller interests in a larger amount of outstanding
capital stock.

CUMULATIVE VOTING RIGHTS

PanEnergy. Holders of PanEnergy Common Stock do not have cumulative voting
rights.

Duke. Holders of Duke Common Stock do not have cumulative voting rights.

ASSESSMENT

PanEnergy. All outstanding shares of PanEnergy Common Stock are fully paid
and nonassessable.

Duke. All outstanding shares of Duke Common Stock are, and those to be issued
in connection with the Merger will be, fully paid and nonassessable.

SHAREHOLDER PROPOSAL PROCEDURES

PanEnergy. Neither the DGCL nor the PanEnergy Certificate of Incorporation or
PanEnergy By-Laws contain any specific provisions regarding notice of
stockholder proposals.

Duke. Neither the NCBCA nor the Duke Articles or Duke By-Laws contain any
specific provisions regarding notice of shareholder proposals.

91
<PAGE>

LEGAL OPINIONS

The validity of the Duke Common Stock to be issued in connection with the
Merger will be passed upon by Steve C. Griffith, Jr., Esq., Charlotte, North
Carolina, or by another member of Duke's Legal Department and by Dewey
Ballantine, New York, New York. In giving its opinion, Dewey Ballantine may
rely as to matters of local law upon the opinion of Mr. Griffith, who is a
director and Vice Chairman and General Counsel of Duke, or such other member
of Duke's Legal Department. As of the date of this Joint Proxy Statement-
Prospectus, Mr. Griffith owns 45,357 shares of Duke Common Stock, including
44,187 shares held under the Duke Retirement Savings Plan and the Duke
Employees' Stock Ownership Plan. Certain tax matters will be passed upon by
LeBoeuf, Lamb, Greene & MacRae, L.L.P., New York, New York.

EXPERTS

The Duke financial statements and the related financial statement schedule
incorporated in this Joint Proxy Statement-Prospectus by reference from Duke's
Current Report on Form 8-K filed on February 10, 1997 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which
is incorporated herein by reference and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.

The PanEnergy consolidated financial statements as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31,
1996 have been incorporated by reference in this Joint Proxy Statement-
Prospectus and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.

Representatives of Deloitte & Touche LLP are expected to be present at the
Duke Meeting, and representatives of KPMG Peat Marwick LLP are expected to be
present at the PanEnergy Meeting. In each case, such representatives will have
the opportunity to make a statement if they desire to do so and are expected
to be available to respond to appropriate questions.

92
<PAGE>

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

The following selected unaudited pro forma combined condensed financial data
combines the historical consolidated balance sheets and statements of income
of Duke and PanEnergy, including their respective subsidiaries, after giving
effect to the business combination. The unaudited pro forma combined condensed
balance sheet, at December 31, 1996, gives effect to the business combination
as if it had occurred at December 31, 1996. The unaudited pro forma combined
condensed statements of income for the years ended December 31, 1996, 1995 and
1994, give effect to the business combination as if it had occurred at January
1, 1994. These statements are prepared on the basis of accounting for the
business combination as a pooling of interests and are based on the
assumptions set forth in the notes thereto.

The following unaudited pro forma combined condensed financial data have
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and related notes thereto of Duke and
PanEnergy, incorporated by reference herein. The following information is not
necessarily indicative of the financial position or operating results that
would have occurred had the business combination been completed on the date as
of which, or at the beginning of the periods for which, the business
combination is being given effect nor is it necessarily indicative of future
operating results or financial position.

93
<PAGE>

DUKE ENERGY CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DUKE POWER PANENERGY PRO FORMA PRO FORMA
(AS REPORTED) (AS RECLASSIFIED) ADJUSTMENTS COMBINED
------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric.............. 4,436.6 77.8 4,514.4
Natural gas and
petroleum products
Sales of natural gas
and petroleum
products........... -- 5,879.2 5,879.2
Transportation and
storage of natural
gas................ -- 1,522.9 1,522.9
Other................. 321.4 95.7 417.1
------- ------- --------
Total operating
revenues......... 4,758.0 7,575.6 12,333.6
------- ------- --------
OPERATING EXPENSES
Fuel used in electric
generation........... 758.5 -- 758.5
Net interchange and
purchased power...... 378.7 78.1 456.8
Natural gas and
petroleum products
purchased............ -- 5,445.5 5,445.5
Other operation and
maintenance.......... 1,505.1 877.7 2,382.8
Depreciation and
amortization......... 492.2 297.2 789.4
General taxes......... 261.3 80.7 342.0
------- ------- --------
Total operating
expenses......... 3,395.8 6,779.2 10,175.0
------- ------- --------
OPERATING INCOME........ 1,362.2 796.4 2,158.6
------- ------- --------
INTEREST EXPENSE AND
OTHER INCOME
Interest expense...... (283.1) (228.0) (511.1)
Allowance for funds
used during
construction
and other deferred
returns.............. 111.9 4.8 116.7
Other, net............ 14.6 16.2 30.8
------- ------- --------
Total interest
expense and other
income........... (156.6) (207.0) (363.6)
------- ------- --------
INCOME BEFORE MINORITY
INTEREST AND INCOME
TAXES.................. 1,205.6 589.4 1,795.0
MINORITY INTEREST....... -- 6.2 6.2
INCOME TAXES............ 475.7 222.1 697.8
------- ------- --------
INCOME BEFORE
EXTRAORDINARY ITEM..... 729.9 361.1 1,091.0
EXTRAORDINARY ITEM, NET
OF TAX................. -- (16.7) (16.7)
------- ------- --------
NET INCOME.............. 729.9 344.4 1,074.3
Dividends on preferred
and preference
stock................ 44.2 -- 44.2
------- ------- --------
EARNINGS FOR COMMON
STOCK.................. 685.7 344.4 1,030.1
======= ======= ========
COMMON STOCK DATA
Average common shares
outstanding.......... 203.6 150.9 6.7 361.2
Earnings per share
Before extraordinary
item............... -- 2.39 2.90
Net income.......... 3.37 2.28 2.85
Dividends per share... 2.08 0.945 1.57
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

94
<PAGE>

DUKE ENERGY CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DUKE POWER PANENERGY PRO FORMA PRO FORMA
(AS REPORTED) (AS RECLASSIFIED) ADJUSTMENTS COMBINED
------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric............... 4,454.6 9.8 4,464.4
Natural gas and
petroleum products
Sales of natural gas
and petroleum
products............ -- 3,397.2 3,397.2
Transportation and
storage of natural
gas................. -- 1,500.6 1,500.6
Other.................. 222.0 110.5 332.5
------- ------- -------
Total operating
revenues.......... 4,676.6 5,018.1 9,694.7
------- ------- -------
OPERATING EXPENSES
Fuel used in electric
generation............ 744.2 -- 744.2
Net interchange and
purchased power....... 468.3 11.9 480.2
Natural gas and
petroleum products
purchased............. -- 3,119.3 3,119.3
Other operation and
maintenance........... 1,403.6 805.4 2,209.0
Depreciation and
amortization.......... 458.1 279.0 737.1
General taxes.......... 253.4 83.2 336.6
------- ------- -------
Total operating
expenses.......... 3,327.6 4,298.8 7,626.4
------- ------- -------
OPERATING INCOME......... 1,349.0 719.3 2,068.3
------- ------- -------
INTEREST EXPENSE AND
OTHER INCOME
Interest expense....... (289.3) (237.5) (526.8)
Allowance for funds
used during
construction and other
deferred returns...... 125.0 7.5 132.5
Other, net............. (3.8) 12.1 8.3
------- ------- -------
Total interest
expense and other
income............ (168.1) (217.9) (386.0)
------- ------- -------
INCOME BEFORE INCOME
TAXES................... 1,180.9 501.4 1,682.3
INCOME TAXES............. 466.4 197.8 664.2
------- ------- -------
NET INCOME............... 714.5 303.6 1,018.1
Dividends on preferred
and preference stock.. 48.9 -- 48.9
------- ------- -------
EARNINGS FOR COMMON
STOCK................... 665.6 303.6 969.2
======= ======= =======
COMMON STOCK DATA
Average common shares
outstanding........... 204.9 149.7 6.6 361.2
Earnings per share..... 3.25 2.03 2.68
Dividends per share.... 2.00 0.885 1.50
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

95
<PAGE>

DUKE ENERGY CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DUKE POWER PANENERGY PRO FORMA PRO FORMA
(AS REPORTED) (AS RECLASSIFIED) ADJUSTMENTS COMBINED
------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric............... 4,312.4 -- 4,312.4
Natural gas and
petroleum products
Sales of natural gas
and petroleum
products............ -- 3,044.0 3,044.0
Transportation and
storage of natural
gas................. -- 1,432.8 1,432.8
Other.................. 176.6 149.2 325.8
------- ------- -------
Total operating
revenues.......... 4,489.0 4,626.0 9,115.0
------- ------- -------
OPERATING EXPENSES
Fuel used in electric
generation............ 705.0 -- 705.0
Net interchange and
purchased power....... 553.4 -- 553.4
Natural gas and
petroleum products
purchased............. -- 2,829.4 2,829.4
Other operation and
maintenance........... 1,341.7 829.4 2,171.1
Depreciation and
amortization.......... 459.8 257.0 716.8
General taxes.......... 249.3 84.0 333.3
------- ------- -------
Total operating
expenses.......... 3,309.2 3,999.8 7,309.0
------- ------- -------
OPERATING INCOME......... 1,179.8 626.2 1,806.0
------- ------- -------
INTEREST EXPENSE AND
OTHER INCOME
Interest expense....... (270.2) (233.2) (503.4)
Allowance for funds
used during
construction and other
deferred returns...... 111.9 14.0 125.9
Other, net............. 14.4 (20.4) (6.0)
------- ------- -------
Total interest
expense and other
income............ (143.9) (239.6) (383.5)
------- ------- -------
INCOME BEFORE INCOME
TAXES................... 1,035.9 386.6 1,422.5
INCOME TAXES............. 397.0 161.4 558.4
------- ------- -------
NET INCOME............... 638.9 225.2 864.1
Dividends on preferred
and preference stock.. 49.7 -- 49.7
------- ------- -------
EARNINGS FOR COMMON
STOCK................... 589.2 225.2 814.4
======= ======= =======
COMMON STOCK DATA
Average common shares
outstanding........... 204.9 148.7 6.6 360.2
Earnings per share..... 2.88 1.51 2.26
Dividends per share.... 1.92 0.84 1.44
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

96
<PAGE>

PANENERGY CORP

UNAUDITED RECLASSIFYING STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PANENERGY PANENERGY PANENERGY
(AS REPORTED) (RECLASSES) (AS RECLASSIFIED)
------------- ----------- -----------------
<S> <C> <C> <C>
OPERATING REVENUES
Electric..................... -- 77.8 (A) 77.8
Sales of natural gas,
petroleum products and
power....................... 5,957.0 (77.8)(A) 5,879.2
Transportation and storage of
natural gas................. 1,522.9 -- 1,522.9
Other........................ 56.9 38.8 (B) 95.7
------- ------ -------
Total...................... 7,536.8 38.8 7,575.6
------- ------ -------
COSTS AND EXPENSES
Net interchange and purchased
power....................... -- 78.1 (C) 78.1
Natural gas, petroleum
products and power
purchased................... 5,523.6 (78.1)(C) 5,445.5
Other operation and
maintenance................. -- 877.7 (D) 877.7
Operating and maintenance.... 605.4 (605.4)(D) --
General and administrative... 272.3 (272.3)(D) --
Depreciation and
amortization................ 297.2 -- 297.2
Miscellaneous taxes.......... 80.7 (80.7)(E) --
General taxes................ -- 80.7 (E) 80.7
------- ------ -------
Total...................... 6,779.2 -- 6,779.2
------- ------ -------
OPERATING INCOME............... 757.6 38.8 796.4
------- ------ -------
OTHER INCOME AND DEDUCTIONS
Interest expense............. -- (228.0)(F) (228.0)
Allowance for funds used
during construction and
other deferred returns...... -- 4.8 (H) 4.8
Equity in earnings of
unconsolidated affiliates... 38.8 (38.8)(B) --
Interest and miscellaneous
income...................... 38.9 (38.9)(G, H) --
Miscellaneous deductions..... (20.8) 20.8 (G) --
Other, net................... -- 16.2 (G) 16.2
------- ------ -------
Total...................... 56.9 (263.9) (207.0)
------- ------ -------
INTEREST EXPENSE
Interest on long-term debt... 216.3 (216.3)(F) --
Other interest............... 8.8 (8.8)(F, H) --
------- ------ -------
Total...................... 225.1 (225.1) --
------- ------ -------
EARNINGS BEFORE MINORITY
INTEREST AND INCOME TAX....... 589.4 -- 589.4
MINORITY INTEREST.............. 6.2 -- 6.2
INCOME TAX..................... 222.1 -- 222.1
------- ------ -------
INCOME BEFORE EXTRAORDINARY
ITEM.......................... 361.1 -- 361.1
EXTRAORDINARY ITEM, NET OF
TAX........................... (16.7) -- (16.7)
------- ------ -------
NET INCOME..................... 344.4 -- 344.4
======= ====== =======
AVERAGE COMMON SHARES
OUTSTANDING................... 150.9 150.9
EARNINGS PER COMMON SHARE
Before extraordinary item.... 2.39 2.39
Net income................... 2.28 2.28
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

97
<PAGE>

PANENERGY CORP

UNAUDITED RECLASSIFYING STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PANENERGY PANENERGY PANENERGY
(AS REPORTED) (RECLASSES) (AS RECLASSIFIED)
------------- ----------- -----------------
<S> <C> <C> <C>
OPERATING REVENUES
Electric..................... -- 9.8 (A) 9.8
Sales of natural gas,
petroleum products and
power....................... 3,407.0 (9.8)(A) 3,397.2
Transportation and storage of
natural gas................. 1,500.6 -- 1,500.6
Other........................ 59.9 50.6 (B) 110.5
------- ------ -------
Total...................... 4,967.5 50.6 5,018.1
------- ------ -------
COSTS AND EXPENSES
Net interchange and purchased
power....................... -- 11.9 (C) 11.9
Natural gas, petroleum
products and power
purchased................... 3,131.2 (11.9)(C) 3,119.3
Other operation and
maintenance................. -- 805.4 (D) 805.4
Operating and maintenance.... 598.4 (598.4)(D) --
General and administrative... 207.0 (207.0)(D) --
Depreciation and
amortization................ 279.0 -- 279.0
Miscellaneous taxes.......... 83.2 (83.2)(E) --
General taxes................ -- 83.2 (E) 83.2
------- ------ -------
Total...................... 4,298.8 -- 4,298.8
------- ------ -------
OPERATING INCOME............... 668.7 50.6 719.3
------- ------ -------
OTHER INCOME AND DEDUCTIONS
Interest expense............. -- (237.5)(F) (237.5)
Allowance for funds used
during construction and
other
deferred returns............ -- 7.5 (H) 7.5
Equity in earnings of
unconsolidated affiliates... 50.6 (50.6)(B) --
Interest and miscellaneous
income...................... 36.8 (36.8)(G, H) --
Miscellaneous deductions..... (21.0) 21.0 (G) --
Other, net................... -- 12.1 (G) 12.1
------- ------ -------
Total...................... 66.4 (284.3) (217.9)
------- ------ -------
INTEREST EXPENSE
Interest on long-term debt... 225.0 (225.0)(F) --
Other interest............... 8.7 (8.7)(F, H) --
------- ------ -------
Total...................... 233.7 (233.7) --
------- ------ -------
EARNINGS BEFORE INCOME TAX..... 501.4 -- 501.4
INCOME TAX..................... 197.8 -- 197.8
------- ------ -------
NET INCOME..................... 303.6 -- 303.6
======= ====== =======
AVERAGE COMMON SHARES
OUTSTANDING................... 149.7 149.7
EARNINGS PER COMMON SHARE...... 2.03 2.03
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

98
<PAGE>

PANENERGY CORP

UNAUDITED RECLASSIFYING STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PANENERGY PANENERGY PANENERGY
(AS REPORTED) (RECLASSES) (AS RECLASSIFIED)
------------- ----------- -----------------
<S> <C> <C> <C>
OPERATING REVENUES
Electric..................... -- -- --
Sales of natural gas and
petroleum products.......... 3,044.0 -- 3,044.0
Transportation and storage of
natural gas................. 1,432.8 -- 1,432.8
Other........................ 108.3 40.9 (B) 149.2
------- ------ -------
Total...................... 4,585.1 40.9 4,626.0
------- ------ -------
COSTS AND EXPENSES
Net interchange and purchased
power....................... -- -- --
Natural gas and petroleum
products purchased.......... 2,829.4 -- 2,829.4
Other operation and
maintenance................. -- 829.4 (D) 829.4
Operating and maintenance.... 570.6 (570.6)(D) --
General and administrative... 258.8 (258.8)(D) --
Depreciation and
amortization................ 257.0 -- 257.0
Miscellaneous taxes.......... 84.0 (84.0)(E) --
General taxes................ -- 84.0 (E) 84.0
------- ------ -------
Total...................... 3,999.8 -- 3,999.8
------- ------ -------
OPERATING INCOME............... 585.3 40.9 626.2
------- ------ -------
OTHER INCOME AND DEDUCTIONS
Interest expense............. -- (233.2)(F) (233.2)
Allowance for funds used
during construction and
other deferred returns...... -- 14.0 (H) 14.0
Equity in earnings of
unconsolidated affiliates... 40.9 (40.9)(B) --
Interest and miscellaneous
income...................... 23.0 (23.0)(G, H) --
Miscellaneous deductions..... (34.0) 34.0 (G) --
Other, net................... -- (20.4)(G) (20.4)
------- ------ -------
Total...................... 29.9 (269.5) (239.6)
------- ------ -------
INTEREST EXPENSE
Interest on long-term debt... 218.3 (218.3)(F) --
Other interest............... 10.3 (10.3)(F, H) --
------- ------ -------
Total...................... 228.6 (228.6) --
------- ------ -------
EARNINGS BEFORE INCOME TAX..... 386.6 -- 386.6
INCOME TAX..................... 161.4 -- 161.4
------- ------ -------
NET INCOME..................... 225.2 -- 225.2
======= ====== =======
AVERAGE COMMON SHARES
OUTSTANDING................... 148.7 148.7
EARNINGS PER COMMON SHARE...... 1.51 1.51
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

99
<PAGE>

DUKE ENERGY CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

DECEMBER 31, 1996
(IN MILLIONS)

<TABLE>
<CAPTION>
DUKE POWER PANENERGY PRO FORMA PRO FORMA
(AS REPORTED) (AS RECLASSIFIED) ADJUSTMENTS COMBINED
------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash..................... 36.1 21.3 57.4
Short-term investments... 72.7 35.9 108.6
Receivables (less
allowance for losses:
$20.0).................. 710.0 1,178.0 1,888.0
Inventory................ 301.4 132.1 433.5
Prepayments and other.... 23.9 133.2 157.1
-------- ------- --------
Total current
assets.............. 1,144.1 1,500.5 2,644.6
-------- ------- --------
INVESTMENTS AND OTHER
ASSETS
Investments in
affiliates.............. 189.0 313.9 502.9
Other investments........ 114.7 58.4 173.1
Nuclear decommissioning
trust funds............. 362.6 -- 362.6
Pre-funded pension cost.. 80.0 280.6 360.6
-------- ------- --------
Total investments and
other assets........ 746.3 652.9 1,399.2
-------- ------- --------
PROPERTY, PLANT AND
EQUIPMENT
Electric plant in service
(at original cost)...... 14,194.4 -- 14,194.4
Less accumulated
depreciation and
amortization............ 5,438.5 -- 5,438.5
-------- ------- --------
Electric plant in
service, net.......... 8,755.9 -- 8,755.9
-------- ------- --------
Nuclear fuel............. 604.8 -- 604.8
Less accumulated
amortization............ 363.3 -- 363.3
-------- ------- --------
Nuclear fuel, net...... 241.5 -- 241.5
-------- ------- --------
Construction work in
progress (including
nuclear fuel in process:
$27.5).................. 389.0 -- 389.0
-------- ------- --------
Total electric plant,
net................. 9,386.4 -- 9,386.4
-------- ------- --------
Natural gas and petroleum
products property, plant
and equipment........... -- 8,681.4 8,681.4
Less accumulated
depreciation and
amortization............ -- 3,360.0 3,360.0
-------- ------- --------
Property, plant and
equipment in service,
net................... -- 5,321.4 5,321.4
Construction work in
progress................ -- 126.7 126.7
-------- ------- --------
Total natural gas and
petroleum products,
net................. -- 5,448.1 5,448.1
-------- ------- --------
Other property--at cost
(less accumulated
depreciation: $37.3)....... 426.0 8.6 434.6
-------- ------- --------
Total property, plant
and equipment, net.. 9,812.4 5,456.7 15,269.1
-------- ------- --------
DEFERRED DEBITS
Purchased capacity
costs................... 892.0 -- 892.0
Debt expense............. 169.8 74.2 244.0
Regulatory assets related
to income taxes......... 489.0 4.5 493.5
Regulatory assets related
to DOE assessment fee... 94.7 -- 94.7
Regulatory assets related
to Order 636............ -- 317.9 317.9
Regulatory assets related
to PCB clean-up......... -- 153.2 153.2
Goodwill, net............ -- 191.4 191.4
Other.................... 121.4 133.9 255.3
-------- ------- --------
Total deferred
debits.............. 1,766.9 875.1 2,642.0
-------- ------- --------
TOTAL ASSETS............... 13,469.7 8,485.2 21,954.9
======== ======= ========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

100
<PAGE>

DUKE ENERGY CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

DECEMBER 31, 1996
(IN MILLIONS)

<TABLE>
<CAPTION>
DUKE POWER PANENERGY PRO FORMA PRO FORMA
(AS REPORTED) (AS RECLASSIFIED) ADJUSTMENTS COMBINED
------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCK-
HOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....... 327.3 959.2 1,286.5
Notes payable and
commercial paper...... 105.6 354.1 459.7
Taxes accrued.......... 1.0 73.8 74.8
Interest accrued....... 64.6 59.7 124.3
Current maturities of
long-term debt and
preferred stock....... 212.3 138.3 350.6
Order 636 liabilities.. -- 84.4 84.4
PCB clean-up costs..... -- 32.4 32.4
Other.................. 152.2 356.1 508.3
-------- ------- --------
Total current
liabilities......... 863.0 2,058.0 2,921.0
-------- ------- --------
LONG-TERM DEBT........... 3,538.1 1,947.0 5,485.1
-------- ------- --------
MINORITY INTEREST........ -- 82.3 82.3
-------- ------- --------
ACCUMULATED DEFERRED
INCOME TAXES............ 2,376.0 1,192.5 3,568.5
-------- ------- --------
DEFERRED CREDITS AND
OTHER LIABILITIES
Investment tax credit.. 250.1 -- 250.1
DOE assessment fee..... 94.7 -- 94.7
Nuclear decommissioning
costs externally
funded................ 362.6 -- 362.6
Order 636 liabilities.. -- 121.9 121.9
PCB clean-up costs..... -- 188.9 188.9
Other.................. 412.5 442.1 854.6
-------- ------- --------
Total deferred
credits and other
liabilities......... 1,119.9 752.9 1,872.8
-------- ------- --------
PREFERRED AND PREFERENCE
STOCK WITH SINKING FUND
REQUIREMENTS............ 234.0 -- 234.0
-------- ------- --------
PREFERRED AND PREFERENCE
STOCK WITHOUT SINKING
FUND REQUIREMENTS....... 450.0 -- 450.0
-------- ------- --------
COMMITMENTS AND
CONTINGENCIES........... -- -- --
-------- ------- --------
COMMON STOCKHOLDERS'
EQUITY
Common stock, shares
issued and
outstanding; Duke
Power--201.6 million,
PanEnergy--151.1
million, Duke Energy--
359.4 million......... 1,896.1 151.1 2,242.1 4,289.3
Paid-in capital........ -- 2,242.1 (2,242.1) --
Retained earnings...... 2,992.6 59.3 -- 3,051.9
-------- ------- -------- --------
Total common
stockholders'
equity.............. 4,888.7 2,452.5 -- 7,341.2
-------- ------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.... 13,469.7 8,485.2 21,954.9
======== ======= ========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

101
<PAGE>

PANENERGY CORP

UNAUDITED RECLASSIFYING BALANCE SHEET

DECEMBER 31, 1996
(IN MILLIONS)

<TABLE>
<CAPTION>
PANENERGY PANENERGY PANENERGY
(AS REPORTED) (RECLASSES) (AS RECLASSIFIED)
------------- ----------- -----------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.. 57.2 (57.2)(I) --
Cash....................... -- 21.3 (I) 21.3
Short-term investments..... -- 35.9 (I) 35.9
Receivables (less allowance
for losses: $12.9)........ -- 1,178.0 (J) 1,178.0
Accounts and notes
receivable
Customers................ 1,151.3 (1,151.3)(J) --
Other.................... 26.7 (26.7)(J) --
Inventory and supplies..... 132.1 -- 132.1
Current deferred income
tax....................... 50.4 (50.4)(K) --
Other...................... 217.8 (84.6)(L) 133.2
-------- -------- --------
Total.................. 1,635.5 (135.0) 1,500.5
-------- -------- --------
INVESTMENTS
Affiliates................. 313.9 -- 313.9
Pre-funded pension costs... -- 280.6 (M) 280.6
Other...................... 58.4 -- 58.4
-------- -------- --------
Total.................. 372.3 280.6 652.9
-------- -------- --------
PLANT, PROPERTY AND EQUIPMENT
Natural gas and petroleum
products plant, property
and equipment............. -- 8,681.4 (N) 8,681.4
Original cost.............. 8,822.5 (8,822.5)(N) --
Accumulated depreciation
and amortization.......... (3,365.8) 5.8 (O) (3,360.0)
Construction work in
progress.................. -- 126.7 (N) 126.7
-------- -------- --------
Net natural gas and
petroleum products........ 5,456.7 (8.6) 5,448.1
Other property--at cost
(less accumulated
depreciation: $5.8)....... -- 8.6 (N,O) 8.6
-------- -------- --------
Net plant, property and
equipment............. 5,456.7 -- 5,456.7
-------- -------- --------
DEFERRED CHARGES
Goodwill, net.............. 191.4 -- 191.4
Prepaid pension............ 280.6 (280.6)(M) --
Debt expense............... -- 74.2 (P) 74.2
Regulatory assets related
to income taxes........... -- 4.5 (Q) 4.5
Regulatory assets related
to Order 636.............. -- 317.9 (L,R) 317.9
Regulatory assets related
to PCB clean-up........... -- 153.2 (L,R) 153.2
Other...................... 631.3 (497.4) (P,Q,R) 133.9
-------- -------- --------
Total.................. 1,103.3 (228.2) 875.1
-------- -------- --------
TOTAL ASSETS................. 8,567.8 (82.6) 8,485.2
======== ======== ========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

102
<PAGE>

PANENERGY CORP

UNAUDITED RECLASSIFYING BALANCE SHEET

DECEMBER 31, 1996
(IN MILLIONS)

<TABLE>
<CAPTION>
PANENERGY PANENERGY PANENERGY
(AS REPORTED) (RECLASSES) (AS RECLASSIFIED)
------------- ----------- -----------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Long-term debt due within one
year........................ 138.3 -- 138.3
Notes payable and commercial
paper....................... 354.1 -- 354.1
Accounts payable............. 959.2 -- 959.2
Rate refund provisions....... 37.0 (37.0)(S) --
Accrued interest............. 59.7 -- 59.7
Accrued wages and benefits... 61.8 (61.8)(S) --
Taxes payable................ 73.8 -- 73.8
Order 636 liabilities........ -- 84.4 (T) 84.4
PCB clean-up costs........... -- 32.4 (T) 32.4
Other........................ 374.1 (18.0)(S,T) 356.1
------- -------- -------
Total...................... 2,058.0 -- 2,058.0
------- -------- -------
DEFERRED LIABILITIES AND
CREDITS
Deferred income tax.......... 1,242.9 (50.4)(K) 1,192.5
Order 636 liabilities........ -- 121.9 (U) 121.9
PCB clean-up costs........... -- 188.9 (U) 188.9
Other........................ 785.1 (343.0)(Q,U) 442.1
------- -------- -------
Total...................... 2,028.0 (82.6) 1,945.4
------- -------- -------
LONG-TERM DEBT................. -- 1,947.0 (V) 1,947.0
Notes payable................ 1,320.2 (1,320.2)(V) --
Debentures................... 298.8 (298.8)(V) --
Revenue bonds................ 328.0 (328.0)(V) --
------- -------- -------
Total...................... 1,947.0 -- 1,947.0
------- -------- -------
COMMITMENTS AND CONTINGENCIES.. -- -- --
------- -------- -------
MINORITY INTEREST.............. 82.3 -- 82.3
------- -------- -------
COMMON STOCKHOLDERS' EQUITY
Common stock, 151.1 million
shares issued and
outstanding, 300 million
shares authorized, $1 par
value per share............. 151.1 -- 151.1
Paid-in capital.............. 2,242.1 -- 2,242.1
Retained earnings............ 59.3 -- 59.3
------- -------- -------
Total...................... 2,452.5 -- 2,452.5
------- -------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.......... 8,567.8 (82.6) 8,485.2
======= ======== =======
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Data.

103
<PAGE>

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

1. There were no material intercompany transactions between PanEnergy and
Duke during the periods presented.

2. The unaudited pro forma combined condensed financial statements reflect
the conversion of each outstanding share of PanEnergy Common Stock into 1.0444
shares of Duke Common Stock, as provided in the Merger Agreement. The
unaudited pro forma combined condensed financial statements are presented as
if the companies were combined during all periods included therein.

3. The effects of accounting policy differences are immaterial and have not
been adjusted in the selected unaudited pro forma combined condensed financial
data.

4. The PanEnergy (unaudited) reclassifying financial data reflects the
reclassifying entries necessary to adjust PanEnergy's consolidated balance
sheet and statement of income presentation to be consistent with the
presentation expected to be used by Duke Energy. The following describes such
reclassifying entries:

STATEMENT OF INCOME RECLASSIFYING ENTRIES

(A)To reclassify electric revenues.

(B)To reclassify Equity in Earnings of Unconsolidated Affiliates to Other
operating revenues.

(C)To reclassify the costs associated with electric revenues.

(D)To combine Operating and Maintenance and General and Administrative
costs.

(E)To reclassify Miscellaneous Taxes to General Taxes.

(F)To reclassify Interest Expense to include capitalized interest, Other
Interest, and Interest on Long-Term Debt.

(G)To reclassify Interest and Miscellaneous Income and Miscellaneous
Deductions to Other, Net.

(H)To reclassify allowance for funds used during construction and
capitalized interest from Interest and Miscellaneous Income and Other
Interest.

BALANCE SHEET RECLASSIFYING ENTRIES

(I)To reclassify Cash and Short-Term Investments.

(J)To combine components of Accounts and Notes Receivable.

(K)To reclassify the Current Deferred Income Tax receivable to Deferred
Income Tax liability.

(L)To reclassify current portions of Regulatory Assets Related to Order
636 and PCB Clean-up ($67.9 million and $16.7 million, respectively)
to the Deferred Charges section.

(M)To reclassify Prepaid Pension to Pre-Funded Pension Costs.

(N)To reclassify Plant, Property and Equipment Original Cost to Natural
Gas and Petroleum Products Plant, Property and Equipment,
Construction Work in Process and Other Property.

(O)To reclassify accumulated depreciation of Other Property.

(P)To reclassify Debt Expense.

(Q)To reclassify Regulatory Assets Related to Income Taxes net of the
related liability from Other Deferred Charges and Other Deferred
Liabilities and Credits ($36.7 million and $32.2 million,
respectively).

(R)To reclassify non-current portions of Regulatory Assets Related to
Order 636 and PCB Clean-up ($250.0 million and $136.5 million,
respectively).

(S)To reclassify Rate Refund Provisions and Accrued Wages and Benefits to
Other Current Liabilities.

104
<PAGE>

(T)To reclassify current portions of Order 636 Liabilities and PCB Clean-
up Costs.

(U)To reclassify non-current portions of Order 636 Liabilities and PCB
Clean-up Costs from Other Deferred Liabilities and Credits.

(V)To combine components of Long-Term Debt.

105
<PAGE>

THE DUKE MEETING--ADDITIONAL MATTERS

ELECTION OF DIRECTORS
(PROPOSAL 2)

Four persons have been nominated by the Duke Board for election as directors
to Class III at the Duke Meeting, to serve three-year terms and until their
successors are duly elected and qualified. The nominees are Robert J. Brown,
George Dean Johnson, Jr., James G. Martin and Richard B. Priory. All of the
Class III nominees are currently Class III directors.

Votes (other than votes withheld) will be cast pursuant to the accompanying
proxy for the election of the nominees listed unless, by reason of death or
other unexpected occurrence, one or more of such nominees shall not be
available for election. In that event, it is intended that such votes will be
cast for such substitute nominee or nominees as may be determined by the
persons named in such proxy. The Duke Board has no reason to believe that any
of the nominees listed will not be available for election as a director.

Directors are elected by a plurality of the votes cast by the holders of
Duke Common Stock at a meeting at which a quorum is present. "Plurality" means
that the individuals who receive the largest number of votes cast are elected
as directors up to the maximum number of directors to be chosen at the
meeting. Consequently, any shares not voted (whether by abstention, broker
non-vote or otherwise) have no impact on the election of directors.

CLASS III
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
(TERM EXPIRING IN 2000)

ROBERT J. BROWN, Chairman and President, B&C
Associates, Inc., marketing research and public
relations firm

Mr. Brown, 62, was elected a director in 1994 and
serves on the Audit Committee. He founded B&C
Associates, Inc., High Point, North Carolina, in 1960
and served as its President from 1960 until 1968 and
its Chairman and President from 1973 to the present.
From 1968 until 1973, Mr. Brown was a Special
Assistant to the President of the United States, with
oversight responsibility for community relations,
civil rights, emergency preparedness and day care. He
is a director of First Union Corporation, Sonoco
Products Company and North Carolina Citizens for
Business and Industry.
PHOTO

GEORGE DEAN JOHNSON, JR., President and Chief
Executive Officer, Extended Stay America,
development, ownership and management of extended-
stay lodging facilities
Mr. Johnson, 54, was elected a director in 1986. He
is Chairman of the Finance Committee and also serves
on the Nominating Committee. Mr. Johnson began his
legal career in 1967 when he joined Johnson, Smith,
Hibbard and Wildman. He was General Partner of WJB
Video, a Blockbuster Video franchisee, from 1987 to
1993, and served as President of the Domestic
Consumer Division of Blockbuster Entertainment
Corporation from 1993 until 1995. He assumed the
position of President and Chief Executive Officer of
Extended Stay America in 1995. He is also Chairman of
Johnson Development Associates, Inc. and a director
of Florida Panthers Holdings, Inc., Extended Stay
America and Republic Industries, Inc. He also serves
on the Board of Trustees of Converse College.

PHOTO

106
<PAGE>

JAMES G. MARTIN, PH.D., Vice President, Research,
Carolinas HealthCare System

Mr. Martin, 61, was elected a director in 1994 and
serves on the Corporate Performance Review Committee.
Since January 1993, he has been Chairman of the
Research Development Board of the Carolinas
HealthCare System located at Carolinas Medical
Center, Charlotte, North Carolina. He was named Vice
President, Research, in 1995. He served as Governor
of the State of North Carolina from 1985 to 1993 and
was a member of the United States House of
Representatives, representing the Ninth District of
North Carolina, from 1972 until 1984. Mr. Martin is
currently a director of J. A. Jones, Inc. and Family
Dollar Stores, Inc. He is Chairman of the Global
TransPark Foundation, Inc. and a Trustee of Wake
Forest University.
PHOTO

RICHARD B. PRIORY, President and Chief Operating
Officer, Duke Power Company

Mr. Priory, 50, joined Duke in 1976 as a Design
Engineer and was elected a director in 1990. He was
named Vice President, Design Engineering, in 1984;
Senior Vice President, Generation and Information
Services, in 1988; Executive Vice President, Power
Generation Group, in 1991 and was appointed to his
present position in 1994. He serves on the
Management, Finance, Retirement Plan and Stock
Purchase-Savings Program Committees. He is a director
of Dana Corporation, J. A. Jones Applied Research
Corp. and NationsBank Corporation. He serves on the
boards of the Charlotte-Mecklenburg Education
Foundation, the North Carolina Chapter of The Nature
Conservancy and the North Carolina State University
Engineering Foundation. He is also a member of the
Foundation of the University of North Carolina at
Charlotte, Inc. and the University's Board of
Visitors. Mr. Priory is also a member of the National
Academy of Engineering.

PHOTO

DIRECTORS CONTINUING IN OFFICE

G. ALEX BERNHARDT, SR., Chairman and Chief Executive
Officer, Bernhardt Furniture Company, furniture
manufacturers

Mr. Bernhardt, 53, was elected a director in 1991 and
serves on the Corporate Performance Review Committee.
He has been associated with Bernhardt Furniture
Company of Lenoir, North Carolina, since 1965. He was
named President and a director in 1976 and became
Chairman and Chief Executive Officer in 1996. He is a
director of Robert Talbott, Inc. and First Union
Corporation. He serves as a trustee of Davidson
College and a member of the North Carolina Governor's
Business Council. He is a director emeritus and past
President of the American Furniture Manufacturers
Association. He is a Class II director with a term
expiring in 1999.
PHOTO

107
<PAGE>

W. A. COLEY, President, Associated Enterprises Group,
Duke Power Company

Mr. Coley, 53, joined Duke in 1966 and was elected a
director in 1990. He was named Vice President,
Operation, in 1984; Vice President, Central Division,
in 1986; Senior Vice President, Power Delivery, in
1988; Senior Vice President, Customer Group, in 1990;
Executive Vice President, Customer Group, in 1991 and
was appointed to his present position in 1994. He
serves on the Management, Corporate Performance
Review, Retirement Plan and Stock Purchase-Savings
Program Committees. He is a director of Carolina Pad
and Paper Company and the North Carolina Board of
SouthTrust Bank. In addition, he serves on the Boards
of Trustees of Charlotte Latin School, Queens
College, Union Theological Seminary, Presbyterian
Healthcare Systems, United Way of the Central
Carolinas and the Charlotte Chamber of Commerce. He
also serves on the Institutional Advisory Board and
the Engineering Advisory Board of the Georgia
Institute of Technology. He is a Class II director
with a term expiring in 1999.
PHOTO

STEVE C. GRIFFITH, JR., Vice Chairman of the Board
and General Counsel, Duke Power Company

Mr. Griffith, 63, joined Duke in 1964 as Assistant
General Counsel, was named Secretary and Associate
General Counsel in 1971 and was appointed General
Counsel in 1975. He was named a Vice President in
1977 and a Senior Vice President in 1982, at which
time he was elected a director. He was named an
Executive Vice President in 1991 and assumed his
present position in 1994. Mr. Griffith serves on the
Management, Retirement Plan and Stock Purchase-
Savings Program Committees. He is a Fellow of the
American Bar Foundation and a member of the American
Bar Association, the North Carolina State Bar and the
South Carolina Bar. He also serves on the Board of
Governors of the Research Triangle Institute. He is a
Class I director with a term expiring in 1998.
PHOTO

W. H. GRIGG, Chairman of the Board and Chief
Executive Officer, Duke Power Company

Mr. Grigg, 64, joined Duke in 1963, was named Vice
President and General Counsel in 1971 and became a
director in 1972. He was elected Senior Vice
President, Legal and Finance, in 1975; Executive Vice
President, Finance and Administration, in 1982;
Executive Vice President, Customer Group, in 1988;
and Vice Chairman of the Board in 1991. He was named
Chairman of the Board, President and Chief Executive
Officer in April 1994, and Chairman of the Board and
Chief Executive Officer in July 1994. He serves on
the Nominating, Finance, Retirement Plan and Stock
Purchase-Savings Program Committees and as Chairman
of the Management Committee. He is a trustee of
Nations Fund Trust and a director of Nations Fund,
Inc., Coltec Industries, Inc., Associated Electric
and Gas Insurers, Ltd. and the Charlotte-Mecklenburg
Hospital Authority. He is a Class II director with a
term expiring in 1999.
PHOTO

108
<PAGE>

PAUL H. HENSON, Chairman, Kansas City Southern
Industries, Inc., holding company for railroad
operations and financial services

Mr. Henson, 71, was elected a director in 1976. He
serves on the Corporate Performance Review,
Nominating and Compensation Committees. He became
Chairman of the Board of Kansas City Southern
Industries, Inc. in 1990 following his retirement as
Chairman of Sprint Corporation. He is a director of
Hallmark Cards, Inc. and Kansas City Southern
Industries, Inc. He is a Class I director with a term
expiring in 1998.
PHOTO

W. W. JOHNSON, Chairman of the Executive Committee,
NationsBank Corporation

Mr. Johnson, 66, was elected a director in 1984. He
is Chairman of the Nominating Committee and also
serves on the Finance Committee. He is Chairman of
the Executive Committee of NationsBank Corporation.
Mr. Johnson was, since 1980, Chairman of the Board
and Chief Executive Officer of Bankers Trust of South
Carolina, which merged with NationsBank Corporation
in January 1986. He is a director of NationsBank
Corporation, ALLTEL Corporation and The Liberty
Corporation. He is a Class I director with a term
expiring in 1998.
PHOTO

MAX LENNON, President, Mars Hill College, Mars Hill,
North Carolina

Dr. Lennon, 56, was elected a director in 1988 and is
Chairman of the Audit Committee. He assumed his
present position in 1996, after serving as President
of Eastern Foods, Inc. from 1994 through 1995. He was
previously involved in higher education from 1966 to
1994, his last tenure being at Clemson University
where he served as President for eight years. He is a
director of First Union Corporation and Delta
Woodside Industries, Inc. He is a Class II director
with a term expiring in 1999.
PHOTO

BUCK MICKEL, Retired Vice Chairman, Fluor Corporation

Mr. Mickel, 71, was elected a director in 1976. He is
Chairman of the Compensation Committee and also
serves on the Corporate Performance Review Committee.
He had been associated with Daniel International
since 1947 and served as its Chairman from 1974 to
1987. He served as President and later Vice Chairman
of Fluor Corporation from 1977 until his retirement
in 1987. He is a director of Emergent Group, Fluor
Corporation, The Liberty Corporation, Delta Woodside
Industries, Inc., RSI Holdings, Inc., Textile Hall
Corporation and Insignia Financial Group, Inc. He is
a life trustee of Clemson University and Converse
College. He is a Class I director with a term
expiring in 1998.
PHOTO

109
<PAGE>

RUSSELL M. ROBINSON, II, Attorney, Robinson, Bradshaw
& Hinson, P.A.

Mr. Robinson, 65, was elected a director in 1995 and
serves on the Audit Committee. He has been engaged in
the practice of law since 1956, and is the author of
Robinson on North Carolina Corporation Law. He is a
director of Cadmus Communications Corporation and
Caraustar Industries, Inc. and also serves as a
member of the American Law Institute and a Fellow of
the American Bar Foundation. He is Chairman of the
Board of Trustees of the University of North Carolina
at Charlotte, a member of the Board of Visitors of
Duke University Law School, a trustee of The Duke
Endowment and a director of the Presbyterian Hospital
Foundation. He is a Class I director with a term
expiring in 1998.
PHOTO

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Set forth below is the number of shares of Duke Common Stock beneficially
owned by the directors, the Chief Executive Officer, the other executive
officers named in the Summary Compensation Table, and the directors and
executive officers as a group, on December 31, 1996:

<TABLE>
<CAPTION>
NAME SHARES
---- ----------
<S> <C>
G. Alex Bernhardt......................... 2,382(1)
Robert J. Brown........................... 592(1)
W. A. Coley............................... 18,025(2)(3)
Steve C. Griffith, Jr..................... 44,457(2)
W. H. Grigg............................... 42,016(2)
Paul H. Henson............................ 3,092(1)
George Dean Johnson, Jr. ................. 2,575(1)(4)
W. W. Johnson............................. 12,062(1)
Max Lennon................................ 1,792(1)
James G. Martin........................... 469(1)
Buck Mickel............................... 67,959(1)(5)
Richard J. Osborne........................ 6,989(2)
Richard B. Priory......................... 11,093(2)
Russell M. Robinson, II................... 10,707,636(1)(6)
Directors and executive officers as a
group (15 persons)....................... 10,923,706(1)(2)(3)(4)(5)(6)
</TABLE>
- --------
(1) Includes full shares held in trust under the arrangement for directors
described under the caption "Directors' Fees."
(2) Includes full shares credited to the participant's account under the Stock
Purchase-Savings Program for Employees as of December 31, 1996.
(3) Includes 1,100 shares owned by Mr. Coley's wife and 245 shares held as
custodian for his son. Beneficial ownership of all such shares is
disclaimed.
(4) Does not include 22,000 shares held in an irrevocable trust of which Mr.
Johnson is a beneficiary. Beneficial ownership of such shares is expressly
disclaimed.
(5) Includes 60,000 shares owned by The Daniel Foundation of South Carolina, a
charitable foundation located in Greenville, South Carolina, of which Mr.
Mickel is a trustee. Beneficial ownership of such shares is expressly
disclaimed.
(6) Includes 9,404,721 shares owned by The Duke Endowment and 1,302,132 shares
owned by the Doris Duke Trust. Mr. Robinson, who is a trustee of each of
such entities, expressly disclaims beneficial ownership of the shares
owned by such trusts.

No person listed in the table beneficially owned more than 1% of the Duke
Common Stock outstanding on December 31, 1996 with the exception of Mr.
Robinson, who beneficially owned 10,707,636 shares of such stock on that date
largely because of the attribution to him of 9,404,721 shares owned by The
Duke Endowment and 1,302,132 shares owned by the Doris Duke Trust, shares he
is deemed to beneficially own in his capacities as a trustee of The Duke
Endowment and a trustee of the Doris Duke Trust, respectively. The directors
and executive officers as a group beneficially owned less than 1% of such
stock (not including the shares owned by such trusts) on that date.

110
<PAGE>

EXECUTIVE COMPENSATION

Set forth below is information regarding compensation to the Chief Executive
Officer and the other four most highly compensated executive officers of Duke
for services to Duke for the years ended December 31, 1996, 1995 and 1994.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------------- ------------
NAME AND PRINCIPAL SALARY BONUS OTHER ANNUAL LTIP ALL OTHER
POSITION YEAR ($)(1) ($)(2) COMPENSATION($) PAYOUTS($) COMPENSATION($)(3)
- ------------------ ---- ------- ------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
W. H. Grigg.................... 1996 695,000 218,925 56,760 188,123 192,606
Chairman and 1995 636,667 312,704 48,098 204,392 163,720
Chief Executive Officer 1994 558,500 103,496 74,292 180,019 138,030
S. C. Griffith, Jr. ........... 1996 372,200 81,369 23,767 124,362 97,264
Vice Chairman and 1995 369,565 122,834 19,064 145,800 83,549
General Counsel 1994 342,850 63,078 16,323 135,081 73,618
R. B. Priory................... 1996 476,509 107,215 14,144 124,362 31,254
President and 1995 423,445 149,407 9,716 130,275 20,945
Chief Operating Officer 1994 348,425 63,078 8,110 118,125 14,299
W. A. Coley.................... 1996 378,947 300,723 43,734 124,362 53,594
President, Associated 1995 380,110 208,360 9,997 130,275 44,809
Enterprises Group 1994 339,975 63,078 13,069 118,125 42,478
R. J. Osborne.................. 1996 253,200 47,931 3,448 61,272 15,932
Senior Vice President 1995 250,800 57,504 1,873 70,763 13,591
and Chief Financial Officer 1994 225,735 28,606 1,572 65,453 7,367
</TABLE>
- --------
(1) Salary amounts may reflect increases either paid in February of each year
or spread over the 12 months from the end of January in each year.
(2) Bonus amounts consist of compensation under the Executive Short-Term
Incentive Plan.
(3) "All Other Compensation" includes the following for 1996:
(i) Amounts contributed to the Stock Purchase-Savings Program for
Employees as follows: W. H. Grigg, $6,634; S. C. Griffith, Jr.,
$6,828; R. B. Priory, $4,780; W. A. Coley, $6,300; and R. J. Osborne,
$5,328.
(ii) Amounts earned by foregoing vacation pursuant to the Vacation Banking
Plan as follows: W. H. Grigg, $40,385; S. C. Griffith, Jr., $20,915;
R. B. Priory, $0; W. A. Coley, $21,118; and R. J. Osborne, $4,892.
(iii) Amounts accrued under a make-whole arrangement under the Supplementary
Defined Contribution Plan designed to maintain the overall integrity
of the employee benefit plans as follows: W. H. Grigg, $34,637; S. C.
Griffith, Jr., $15,991; R. B. Priory, $15,328; W. A. Coley, $18,563;
and R. J. Osborne, $4,535.
(iv) Above-market interest earned on account balances in the Compensation
Deferral Plan as follows: W. H. Grigg, $62,930; S. C. Griffith, Jr.,
$38,980; R. B. Priory, $2,889; W.A. Coley, $1,890; and R. J. Osborne,
$1,177.
(v) Economic value of life insurance coverage provided under the Life
Insurance Plan as follows: W. H. Grigg, $28,519; S. C. Griffith, Jr.,
$8,146; R. B. Priory, $3,340; W. A. Coley, $2,523; and R. J. Osborne,
$0.
(vi) The cost to Duke of supplemental life insurance coverage under the
Supplemental Insurance Plan as follows: W. H. Grigg, $17,048; S. C.
Griffith, Jr., $5,500; R. B. Priory, $4,733; W. A. Coley, $2,974; and
R. J. Osborne, $0.
(vii) The economic benefit of split-dollar life insurance coverage pursuant
to the Estate Conservation Plan as follows: W. H. Grigg, $2,453; S. C.
Griffith, Jr., $904; R. B. Priory, $184; W. A. Coley, $226; and R. J.
Osborne, $0.

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<PAGE>

LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR

The following table sets forth estimated future payouts to the executives
named in the Summary Compensation Table under the Executive Long-Term
Incentive Plan for the performance period beginning in 1996. Awards are based
upon Duke's total shareholder return during the performance period as compared
with that of the companies comprising the S&P Electric Utility Index. The
table assumes that total shareholder return will be attained at the threshold
(or minimum) performance level. The actual award, however, will be $0 if total
shareholder return is less than the 33rd percentile as compared with the
companies comprising the S&P Electric Utility Index. Payout of the threshold,
target and maximum amounts will be made for performance at or above the 33rd,
55th and 75th percentiles, respectively.

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-
BASED PLAN
-------------------------
PERFORMANCE OR OTHER PERIOD THRESHOLD TARGET MAXIMUM
NAME UNTIL MATURATION OR PAYOUT ($) ($) ($)
---- --------------------------- --------- ------- -------
<S> <C> <C> <C> <C>
W. H. Grigg............... 1/1/96--12/31/98 192,500 385,000 577,500
S. C. Griffith, Jr........ 1/1/96--12/31/98 72,504 145,008 217,512
R. B. Priory.............. 1/1/96--12/31/98 96,182 192,364 288,546
W. A. Coley............... 1/1/96--12/31/98 73,208 146,416 219,624
R. J. Osborne............. 1/1/96--12/31/98 44,520 89,040 133,560
</TABLE>

RETIREMENT PLAN INFORMATION

Duke maintains a noncontributory, qualified pension plan known as the
Retirement Cash Balance Plan. In addition, a select group of managers are
eligible to participate in a noncontributory, nonqualified pension plan known
as the Executive Cash Balance Plan. A portion of the benefits earned in the
Executive Cash Balance Plan is attributable to compensation in excess of the
IRS compensation limit ($160,000 for 1997) or deferred compensation. Benefits
for the Retirement Cash Balance Plan and the Executive Cash Balance Plan are
based on base pay, short-term incentives and lump-sum merit increases. The
Retirement Cash Balance Plan excludes deferred compensation.

For eligible employees, Duke will make an allocation to employees' accounts
at the end of each month in which an employee is actively employed and
receives pay for services. Duke's monthly allocations are based on a
percentage of pay. The percentage received depends on the age and completed
years of service at the beginning of the year, as shown below:

<TABLE>
<CAPTION>
MONTHLY ALLOCATION
AGE AND SERVICE PERCENTAGE
--------------- ------------------
<S> <C>
34 or less............................................ 4%
35 to 49.............................................. 5%
50 to 64.............................................. 6%
65 or more............................................ 7%
</TABLE>

In addition to the basic monthly allocation percentage, an employee will
receive a monthly allocation of 4% for any portion of eligible compensation
above the Social Security taxable wage base ($65,400 as of 1997).

Employee accounts will also earn monthly interest credits. The amount of the
interest credit will be adjusted quarterly and will equal the yield on 30-year
U.S. Treasury Bonds during the third week of the last month of the previous
quarter, subject to a minimum rate of 4% per year and a maximum rate of 9% per
year.

The Retirement Cash Balance Plan and the Executive Cash Balance Plan became
effective on January 1, 1997. Prior to this effective date, employees were
covered under Duke's Employees' Retirement Plan, Supplemental Retirement Plan
and Supplemental Security Plan. To account for the transition in the pension
plans, each employee account was given an initial opening balance determined
on the basis of age and credited service.

112
<PAGE>

The years of credited service under the Retirement Cash Balance Plan as of
December 31, 1996 for the executives named in the Summary Compensation Table
were: W.H. Grigg, 33; S.C. Griffith, Jr., 32; W.A. Coley, 30; R.B. Priory, 20;
and R.J. Osborne, 21. Assuming that such officers continue in their present
positions at their present salaries until retirement at age 65, their
estimated annual pensions under the Retirement Cash Balance Plan and the
Executive Cash Balance Plan attributable to such salaries would be: W.H.
Grigg, $337,000; S.C. Griffith, Jr., $222,000; W.A. Coley, $366,000; R.B.
Priory, $396,000; and R.J. Osborne, $226,000. Such estimates are calculated
assuming that cash balances are credited with interest at 7% per annum and
using a future Social Security taxable wage base equal to $65,400.

----------------

Notwithstanding anything to the contrary set forth in any of Duke's previous
filings under the Securities Act or the Exchange Act that might incorporate
future filings, including this Joint Proxy Statement-Prospectus, in whole or
in part, the following Compensation Committee Report and the Performance Graph
immediately following such Report shall not be incorporated by reference into
any such filings.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Duke, under the supervision of the Compensation Committee of the Duke Board,
has developed and implemented compensation programs which seek to provide a
direct relationship between compensation provided to executive officers and
corporate performance.

COMPENSATION PHILOSOPHY

Duke has a pay policy of setting total cash compensation for its entire
workforce between the 50th and 75th percentiles of the marketplace. Consistent
with this policy, it is the philosophy of the Duke Board to set total
compensation opportunities for its executive officers between the 50th and
75th percentiles. The "marketplace" for executive officers has been defined as
the group of electric utilities comprising the Standard & Poor's ("S&P")
Electric Utility Index and expanded to also include a group of general
industry companies of a similar revenue size to Duke. The need to establish
competitive compensation packages to attract and retain executive talent
beyond the electric utility industry has been recognized as Duke moves into a
more deregulated environment and expands its nonregulated business.

Total cash compensation for executive officers consists of base salary,
which is subject to annual merit increases, and incentives, which are awarded
through Duke's Executive Short-Term Incentive Plan and Duke's Executive Long-
Term Incentive Plan. The use of incentives is intended to result in a direct
relationship between total compensation and corporate performance. Opportunity
to receive compensation beyond the 50th percentile of the marketplace is
provided through incentives, based on corporate performance. Similarly,
compensation can fall below the 50th percentile if corporate performance
measures are not achieved and incentives are not paid. Duke's goal is to
create a competitive compensation program that will attract and retain quality
leadership and link compensation directly to corporate performance.

The Duke Board, upon the Compensation Committee's recommendation,
underscored the importance of linking executive and shareholder interests by
adopting stock ownership guidelines for executive officers and other members
of senior management. Under the guidelines, the target ownership of Duke
Common Stock for the Chief Executive Officer is four times annual base salary.
The target for the other officers who are members of Duke's Management
Committee (Messrs. Griffith, Priory and Coley) is three times base salary, and
the target for Senior Vice Presidents (such as Mr. Osborne) is two times base
salary. Each employee subject to the guidelines is expected to achieve the
ownership target within a period of five years, commencing on January 1, 1997,
and each employee who subsequently becomes subject to the guidelines is given
five years to attain the ownership level required for his or her position.
Duke Common Stock in each participant's Retirement Savings Plan account, Duke
Common Stock equivalents earned through the Executive Savings Plan (which was
implemented effective January 1, 1997) and any private holdings are included
in determining compliance with the ownership targets.

113
<PAGE>

The Compensation Committee may choose to make awards under Duke's Stock
Incentive Plan which would qualify for deductibility under Section 162(m) of
the Code. Duke has no current plans to qualify other compensation paid to its
executive officers for deductibility under such section.

COMPENSATION PROCESS

In the early part of each year the Compensation Committee reviews the
compensation of Duke's executive officers (other than the Chief Executive
Officer) with the Chief Executive Officer and sets the compensation of the
executive officers for such year with modifications as it deems appropriate.
The review is based on performance evaluations of the individual executive
officers and on a comparison of their compensation with compensation in the
marketplace. Information is used from surveys such as the Edison Electric
Institute Executive Compensation Survey and from external consultants.

The Compensation Committee also reviews the compensation of the Chief
Executive Officer with assistance from Duke's human resources staff. It
recommends adjustments as appropriate, based on competitive compensation data
from the marketplace, the Committee's assessment of the Chief Executive
Officer's performance and its expectation as to his future contributions in
leading Duke. The Committee's recommendation on compensation for the Chief
Executive Officer is considered and acted upon by the Duke Board, with inside
directors neither present nor participating. (For information on employment
agreements involving certain officers of Duke which take effect upon
consummation of the Merger, see "THE MERGER--Interests of Certain Persons in
the Merger.")

1996 COMPENSATION SUMMARY

Increases in Base Salary

Increases in base salary were granted in February 1996 to the executive
officers named in the Summary Compensation Table and were based on individual
performance for the 1995 performance period, as measured under Duke's job
performance evaluation program. Increases varied based upon individual
performance and the individual's compensation relative to the competitive
marketplace.

Messrs. Griffith, Priory, Coley and Osborne received increases in base
salary ranging from 3.00% to 12.53%. Each of these increases reflects
comparison of full-year 1996 salary compensation with full-year 1995 amounts.
The increases varied based upon individual performance and the individual's
compensation relative to the competitive marketplace.

Chief Executive Officer Grigg received a salary of $695,000 in 1996,
representing a 9.16% increase over his 1995 base salary. In recommending such
increase to the Duke Board, the Compensation Committee considered Mr. Grigg's
individual performance and competitive compensation levels in the marketplace.

Short-Term Incentive Compensation

Short-term incentive awards were made through Duke's Executive Short-Term
Incentive Plan and were based on a pre-established awards formula and the
achievement of certain corporate and business unit measures. Those measures
vary according to the position held by the executive officer and provide
additional alignment with business unit performance. Minimum, target and
maximum performance levels are established for determining awards. 1996 awards
were calculated with respect to base salaries earned during 1996.

Messrs. Grigg, Griffith and Priory were members of Duke's Management
Committee in 1996 for purposes of determining awards under the Plan, with
their awards being based on the achievement of certain corporate measures and
a return on equity threshold of 12.95%. These measures, target performance
levels and respective weights were:

(i) return on equity of 13.45% (50%);

(ii) total cost per kilowatt hour delivered of 5.34 cents (20%);

114
<PAGE>

(iii) corporate safety level of 148 recordable incidents reported for the
year (20%); and

(iv) after-tax net profit of the Associated Enterprises Group of
$39,321,000 (10%).

Duke, including the Associated Enterprises Group, achieved a return on
equity of 14.51% in 1996, thereby exceeding the maximum specified in the Plan
with respect to awards for Messrs. Grigg, Griffith and Priory. Duke's total
cost per kilowatt hour delivered was 5.46 cents, not achieving the minimum
performance level of 5.39 cents. Duke also did not achieve the corporate
safety minimum performance level, with 265 recordable incidents reported in
1996. After-tax net profit for the Associated Enterprises Group was
$52,099,000, exceeding the maximum performance level. Accordingly, Messrs.
Griffith and Priory received awards of 22.50% of their base salaries. Chief
Executive Officer Grigg received an award of $218,925, constituting 31.50% of
his base salary.

Mr. Coley, who is President of the Associated Enterprises Group and also a
member of Duke's Management Committee, received an award that was based on the
level of achievement of after-tax net profit for four key business units of
the Associated Enterprises Group, with each being weighted at 25%. The after-
tax net profit for three of the four business units, Crescent Resources, Inc.,
Duke Engineering & Services, Inc. and Duke/Fluor Daniel, exceeded the maximum
performance level and the after-tax net profit for the fourth business unit,
Duke Energy Group, Inc., did not attain the minimum performance level,
resulting in Mr. Coley receiving an award of 28.13% of his base salary.
Mr. Coley was also eligible for an additional award based on the 1996 total
after-tax net profits of the Associated Enterprises Group as a whole.
Accordingly, since the Associated Enterprises Group exceeded the maximum level
in respect of total after-tax net profits, Mr. Coley received an additional
award of 54.29% of his base salary.

Mr. Osborne was a member of Duke's Senior Vice President group for purposes
of determining awards under the Plan. Accordingly, his award was based on the
four corporate measures listed in (i), (ii), (iii) and (iv) above, which
together were weighted 60% for purposes of his award, together with business
unit measures weighted 40%. Mr. Osborne received an award of 18.93% of his
base salary.

Long-Term Incentive Compensation

Long-term incentive awards were made through Duke's Executive Long-Term
Incentive Plan using a pre-established awards formula based on total
shareholder return over a three-year period as compared to the performance of
a peer group consisting of companies in the S&P Electric Utility Index. "Total
shareholder return" is calculated by dividing the sum of the change in the
market price of Duke Common Stock over the three-year performance period plus
dividends paid over that period, by the price of Duke Common Stock at the
beginning of the performance period. For any award to have been made, this
figure had to exceed the 33rd percentile of the peer group, which was the
minimum performance level established by the Compensation Committee. The
target performance level was the 55th percentile of the peer group and the
maximum performance level was the 75th percentile. Duke exceeded the target
performance level by achieving total shareholder return at the 64th percentile
of the peer group for the 1994 through 1996 performance period. As a result,
Messrs. Griffith, Priory, Coley and Osborne received awards under the Plan
ranging from 30.63% to 36.75% of their respective base salaries as established
in February 1994. Chief Executive Officer Grigg received an award of 42.37% of
his base salary, also as established in February 1994.

This report has been provided by the Compensation Committee.

Buck Mickel, Chairman
Paul H. Henson
Russell M. Robinson, II

115
<PAGE>

PERFORMANCE GRAPH

Note: The stock price performance shown on the graph below is not necessarily
indicative of future price performance.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG DUKE, S&P 500 INDEX
AND S&P ELECTRIC UTILITY INDEX

[LINE GRAPH APPEARS HERE]

- -------------------------------------------------
Assumes $100 invested on December 31, 1991 in
Duke Common Stock, S&P 500 Index,
and S&P Electric Index.
Assumes reinvestment of dividends.
- -------------------------------------------------

<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Duke $100 $109 $133 $126 $165 $167
S&P 500 Index 100 108 119 120 164 203
S&P Electric Utility Index 100 106 118 104 136 136
</TABLE>

DIRECTORS' FEES

During 1996, directors who are not employees of Duke received fixed annual
compensation of $30,000 and a fee of $1,000 for attendance at each meeting of
the Duke Board, each committee meeting and other functions of Duke requiring
their presence, together with expenses of attendance. In addition, each of the
Chairmen of the Audit, Compensation, Nominating, Corporate Performance Review
and Finance Committees received annual compensation of $3,500.

A nonemployee director may elect to receive 50% of his or her retainer and
attendance fees in the form of Duke Common Stock or may defer such portion by
having it held in trust for the director's benefit and invested in Duke Common
Stock at market price. The director may elect to receive the remaining 50% of
such compensation in cash or may elect to defer, until termination of service
on the Duke Board, that portion in trust

116
<PAGE>

as shares of Duke Common Stock or in an investment account which will be
credited with interest based upon the interest paid on 30-year U.S. Treasury
Bonds.

Each January and July that a nonemployee director continues to serve on the
Duke Board, the director is also credited with 100 shares of Duke Common Stock
to be held in trust. Each nonemployee director with service on the Duke Board
prior to 1997 has been credited with shares of Duke Common Stock which are
held in trust and based upon the benefit which such director accrued under a
prior retirement plan that was terminated on December 31, 1996.

In general, shares of Duke Common Stock held in trust, and income thereon,
will not become distributable until the nonemployee director terminates
service on the Duke Board. Dividends will be converted into additional shares
held in trust at fair market value. When a nonemployee director terminates
service on the Duke Board, stock held in trust for his or her account will be
distributed to the director on the basis of a distribution schedule chosen by
such director.

The Duke Board, upon the recommendation of the Compensation Committee, has
adopted stock ownership guidelines for nonemployee directors. The guidelines
became effective January 1, 1997, and require nonemployee directors to build
and maintain holdings of Duke Common Stock (or Duke Common Stock equivalents)
equal in market value to three times the annual cash retainer. Such directors
are given five years from the date of the implementation of the guidelines (or
from the beginning of service on the Duke Board, if after January 1, 1997) in
which to reach the required ownership level.

INFORMATION REGARDING THE BOARD OF DIRECTORS

The Duke Board had a total of nine meetings during 1996. No director
attended fewer than 75% of the total of such Board meetings and the meetings
of the committees upon which he or she served during the period for which he
or she was a director, with the exception of Paul H. Henson who attended 69%
of such meetings.

Among its standing committees Duke has a Management Committee, an Audit
Committee, a Compensation Committee, a Nominating Committee, a Corporate
Performance Review Committee and a Finance Committee.

The Management Committee consists of W.H. Grigg, Steve C. Griffith, Jr.,
Richard B. Priory and William A. Coley. This Committee may exercise all of the
authority of the Duke Board except with respect to certain actions specified
in the Duke By-Laws.

The Audit Committee consists of Robert J. Brown, Max Lennon and Russell M.
Robinson, II. This Committee recommends to the Duke Board the engagement of
the independent auditors for Duke, determines the scope of the auditing of the
books and accounts of Duke, reviews the reports submitted by the auditors,
examines procedures employed in connection with Duke's internal audit program
and makes recommendations to the Duke Board as may be appropriate. There were
six meetings of this Committee during 1996.

The Compensation Committee consists of Paul H. Henson, Buck Mickel and
Russell M. Robinson, II. This Committee sets the salaries and other
compensation of all employees of Duke except the Chairman of the Board, Vice
Chairman of the Board, President and any other officers the Duke Board may
designate whose salaries are at a monthly rate at or above a level as
determined from time to time by the Duke Board. This Committee makes
recommendations to the Duke Board regarding the salary of the Chairman of the
Board, Vice Chairman of the Board and any President for consideration and
action by the Duke Board, without the presence or participation of those
directors who are also employees of Duke. The Committee also makes
recommendations to the Duke Board regarding the compensation of non-employee
directors. There were nine meetings of this Committee during 1996.

The Nominating Committee recommends to the Duke Board the size and
composition of the Duke Board within the limits set forth in the Duke Articles
and the Duke By-Laws and recommends persons to be considered as successors to
the Chief Executive Officer. The Nominating Committee will consider nominees
for the Duke

117
<PAGE>

Board recommended by shareholders. Recommendations by shareholders should be
forwarded to the Secretary of Duke and should identify the nominee by name and
provide pertinent information concerning his or her background and experience.
A shareholder recommendation must be received at least ninety days prior to
the date of the annual meeting of shareholders. The Nominating Committee,
consisting of W. H. Grigg, Paul H. Henson, George Dean Johnson, Jr. and W. W.
Johnson, met twice in 1996.

The Corporate Performance Review Committee consists of G. Alex Bernhardt,
William A. Coley, Paul H. Henson, James G. Martin and Buck Mickel. The
Corporate Performance Review Committee monitors and makes recommendations for
improving the overall performance of Duke, and, at the policy level,
determines the adequacy of and support for Duke's emphasis on continuous
improvement. The Committee met six times during 1996.

The Finance Committee consists of W. H. Grigg, George Dean Johnson, Jr., W.
W. Johnson and Richard B. Priory. This Committee directs the financial and
fiscal affairs of Duke and makes recommendations to the Duke Board regarding
Duke's dividend, financing and fiscal policies. There were seven meetings of
this Committee during 1996.

During 1996, Duke retained the law firm of Robinson, Bradshaw & Hinson,
P.A., of which Russell M. Robinson, II is a shareholder, in connection with a
number of small matters. Legal fees paid by Duke to the law firm in 1996
represented less than 5% of such firm's gross revenues for the year.

RATIFICATION OF APPOINTMENT OF AUDITORS
(PROPOSAL 3)

The Duke Board, upon recommendation of the Audit Committee, has reappointed,
subject to shareholder ratification, the firm of Deloitte & Touche LLP,
certified public accountants, as independent auditors to make an examination
of the accounts of Duke for the year 1997. If the shareholders do not ratify
this appointment, other certified public accountants will be considered by the
Duke Board upon recommendation of the Audit Committee.

THE DUKE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.

A representative of Deloitte & Touche LLP will, as in prior years, attend
the annual meeting and will have the opportunity to make a statement and be
available to respond to appropriate questions.

OTHER BUSINESS

The Duke Board knows of no other matter to come before the Duke Meeting.
However, if any matter requiring a vote of the holders of Duke Common Stock
should arise, it is the intention of the persons named in the enclosed form of
proxy to vote such proxy in accordance with their best judgment.

PROPOSALS FOR 1998 ANNUAL MEETING

Shareholder proposals intended to be presented at Duke's 1998 annual meeting
must be received by Duke by November 17, 1997 for possible inclusion in the
proxy material relating to such meeting.

ANNUAL REPORT ON FORM 10-K

A copy of Duke's Annual Report on Form 10-K for the year ended December 31,
1996, which is required to be filed with the SEC, will be made available to
holders of Duke Common Stock to whom this Joint Proxy Statement-Prospectus is
mailed, without charge, upon written request to Allen Stewart, Investor
Relations Department, Duke Power Company, P.O. Box 1005, Charlotte, North
Carolina 28201-1005.

By Order of the Board of Directors,

/s/ ELLEN T. RUFF
ELLEN T. RUFF
Secretary

March 13, 1997

118
<PAGE>

THE PANENERGY MEETING--ADDITIONAL MATTERS

ELECTION OF DIRECTORS
(PROPOSAL 2)

The PanEnergy Board consists of twelve directors, ten of whom are
nonemployee directors, and two advisory directors, neither of whom is employed
by PanEnergy. In accordance with the PanEnergy By-Laws, the directors have
been divided into three Classes of approximately equal size, with staggered
terms in office. At each PanEnergy Annual Meeting, directors constituting one
Class are elected for three-year terms. Each Class is designated by the year
in which its current term ends. The members of the 1997 Class of Directors,
Paul M. Anderson, William T. Esrey, Ann Maynard Gray and Matthew R. Simmons,
have been nominated for re-election at this year's PanEnergy Meeting. If re-
elected, they will hold office until the earlier to occur of the Effective
Time, the Annual Meeting in the year 2000 or until successors shall have been
elected and shall have qualified. The terms of the directors constituting the
other two Classes will continue until the earlier of the Effective Time or the
terms indicated below.

The proxy holders named on the proxy card will vote FOR the election of the
nominees listed below, unless otherwise instructed on proxy cards that have
been signed and returned. If you do not wish your shares to be voted for
particular nominees, please identify the exceptions on the proxy card. If any
of these nominees should be unable to serve, the proxies will be voted by the
proxy holders for the election of such other person as they shall determine,
in accordance with their judgment.

INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS

1997 CLASS

<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND AGE IN 1997
---- -----------------------------------
<C> <S>
Paul M. Anderson........ Age 52. Chief Executive Officer of PanEnergy since April
1995, President of PanEnergy since December 1993 and
director since December 1992. Executive Vice President of
PanEnergy from March 1991 to December 1993. President and
Chief Executive Officer of Panhandle Eastern Pipe Line
Company ("PEPL") from April 1991 to January 1994, a
director of PEPL since 1991, and Chairman of the Board
since January 1994. Director of Texas Eastern Transmission
Corporation ("TETCO") since April 1991 and Chairman of the
Board since January 1994. Vice President, Finance and
Chief Financial Officer, Inland Steel Industries, Inc.,
1990-91. Director of Temple-Inland, Inc., Kerr-McGee
Corporation and of Texas Eastern Products Pipeline Company
("TEPPCO"), a wholly-owned subsidiary of PanEnergy and the
general partner of TEPPCO Partners, L.P., a publicly
traded master limited partnership.
William T. Esrey........ Age 57. Chairman since April 1990 and Chief Executive
Officer since April 1985 of Sprint Corporation ("Sprint"),
Westwood, Kansas, a diversified telecommunications holding
company. President of Sprint from April 1985 to April
1996. Director of PanEnergy since 1985. Director of
Sprint, Equitable Life Assurance Society of the United
States, General Mills, Inc. and Everen Capital
Corporation.
Ann Maynard Gray........ Age 52. Since 1991, President, Diversified Publishing
Group of ABC, Inc. (until October 1, 1996 known as
"Capital Cities/ABC, Inc."), New York, New York, involved
in television, radio and publishing, and Corporate Vice
President since 1986. Senior Vice President--Finance, ABC
Television Network from 1988 to 1991. Director of
PanEnergy since 1994. Director of Cyprus Amax Minerals
Company.
</TABLE>

106
<PAGE>

<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND AGE IN 1997
---- -----------------------------------
<C> <S>
Matthew R. Simmons...... Age 54. President since 1974, and founder of Simmons &
Company International, Houston, Texas, a specialized
investment banking firm focusing exclusively on the oil
and gas services and equipment industry. Director of
PanEnergy since October 1996. Director of United Meridian
Corporation.
</TABLE>

INFORMATION REGARDING DIRECTORS CONTINUING IN OFFICE

1998 CLASS

<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND AGE IN 1997
---- -----------------------------------
<C> <S>
Charles W. Duncan, Age 71. Engaged in private investments in Houston, Texas,
Jr. ................... since 1981. Deputy Secretary of the United States
Department of Defense, January 1977 to August 1979,
Secretary of the United States Department of Energy,
August 1979 until January 1981. Director of PanEnergy
since 1990. Director of American Express Company, The
Coca-Cola Company, Newfield Exploration Company and United
Technologies Corporation.
Harry E. Ekblom......... Age 69. Vice Chairman of A. T. Hudson & Co., Inc.,
Oradell, New Jersey, a management consulting firm, since
1985, and President of Harry E. Ekblom & Co., Inc.,
Osterville, Massachusetts, a financial consulting firm,
since January 1984. Director of PanEnergy since 1971.
Director of Harris & Harris Group, Inc. and The Commercial
Bank of New York.
Dennis R. Hendrix....... Age 57. Chairman of the Board of PanEnergy since November
1990 and Chief Executive Officer from November 1990 to
April 1995. President of PanEnergy from November 1990 to
December 1993. Director of PEPL and TETCO since November
1990, Chairman of the Board from November 1990 to January
1994 and Chief Executive Officer from November 1990 to
April 1991 of PEPL and TETCO, and President of TETCO from
November 1990 to January 1994. Director of TECO Energy,
Inc. and TEPPCO.
Ralph S. O'Connor....... Age 71. For more than five years, principally engaged in
investments as Chairman and Chief Executive Officer of
Ralph S. O'Connor & Associates, Houston, Texas. Director
of PanEnergy since 1991.
</TABLE>

1999 CLASS

<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND AGE IN 1997
---- -----------------------------------
<C> <S>
Milton Carroll.......... Age 47. Chairman, President and Chief Executive Officer of
Instrument Products, Inc., Houston, Texas, a manufacturer
of oilfield equipment, since 1977. Director of PanEnergy
since 1993. Director of the Federal Reserve Bank of
Dallas, Houston Industries, Inc., Seagull Energy
Corporation and Blue Cross Blue Shield of Texas, Inc.
Robert Cizik............ Age 66. Former Chairman, Chief Executive Officer and a
Director of Cooper Industries, Inc. ("Cooper"), Houston,
Texas, a diversified international manufacturing company,
where he served from 1975 to 1996. Director of PanEnergy
since 1991. Currently serves as Non-executive Chairman of
EASCO, Inc., Gerard, Ohio, which is in the business of
aluminum extraction. Director of Temple-Inland, Inc.,
Harris Corporation, and Air Products and Chemicals, Inc.
</TABLE>

107
<PAGE>

<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND AGE IN 1997
---- -----------------------------------
<C> <S>
Harold S. Hook.......... Age 66. Chairman of American General Corporation
("American General"), Houston, Texas, a diversified
financial services organization, for more than five years.
Director of PanEnergy since 1978. Director of American
General, American General Finance, Inc., Chase Manhattan
Corporation, Chase Manhattan Bank, Cooper and Sprint.
Leo E. Linbeck, Jr. .... Age 63. Since 1990, Chairman, President and Chief
Executive Officer of Linbeck Corporation, Houston, Texas,
a holding company of five construction-related firms, and,
since 1975, Chairman, President and Chief Executive
Officer of Linbeck Construction Corporation, Houston,
Texas, a client-focused organization whose expertise is
the planning and building of facilities. Director of
PanEnergy since 1986. Director of Daniel Industries, Inc.,
and a Director and Trustee of thirty-three investment
companies managed by John Hancock Advisors, Inc.
</TABLE>

ADDITIONAL INFORMATION

BOARD OF DIRECTORS RETIREMENT POLICY

In January 1996, the PanEnergy Board amended its policy regarding the
retirement of nonemployee directors to provide for the retirement of a
nonemployee director at the PanEnergy Annual Meeting next following the
nonemployee director's seventy-second birthday. Previously, the policy
provided that the nonemployee director would retire at the next meeting of the
PanEnergy Board following the nonemployee director's seventieth birthday.

INFORMATION REGARDING ADVISORY DIRECTORS

In January 1997, the PanEnergy Board elected two advisory directors, Senator
Lloyd M. Bentsen and Cortlandt S. Dietler, to their third terms to serve until
the earlier to occur of the Effective Time or January 31, 1998. An advisory
director has no voting rights but attends meetings of the PanEnergy Board and
certain PanEnergy Board committees in an advisory capacity. Information
regarding the advisory directors is as follows:

<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE AND AGE IN 1997
---- -----------------------------------
<C> <S>
Lloyd M. Bentsen........ Age 76. Shareholder of the law firm of Verner, Liipfert,
Bernhard, McPherson and Hand, Houston, Texas. United
States Senator from Texas from 1971 to 1993. Secretary of
the Treasury of the United States from January 1993 to
December 1994. Advisory director of PanEnergy since
January 1995. Director of Continental Airlines, Inc., IVAX
Corporation and American International Group, Inc., and
Chairman of the Board of New Holland, Ltd., a Dutch
company, and a director of Fomento Economico Mexicano SA
de CV, a Mexican corporation. As of December 31, 1996,
Senator Bentsen owned 8,930 shares of PanEnergy Common
Stock.
Cortlandt S. Dietler.... Age 76. Chairman, President and Chief Executive Officer
since April 1995, of TransMontaigne Oil Corporation,
Denver, Colorado, a wholesale marketer, transporter and
terminaler of petroleum-derived commodities. Until the
December 1994 merger with PanEnergy, Chairman of the Board
and Chief Executive Officer of Associated Natural Gas
Corporation, Denver, Colorado, a marketer, gatherer and
processor of natural gas, for more than five years.
Advisory director of PanEnergy since January 1995.
Director of Forrest Oil Corporation, Hallador Petroleum
Company, Key Production Company, Inc. and Grease Monkey
International, Inc. As of December 31, 1996, Mr. Dietler
owned 1,322,404 shares of PanEnergy Common Stock,
including 6,000 shares owned by Mrs. Dietler, and 3,500
limited partnership units of TEPPCO Partners, L.P.
</TABLE>

108
<PAGE>

MEETINGS OF THE PANENERGY BOARD AND ITS COMMITTEES

During 1996, the PanEnergy Board met twelve times. Each director attended at
least 75% of the aggregate number of the PanEnergy Board meetings and the
meetings of PanEnergy Board committees on which he or she served.

The PanEnergy Board has six committees, which are the Audit Committee, the
Compensation & Organization Committee ("Compensation Committee"), the
Committee on Directors, the Executive Committee, the Finance Committee and the
Public Responsibilities Committee. With the exception of the Executive
Committee, all committees are composed solely of nonemployee directors.

Mr. Cizik is Chairman, and Ms. Gray and Messrs. Carroll, Hook, O'Connor and
Dietler are members, of the Audit Committee. The Audit Committee recommends
the appointment of independent auditors and reviews the plan, scope and
results of the audit and monitors the fees for audit and other services;
reviews the recommendations resulting from such audit and management responses
thereto; and reviews PanEnergy's accounting principles, policies, internal
accounting controls, and the internal auditing department plans and
procedures. The Audit Committee also reviews PanEnergy's annual financial
statements and recommends accounting and internal auditing policies which, in
the Audit Committee's judgment, should receive the attention of the PanEnergy
Board. The Audit Committee met three times in 1996.

Mr. Duncan is Chairman of the Compensation Committee and Messrs. Cizik,
Ekblom, Esrey, Linbeck and O'Connor are members. The Compensation Committee
establishes the compensation policies for the Chief Executive Officer and
other senior officers; approves the salaries and certain remuneration
arrangements of senior officers; recommends the adoption of compensation plans
in which officers and certain key employees are eligible to participate; and
approves, appoints a subcommittee which approves, or recommends awards
pursuant thereto, including bonuses, stock option grants, and other awards.
The Compensation Committee acts on management recommendations for the election
of officers, recommends the election of a Chief Executive Officer when
appropriate, and reviews management succession plans. The Compensation
Committee met five times in 1996.

Mr. Esrey is Chairman of the Committee on Directors and Messrs. Carroll,
Cizik, Dietler, Duncan, Ekblom and Hook are members. The Committee on
Directors identifies and recommends candidates to fill PanEnergy Board
vacancies and considers nominees for election as directors at the Annual
Meeting; considers the removal of directors; reviews the PanEnergy Board's
retirement policy and policies pertaining to PanEnergy Board membership;
advises the PanEnergy Board on matters pertaining to PanEnergy Board tenure
and compensation; and considers and makes recommendations pertaining to
corporate governance matters. In addition, the Committee on Directors will
consider stockholders' suggestions of nominees for director that are submitted
in writing to it, in care of the Secretary of PanEnergy. The Committee on
Directors met three times in 1995.

Mr. Hook is Chairman of the Finance Committee and the members are Ms. Gray,
Senator Bentsen and Messrs. Duncan, Ekblom and Linbeck. The Finance Committee
reviews PanEnergy's financial needs and approves PanEnergy's financing plans,
represents the PanEnergy Board in discharging administrative responsibilities
with respect to employee benefit plans, reviews the performance of the
investment managers of the Retirement Income Plan of Panhandle Eastern
Corporation and Participating Affiliates ("Retirement Income Plan"), monitors
PanEnergy's risk management activities, and reviews the PanEnergy Board's
dividend policy. The Finance Committee met three times in 1996.

Mr. Linbeck is Chairman, and Senator Bentsen, Messrs. Carroll, Esrey and
O'Connor and Ms. Gray are members, of the Public Responsibilities Committee.
This committee reviews and considers PanEnergy's policies and practices
related to public issues important to PanEnergy and the industry, including:
safety; environmental affairs; governmental relations; community relations;
employee participation in civic and charitable affairs; civic, charitable, and
philanthropic contributions; and equal opportunity policies and programs. The
Public Responsibilities Committee met once in 1996.

109
<PAGE>

Mr. Hendrix is Chairman, and Senator Bentsen and Messrs. Anderson, Carroll,
Cizik, Duncan, Hook, Linbeck, O'Connor and Simmons are members, of the
Executive Committee, which reviews and, where appropriate, authorizes
corporate action with respect to the conduct of the business of PanEnergy
between PanEnergy Board meetings. Actions taken by the Executive Committee are
regularly submitted to the PanEnergy Board for review and ratification at the
next meeting. The Executive Committee did not meet in 1996.

SECURITY OWNERSHIP OF MANAGEMENT

As of December 31, 1996, all directors and executive officers of PanEnergy
as a group owned beneficially, or had the right to acquire within 60 days of
December 31, 1996, under one or more of the 1982 Key Employee Stock Option
Plan, as amended (the "1982 Plan"), the 1989 Nonemployee Directors Stock
Option Plan (the "1989 Plan"), the 1990 Long Term Incentive Plan (the "1990
LTIP"), and the 1994 Long Term Incentive Plan (the "1994 LTIP"), less than 1%
of the presently issued and outstanding PanEnergy Common Stock.

The following table shows the number of shares of PanEnergy Common Stock
beneficially owned as of December 31, 1996, or as to which there was a right
to acquire beneficial ownership within 60 days of such date, by each director
(other than advisory directors) or nominee for director, each executive
officer of PanEnergy named in the Summary Compensation Table ("Named Executive
Officers"), and all directors (other than advisory directors) and executive
officers of PanEnergy as a group.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES WHICH
BENEFICIALLY MAY BE
NAME OWNED(1) ACQUIRED(2)
---- ------------ ------------
<S> <C> <C>
Paul M. Anderson................................... 45,177 290,400
D.H. Anderson...................................... 63,910 17,076
Milton Carroll..................................... 431 7,000
Robert Cizik....................................... 1,322 9,000
Charles W. Duncan, Jr. ............................ 7,767(3) 10,000
Harry E. Ekblom.................................... 4,276(4) 11,000
William T. Esrey................................... 2,500 11,000
Ann Maynard Gray................................... 500 6,000
James T. Hackett................................... 70,582 16,666
Dennis R. Hendrix.................................. 341,600 --
Harold S. Hook..................................... 5,600 11,000
Carl B. King....................................... 57,603 17,076
Leo E. Linbeck, Jr................................. 1,223 11,000
George L. Mazanec.................................. 27,887 276,886
Ralph S. O'Connor.................................. 35,908 9,000
Matthew R. Simmons................................. 5,000 --
All directors (other than advisory directors),
nominees for director, and 12 executive officers
as a group, including those named above........... 741,769 895,401
</TABLE>
- --------
(1) Included are beneficially owned and undistributed shares of PanEnergy
Common Stock held as of December 31, 1996, in the PanEnergy Corp Dividend
Reinvestment and Stock Purchase Plan, the Tax Credit Employee Stock
Ownership Plan of PanEnergy Corp and Participating Affiliates, shares held
as of December 31, 1996, in, and allocable to the individual under, the
Employees' Savings Plan of PanEnergy Corp and Participating Affiliates,
and, in the case of D.H. Anderson, shares held as of December 31, 1996,
in, and allocable to him under, the Retirement Savings Plan of PanEnergy
Natural Gas Corporation (formerly known as Associated Natural Gas
Corporation).
(2) Shares of PanEnergy Common Stock which the directors or executive officers
of PanEnergy have the right to acquire within 60 days of December 31,
1996, pursuant to options outstanding under one or more of the 1982 Plan,
the 1989 Plan, the 1990 LTIP and the 1994 LTIP. Nonemployee directors do
not participate in the 1982 Plan, the 1990 LTIP or the 1994 LTIP, and
employee directors do not participate in the 1989 Plan.
(3) Includes 4,531 shares held by Duncan Investors, Ltd., a partnership in
which Mr. Duncan is a general partner.
(4) Includes 2,000 shares held by Mrs. Ekblom.

110
<PAGE>

Texas Eastern Products Pipeline Company, a wholly-owned subsidiary of
PanEnergy, is the general partner of TEPPCO Partners, L.P. ("TEPPCO"), a
publicly traded master limited partnership. The following table shows the
number of units of limited partnership interests in TEPPCO beneficially owned
as of December 31, 1996, or as to which there was a right to acquire
beneficial ownership within 60 days of such date, by each director (other than
advisory directors) or nominee for director, each of the Named Executive
Officers, and all directors and executive officers of PanEnergy as a group. As
of December 31, 1996, the percentage of units beneficially owned by all
directors (other than advisory directors) and executive officers of PanEnergy
as a group did not exceed 1% of the presently issued and outstanding units.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNITS UNITS WHICH
BENEFICIALLY MAY BE
NAME OWNED ACQUIRED
---- ------------ -----------
<S> <C> <C>
Paul M. Anderson...................................... 2,000 --
D.H. Anderson......................................... -- --
Milton Carroll........................................ -- --
Robert Cizik.......................................... -- --
Charles W. Duncan, Jr. ............................... -- --
Harry E. Ekblom....................................... -- --
William T. Esrey...................................... -- --
Ann Maynard Gray...................................... -- --
James T. Hackett......................................
Dennis R. Hendrix..................................... 14,500 --
Harold S. Hook........................................ 2,000 --
Carl B. King.......................................... -- --
Leo E. Linbeck, Jr. .................................. -- --
George L. Mazanec..................................... 2,000 --
Ralph S. O'Connor..................................... 1,000 --
Matthew R. Simmons.................................... -- --
All directors (other than advisory directors),
nominees for director, and
12 executive officers as a group, including those
named above.......................................... 19,500 --
</TABLE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table shows the number of shares of PanEnergy Common Stock
held by beneficial owners of more than 5% of the PanEnergy Common Stock as of
December 31, 1996, and the percentage of the total outstanding shares of
PanEnergy Common Stock as of that date.

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OUTSTANDING
NAME AND ADDRESS BENEFICIALLY SHARES
OF BENEFICIAL OWNER OWNED OWNED
------------------- ------------ -----------
<S> <C> <C>
Sonatrach Petroleum Investment Corp., B.V.
Sloterkade 138D
1058 HM Amsterdam, The Netherlands.................... 7,700,000 5.09
Employees' Savings Plan of
PanEnergy Corp and Participating Affiliates
5400 Westheimer Court
Houston, Texas 77056.................................. 9,465,386 6.30
</TABLE>

Sonatrach Petroleum Investment Corp., B.V., is a Dutch corporation owned by
two stockholders: Sonatrach (the national oil and gas company of Algeria),
which owns a 99.9% interest, and Banque Algerienne du Commerce Exterieur
("BACE"), a Swiss bank, which owns a 0.1% interest. The principal executive
offices of Sonatrach are located at 10, Rue du Sahara, Hydra, Algiers,
Algeria, and the principal executive offices of BACE are located at
Schutzengasse 4, Postfach, 8023 Zurich, Switzerland. Sonatrach and BACE are
wholly owned by the government of Algeria.

111
<PAGE>

PanEnergy and Sonatrach, directly and through subsidiaries, are parties to
agreements entered into in 1987 providing for the importation of liquefied
natural gas ("LNG") over a period of up to 20 years at volumes and prices and
upon other terms to be agreed upon from time to time. The agreements provide
that if LNG is purchased by PanEnergy from Sonatrach, Sonatrach will receive
an f.o.b. payment equal to approximately 63% of the average gross selling
price of an equivalent quantity of regasified LNG, with PanEnergy receiving
the balance. For the year ended December 31, 1996, payments to Sonatrach under
this program for LNG and shipping were approximately $10.8 million.

Through its Trustee, Northern Trust Company, the Employees' Savings Plan of
PanEnergy Corp and Participating Affiliates ("ESP") holds shares of PanEnergy
Common Stock for the account of participants, who are employees of PanEnergy
and participating affiliates. Generally, the ESP passes through to
participants the right to direct the voting of shares of PanEnergy Common
Stock allocable to their accounts and to direct the tender of such shares in
response to a tender or exchange offer for PanEnergy Common Stock. The ESP is
administered by an administrative committee whose members are H. D. Church,
Senior Vice President of TETCO; Paul F. Ferguson, Jr., Senior Vice President
and Chief Financial Officer of PanEnergy; D. R. Hennig, Vice President of
PEPL, TETCO and Trunkline Gas Company ("Trunkline"); Bruce A. Williamson, Vice
President of PanEnergy; Theopolis Holeman, Vice President of PEPL; Sandra P.
Meyer, Vice President, Treasurer and Controller of PanEnergy; Erik B. Carlson,
Senior Vice President and General Counsel of PanEnergy Field Services, Inc.;
and P. J. Hester, Vice President and General Counsel of Algonquin Gas
Transmission Company. According to its Schedule 13G under the Securities
Exchange Act of 1934, dated February 14, 1997, Northern Trust Corporation, the
parent holding company of Northern Trust Company and other affiliates,
beneficially owned a total of 10,029,449 shares, including those attributable
to the ESP. Northern Trust Corporation is located at 50 South LaSalle Street,
Chicago, Illinois 60675.

COMPENSATION OF DIRECTORS

As employees of PanEnergy, Messrs. Anderson and Hendrix receive no fees for
their service as directors, for attendance at PanEnergy Board and committee
meetings, or for chairing PanEnergy Board committees. Nonemployee directors
and advisory directors receive an annual retainer fee of $30,000, and $1,000
for each PanEnergy Board meeting and each Committee meeting attended.
Nonemployee Committee Chairmen receive an additional annual retainer of
$4,000. Nonemployee directors and advisory directors are reimbursed for
expenses incurred in attending PanEnergy Board and committee meetings.

In addition to the foregoing, PanEnergy maintains, or formerly maintained,
the following plans for nonemployee directors:

(1) The 1982 Directors' Deferred Compensation Plan permits nonemployee
directors to elect, on a year-to-year basis, to defer either 50% or 100% of
their directors' fees. As amended in January 1995, the annual interest rate
applicable to deferred amounts is equal to Moody's seasoned Baa Corporate
Bond Yield Index for the week ending with the final Friday of the previous
November, as reported in the Federal Reserve Statistical Release No. 15 or
its successor. Amounts accrued are payable either in a lump sum or over a
period of 5 or 10 years, as elected by the nonemployee director, commencing
on January 15 of the year next succeeding the year in which the nonemployee
director either ceases to be a director or upon the attainment of the age
the nonemployee director previously elected. For the year ended December
31, 1996, amounts deferred under this Plan and interest accrued relative to
such deferrals were $335,880 for the five participating nonemployee
directors as a group.

(2) The 1989 Nonemployee Directors' Stock Option Plan ("1989 Plan")
provides for the granting of non-qualified options for the purchase of
shares of PanEnergy Common Stock to each nonemployee director. Stock
appreciation rights ("SARs") are not permitted. All options are granted at
the fair market value of the PanEnergy Common Stock on the date of grant.
On May 1, 1989, each nonemployee director was granted an option to purchase
5,000 shares of PanEnergy Common Stock effective on the May 1 next
following election to the PanEnergy Board. Additional options to purchase
1,000 shares of PanEnergy Common Stock are granted to each nonemployee
director on May 1 of each year, through and including

112
<PAGE>

May 1, 1998. On May 1, 1996, options to purchase a total of 9,000 shares of
PanEnergy Common Stock were granted under the 1989 Plan at an exercise
price of $32.25 per share. Options granted under the 1989 Plan become
exercisable one year from the date of grant and expire on the tenth
anniversary of the date of grant. Accordingly, the options granted on May
1, 1996, are not reflected in the first table under the heading "Security
Ownership of Management." None of the ten nonemployee directors currently
participating in the 1989 Plan exercised options during 1996.

(3) The Nonemployee Directors' Retirement Plan provides an annual
unfunded retirement benefit for each nonemployee director of PanEnergy upon
the later to occur of the director's retirement date or the attainment of
age 65. A retired nonemployee director with 10 years or more of service on
the PanEnergy Board will receive annually for life (a guaranteed minimum of
10 years) an amount equal to 60% of the annual retainer fee in effect on
the director's retirement date. For a nonemployee director retiring with
less than 10 years of service, the annual benefit accrues at a rate of 6%
of the annual retainer fee in effect on the director's retirement date for
each year of service, not to exceed a total of 60% of such annual retainer
fee. In the event of a "change of control," a nonemployee director will be
deemed to have served as such until the earlier of the tenth anniversary of
the director's service on the PanEnergy Board or attainment of retirement
age. There are also certain pre-retirement supplemental death benefits
provided under this plan.

(4) At the time it was acquired by PanEnergy in 1989, Texas Eastern
Corporation ("TEC") maintained an unfunded plan, the TEC Directors'
Retirement Plan, which provided an annual benefit payable for 10 years
following a nonemployee director's retirement from active service on the
TEC Board of directors. Upon the nonemployee director's death following
retirement, any unpaid installments will be paid to the named beneficiary.
Under this plan, Messrs. Duncan and O'Connor have vested rights to annual
benefits for 10 years of $18,000 commencing January 1, 1999.

(5) The Directors' Deferred Compensation Plan of Panhandle Eastern
Corporation ("Nonemployee Directors' Plan") was available until December
31, 1986, to nonemployee directors and permitted deferral of up to 100% of
each participating nonemployee director's annual retainer fee. Benefit
payment amounts related to retainer fees deferred, to interest accrued at
seniority-based rates, and to age at the time of deferral. For the year
ended December 31, 1996, interest accrued for the four participating
nonemployee directors relative to amounts deferred under the Nonemployee
Directors' Plan was $27,848.

113
<PAGE>

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The following table and notes present the cash and certain other
compensation paid or accrued by PanEnergy to or on behalf of PanEnergy's Chief
Executive Officer and the other Named Executive Officers as of December 31,
1996, for the years ended December 31, 1996, 1995 and 1994:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------ ------------------------------
AWARDS PAYMENTS
--------------------- --------
SECURITIES
RESTRICTED UNDERLYING
OTHER STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS ANNUAL AMOUNT SARS PAYOUTS COMPENSATION
POSITION (1) YEAR ($) ($) COMP.($) ($)(2) (#)(3) ($) ($)(4)
- ------------------------ ---- ------- ------- -------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul M. Anderson........ 1996 600,000 615,000 -- 806,250 75,000 -- 241,233
1995 455,417 333,540 -- -- -- -- 105,725
1994 340,000 191,964 -- -- -- -- 69,424
James T. Hackett........ 1996 350,000 442,113 -- 2,090,625 50,000 -- 622
1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
George L. Mazanec....... 1996 388,750 278,558 -- -- -- 203,175 80,947
1995 372,083 215,259 -- -- -- 149,231 126,227
1994 340,000 189,414 -- -- -- 198,413 97,111
D. H. Anderson.......... 1996 303,500 203,497 -- -- -- -- 46,554
1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
Carl B. King............ 1996 270,000 202,020 -- 112,250 12,000 17,738 83,022
1995 261,875 115,689 -- -- 20,000 13,028 40,639
1994 255,000 135,333 -- -- 15,000 64,998 33,714
Fred J. Fowler.......... 1996 260,000 165,122 -- 112,250 12,000 7,740 60,090
1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
</TABLE>
- --------
(1) Paul M. Anderson is the President and Chief Executive Officer of
PanEnergy. Mr. Hackett was elected Executive Vice President of PanEnergy
in January 1996. Mr. Mazanec was Vice Chairman of PanEnergy through
October 1996, when he resigned as an officer and director of PanEnergy. He
remains an employee. D. H. Anderson was elected Group Vice President in
April 1996 and is President of PanEnergy Services, Inc. Mr. King is Senior
Vice President and General Counsel. Mr. Fowler was elected Group Vice
President of PanEnergy in May 1996 and is President of TETCO.

(2) On January 2, 1996, Mr. Hackett was awarded 75,000 shares of restricted
stock, the restrictions on which will be removed on 15,000 shares on the
business day preceding each of five consecutive anniversaries of his
employment. However, restrictions will be removed upon a change in
control, which is expected to occur at the Effective Time of the Merger.
The value of the 75,000 restricted shares, based on the fair market value
of PanEnergy Common Stock as reported on the NYSE Composite Reporting
System on January 2, 1996, which was $27.875 per share, was $2,090,625.
Based on the December 31, 1996 fair market value of $45.8125 per share,
the 75,000 restricted shares would be valued at $3,435,938. On January 24,
1996, 200 executives and management employees were granted 110,700 shares
of Performance Vesting Restricted Stock ("PVRS"), including Mr. King and
Mr. Fowler who each were granted 4,000 shares, and, in April 1996, Paul M.
Anderson was granted 25,000 shares of PVRS. These shares of PVRS vest upon
the achievement of certain total stockholder return targets, or, if
earlier, upon a change in control, which is expected to occur at the
Effective Time of the Merger. Recipients of the January 1996 and April
1996 grants

114
<PAGE>

receive dividends payable to holders of record of PanEnergy Common Stock on
the PVRS. Based on the fair market value of PanEnergy Common Stock as
reported on the NYSE Composite Reporting System on January 24 and April 24,
1996, which was $28.0625 per share and $32.25 per share, respectively, the
grant date values of these grants to Mr. King, Mr. Fowler and Paul M.
Anderson were $112,250, $112,250 and $806,250, respectively. Based on the
December 31, 1996 fair market value of $45.8125 per share, the PVRS would
be valued at $183,250, $183,250 and $1,145,313 for Messrs. King, Fowler and
Paul M. Anderson, respectively.

(3) In January 1994, 129 executive and management employees, including Mr.
King and Mr. Fowler, were granted options to purchase 324,300 shares,
together with an equivalent number of EPS Performance Units, and in
January 1995, 847,000 options and EPS Performance Units were granted to
178 executives and management employees, including Mr. King and Mr.
Fowler. Each EPS Performance Unit creates a credit to an employee's EPS
Performance Unit account when earnings per share exceed a threshold, which
was $1.50 for the awards made in January 1994 and $1.61 for awards made in
January 1995. When earnings for a calendar year (exclusive of certain
special items) exceed the threshold, the excess amount is credited to the
employee's EPS Performance Unit account. The balance in the account may be
used to exercise stock options granted in connection with the EPS
Performance Units or will be paid two years after the underlying options
expire, usually 10 years from the date of grant. Under the agreements for
such stock options, the options may also be exercised by normal means once
vesting requirements are met. In January 1996, 147 executive and
management employees, including Messrs. Hackett, King and Fowler, were
granted options to purchase a total of 374,900 shares and, in April 1996,
Paul M. Anderson was granted options to purchase 75,000 shares. Each of
these options, which did not include grants of EPS Performance Units,
become exercisable in equal installments over three years from the date of
grant. However, each will become fully exercisable upon a "change in
control," which is expected to occur at the Effective Time of the Merger.

(4) Pursuant to rules on executive and director compensation disclosure
adopted by the SEC, all other compensation reported for the last completed
fiscal year is required to be identified and quantified in a footnote.
Accordingly, amounts reported for 1996 include (a) amounts credited by
PanEnergy for the Named Executive Officers under the ESP and under the
PanEnergy Corp Key Employees Deferred Compensation Plan ("KED"), an
unfunded, defined contribution plan that allows eligible employees,
including Messrs. Paul M. Anderson, Mazanec, D. H. Anderson, King and
Fowler, to elect deferral of base salary and bonus, and receive matching
PanEnergy contributions and interest credits whenever, and to the extent
that, their participation in the ESP is limited by provisions of the Code,
(b) that portion of interest credits on deferred compensation amounts that
are considered, pursuant to rules promulgated by the SEC, to be at above-
market rates, (c) the value of EPS Performance Units credited to EPS
Performance Unit accounts of the Named Executive Officers in 1996, and (d)
the imputed value of premiums paid by PanEnergy for insurance on the Named
Executive Officers' lives (none of the Named Executive Officers has any
cash value rights related to such insurance).

<TABLE>
<CAPTION>
INTEREST VALUE OF
AT ABOVE EPS VALUE OF
MARKET PERFORMANCE INSURANCE
ESP/KED RATES UNITS PREMIUMS
NAME ($) ($) ($) ($)
---- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Paul M. Anderson...................... 61,614 7,051 169,400 3,168
James T. Hackett...................... -- 10 -- 612
George L. Mazanec..................... 34,871 30,404 -- 15,672
D.H. Anderson......................... 23,610 6 21,000 1,938
Carl B. King.......................... 21,179 228 58,800 2,815
Fred J. Fowler........................ 23,747 75 30,566 5,702
</TABLE>

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STOCK OPTION/SAR GRANTS IN 1996

The following table shows all grants of stock options to the Named Executive
Officers in 1996. No SARs were granted to any Named Executive Officer in 1996
nor were the exercise prices on stock options previously awarded to any of
them amended or adjusted.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------- ----------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/ GRANT DATE
UNDERLYING SARS GRANTED EXERCISE OR PRESENT
OPTIONS/SARS TO EMPLOYEES BASE PRICE EXPIRATION VALUE(2)
NAME GRANTED(1) IN FISCAL YEAR ($/SH) DATE ($)
---- ------------ -------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Paul M. Anderson........ 75,000 16 32.2500 4-24-06 636,161
James T. Hackett........ 50,000 11 27.8750 1-2-06 366,556
George L. Mazanec....... -- -- -- N/A --
D.H. Anderson........... -- -- -- N/A --
Carl B. King............ 12,000 3 28.0625 1-24-05 88,565
Fred J. Fowler.......... 12,000 3 28.0625 1-24-05 88,565
</TABLE>
- --------
(1) During 1996 the PanEnergy Board granted nonqualified stock options with
ten year terms to purchase 459,300 shares of PanEnergy Common Stock to 151
employees, including Messrs. Paul M. Anderson, Hackett, King and Fowler,
at exercise prices equal to the fair market value of PanEnergy Common
Stock on the dates of grant. The stock options, including those granted to
Messrs. Paul M. Anderson, Hackett, King and Fowler, vest in annual
increments of one-third commencing one year from the date of grant.
However, all unvested options will fully vest and become exercisable upon
change in control which is expected to occur at the Effective Time of the
Merger.
(2) Grant date present values are based on the Black-Scholes option valuation
model. The key input variables used in valuing the options were: risk-free
interest rate -- 6.28%; dividend yield -- 3.48%; stock price volatility --
21.55%; option term -- ten years. The Standard and Poor's Compustat
Database was used and the volatility variable reflected 36 months of stock
price trading data. No adjustments for non-transferability or risk of
forfeiture were made. The grant date value is set out for illustrative
purposes and, therefore, is not intended to forecast future financial
performance or possible future appreciation, if any, in the price of
PanEnergy Common Stock.

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EXERCISES OF STOCK OPTIONS IN 1996 AND YEAR-END OPTION VALUES

The following table provides information concerning stock options exercised
by each of the Named Executive Officers during 1996 and the value of
unexercised stock options to the Named Executive Officers as of December 31,
1996. The value realized and the value assigned to each unexercised, "in the
money" stock option is based on the positive spread between the exercise price
of such stock option and the fair market value ("FMV") of the PanEnergy Common
Stock on December 31, 1996, which was $45.8125. The FMV is the average of the
high and low prices of a share of PanEnergy Common Stock on that date as
reported on the NYSE Composite Transactions Tape. In assessing the value, it
should be kept in mind that no matter what theoretical value is placed on a
stock option on a particular date, its ultimate value will be dependent on the
market value of the underlying stock at a future date. That future value will
depend in part on the efforts of the Named Executive Officers to foster the
future success of the corporation for the benefit of all stockholders.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES

<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS/SARS
ACQUIRED ON VALUE OPTIONS/SARS AT FY-END AT FY-END ($)
EXERCISE REALIZED (#) EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE* UNEXERCISABLE
---- ----------- --------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Paul M. Anderson........ 8,600 222,056 265,400/75,000 6,515,863/1,017,188
James T. Hackett........ -- -- --/50,000 --/876,875
George L. Mazanec....... -- -- 276,886/-- 6,916,457/--
D.H. Anderson........... 103,125 3,286,602 66,145/16,667 1,343,505/831,267
Carl B. King............ 20,161 420,893 8,172/25,334 215,035/535,517
Fred J. Fowler.......... 3,168 68,623 30,984/22,000 770,864/462,375
</TABLE>
- --------
* Future exercisability of currently unexercisable stock options depends on
the grantee remaining employed by PanEnergy throughout the vesting period of
the options, subject to provisions applicable at retirement, death or total
disability. The unexercisable options vest and become exercisable on the
following schedule, although all unvested options will fully vest and become
exercisable upon change in control which is expected to occur at the
Effective Time of the Merger:

<TABLE>
<CAPTION>
P.M. ANDERSON J.T. HACKETT D.H. ANDERSON C.B. KING F. J. FOWLER
------------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
January 2, 1997......... 16,666
January 24, 1997........ 16,667 4,000 4,000
January 25, 1997........ 6,667 5,000
April 24, 1997.......... 25,000
January 2, 1998......... 16,667
January 24, 1998........ 4,000 4,000
January 25, 1998........ 16,667 6,667 5,000
April 24, 1998.......... 25,000
January 2, 1999......... 16,667
January 24, 1999........ 4,000 4,000
April 24, 1999.......... 25,000
</TABLE>

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<PAGE>

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
ARRANGEMENTS

PanEnergy and Mr. Mazanec entered into a five-year employment agreement in
November 1989 which set a minimum base salary of $250,000 per year. In
addition to maintaining certain non-qualified retirement benefits to which Mr.
Mazanec was entitled as an executive of TEC, the agreement provides Mr.
Mazanec a supplemental lump sum cash benefit of $750,000 plus 8% interest
compounded semi-annually from November 1, 1989, payable within 30 days of his
termination from PanEnergy for any reason. Effective November 1, 1992,
PanEnergy and Mr. Mazanec entered into an amendment to the employment
agreement, extending the period of employment covered by the agreement through
October 31, 1996. On July 19, 1996, Mr. Mazanec and PanEnergy entered into an
employment/consulting agreement which defines the terms of his transition to
retirement in August 1997. The agreement provides that he will resign as an
officer and director of PanEnergy but that, commencing January 1, 1997, he
will remain an employee of PanEnergy through August 1997. The agreement
further provides that the aforementioned lump sum supplemental benefit of
$750,000, plus accumulated interest, calculated to be $558,031, would be paid
to Mr. Mazanec on January 2, 1997.

On March 1, 1991, PanEnergy and Paul M. Anderson entered into an employment
agreement, the primary term of which originally was to expire on December 31,
1993. Unless either party serves notice of termination, on December 31 of each
year the term is automatically extended for an additional one-year period. On
December 31 of each year from 1991 through 1995, the primary term was
automatically extended and currently is extended through December 31, 1999.
PanEnergy may terminate the agreement for cause, death or disability. Under
such circumstances, or if Mr. Anderson terminates the agreement for other than
good reason, Mr. Anderson or his estate will be paid base pay and incentive
compensation earned for that fraction of the year which he was actually
employed. If the agreement is terminated by Mr. Anderson for good reason, or
by PanEnergy for reasons other than cause, death or disability, Mr. Anderson
will receive in a lump sum the present value of his base pay and incentive
compensation projected through the employment period, as well as an extension
of welfare plan benefits through the employment period.

Effective March 1, 1991, Mr. Anderson was awarded 40,000 shares of
restricted PanEnergy Common Stock under the terms of the 1990 LTIP. These
shares were initially restricted as to the transfer of ownership, with such
restriction being removed on 10,000 shares on March 1 of each year, beginning
on March 1, 1992, and continuing through March 1, 1995, provided Mr. Anderson
remained in the employ of PanEnergy during that period. The restriction would
have terminated early as to all of the restricted shares in the event of death
or disability, involuntary termination by PanEnergy for any reason other than
cause, or change in control of PanEnergy. Mr. Anderson received dividends
payable to holders of record of PanEnergy Common Stock on the restricted
shares. On November 24, 1996, Duke, PanEnergy and Mr. Anderson entered into an
employment agreement, described under the heading "THE MERGER--Interests of
Certain Persons in the Merger," which will become effective at the Effective
Time.

The terms of Mr. Hackett's employment were defined in a letter agreement
effective January 2, 1996. The terms included a two-year base salary guarantee
of $350,000, a minimum annual bonus for the first year of employment of
$175,000, a restricted stock grant of 75,000 shares of PanEnergy Common Stock,
which vest in equal portions upon the completion of each of the first five
years of his employment, and a grant of 50,000 non-qualified stock options,
which vest in equal portions over a three-year period. However, upon "change
in control" which is expected to occur at the Effective Time, all of the
unvested shares of restricted stock and stock options will become fully
vested. On November 24, 1996, PanEnergy and Mr. Hackett entered into a new
employment agreement, described under the heading "THE MERGER--Interests of
Certain Persons in the Merger," which will become effective at the Effective
Time.

In December 1994, in connection with the merger of PanEnergy and Associated
Natural Gas Corporation ("ANGC"), PanEnergy assumed and adopted a two-year
employment agreement dated October 9, 1994, between D. H. Anderson and ANGC
that had been entered into in contemplation of the merger. The agreement
provided that D. H. Anderson would receive a minimum annual base salary of
$291,500 and a minimum annual bonus of $51,750. Further, the agreement
provided that if D. H. Anderson voluntarily terminated employment

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<PAGE>

during the term for any reason or if PanEnergy terminated him for any reason
other than cause or if he died or became disabled, he would receive one-half
of the base salary and bonus he otherwise would have received through the term
of the agreement, but no more than one-half year's base salary and bonus.

PanEnergy's Executive Severance Program ("Program"), which during 1996
covered three executive officers of PanEnergy, including Mr. King and Mr.
Fowler, provides that in the event of a "change in control," as defined in the
agreements entered into between PanEnergy and the participants in the Program,
such participants will have certain benefits provided to them in the event of
the termination of their employment within three years of the effective date
of such change in control. Such benefits are provided unless such termination
of employment is (i) because of the death or retirement of the participant,
(ii) by PanEnergy or its subsidiaries for cause or disability, or (iii) by the
participant other than for good reason. Generally, benefits include a lump-sum
cash payment equal to two and one-half times the average of the participant's
annual compensation for the five years preceding the change in control
(including deferred amounts, bonuses and employer contributions to the ESP);
cash payment for the participant's account in the ESP; a continuation of
various medical, insurance and certain other benefits for a period of two and
one-half years, and a lump-sum cash payment, at termination, equal to the
present value of the additional retirement benefits the participant would have
received as a result of two and one-half years' additional service. The
aggregate of each participant's benefits, when combined, will not exceed three
times the "base amount" (as defined in the Code). In consideration of these
benefits, the participant agrees, in the event a person seeks to effect a
change in control, not to leave the employ of PanEnergy, and to continue to
render services commensurate with the participant's position, until such
person has abandoned or terminated efforts or the change in control has
occurred. The participant also agrees to retain in confidence all of the
confidential business information of PanEnergy or its subsidiaries known to
the participant.

PanEnergy's Change in Control Severance Pay Plan ("Severance Plan") is
available for all employees of PanEnergy and certain of its subsidiaries,
except those employees who are covered by agreements under the Executive
Severance Program or whose terms and conditions of employment are subject to
collective bargaining where there is not in effect a collective bargaining
agreement that provides for their Severance Plan participation. The Severance
Plan provides a number of severance benefits for eligible employees, which
would be triggered by certain specific events occurring subsequent to a change
in control of PanEnergy. In addition to the variable cash payments provided
for in the Severance Plan, eligible employees and dependents would receive, at
no cost to the employee, six months' continuation of medical and dental
benefits coverage. As of December 31, 1996, no benefits had been provided
under the Severance Plan.

PENSION PLAN

PanEnergy's qualified retirement plan provides, with respect to participants
employed by certain participating subsidiary companies, benefits, expressed in
the form of a single life annuity commencing at normal retirement date (age
65, or, if later, the fifth anniversary of participation in the retirement
plan), based on a final average pay benefit formula that, in part, uses final
five-year average pay, which considers the regular compensation of the
participant, including overtime payments, bonus payments, and some forms of
deferred compensation. The retirement plan also provides, on and after January
1, 1996, with respect to participants employed by certain other participating
subsidiary companies, benefits, expressed in the form of a cash balance, based
on a benefit formula that uses annual regular compensation accruals and
interest accruals. In addition to providing certain death benefits, the
retirement plan permits participants who meet certain eligibility
requirements, some of which necessitate a change in control of PanEnergy, to
commence final average pay benefit formula benefit payments as early as age 55
and with less than full actuarial reductions for early commencement.

Qualified retirement plan benefits may be subject to statutory limitations
if the participant receives compensation in excess of a maximum, is covered by
other qualified plans, if benefits are paid before Social Security retirement
age, if the participant has less than ten years of plan participation, or if
benefits are paid in a more valuable form than a single life annuity. When
qualified plan benefits are limited by statute, non-qualified plans restore
certain benefits for participants covered by the non-qualified plans to a
level which would have been available if such statutory limits did not exist.

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<PAGE>

The table below shows the estimated annual benefits payable at age 65 under
the qualified and non-qualified retirement plans at various levels of final
average compensation and assuming various years of benefit accrual service:

PENSION PLAN TABLE
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------
REMUNERATION 15 20 25 30 35
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 200.............................................. $ 46 $ 61 $ 77 $ 92 $108
300.............................................. 70 93 117 140 164
400.............................................. 94 125 157 188 220
500.............................................. 118 157 197 236 276
600.............................................. 142 189 237 284 332
800.............................................. 190 253 317 380 444
1,000.............................................. 238 317 397 476 556
1,200.............................................. 286 381 477 572 668
</TABLE>

The years of benefit accrual service for each Named Executive Officer,
except Mr. Hendrix who does not participate in the plan, are as follows: Paul
M. Anderson, 18; James T. Hackett, 1; George L. Mazanec, 9; D.H. Anderson, 2;
Carl B. King, 6; and Fred J. Fowler, 11. The covered compensation is the sum
of the salary and bonus reported in the Summary Compensation Table.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee, which is composed exclusively of nonemployee
directors, is responsible for, among other things, PanEnergy's executive
compensation programs. The following is the report of the Compensation
Committee on compensation policies regarding executive officers and the basis
of compensation actions it has taken.

The objective of PanEnergy's executive compensation programs is to offer
compensation opportunities which attract and retain talented executive
officers and key employees and which motivate such employees to enhance
stockholder value. Base pay, annual incentives and long-term incentives are
structured so as to deliver competitive pay opportunities, reward individual
performance and encourage executives to manage from the perspective of owners
with an equity stake in PanEnergy. The executive compensation programs are
intended to provide total compensation (consisting of base salaries, annual
cash incentive opportunities and long-term incentive opportunities) that is
competitive with the average total compensation offered other executives
employed by companies of similar size, complexity and line of business. To
determine competitive compensation levels, the Compensation Committee
considers data from surveys, proxy statements, independent compensation
consultants, and those peer group companies listed in the Stockholder Return
Comparison below. The achievement of both corporate and individual annual
performance goals determine the payouts from the annual incentive compensation
plans in which executive officers and key employees participate. Long-term
incentive compensation awards are designed to make a significant portion of
total pay directly linked to long-term financial performance and the creation
of stockholder value.

DESCRIPTION OF THE CURRENT EXECUTIVE COMPENSATION PROGRAM

Base Salaries. Salaries are reviewed annually and established by the
Compensation Committee based upon the executive's job responsibilities, level
of experience, individual performance and contributions to the business, and
competitive data obtained from surveys. At the Compensation Committee's
January 1996 and January 1997 meetings, base pay adjustments were approved for
certain key employees, including Messrs. Anderson, King, Mazanec and Fowler in
1996 and Messrs. Anderson, King, Hackett and Fowler in 1997, in accordance
with these criteria.

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<PAGE>

Annual Cash Incentive Opportunities. The Compensation Committee administers
the Annual Cash Bonus Plan ("ACBP") which permits the granting of cash
incentive compensation awards. The ACBP requires the Compensation Committee
annually to establish administrative guidelines to define employees who are
entitled to earn an incentive award, what performance is required to earn it,
and how much may be earned. Guidelines effective for 1996 called for the Chief
Executive Officer to recommend, and the Compensation Committee to approve, an
annual bonus opportunity for each participant. This bonus opportunity, or
"target," is expressed as a percentage of base salary and is determined by the
Compensation Committee's judgment of the direct or indirect impact each
individual could have on PanEnergy's performance, as measured by earnings
before interest and taxes ("EBIT") and earnings per share. Depending upon
performance, participants could receive up to 162.5% of the bonus target. Of
the twelve executive officers of PanEnergy in 1996, ten were participants in
the ACBP.

Each of the executive officers, in consultation with the Chief Executive
Officer, established six to ten specific personal objectives, which were
primarily directed toward development of new services, market expansion, cost
control, increasing returns on capital employed and advancing PanEnergy's
nonjurisdictional business segments. Fifty percent of each executive officer's
1996 bonus was determined by the degree to which, in the opinion of the Chief
Executive Officer and the Compensation Committee, the executive officer
achieved his or her personal objectives. Further, PanEnergy and the
jurisdictional and nonjurisdictional business units established EBIT
objectives. If either the jurisdictional or nonjurisdictional business units
failed to reach a minimum level of earnings established in the guidelines or
if PanEnergy failed to achieve a threshold earnings per share level, the
executive officer would receive no compensation for the portion of the bonus
contingent upon that performance measure. In 1996, performance on all
financial measures exceeded target, and all but one participating executive
officer scored in excess of 100% on personal objectives.

Long-Term Incentive Opportunities. Through the 1990 LTIP and 1994 LTIP,
which were approved by the stockholders in April 1990 and 1994, respectively,
the Compensation Committee has the flexibility to structure long-term awards
to meet particular business needs. To date, four types of awards have been
made under the 1990 LTIP and three types of awards have been made under the
1994 LTIP.

1990 LTIP

Restricted Stock. Mr. Anderson received a grant of 40,000 shares of stock in
1991, restricted as to transferability, which vested in four equal
installments on the first through fourth anniversaries of the grant date. In
January 1996, an award of 75,000 shares of restricted stock was granted to Mr.
Hackett. The terms of Mr. Hackett's award provide that transferability
restrictions will be removed on 15,000 shares on the business day preceding
each of five consecutive anniversaries of his employment. However, such
restrictions will be removed upon change in control which is expected to occur
at the Effective Time of the Merger.

Conditional Stock. This form of award was employed in November 1990 and
January and April 1991 when PanEnergy's management team was being assembled
following the merger of PanEnergy and Texas Eastern Corporation and in
conjunction with PanEnergy's reorganization into distinct business units. The
awards, made to grantees that included Messrs. Mazanec, King and Fowler as
well as other officers of PanEnergy, were for the purpose of focusing the
recipients' attention on long-term objectives by adding, through the ownership
of PanEnergy Common Stock, a meaningful long-term incentive opportunity. The
November 1990 and January 1991 conditional stock awards vested and were
distributed in four scheduled annual installments ending in 1994. The April
1991 conditional stock awards vest and are distributed in scheduled annual
installments over a six-year term. Recipients of conditional stock awards are
paid dividend equivalents in cash on unvested, undistributed shares. These
awards were designed for a unique purpose and time, and the Compensation
Committee has no plans to make additional conditional stock awards.

Stock Options. Stock options have been granted to executive officers and
others by the Compensation Committee at various times since the inception of
the 1990 LTIP, as a vehicle for providing long-term incentive opportunities to
executive officers. The number of stock options granted was determined through
a process

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<PAGE>

which, first, utilized survey data to determine the annualized value of long-
term incentive grants made to other executives and management employees in
PanEnergy's compensation data base ("target value"). Next, the Black-Scholes
stock option pricing model was used to calculate a ratio which, when
multiplied by the exercise price of an option, produced an expected present
value of the option. Finally, the number of options required to make a
competitive long-term grant was calculated by dividing the target value by the
expected present value of a single option plus the expected present value of
an EPS Performance Unit (described below), if an EPS Performance Unit was
granted in connection with an option. The result of this equation, expressed
as a number of options, could be adjusted by the Compensation Committee
depending upon the recipient's individual performance, the size of stock
option grants awarded the recipient in the past, and expectations of future
contributions. No options have been granted under the 1990 LTIP since January
1994, when 129 executive and management employees, including Mr. King and Mr.
Fowler, were granted options to purchase 324,300 shares.

EPS Performance Units. The Compensation Committee granted EPS Performance
Units in conjunction with stock options to further encourage stock ownership
by executive officers and key employees and to strengthen the linkage among
financial performance, stockholder return and long-term incentives. Beginning
in 1991 and ending with grants made in 1995 under the 1994 LTIP, one EPS
Performance Unit was granted in conjunction with each option awarded. Each EPS
Performance Unit creates a credit to the grantee's EPS Performance Unit
account when PanEnergy's earnings per share have exceeded a threshold
established by the Compensation Committee based on earnings per share for the
year preceding the grant date. When earnings for a calendar year, exclusive of
certain special items, exceed the threshold, the excess amount is credited to
the grantee's EPS Performance Unit account. The balance in the account may be
used to exercise stock options granted in connection with the EPS Performance
Units or will be paid to the grantee, without interest, two years after the
underlying options expire, usually ten years from the date of grant. Options
may also be exercised by normal means once vesting requirements are met.

1994 LTIP

Stock Options. In January 1995, 178 executive and management employees were
granted options under the 1994 LTIP to purchase 847,000 shares. In June 1995,
36 executive and management employees were granted options to purchase 58,350
shares, and, in July 1995, one executive was granted an award of 5,000 shares.
In January 1996, 146 executives and key employees were awarded options to
purchase 324,900 shares. In April 1996, Mr. Anderson was awarded an option to
purchase 75,000 shares. In January 1997, 240 executives and key employees,
including Messrs. Anderson, Hackett, King and Fowler, were awarded options to
purchase 340,500 shares. The method used to determine the number of stock
options granted and the present value of the options was the same as described
for stock option grants under the 1990 LTIP. All stock option award
agreements, except those related to the January 1997 awards, contain
provisions that result in vesting upon change in control, which is expected to
occur at the Effective Time of the Merger.

EPS Performance Units. The Compensation Committee granted to each
participant who received a 1995 stock option grant, a number of EPS
Performance Units equal to the number of stock options granted. The threshold
for calculating credit to the grantee's EPS Performance Unit account was $1.61
per share for these grants. No EPS units were awarded in connection with the
January 1996, April 1996 or January 1997 grants.

Performance-Vested Restricted Stock. At its January 1996 meeting, the
Compensation Committee elected to replace EPS Performance Units by awarding
grants of performance-vested restricted stock ("PVRS") totalling 110,700
shares to 200 executive and key employees. In April 1996, the Compensation
Committee granted PVRS totalling 25,000 shares to Mr. Anderson and, in October
1996, the Compensation Committee awarded two employees PVRS totalling 3,000
shares. In January 1997, the Compensation Committee granted PVRS totalling
110,400 shares to 172 executives and key employees, including Messrs.
Anderson, Hackett, King and Fowler. With the assistance of an outside
compensation consultant, the Compensation Committee determined how many shares
of PVRS in addition to stock options granted to any employee would have a
combined value which approximates a competitive long-term incentive grant. The
Compensation Committee believes that shares of PVRS establish an opportunity
for increased share ownership and dividend income by executive management and
key employees and encourages management decision making from the perspective
of an investor in PanEnergy.

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<PAGE>

With the exception of the October 1996 awards, the terms of the PVRS awards
granted in 1996 and 1997 provide that one-sixth of the shares awarded any
participant will vest when total stockholder return, measured from the grant
date, equals or exceeds 15%. Another one-third of the award will vest when
total stockholder return measured from the grant date equals or exceeds 30%,
and the final one-half of the award will vest when total stockholder return
equals or exceeds 45%. Total stockholder return is defined as accumulated
dividends plus market appreciation of PanEnergy Common Stock when measured
over a ten consecutive trading day period. No shares granted in 1996 may vest
before the first anniversary of the award unless there is a change in control.
Shares granted in 1997 contain no change-in-control vesting provisions. If the
stockholder return targets are not met and the PVRS awards do not vest within
five years, the awards will be forfeited. The October 1996 awards will vest
only upon the completion of an international project within certain parameters
relating to schedule and budget.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

At its January 1997 meeting, the Compensation Committee received an analysis
by the compensation consultants of total compensation opportunities available
to CEO's in the competitive marketplace. The consultants advised that the
appropriate salary range for the CEO is $608,000 to $912,000 with a mid-point
of $760,000. After considering this, the Compensation Committee adjusted Mr.
Anderson's salary to $700,000 annually. The results of the consultants' study
also indicated that a target bonus opportunity for the CEO should be 70% of
base pay in 1997. Accordingly, the Compensation Committee established
Mr. Anderson's bonus opportunity at 70% of base pay.

The Compensation Committee also reviewed Mr. Anderson's personal objectives,
established in early 1996, and his performance on each, and discussed the
bonus to be paid to Mr. Anderson pursuant to the 1996 ACBP. His objectives
included: (1) achieving a management/Board of Directors consensus on
PanEnergy's strategic direction, (2) positioning the pipelines to achieve
maximum value and competitive position, (3) advancing interfuel opportunities,
(4) continuing to broaden the activity base of PanEnergy and (5) continuing to
advance a smooth transition to the next generation of management organization
structure. After thorough discussion, the Compensation Committee awarded Mr.
Anderson the bonus indicated in the Summary Compensation Table.

Section 162(m) of the Code imposes a limitation on the deductibility from
income tax by PanEnergy on annual compensation in excess of $1 million paid to
certain employees, generally, the Chief Executive Officer and the four other
highest compensated employees. The Compensation Committee intends to structure
compensation that rewards performance while preserving maximum deductibility
of all compensation awards. It is not anticipated that compensation realized
by any executive officer under programs now in effect will, in the immediate
future, result in a material loss of tax deductions.

THE COMPENSATION AND ORGANIZATION COMMITTEE

Charles W. Duncan, Jr., Chairman William T. Esrey
Robert Cizik Leo E. Linbeck, Jr.
Harry E. Ekblom Ralph S. O'Connor

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<PAGE>

STOCKHOLDER RETURN COMPARISON

SEC rules require that PanEnergy include in this Joint Proxy Statement-
Prospectus a line graph presentation comparing cumulative, five-year
stockholder returns on an indexed basis with the S&P 500 Stock Index and
either a nationally recognized industry standard or an index of peer companies
selected by PanEnergy. This information is set forth on the graph below, which
covers the period from year-end 1991 through year-end 1996. PanEnergy has
chosen the Dow Jones Pipeline Group for its peer comparison. The Dow Jones
Pipeline Group includes The Coastal Corporation, El Paso Natural Gas Company,
Enron Corp., Enserch Corp., Sonat, Inc., The Williams Companies and PanEnergy.

[LINE GRAPH APPEARS HERE]

Comparison of Five-Year Cumulative Total
Stockholder Return* Among PanEnergy,
S&P 500 Stock Index, and Dow Jones Pipeline Group
(*Total return assumes quarterly reinvestment of dividends)

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<PAGE>

There can be no assurance that PanEnergy's cumulative total return will
continue into the future with the same or similar trends depicted in the graph
above.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To PanEnergy's knowledge, based on information furnished to it and contained
in the reports filed pursuant to Rule 16a-3 of the Exchange Act, as well as
written representations that no other reports were required, all applicable
Section 16(a) filing requirements were complied with during the year ended
December 31, 1996, except that the initial Form 3 report for Mr. Simmons was
filed one day late and Mr. Carroll filed a Form 4 report reporting the sale of
69 shares of PanEnergy Common Stock 83 days late.

OTHER MATTERS

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP ("Peat Marwick") served as PanEnergy's independent
auditor during 1996. Representatives of Peat Marwick will be present at the
PanEnergy Meeting to respond to appropriate questions from stockholders and to
make a statement if they desire to do so.

OTHER MATTERS BEFORE THE MEETING

PanEnergy does not expect any other matters to come before the PanEnergy
Meeting. However, if any other matters properly come before the PanEnergy
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote such proxy in accordance with their judgment on such matters.

STOCKHOLDER PROPOSALS

In the event the proposal to adopt the Merger Agreement does not receive the
affirmative vote of the holders of a majority of the outstanding shares of
PanEnergy Common Stock, the Merger will not be consummated and PanEnergy will
hold an Annual Stockholders Meeting in 1998. Stockholder proposals will be
eligible for consideration for inclusion in the Proxy Statement for such
meeting if they are received by the Secretary of the Company no later than
November 17, 1997 at PanEnergy's address.

It is important that proxies be returned promptly. All holders of PanEnergy
Common Stock, whether or not they expect to attend the PanEnergy Meeting in
person, are urged to mark, sign, date and return the accompanying form of
proxy in the enclosed pre-addressed envelope, which requires no postage if
mailed in the United States.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ ROBERT W. REED
ROBERT W. REED
Secretary

Dated: March 13, 1997
Houston, Texas

125
<PAGE>

EXHIBIT A

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

DUKE POWER COMPANY

AND

DUKE TRANSACTION CORPORATION

AND

PANENERGY CORP

DATED AS OF NOVEMBER 24, 1996,

AS AMENDED AND RESTATED

AS OF MARCH 10, 1997

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1
THE MERGER
1.1. The Merger...................................................... A-1
1.2. The Closing..................................................... A-1
1.3. Effective Time.................................................. A-1
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION
2.1. Certificate of Incorporation.................................... A-2
2.2. By-laws......................................................... A-2
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1. Directors....................................................... A-2
3.2. Officers........................................................ A-2
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND PANENERGY
4.1. Merger Sub Stock................................................ A-2
4.2. PanEnergy Securities............................................ A-2
4.3. Exchange of Certificates Representing PanEnergy Common Stock.... A-3
4.4. Adjustment of Exchange Ratio.................................... A-5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PANENERGY
5.1. Organization, Standing and Power................................ A-5
5.2. Capital Structure............................................... A-6
5.3. Authority; No Violations; Consents and Approvals................ A-7
5.4. SEC Documents................................................... A-8
5.5. Information Supplied............................................ A-8
5.6. Absence of Certain Changes or Events............................ A-9
5.7. No Undisclosed Material Liabilities............................. A-9
5.8. No Default...................................................... A-9
5.9. Compliance with Applicable Laws................................. A-9
5.10. Litigation...................................................... A-10
5.11. Tax Matters..................................................... A-10
5.12. Employee Benefits; Labor Matters................................ A-12
5.13. Environmental Matters........................................... A-13
5.14. Insurance....................................................... A-15
5.15. Contracts....................................................... A-15
5.16. Regulatory Proceedings.......................................... A-16
5.17. Regulation as a Utility......................................... A-16
5.18. Opinions of Financial Advisors.................................. A-16
5.19. Vote Required................................................... A-16
5.20. Beneficial Ownership of Duke Common Stock....................... A-16
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.21. Brokers........................................................... A-16
5.22. Article Seventh of the Restated Certificate of Incorporation of
PanEnergy and Section 203 of the DGCL Not Applicable............. A-16
5.23. Properties........................................................ A-16
5.24. Easements......................................................... A-17
5.25. Futures Trading and Fixed Price Exposure.......................... A-17
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DUKE
6.1. Organization, Standing and Power.................................. A-17
6.2. Capital Structure................................................. A-18
6.3. Authority; No Violations; Consents and Approvals.................. A-19
6.4. SEC Documents..................................................... A-20
6.5. Information Supplied.............................................. A-20
6.6. Absence of Certain Changes or Events.............................. A-20
6.7. No Undisclosed Material Liabilities............................... A-21
6.8. No Default........................................................ A-21
6.9. Compliance with Applicable Laws................................... A-21
6.10. Litigation........................................................ A-21
6.11. Tax Matters....................................................... A-22
6.12. Employee Benefits; Labor Matters.................................. A-24
6.13. Environmental Matters............................................. A-25
6.14. Insurance......................................................... A-26
6.15. Contracts......................................................... A-26
6.16. Regulatory Proceedings............................................ A-26
6.17. Regulation as a Utility........................................... A-26
6.18. Opinions of Financial Advisors.................................... A-26
6.19. Vote Required..................................................... A-26
6.20. Beneficial Ownership of PanEnergy Common Stock.................... A-26
6.21. Brokers........................................................... A-26
6.22. Properties........................................................ A-27
6.23. Franchises, Licenses, Etc......................................... A-27
6.24. Nuclear Operations................................................ A-27
6.25. Duke/Louis Dreyfus L.L.C. ("D/LD") Obligations.................... A-28
6.26. Representations with Respect to Merger Sub........................ A-28
ARTICLE 7
CONDUCT OF BUSINESS PENDING THE MERGER
7.1. Conduct of Business of PanEnergy Pending the Merger............... A-28
(a)Ordinary Course of Business.................................... A-28
(b)Dividends; Changes in Stock.................................... A-28
(c)Issuance of Securities......................................... A-29
(d)Capital Expenditures........................................... A-29
(e)No Acquisitions................................................ A-29
(f)No Dispositions................................................ A-29
(g)No Dissolution, Etc............................................ A-29
(h)Certain Employee Matters....................................... A-29
(i)Indebtedness; Leases........................................... A-30
(j)Governing Documents............................................ A-30
</TABLE>

ii
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(k)Accounting..................................................... A-30
(l)Rate Matters................................................... A-30
(m)Contracts...................................................... A-30
(n)Insurance...................................................... A-31
(o)Permits........................................................ A-31
(p)Discharge of Liabilities....................................... A-31
(q)1935 Act....................................................... A-31
(r)Tax Matters.................................................... A-31
(s)Tax Status..................................................... A-31
(t)Other Actions.................................................. A-31
(u)Agreements..................................................... A-31
7.2. Conduct of Business of Duke Pending the Merger.................... A-31
(a)Ordinary Course of Business.................................... A-31
(b)Dividends; Changes in Stock.................................... A-32
(c)Issuance of Securities......................................... A-32
(d)Capital Expenditures........................................... A-32
(e)No Acquisitions................................................ A-32
(f)No Dispositions................................................ A-32
(g)No Dissolution, Etc............................................ A-33
(h)Certain Employee Matters....................................... A-33
(i)Indebtedness; Leases........................................... A-33
(j)Governing Documents............................................ A-33
(k)Accounting..................................................... A-33
(l)Rate Matters................................................... A-34
(m)Contracts...................................................... A-34
(n)Insurance...................................................... A-34
(o)Permits........................................................ A-34
(p)Discharge of Liabilities....................................... A-34
(q)1935 Act....................................................... A-34
(r)Tax Matters.................................................... A-34
(s)Tax Status..................................................... A-34
(t)Other Actions.................................................. A-34
(u)Agreements..................................................... A-34
7.3. Transition Committee.............................................. A-34
ARTICLE 8
COVENANTS
8.1. Alternative Proposals............................................. A-35
8.2. Preparation of S-4 and the Joint Proxy Statement.................. A-35
8.3. Letter of PanEnergy's Accountants................................. A-36
8.4. Letter of Duke's Accountants...................................... A-36
8.5. Access to Information............................................. A-36
8.6. PanEnergy Stockholders' Meeting................................... A-36
8.7. Duke Shareholders' Meeting........................................ A-36
8.8. Regulatory and Other Approvals.................................... A-37
(a)HSR Act........................................................ A-37
(b)Other Regulatory Approvals..................................... A-37
(c)Other Approvals................................................ A-37
8.9. Agreements of Others.............................................. A-37
8.10. Authorization for Shares and Stock Exchange Listings.............. A-37
</TABLE>

iii
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
8.11. Indemnification; Directors' and Officers' Insurance............. A-37
8.12. Public Announcements............................................ A-38
8.13. Other Actions................................................... A-38
8.14. Cooperation; Notification....................................... A-38
8.15. Governance...................................................... A-38
(a)Board of Directors of Duke................................... A-38
(b)Committees of the Board of Directors of Duke................. A-38
(c)Officers of Duke............................................. A-38
(d)Office of the Chief Executive; Policy Committee.............. A-39
(e)Name; Corporate Headquarters................................. A-39
8.16. Employment Agreements........................................... A-39
8.17. Expenses........................................................ A-39
8.18. Pooling......................................................... A-39
8.19. Tax Matters..................................................... A-39
8.20. Employee Benefit Plans.......................................... A-40
8.21. Transfer Taxes.................................................. A-41
ARTICLE 9
CONDITIONS
9.1. Conditions to Each Party's Obligation to Effect the Merger...... A-41
9.2. Conditions to Obligation of PanEnergy to Effect the Merger...... A-42
9.3. Conditions to Obligation of Duke and Merger Sub to Effect the
Merger.......................................................... A-43
ARTICLE 10
TERMINATION
10.1. Termination by Mutual Consent................................... A-43
10.2. Termination by Either Duke or PanEnergy......................... A-43
10.3. Termination by PanEnergy........................................ A-44
10.4. Termination by Duke............................................. A-44
10.5. Effect of Termination and Abandonment........................... A-44
10.6. Extension, Waiver............................................... A-44
ARTICLE 11
GENERAL PROVISIONS
11.1. Nonsurvival of Representations, Warranties and Agreements....... A-45
11.2. Notices......................................................... A-45
11.3. Assignment; Binding Effect...................................... A-46
11.4. Entire Agreement................................................ A-46
11.5. Amendment....................................................... A-46
11.6. Governing Law................................................... A-46
11.7. Counterparts.................................................... A-46
11.8. Headings........................................................ A-46
11.9. Interpretation.................................................. A-46
11.10. Waivers......................................................... A-46
11.11. Severability.................................................... A-47
11.12. Enforcement of Agreement........................................ A-47
11.13. Further Assurances.............................................. A-47
11.14. Waiver of Jury Trial............................................ A-47
11.15. Certain Definitions............................................. A-47
</TABLE>

iv
<PAGE>

EXHIBITS

Exhibit A Form of Affiliate Letter
Exhibit B-1 Form of Employment Agreement for Paul M. Anderson of PanEnergy
Exhibit B-2 Form of Employment Agreement for James T. Hackett of PanEnergy
Exhibit B-3 Form of Employment Agreement for Fred J. Fowler of PanEnergy
Exhibit B-4 Form of Employment Agreement for L.B. Gatewood of PanEnergy
Exhibit B-5 Form of Employment Agreement for Jim W. Mogg of PanEnergy
Exhibit B-6 Form of Employment Agreement for Bruce Williamson of PanEnergy
Exhibit C-1 Form of Employment Agreement for Richard B. Priory of Duke
Exhibit C-2 Form of Employment Agreement for William A. Coley of Duke
Exhibit C-3 Form of Employment Agreement for Richard J. Osborne of Duke
Exhibit C-4 Form of Employment Agreement for Ruth G. Shaw of Duke
Exhibit C-5 Form of Employment Agreement for Michael S. Tuckman of Duke
Exhibit C-6 Form of Employment Agreement for David L. Hauserof Duke

v
<PAGE>

INDEX OF DEFINED TERMS

<TABLE>
<S> <C>
"1935 Act"................................................................. A-16
"Agreement"................................................................ A-1
"Alternative Proposal"..................................................... A-35
"Atomic Energy Act"........................................................ A-20
"Cash Balance Conversion".................................................. A-40
"Certificate".............................................................. A-3
"Closing".................................................................. A-1
"Closing Date"............................................................. A-1
"Code"..................................................................... A-1
"Confidentiality Agreement"................................................ A-36
"Continuation Period"...................................................... A-40
"Convertible Notes"........................................................ A-3
"D/LD"..................................................................... A-28
"D/LD Agreement"........................................................... A-43
"D&O Insurance"............................................................ A-38
"Delaware Courts".......................................................... A-46
"DGCL"..................................................................... A-1
"Duke"..................................................................... A-1
"Duke 1995 Margin Threshold"............................................... A-26
"Duke 1995 Revenue Threshold".............................................. A-26
"Duke Benefit Plans"....................................................... A-24
"Duke Capital Budget"...................................................... A-31
"Duke Common Stock"........................................................ A-2
"Duke Director"............................................................ A-38
"Duke Disclosure Schedule"................................................. A-17
"Duke Generating Stations"................................................. A-27
"Duke Litigation".......................................................... A-22
"Duke Orders".............................................................. A-22
"Duke Permits"............................................................. A-21
"Duke Personnel"........................................................... A-24
"Duke Preference Stock".................................................... A-18
"Duke Preferred Stock"..................................................... A-18
"Duke Preferred Stock A"................................................... A-18
"Duke Required Consents"................................................... A-19
"Duke Required Statutory Approvals"........................................ A-20
"Duke SEC Documents"....................................................... A-20
"Duke Shareholders' Meeting"............................................... A-8
"Duke Stock Plans"......................................................... A-18
"Duke Stock Repurchase Program"............................................ A-21
"Duke Vote Matter"......................................................... A-19
"Easements"................................................................ A-17
"Effective Time"........................................................... A-2
"Environmental Claims"..................................................... A-13
"Environmental Laws"....................................................... A-14
"Environmental Permits".................................................... A-15
"Environmental Subsidiary"................................................. A-14
"ERISA".................................................................... A-13
"Exchange Act"............................................................. A-8
"Exchange Agent"........................................................... A-3
"Exchange Fund"............................................................ A-3
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
"Exchange Ratio"........................................................... A-2
"FERC"..................................................................... A-8
"Final Order".............................................................. A-42
"GAAP"..................................................................... A-1
"Governmental Entity"...................................................... A-8
"Hazardous Materials"...................................................... A-14
"HSR Act".................................................................. A-8
"IRS"...................................................................... A-11
"Joint Proxy Statement".................................................... A-8
"Joint Venture"............................................................ A-47
"Material Adverse Effect".................................................. A-6
"Maximum Premium".......................................................... A-38
"Merger"................................................................... A-1
"Merger Sub"............................................................... A-1
"Mobil Joint Venture"...................................................... A-17
"Mortgage"................................................................. A-27
"NCBCA".................................................................... A-19
"NCUC"..................................................................... A-20
"Net PanEnergy Position"................................................... A-17
"NP&L"..................................................................... A-26
"Nuclear Stations"......................................................... A-27
"NYSE"..................................................................... A-5
"PanEnergy"................................................................ A-1
"PanEnergy Benefit Plans".................................................. A-13
"PanEnergy Business Unit".................................................. A-15
"PanEnergy Business Unit's 1995 Margin Threshold".......................... A-16
"PanEnergy Business Unit's 1995 Revenue Threshold"......................... A-16
"PanEnergy Capital Budget"................................................. A-28
"PanEnergy Common Stock"................................................... A-2
"PanEnergy Director"....................................................... A-38
"PanEnergy Disclosure Schedule"............................................ A-5
"PanEnergy DRIP"........................................................... A-6
"PanEnergy Employees"...................................................... A-40
"PanEnergy Litigation"..................................................... A-10
"PanEnergy Option"......................................................... A-3
"PanEnergy Options"........................................................ A-3
"PanEnergy Orders"......................................................... A-10
"PanEnergy Permits"........................................................ A-9
"PanEnergy Personnel"...................................................... A-12
"PanEnergy Pipeline Assets"................................................ A-17
"PanEnergy Preferred Stock"................................................ A-6
"PanEnergy Required Consents".............................................. A-7
"PanEnergy Restricted Stock"............................................... A-3
"PanEnergy SEC Documents".................................................. A-8
"PanEnergy Stock Option Plan".............................................. A-3
"PanEnergy Stock Option Plans"............................................. A-3
"PanEnergy Stock Plans".................................................... A-6
"PanEnergy Stockholders' Approval"......................................... A-7
"PanEnergy Stockholders' Meeting".......................................... A-8
"Power Act"................................................................ A-8
"PSCSC".................................................................... A-20
"Record Date".............................................................. A-29
</TABLE>

ii
<PAGE>

<TABLE>
<S> <C>
"Release".................................................................. A-14
"Rule 145 Affiliates"...................................................... A-37
"S-4"...................................................................... A-8
"Securities Act"........................................................... A-4
"Significant Subsidiary"................................................... A-47
"Special Dividend"......................................................... A-41
"Stock Benefit Plans"...................................................... A-41
"Subsidiary"............................................................... A-47
"Subsidiary Capital Expenditures".......................................... A-32
"Surviving Corporation".................................................... A-1
"Tax Return"............................................................... A-10
"Tax Ruling"............................................................... A-11
"Taxes".................................................................... A-10
"Transfer Taxes"........................................................... A-41
"Transition Committee"..................................................... A-34
"Voting Debt".............................................................. A-6
</TABLE>

iii
<PAGE>

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November 24,
1996, as amended and restated as of March 10, 1997, by and among Duke Power
Company, a North Carolina corporation ("Duke"), Duke Transaction Corporation,
a Delaware corporation and a wholly-owned subsidiary of Duke ("Merger Sub"),
and PanEnergy Corp, a Delaware corporation ("PanEnergy").

RECITALS

WHEREAS, Duke and PanEnergy have each determined to engage in a strategic
business combination with the other;

WHEREAS, in furtherance thereof, the respective Boards of Directors of Duke
and PanEnergy have approved the merger (the "Merger") of Merger Sub with and
into PanEnergy whereby the Common Stock of PanEnergy will be converted into
and exchanged for Common Stock of Duke and PanEnergy will become a wholly-
owned subsidiary of Duke, all pursuant to the terms and conditions set forth
in this Agreement;

WHEREAS, for federal income tax purposes, it is intended that the Merger
will be a reorganization of the type described in Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder;

WHEREAS, for accounting purposes, it is intended that the transaction
contemplated hereby shall be accounted for as a pooling of interests under
United States generally accepted accounting principles ("GAAP");

WHEREAS, Duke and PanEnergy have each received fairness opinions relating to
the transactions contemplated hereby (as more fully described herein);

WHEREAS, Duke, Merger Sub and PanEnergy desire to make certain
representations, warranties and agreements in connection with the Merger;

WHEREAS, this Agreement amends and restates the Agreement and Plan of Merger
among the parties hereto dated as of November 24, 1996; and

WHEREAS, it is the intent of the parties hereto, notwithstanding such
amendment and restatement, that this Agreement continue to speak as of
November 24, 1996 unless otherwise expressly provided herein and that "the
date hereof" shall mean November 24, 1996 when used in this Agreement.

NOW, THEREFORE, in consideration of the foregoing, the parties hereto hereby
agree as follows:

ARTICLE 1

THE MERGER

1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into PanEnergy in accordance with this Agreement, and the separate
corporate existence of Merger Sub shall thereupon cease. PanEnergy shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"). The Merger shall have the effects specified in
the Delaware General Corporation Law (the "DGCL").

1.2. The Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the offices of
Dewey Ballantine, 1301 Avenue of the Americas, New York, New York, at 10:00
a.m., local time, on the second business day immediately following the day on
which the last to be fulfilled or waived of the conditions set forth in
Article 9 shall be fulfilled or waived in accordance herewith or (b) at such
other time, date or place as Duke and PanEnergy may agree. The date on which
the Closing occurs is hereinafter referred to as the "Closing Date".

1.3. Effective Time. If all the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 10, the
parties hereto shall cause a Certificate of Merger meeting the requirements of
Section 251 of the DGCL to be properly executed and filed in accordance with
such Section on the Closing Date. The Merger shall become

A-1
<PAGE>

effective at the time of filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the DGCL or at
such later time which the parties hereto shall have agreed upon and designated
in such filing as the effective time of the Merger (the "Effective Time").

ARTICLE 2

CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION

2.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time (except that Article 1 of such Certificate of Incorporation shall be
amended as of the Effective Time to read as follows: "The name of the
Corporation is PanEnergy Corp."), until duly amended in accordance with
applicable law.

2.2. By-laws. The By-laws of Merger Sub in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation, until duly
amended in accordance with applicable law.

ARTICLE 3

DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION

3.1. Directors. The directors of the Surviving Corporation at the Effective
Time shall be the directors of PanEnergy immediately prior to the Effective
Time together with such other persons as Duke shall designate and until their
successors are duly appointed or elected in accordance with applicable law.

3.2. Officers. The officers of the Surviving Corporation at the Effective
Time shall be the officers of PanEnergy immediately prior to the Effective
Time together with such other persons as Duke shall designate and until their
successors are duly appointed or elected in accordance with applicable law.

ARTICLE 4

EFFECT OF THE MERGER ON SECURITIES OF
MERGER SUB AND PANENERGY

4.1. Merger Sub Stock. At the Effective Time, each share of Common Stock,
$1.00 par value, of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and non-assessable share of Common Stock, $1.00 par value, of the Surviving
Corporation.

4.2. PanEnergy Securities. (a) At the Effective Time, each share of Common
Stock, par value $1.00 per share (the "PanEnergy Common Stock"), of PanEnergy
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive 1.0444 shares of Common Stock, without
par value (the "Duke Common Stock"), of Duke (the "Exchange Ratio").

(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of PanEnergy Common Stock
shall cease to be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of shares of PanEnergy Common Stock shall
thereafter cease to have any rights with respect to such shares of PanEnergy
Common Stock, except the right to receive, without interest, the Duke Common
Stock and cash for fractional shares of Duke Common Stock in accordance with
Sections 4.3(b) and

A-2
<PAGE>

4.3(e) upon the surrender of a certificate (a "Certificate") representing such
shares of PanEnergy Common Stock.

(c) Each share of PanEnergy Common Stock issued and held in PanEnergy's
treasury or by any Subsidiary (as defined in Section 11.15) of PanEnergy at
the Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be cancelled and retired without payment of any consideration therefor.

(d) All options (individually, a "PanEnergy Option" and collectively, the
"PanEnergy Options") outstanding at the Effective Time under any PanEnergy
stock option plan (individually, a "PanEnergy Stock Option Plan" and
collectively, the "PanEnergy Stock Option Plans") shall remain outstanding
following the Effective Time. At the Effective Time, such PanEnergy Options
shall, by virtue of the Merger and without any further action on the part of
PanEnergy or the holder of any such PanEnergy Options, be assumed by Duke in
such manner that Duke (i) is a corporation "assuming a stock option in a
transaction to which Section 424(a) applied" within the meaning of Section 424
of the Code, or (ii) to the extent that Section 424 of the Code does not apply
to any such PanEnergy Options, would be such a corporation were Section 424 of
the Code applicable to such PanEnergy Option. Each PanEnergy Option assumed by
Duke shall be exercisable upon the same terms and conditions as under the
applicable PanEnergy Stock Option Plan and the applicable option agreement
issued thereunder, except that (i) each such PanEnergy Option shall be
exercisable for that whole number of shares of Duke Common Stock (rounded down
to the nearest whole share) into which the number of shares of PanEnergy
Common Stock subject to such PanEnergy Option immediately prior to the
Effective Time would be converted under this Section 4.2, and (ii) the option
price per share of Duke Common Stock shall be an amount equal to the option
price per share of PanEnergy Common Stock subject to such PanEnergy Option in
effect immediately prior to the Effective Time divided by the Exchange Ratio
(the option price per share, as so determined, being rounded up to the nearest
full cent). No payment shall be made for fractional interests. Each award of
restricted PanEnergy Common Stock outstanding at the Effective Time that is
not vested before or at the Effective Time (the "PanEnergy Restricted Stock")
shall remain outstanding following the Effective Time in accordance with the
terms of any such award. At the Effective Time, such PanEnergy Restricted
Stock shall, by virtue of the Merger and without any further action on the
part of PanEnergy or the holder of any such PanEnergy Restricted Stock, be
assumed by Duke and such shares of PanEnergy Restricted Stock shall be
exchanged for shares of restricted Duke Common Stock in accordance with
Sections 4.2(a) and 4.2(b) hereof, upon the same terms and conditions as were
applicable under such PanEnergy Restricted Stock. At the Effective Time, Duke
shall assume each agreement relating to PanEnergy Stock Options and PanEnergy
Restricted Stock, each as amended pursuant to the foregoing. As soon as
practicable after the Effective Time, Duke shall deliver to the holders of
PanEnergy Stock Options and PanEnergy Restricted Stock appropriate
documentation setting forth such holders' rights pursuant to the amended terms
thereof, each as assumed by Duke.

(e) The 9% Convertible Senior Subordinated Notes Due December 15, 2004 of
PanEnergy (the "Convertible Notes") shall remain outstanding following the
Effective Time, unless prepaid or converted in accordance with the terms
thereof. At the Effective Time, PanEnergy shall take such action as may be
necessary so that, after the Effective Time, the Convertible Notes outstanding
at the Effective Time, if any, shall be convertible in accordance with their
terms for Duke Common Stock. Duke shall authorize and reserve for issuance, or
otherwise provide, a sufficient number of shares of Duke Common Stock for
delivery upon such conversion of the then outstanding Convertible Notes.

4.3. Exchange of Certificates Representing PanEnergy Common Stock. (a) As of
the Effective Time, Duke (which shall act as exchange agent) (or any agent
appointed by Duke and reasonably satisfactory to PanEnergy acting in such
capacity in Duke's stead) (in each case, the "Exchange Agent"), for the
benefit of the holders of shares of PanEnergy Common Stock, shall keep on
deposit, for exchange in accordance with this Article 4, certificates
representing the shares of Duke Common Stock and cash in lieu of fractional
shares (such cash and such certificates, together with any dividends or
distributions paid with respect thereto relating to record dates for such
dividends or distributions after the Effective Time, being hereinafter
referred to as the "Exchange

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Fund") to be issued pursuant to Section 4.2 and paid pursuant to this Section
4.3 in exchange for Certificates representing outstanding shares of PanEnergy
Common Stock.

(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates which
immediately prior to the Effective Time represented outstanding shares of
PanEnergy Common Stock which were converted into the right to receive shares
of Duke Common Stock pursuant to Section 4.2(a) hereof, (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such shares of PanEnergy Common Stock shall pass, only upon
delivery of the Certificates representing such shares to the Exchange Agent
and which shall be in such form and have such other provisions as the Exchange
Agent may reasonably specify and (ii) instructions for effecting the surrender
of such Certificates in exchange for certificates representing shares of Duke
Common Stock and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as the Exchange Agent shall
require, the holder of the shares represented by such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing that
number of whole shares of Duke Common Stock and (y) a check representing the
amount of cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect
of the Certificate surrendered pursuant to the provisions of this Article 4,
less any required withholding tax, and the shares represented by the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of shares of PanEnergy Common
Stock. Subject to applicable law, in the event of a transfer of ownership of
PanEnergy Common Stock which is not registered in the transfer records of
PanEnergy, a certificate representing the proper number of shares of Duke
Common Stock, together with a check for the cash to be paid in lieu of
fractional shares and dividends or distributions which such transferee is
entitled to receive pursuant to Sections 4.3(c) and (e), may be issued to such
a transferee if the Certificate representing such PanEnergy Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.

(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared or made after the Effective Time on Duke Common
Stock with a record date after the Effective Time shall be paid with respect
to any shares of PanEnergy Common Stock represented by a Certificate to the
holder of such Certificate until such Certificate is surrendered for exchange
as provided herein. Any dividends and distributions in respect of shares of
Duke Common Stock that would be delivered by the Exchange Agent in exchange
for shares of PanEnergy Common Stock upon surrender of the Certificates
therefor shall be deposited with the Exchange Agent for the benefit of the
holders of such Certificates until the unclaimed portion of the Exchange Fund
is returned to Duke in accordance with Section 4.3(f). Subject to applicable
law, following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole shares of Duke Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Duke Common Stock, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Duke Common Stock, less the amount of any
withholding taxes which may be required thereon.

(d) At or after the Effective Time, there shall be no transfers on the stock
transfer books of PanEnergy of the shares of PanEnergy Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates for shares of Duke Common Stock and
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect
of the Certificates surrendered in accordance with the procedures set forth in
this Article 4. Certificates surrendered for exchange by any person
constituting an "affiliate" of PanEnergy for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged, nor shall any other shares of PanEnergy Common Stock owned by any
such person be converted into shares of Duke Common Stock, until Duke has
received a written agreement from such person as provided in Section 8.9.

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(e) No fractional shares of Duke Common Stock shall be issued upon the
surrender for exchange of Certificates. Any holder of a Certificate who would
otherwise be entitled to a fractional share of Duke Common Stock shall be
entitled to receive a cash payment in lieu of such fractional share in an
amount equal to the product of such fraction multiplied by the average of the
closing price per share of Duke Common Stock on the New York Stock Exchange
Composite Transactions Tape for the ten business days prior to and including
the last business day on which PanEnergy Common Stock was traded on the New
York Stock Exchange ("NYSE"), without any interest thereon.

(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Duke Common Stock) that remains
unclaimed by former holders of PanEnergy Common Stock one year after the
Effective Time shall be delivered by the Exchange Agent from the Exchange Fund
to Duke. Any holders of unsurrendered Certificates who have not theretofore
complied with this Article 4 shall thereafter look only to Duke for payment of
their shares of Duke Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on the Duke Common Stock deliverable,
subject to applicable law, in respect of the shares of PanEnergy Common Stock
such stockholder holds, as determined pursuant to this Agreement, in each
case, without any interest thereon.

(g) None of Duke, PanEnergy, the Surviving Corporation, the Exchange Agent
(which may be Duke in such capacity) or any other person shall be liable to
any former holder of shares of PanEnergy Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.

(h) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Duke, the
posting by such person of a bond in such reasonable amount as Duke may direct
as indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of Duke
Common Stock and cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Duke Common Stock as provided in Section 4.3(c),
deliverable in respect thereof pursuant to this Agreement.

4.4. Adjustment of Exchange Ratio. In the event that, subsequent to the date
hereof but prior to the Effective Time, the outstanding shares of Duke Common
Stock or PanEnergy Common Stock, respectively, shall have been changed into a
different number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification,
combination, exchange, recapitalization or other similar transaction, the
Exchange Ratio shall be appropriately adjusted.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PANENERGY

Except as set forth in the disclosure schedule dated as of the date hereof
and signed by an authorized officer of PanEnergy and delivered to Duke by or
on behalf of PanEnergy on or prior to the date hereof (the "PanEnergy
Disclosure Schedule") (each of which exceptions shall specifically identify
the relevant Section hereof to which it relates), PanEnergy represents and
warrants to Duke as follows:

5.1. Organization, Standing and Power. Each of PanEnergy and its
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its state of incorporation or
organization, has all requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each

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jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its assets and properties, makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on PanEnergy (as hereinafter
defined). As used in this Agreement a "Material Adverse Effect" shall mean, in
respect of PanEnergy, any effect or change that is, or is reasonably likely to
be, materially adverse to the business, operations, assets, financial
condition or results of operations of PanEnergy and its Subsidiaries taken as
a whole. PanEnergy has heretofore made available to Duke complete and correct
copies of its Restated Certificate of Incorporation and By-laws and the
certificates of incorporation and by-laws (or similar governing documents) of
each of its Subsidiaries, in each case as in effect at the date hereof.

5.2. Capital Structure. (a) The authorized capital stock of PanEnergy
consists of 300,000,000 shares of PanEnergy Common Stock and 3,000,000 shares
of preferred stock, par value $1.00 per share (the "PanEnergy Preferred
Stock"). At the close of business on October 31, 1996: (i) 151,066,410 shares
of PanEnergy Common Stock and no shares of PanEnergy Preferred Stock were
issued and outstanding; (ii) 7,015,366 shares of PanEnergy Common Stock were
reserved for issuance pursuant to PanEnergy's stock option plans and programs
(collectively, the "PanEnergy Stock Plans"); (iii) no shares of PanEnergy
Common Stock were held by PanEnergy in its treasury or by any Subsidiary of
PanEnergy, except for shares of PanEnergy Common Stock held in treasury for
issuance pursuant to PanEnergy's Dividend Reinvestment and Stock Purchase Plan
(together with any successor plan, the "PanEnergy DRIP"); and (iv) no bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote on any matters on which
its stockholders may vote) ("Voting Debt") were issued or outstanding, except
for the Convertible Notes. Since October 31, 1996, except for changes
resulting from the exercise of stock options granted prior to the date hereof
pursuant to the PanEnergy Stock Plans, changes resulting from issuances of
PanEnergy Common Stock pursuant to the PanEnergy DRIP and changes resulting
from the conversion of Convertible Notes (which exercises of stock options,
issuances of PanEnergy Common Stock and conversions of Convertible Notes are
set forth, as of November 15, 1996, in Section 5.2(a) of the PanEnergy
Disclosure Schedule), PanEnergy has not issued: (A) any additional shares of
capital stock, Voting Debt or other voting securities or (B) any securities
convertible into or exchangeable for shares of capital stock, any Voting Debt
or other voting securities. The authorized capital stock of each wholly-owned
Subsidiary of PanEnergy and the percentage ownership interest of PanEnergy and
any other Subsidiary or Subsidiaries of PanEnergy in any Subsidiary that is
not wholly-owned, in each case as of the date hereof, are set forth in Section
5.2(a) of the PanEnergy Disclosure Schedule. All outstanding shares of
PanEnergy Common Stock and all outstanding shares of the capital stock of each
Subsidiary of PanEnergy are validly issued, fully paid and nonassessable and
are not subject to any preemptive rights. Except as set forth in Section
5.2(a) of the PanEnergy Disclosure Schedule, all outstanding shares of the
capital stock of the Subsidiaries of PanEnergy are owned by PanEnergy or
wholly-owned Subsidiaries of PanEnergy, free and clear of all liens, charges,
encumbrances, claims, security interests, equities and options of any nature
whatsoever. Except as set forth in Section 5.2(a) of the PanEnergy Disclosure
Schedule and except for the conversion rights of the holders of the
Convertible Notes, as of the date hereof, there are no outstanding
subscriptions, options, warrants, calls, rights, commitments or agreements to
which PanEnergy or any Subsidiary of PanEnergy is a party or by which
PanEnergy or any Subsidiary of PanEnergy is bound, obligating PanEnergy or any
Subsidiary of PanEnergy to issue, deliver, sell, purchase, redeem or acquire,
or cause to be issued, delivered, sold, purchased, redeemed or acquired, any
additional shares of capital stock, any Voting Debt or other voting securities
of PanEnergy or of any Subsidiary of PanEnergy, or obligating PanEnergy or any
Subsidiary of PanEnergy to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are no stockholder
agreements, voting trusts, proxies or other agreements or understandings to
which PanEnergy or any Subsidiary of PanEnergy is a party or by which
PanEnergy or any Subsidiary of PanEnergy is bound relating to the voting of
any shares of the capital stock of PanEnergy or any Subsidiary of PanEnergy by
any person other than PanEnergy or a Subsidiary of PanEnergy.

(b) Section 5.2(b) of the PanEnergy Disclosure Schedule lists as of the date
hereof all Subsidiaries of PanEnergy, including the name of each Subsidiary,
the state or jurisdiction of its incorporation or organization, the states or
jurisdictions in which they are qualified or licensed to do business and
PanEnergy's interest therein.

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(c) Section 5.2(c) of the PanEnergy Disclosure Schedule lists as of the date
hereof all Joint Ventures (as defined in Section 11.15) of PanEnergy,
including the name of each such entity, the state or jurisdiction of its
organization, the states or jurisdictions in which they are qualified or
licensed to do business and PanEnergy's interest therein.

(d) The Shareholder Rights Protection Agreement dated as of March 11, 1986,
as amended, between PanEnergy and Continental Stock Transfer & Trust Company,
as successor Rights Agent, has been terminated or has expired without any
rights becoming exercisable thereunder, and PanEnergy has not adopted any
other shareholder rights plan and will not do so prior to the Effective Time.

5.3. Authority; No Violations; Consents and Approvals. (a) The Board of
Directors of PanEnergy has approved this Agreement, the Merger and the other
transactions contemplated hereby by the unanimous vote of all of the directors
present and has declared this Agreement, the Merger and the other transactions
contemplated hereby to be in the best interests of the holders of PanEnergy
Common Stock. The directors voting thereon have advised PanEnergy and Duke
that they intend to vote or cause to be voted all of the shares of PanEnergy
Common Stock beneficially owned by them in favor of adoption of this
Agreement. PanEnergy has all requisite corporate power and authority to enter
into this Agreement and, subject to adoption of this Agreement by the holders
of PanEnergy Common Stock in accordance with the DGCL (the "PanEnergy
Stockholders' Approval") and due and timely receipt of all regulatory consents
and approvals set forth in Section 5.3(c) of the PanEnergy Disclosure
Schedule, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of PanEnergy, subject, with respect to consummation of the
Merger, to the PanEnergy Stockholders' Approval and due and timely receipt of
the regulatory consents and approvals specified above. This Agreement has been
duly executed and delivered by PanEnergy and, subject, with respect to
consummation of the Merger, to the PanEnergy Stockholders' Approval and due
and timely receipt of the regulatory consents and approvals specified above,
and assuming this Agreement constitutes the valid and binding obligation of
Duke and Merger Sub, constitutes a valid and binding obligation of PanEnergy
enforceable in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity.

(b) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
to the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of PanEnergy, any of its Subsidiaries or, to PanEnergy's knowledge, any
of its Joint Ventures under, any provision of (A) the Restated Certificate of
Incorporation or By-Laws of PanEnergy or the comparable charter or
organizational documents of any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures, (B) subject to obtaining the third-party
consents set forth in Section 5.3(b) of the PanEnergy Disclosure Schedule (the
"PanEnergy Required Consents"), any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to PanEnergy, any of its Subsidiaries or, to
PanEnergy's knowledge, any of its Joint Ventures or any of their respective
properties or assets or (C) assuming the consents, approvals, authorizations
or permits and filings or notifications referred to in Section 5.3(c) are duly
and timely obtained or made and the PanEnergy Stockholders' Approval has been
obtained, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to PanEnergy, any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures or any of their respective properties or
assets, other than, in the case of clause (B) or (C), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on PanEnergy, materially impair the ability of PanEnergy to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any court, governmental, regulatory
or administrative agency or commission or other governmental authority or

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instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to PanEnergy, any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures in connection with the execution and
delivery of this Agreement by PanEnergy or the consummation by PanEnergy of
the transactions contemplated hereby, as to which the failure to obtain or
make would have a Material Adverse Effect on PanEnergy, would impair the
ability of PanEnergy to perform its obligations hereunder or would prevent the
consummation of any of the transactions contemplated hereby, except for: (A)
the filing of a premerger notification report by PanEnergy under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and the expiration or termination of the applicable waiting period with
respect thereto; (B) the filing with the SEC of (x) a joint proxy statement in
preliminary and definitive form relating to the meeting of holders of
PanEnergy Common Stock (the "PanEnergy Stockholders' Meeting") and the meeting
of holders of Duke Common Stock (the "Duke Shareholders' Meeting") to be held
in connection with the Merger (the "Joint Proxy Statement") and (y) such
reports under Section 13(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and such other compliance with the Exchange Act and the
rules and regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware;
(D) such filings and approvals as may be required by any applicable state
securities or "blue sky" laws; and (E) those consents, approvals, orders or
authorizations, registrations, declarations, filings and permits set forth in
Section 5.3(c) of the PanEnergy Disclosure Schedule.

5.4. SEC Documents. The filings required to be made by PanEnergy and its
Subsidiaries since December 31, 1993 under the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the Federal Power Act (the
"Power Act") and applicable state laws and regulations, if any, have been
filed with the SEC, the Federal Energy Regulatory Commission (the "FERC") and
the relevant state authorities, if any, as the case may be, and PanEnergy has
complied in all material respects with all applicable requirements of such
acts and the rules and regulations thereunder, with such exceptions as would
not in the aggregate have a Material Adverse Effect on PanEnergy. PanEnergy
has made available to Duke a true and complete copy of each report, schedule,
registration statement, definitive proxy statement or other document filed by
PanEnergy or any of its Subsidiaries with the SEC since December 31, 1993 (the
"PanEnergy SEC Documents"). As of their respective dates, the PanEnergy SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such PanEnergy SEC Documents,
with such exceptions as would not in the aggregate have a Material Adverse
Effect on PanEnergy and none of the PanEnergy SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of PanEnergy included in the PanEnergy SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which will be material) the
consolidated financial position of PanEnergy and its consolidated subsidiaries
as of their respective dates and the consolidated results of operations and
the consolidated cash flows of PanEnergy and its consolidated subsidiaries for
the periods presented therein.

5.5. Information Supplied. None of the information supplied or to be
supplied by PanEnergy for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Duke in
connection with the issuance of shares of Common Stock in the Merger (the "S-
4") will, at the time the S-4 becomes effective under the Securities Act or at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information supplied or to
be supplied by PanEnergy and included or incorporated by reference in the
Joint Proxy Statement will, at the date mailed to the holders of PanEnergy
Common Stock and the holders of Duke Common Stock or at the time of the
meetings of such holders to be

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held in connection with the Merger or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to PanEnergy or any of its Subsidiaries, or with respect to other information
supplied by PanEnergy for inclusion in the Joint Proxy Statement or the S-4,
shall occur which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement or the S-4, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the holders of PanEnergy Common
Stock. The Joint Proxy Statement, insofar as it relates to PanEnergy or its
Subsidiaries or other information supplied by PanEnergy for inclusion therein,
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.

5.6. Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the PanEnergy SEC
Documents, or except as contemplated by this Agreement, from December 31, 1995
through the date hereof, each of PanEnergy, its Subsidiaries and, to
PanEnergy's knowledge, its Joint Ventures has conducted its business only in
the ordinary course of business consistent with past practice and there has
not been: (i) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
shares of PanEnergy's capital stock, except for regular quarterly cash
dividends consistent with past practice on PanEnergy Common Stock with usual
record and payment dates for such dividends; (ii) any repurchase, redemption
or other acquisition by PanEnergy or any Subsidiary of PanEnergy of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, PanEnergy or any Subsidiary of PanEnergy, except in
accordance with the terms of the PanEnergy Stock Plans, the PanEnergy Benefit
Plans (as defined in Section 5.12(a)) or the PanEnergy DRIP; (iii) any
material change in any method of accounting or accounting practice by
PanEnergy or any Subsidiary of PanEnergy; or (iv) any other transaction,
commitment, dispute or other event or condition (financial or otherwise) of
any character (whether or not in the ordinary course of business) that could
reasonably be expected to have a Material Adverse Effect on PanEnergy. Since
November 24, 1995, PanEnergy has executed no confidentiality agreement with
any person in connection with its consideration of acquiring all or a
substantial part of PanEnergy or its Significant Subsidiaries.

5.7. No Undisclosed Material Liabilities. Except as disclosed in the
PanEnergy SEC Documents, as of the date hereof, there are no liabilities or
obligations of PanEnergy, any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures of any kind whatsoever, whether accrued,
contingent or otherwise, that would constitute, and there have been no events,
changes or effects with respect to PanEnergy, any of its Subsidiaries or, to
PanEnergy's knowledge, any of its Joint Ventures, constituting or which are
reasonably likely to constitute, whether individually or in the aggregate, a
Material Adverse Effect on PanEnergy.

5.8. No Default. Neither PanEnergy nor any of its Subsidiaries nor, to
PanEnergy's knowledge, any of its Joint Ventures is in default or violation
(and no event has occurred which, with notice or the lapse of time or both,
would constitute a default or violation) of any term, condition or provision
of (i) their respective charters, bylaws or other governing documents, (ii)
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which PanEnergy, any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures is now a party or by which PanEnergy, any
of its Subsidiaries or, to PanEnergy's knowledge, any of its Joint Ventures or
any of their respective properties or assets may be bound or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to PanEnergy,
any of its Subsidiaries or, to PanEnergy's knowledge, any of its Joint
Ventures, except in the case of (ii) and (iii) for defaults or violations
which in the aggregate would not have a Material Adverse Effect on PanEnergy.

5.9. Compliance with Applicable Laws. PanEnergy and its Subsidiaries and, to
PanEnergy's knowledge, its Joint Ventures hold all permits, licenses,
variances, exemptions, orders, franchises, consents and approvals of all
Governmental Entities necessary for them to own, lease and operate their
properties and assets and to lawfully conduct their respective businesses (the
"PanEnergy Permits"), except where the failure so to hold would not have a
Material Adverse Effect on PanEnergy. PanEnergy and its Subsidiaries and, to
PanEnergy's knowledge, its Joint Ventures are in compliance with the terms of
the PanEnergy Permits, except where the failure so to

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comply would not have a Material Adverse Effect on PanEnergy. Except as
disclosed in the PanEnergy SEC Documents, the businesses of PanEnergy, its
Subsidiaries and, to PanEnergy's knowledge, its Joint Ventures are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which would not have a Material Adverse
Effect on PanEnergy. No action, proceeding, investigation or review of any
Governmental Entity with respect to PanEnergy, any of its Subsidiaries or, to
PanEnergy's knowledge, any of its Joint Ventures is pending, and, to
PanEnergy's knowledge, no investigation or review by any Governmental Entity
with respect to PanEnergy, any of its Subsidiaries or any of its Joint
Ventures is threatened which would, or would be reasonably likely to, have a
Material Adverse Effect on PanEnergy.

5.10. Litigation. Except as disclosed in the PanEnergy SEC Documents or as
set forth in Section 5.10 of the PanEnergy Disclosure Schedule, there is no
suit, action or proceeding pending, or, to the knowledge of PanEnergy,
threatened against or affecting PanEnergy, any of its Subsidiaries or any of
its Joint Ventures ("PanEnergy Litigation"), and PanEnergy, its Subsidiaries
and, to PanEnergy's knowledge, its Joint Ventures have no knowledge of any
facts that are likely to give rise to any PanEnergy Litigation, that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on PanEnergy or its ability to consummate the transactions
contemplated by this Agreement, nor are there any judgments, decrees,
injunctions, rules or orders of any Governmental Entity or arbitrator
outstanding against PanEnergy, any of its Subsidiaries or, to PanEnergy's
knowledge, any of its Joint Ventures ("PanEnergy Orders") that are,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on PanEnergy or its ability to consummate the transactions contemplated
by this Agreement.

5.11. Tax Matters. "Taxes", as used in this Agreement, means any federal,
state, county, local or foreign taxes, charges, fees, levies, or other
assessments, including, without limitation, all net income, gross income,
sales and use, ad valorem, transfer, gains, profits, excise, franchise, real
and personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, whether foreign or domestic, and includes any additions to tax,
interest and penalties (civil or criminal), and any expenses incurred in
connection with the determination, settlement or litigation of any liability
for any of the foregoing. "Tax Return", as used in this Agreement, means a
report, return or other information required to be supplied to a governmental
entity with respect to Taxes including, where permitted or required, combined
or consolidated returns for any group of entities that includes PanEnergy or
any of its Subsidiaries on the one hand, or Duke or any of its Subsidiaries on
the other hand.

Except (i) as disclosed in Section 5.11 of the PanEnergy Disclosure Schedule
or (ii) where the failure of the following representations to be true would
not, either individually or in the aggregate, have a Material Adverse Effect
on PanEnergy:

(a) Filing of Timely Tax Returns. All material Tax Returns required to be
filed by PanEnergy and each of its Subsidiaries under applicable law have been
(and, as to Tax Returns not filed as of the date hereof, will be) filed on a
timely basis. All such Tax Returns were and are in all material respects (and,
as to Tax Returns not filed as of the date hereof, will be) true, complete and
correct.

(b) Payment of Taxes. PanEnergy and each of its Subsidiaries have, within
the time and in the manner prescribed by law, paid (and until the Closing Date
will pay within the time and in the manner prescribed by law) all material
Taxes that are currently due and payable except for those being contested in
good faith or for which adequate reserves have been established. No written
claim (and, to PanEnergy's knowledge, no other claim) has ever been made by an
authority in a jurisdiction where any of PanEnergy and its Subsidiaries does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.

(c) Tax Reserves. Except as previously disclosed by PanEnergy to Duke,
PanEnergy and its Subsidiaries have established (and until the Closing Date
will maintain) on their books and records (i) reserves adequate to pay all
material Taxes and all deficiencies in material Taxes asserted, proposed or
threatened against PanEnergy or its Subsidiaries and (ii) reserves for
deferred income taxes, in each case in accordance with GAAP.

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(d) Tax Liens. There are no Tax liens upon the assets of PanEnergy or any of
its Subsidiaries except liens for Taxes not yet due.

(e) Withholding Taxes. PanEnergy and each of its Subsidiaries have complied
(and until the Closing Date will comply) in all material respects with the
provisions of the Code relating to the withholding of Taxes, including,
without limitation, the withholding and reporting requirements under Sections
1441 through 1464, 3401 through 3406, and 6041 through 6049 of the Code, as
well as any similar provisions under any other laws, and have, within the time
and in the manner prescribed by law, withheld from employee wages and paid
over to the proper governmental authorities all material amounts required.

(f) Extensions of Time for Filing Tax Returns. Neither PanEnergy nor any of
its Subsidiaries has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.

(g) Waivers of Statute of Limitations. Neither PanEnergy nor any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.

(h) Expiration of Statute of Limitations. The statute of limitations for the
assessment of all material Taxes has expired for all applicable material Tax
Returns of PanEnergy and each of its Subsidiaries or those Tax Returns have
been examined by the appropriate taxing authorities for all periods through
the date hereof, and no deficiency for any material Taxes has been proposed,
asserted or assessed (or, to PanEnergy's knowledge, threatened) against
PanEnergy or any of its Subsidiaries that has not been resolved and paid in
full or previously disclosed by PanEnergy to Duke.

(i) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or material Tax Returns of PanEnergy or any of
its Subsidiaries. Neither PanEnergy nor any of its Subsidiaries has any
knowledge of any threatened action, audit or administrative or court
proceeding with respect to any such Taxes or Tax Returns. Further, to the best
of the knowledge of PanEnergy, no state of facts exists or has existed which
would constitute grounds for the assessment of any material liability for
Taxes with respect to the periods which have not been audited by the Internal
Revenue Service (the "IRS") or other taxing authority.

(j) Tax Rulings. Neither PanEnergy nor any of its Subsidiaries has received
a Tax Ruling (as defined below) or entered into a Closing Agreement (as
defined below) with any taxing authority that would have a continuing material
adverse effect after the Closing Date. "Tax Ruling", as used in this
Agreement, shall mean a written ruling of a taxing authority relating to
Taxes. "Closing Agreement", as used in this Agreement, shall mean a written
and legally binding agreement with a taxing authority relating to Taxes.

(k) Availability of Tax Returns. To the extent not previously provided, as
soon as practicable after the date hereof, PanEnergy and its Subsidiaries will
make available to Duke complete and accurate copies of such of the following
materials as Duke may reasonably request: (i) material Tax Returns, and any
amendments thereto, filed by PanEnergy or any of its Subsidiaries since
January 1, 1994, (ii) audit reports received from any taxing authority
relating to any material Tax Return filed by PanEnergy or any of its
Subsidiaries and (iii) Closing Agreements entered into by PanEnergy or any of
its Subsidiaries with any taxing authority.

(l) Tax Sharing Agreements. Neither PanEnergy nor any of its Subsidiaries is
a party to any Tax allocation or sharing agreement with any person other than
PanEnergy and its Subsidiaries.

(m) Liability for Others. Neither PanEnergy nor any of its Subsidiaries has
any liability for Taxes of any person other than PanEnergy and its
Subsidiaries under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.

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(n) Section 341(f). Neither PanEnergy nor any of its Subsidiaries has filed
(or will file prior to the Closing) a consent pursuant to Section 341(f) of
the Code or has agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by PanEnergy or any of its Subsidiaries.

(o) Section 168. No property of PanEnergy or any of its Subsidiaries is
property that PanEnergy or any such Subsidiary or any party to this
transaction is or will be required to treat as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Code (as in effect
prior to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.

(p) Section 481 Adjustments. Neither PanEnergy nor any of its Subsidiaries
is required to include in income any adjustment pursuant to Section 481(a) of
the Code by reason of a voluntary change in accounting method initiated by
PanEnergy or any of its Subsidiaries, and to the best of the knowledge of
PanEnergy, the IRS has not proposed any such adjustment or change in
accounting method.

(q) Tax-Exempt Interest. None of the assets of PanEnergy or its Subsidiaries
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.

(r) Sections 6661 and 6662. All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of
the Code for Tax Returns due (without regard to extensions) on or before
December 31, 1989, and within the meaning of Section 6662 of the Code for Tax
Returns due (without regard to extensions) after December 31, 1989) have been
adequately disclosed (or, with respect to Tax Returns not yet filed will be
adequately disclosed) on the Tax Returns of PanEnergy and its Subsidiaries in
accordance with Section 6661(b)(2)(B) of the Code for Tax Returns due (without
regard to extensions) on or prior to December 31, 1989, and in accordance with
Section 6662(d)(2)(B) of the Code for Tax Returns due (without regard to
extensions) after December 31, 1989.

(s) Section 280G. Neither PanEnergy nor any of its Subsidiaries is a party
to any agreement, contract, or arrangement that could result, either directly
or indirectly, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code (except for such
payments as may be payable pursuant to certain provisions in contracts
contemplated by Section 8.16 and/or as a result of the accelerated vesting of
awards of restricted PanEnergy Common Stock and/or PanEnergy Options).

(t) Acquisition Indebtedness. No indebtedness of PanEnergy or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.

(u) NOLs. As of September 30, 1996, PanEnergy and its Subsidiaries had net
operating loss carryovers available to offset future income as set forth in
Section 5.11(u) of the PanEnergy Disclosure Schedule. Section 5.11(u) of the
PanEnergy Disclosure Schedule sets forth the amount of and year of expiration
of each company's net operating loss carryovers.

(v) Credit Carryover. As of September 30, 1996, PanEnergy and its
Subsidiaries had tax credit carryovers available to offset future tax
liability as set forth in Section 5.11(v) of the PanEnergy Disclosure
Schedule. Section 5.11(v) of the PanEnergy Disclosure Schedule sets forth the
amount and year of expiration of each company's tax credit carryovers.

(w) The Merger. Neither PanEnergy nor any of its Subsidiaries has taken any
action or has any knowledge of any fact or circumstance that would, or would
be reasonably likely to, adversely affect the status of the Merger as a
reorganization under Section 368(a) of the Code.

5.12. Employee Benefits; Labor Matters. (a) Except as disclosed in the
PanEnergy SEC documents, as set forth in Section 5.12(a) of the PanEnergy
Disclosure Schedule or as would not have a Material Adverse Effect on
PanEnergy, (i) all employee benefit plans, policies, practices, arrangements
and programs maintained for the benefit of the current or former employees or
directors of PanEnergy or any of its Subsidiaries ("PanEnergy

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Personnel") that are sponsored, maintained or contributed to by PanEnergy or
any of its Subsidiaries, or with respect to which PanEnergy or any of its
Subsidiaries has incurred or could be reasonably expected to incur any
liability, including without limitation any such plan that is an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") ("PanEnergy Benefit Plans"), are in compliance
with all applicable requirements of law, including ERISA and the Code, and
have been administered and operated in compliance with their terms, and (ii)
neither PanEnergy nor any of its Subsidiaries has any liabilities or
obligations with respect to any such PanEnergy Benefit Plans or any employee
benefit plan which is not a PanEnergy Benefit Plan because (x) such plan has
been terminated and/or (y) such plan is or was maintained or contributed to by
any entity (other than a Subsidiary of PanEnergy) required to be aggregated
with PanEnergy pursuant to Section 414 of the Code or Section 4001(b) of
ERISA, whether accrued, contingent or otherwise, nor, to the knowledge of
PanEnergy, are any such liabilities or obligations expected to be incurred.

(b) Except as set forth in Section 5.12(b) of the PanEnergy Disclosure
Schedule, the execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any plan, policy,
arrangement or agreement, including but not limited to the PanEnergy Benefit
Plans, or any trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any PanEnergy Personnel.

(c) Except as set forth in Schedule 5.12(c) of the PanEnergy Disclosure
Schedule, neither PanEnergy nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor agreement with any union or
labor organization, nor does PanEnergy know of any activity or proceeding of
any labor organization (or representative thereof) or employee group to
represent or organize any PanEnergy Personnel. Except as set forth in Section
5.12(c) of the PanEnergy Disclosure Schedule, (i) there is no unfair labor
practice, employment discrimination or other complaint against PanEnergy
pending, or, to the knowledge of PanEnergy, threatened, which has or could
reasonably be expected to have, a Material Adverse Effect on PanEnergy and
(ii) there is no strike, dispute, slowdown, work stoppage or lockout pending,
or, to the knowledge of PanEnergy, threatened, against or involving PanEnergy
or any of its Subsidiaries which has or could reasonably be expected to have,
a Material Adverse Effect on PanEnergy.

5.13. Environmental Matters.

(a) Definitions. For purposes of this Agreement:

(i) "Environmental Claims" means, with respect to any person, (x) any and
all administrative, regulatory or judicial actions, suits, injunctions,
judgments, demands (including, without limitation, demands or other notices
pursuant to any indemnification, contribution or similar agreement), demand
letters, directives, claims, complaints, orders, decrees, liens,
investigations, proceedings or notices of non-compliance or violation or any
other notice in writing by or from any person or entity (including any
Governmental Entity), or (y) any oral information provided by a Governmental
Entity that written action of the type described in the foregoing clause is in
process, which (in case of either (x) or (y)) alleges potential liability or
any obligation to take any action or cease any action (including, without
limitation, potential liability for enforcement, investigatory costs,
monitoring costs, cleanup costs, governmental response costs, removal costs,
remedial costs, response costs, corrective action, natural resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (1) the presence, or Release (as hereinafter defined) into the
environment, of any Hazardous Materials (as hereinafter defined) at any
location, whether or not owned, operated, occupied, leased or managed by
PanEnergy or any of its Environmental Subsidiaries (for purposes of this
Section 5.13) or by Duke or any of its Environmental Subsidiaries (for
purposes of Section 6.13) and (2) circumstances or conditions forming the
basis of any violation, or alleged violation, of any Environmental Law (as
hereinafter defined) including, without limitation (in case of either (1) or
(2)), any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from the presence or Release of any Hazardous Materials at any location.

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(ii) "Environmental Laws" means all foreign, federal, state and local laws,
statutes, rules, regulations, orders, codes, directives and ordinances
pertaining to: (A) the protection of health, safety and the indoor or outdoor
environment; (B) the conservation, management, or use of natural resources and
wildlife; (C) the protection or use of surface water and ground water; (D) the
management, manufacture, possession, presence, use, processing, generation,
transportation, distribution, treatment, storage, disposal, release,
threatened release, abatement, removal, remediation, or handling of, or
exposure to, any Hazardous Materials; or (E) pollution (including any Release
or threatened Release of Hazardous Materials to indoor or outdoor air, land
surface or subsurface strata, surface water or ground water); and includes,
without limitation, the following federal statutes (and their implementing
regulations and the analogous state statutes and regulations): the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. (S) 9601 et seq.; the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended by the Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. (S) 6901 et seq.; the Federal
Water Pollution Control Act of 1972, as amended by the Clean Water Act of
1977, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act
of 1976, as amended, 15 U.S.C. (S) 2601 et seq.; the Emergency Planning and
Community Right-To-Know Act of 1986, 42 U.S.C. (S) 11001 et seq.; the Clean
Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C.
(S) 7401 et seq.; the National Environmental Policy Act of 1970, as amended,
42 U.S.C. (S) 4321 et seq.; the Rivers and Harbors Act of 1899, as amended, 33
U.S.C. (S) 401 et seq.; the Endangered Species Act of 1973, as amended, 16
U.S.C. (S) 1531 et seq.; the Atomic Energy Act, as amended, 42 U.S.C. (S) 2014
et seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
(S) 651 et seq.; the Safe Drinking Water Act of 1974, as amended, 42 U.S.C.
(S) 300(f) et seq.; and the Oil Pollution Act of 1990, as amended, 33 U.S.C.
(S) 2701 et seq.

(iii) "Hazardous Materials" means (x) any petroleum or petroleum products,
radioactive materials, asbestos in any form, and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls,
(y) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances" or "toxic pollutants," or words of similar import,
under any Environmental Law and (z) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under any
applicable Environmental Law.

(iv) "Release" means any release or threatened release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without
limitation, the atmosphere, soil, indoor air, subsurface, surface water,
groundwater or property.

(v) "Environmental Subsidiary" means any corporation or other organization,
whether incorporated or unincorporated, in which a party to this Agreement
directly or indirectly owns or controls securities or other interests or any
organization of which such party or any subsidiary of such party is a general
partner.

(b) Compliance. (i) Except as set forth in the PanEnergy SEC Documents,
PanEnergy and each of its Environmental Subsidiaries and any real or personal
property (including, without limitation, any vessel) that any of them owns,
operates, occupies, leases or manages, in whole or in part, directly or
indirectly, are in compliance with all applicable Environmental Laws, except
where the failure to be so in compliance would not be reasonably likely to
have a Material Adverse Effect on PanEnergy.

(ii) Except as set forth in the PanEnergy SEC Documents, neither PanEnergy
nor any of its Environmental Subsidiaries has received any written
communication from any person or Governmental Entity that alleges that
PanEnergy or any of its Environmental Subsidiaries or any real or personal
property (including, without limitation, any vessel) that any of them owns,
operates, occupies, leases or manages, in whole or in part, directly or
indirectly, is not in compliance with applicable Environmental Laws, except
where the failure to be so in compliance would not be reasonably likely to
have a Material Adverse Effect on PanEnergy.

(c) Environmental Permits. Except as set forth in the PanEnergy SEC
Documents, PanEnergy and each of its Environmental Subsidiaries has obtained,
and will maintain through the Closing Date, all permits, consents,

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licenses, variances, certificates, exemptions, orders, franchises,
authorizations and approvals required under any Environmental Law
(collectively, "Environmental Permits") necessary for the construction and
operation of their facilities (including, without limitation, any vessel) and
the conduct of their operations, and all such Environmental Permits are in
good standing or, where applicable, an application or renewal application has
been timely filed, is pending and agency approval is expected to be obtained,
and PanEnergy and its Environmental Subsidiaries are in compliance with all
terms and conditions of all such Environmental Permits and are not required to
make any expenditure in order to obtain or renew any Environmental Permits,
except where the failure to obtain or be in compliance with such Environmental
Permits and the requirement to make such expenditures would not be reasonably
likely to have a Material Adverse Effect on PanEnergy.

(d) Environmental Claims. Except as set forth in the PanEnergy SEC
Documents, there is no Environmental Claim pending or, to the knowledge of
PanEnergy and its Environmental Subsidiaries, threatened:

(i) against PanEnergy or any of its Environmental Subsidiaries,

(ii) against any person or entity whose liability for, or whose
obligation to satisfy, any Environmental Claim PanEnergy or any of its
Environmental Subsidiaries has retained, assumed or guaranteed, either
contractually or by operation of law, or

(iii) against any real or personal property (including, without
limitation, any vessel) or operations that PanEnergy or any of its
Environmental Subsidiaries owns, operates, occupies, leases or manages, in
whole or in part, directly or indirectly, that would be reasonably likely
to have a Material Adverse Effect on PanEnergy.

(e) Releases. Except as set forth in the PanEnergy SEC Documents, and except
for Releases of Hazardous Materials the liability for which would not be
reasonably likely to have a Material Adverse Effect on PanEnergy, PanEnergy
has no knowledge of any Release of any Hazardous Materials that has occurred
on, at, from or to any of the real or personal property (including, without
limitation, any vessel) owned, operated, occupied, leased or managed by
PanEnergy or any Environmental Subsidiary of PanEnergy or any predecessor of
PanEnergy or any Environmental Subsidiary of PanEnergy or any other property
which requires investigation, assessment, monitoring, remediation, response,
removal, corrective action, cleanup or any similar action under Environmental
Laws.

(f) Disclosure. PanEnergy has disclosed to Duke all material facts that
PanEnergy reasonably believes would be reasonably likely to form the basis of
a Material Adverse Effect on PanEnergy arising from (x) the cost of pollution
control equipment currently required or known to be required in the future,
(y) investigation, assessment, monitoring, remediation, response, removal,
corrective action, cleanup, or remediation costs and any related costs
currently required or known to be required in the future, or (z) any other
environmental, health or safety matter affecting PanEnergy or its
Environmental Subsidiaries.

5.14. Insurance. Except as set forth in Section 5.14 of the PanEnergy
Disclosure Schedule, each of PanEnergy and its Subsidiaries is, and has been
continuously since December 31, 1993, insured by reputable and financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting their respective businesses during such
time period. Neither PanEnergy nor any of its Subsidiaries has received any
notice of cancellation or termination with respect to any material insurance
policy thereof and neither PanEnergy nor any of its Subsidiaries has received
notice that any such policy is invalid or unenforceable.

5.15. Contracts. PanEnergy has set forth in Section 5.15 of the PanEnergy
Disclosure Schedule a list of all contracts to which PanEnergy or Texas
Eastern Transmission Corporation, Algonquin Gas Transmission Company,
Panhandle Eastern Pipe Line Company, Trunkline Gas Company, PanEnergy Field
Services, Inc., or PanEnergy Trading and Market Services, L.L.C. (each a
"PanEnergy Business Unit") is a party as of the date hereof and which, in the
reasonable judgment of PanEnergy, is likely (on an annualized basis) in the
fiscal year ending December 31, 1996, to (i) provide gross revenues in excess
of the PanEnergy Business Unit's 1995

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Revenue Threshold, (ii) require payments in excess of the PanEnergy Business
Unit's 1995 Revenue Threshold, or (iii) provide a contribution to the gross
margin in excess of the PanEnergy Business Unit's 1995 Margin Threshold. As
used herein, a "PanEnergy Business Unit's 1995 Revenue Threshold" means an
amount equal to 5% of such PanEnergy Business Unit's gross revenues for the
fiscal year ended December 31, 1995, and a "PanEnergy Business Unit's 1995
Margin Threshold" means an amount equal to 5% of such PanEnergy Business
Unit's gross margin for the fiscal year ended December 31, 1995.

5.16. Regulatory Proceedings. Except as set forth in the PanEnergy SEC
Documents or Section 5.16 of the PanEnergy Disclosure Schedule, neither
PanEnergy nor any of its Subsidiaries nor, to PanEnergy's knowledge, any of
its Joint Ventures all or part of whose rates or services are regulated by a
Governmental Entity is a party to any proceeding before a court or other
Governmental Entity which is reasonably likely to result in orders having a
Material Adverse Effect on PanEnergy nor has any such proceeding been noticed.

5.17. Regulation as a Utility. (a) Neither PanEnergy nor any of its
Subsidiaries or Joint Ventures is a "holding company," a "subsidiary company"
or an "affiliate" of any public utility company within the meaning of Section
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of
1935, as amended (the "1935 Act"), respectively, and none of PanEnergy or any
of its Subsidiaries or Joint Ventures is a "public utility company" within the
meaning of Section 2(a)(5) of the 1935 Act.

(b) Neither PanEnergy nor any "subsidiary company" or "affiliate" (as each
such term is defined in the 1935 Act) of PanEnergy is subject to regulation as
a public utility or public service company (or similar designation) by any
state in the United States or any foreign country.

5.18. Opinions of Financial Advisors. The Board of Directors of PanEnergy
has received the opinions of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Lehman Brothers Inc. ("Lehman"), dated
November 24, 1996, to the effect that, as of November 24, 1996, the Exchange
Ratio is fair from a financial point of view to the holders of PanEnergy
Common Stock.

5.19. Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of PanEnergy Common Stock in favor of adopting this
Agreement is the only vote of the holders of any class or series of capital
stock of PanEnergy necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby.

5.20. Beneficial Ownership of Duke Common Stock. Neither PanEnergy nor any
of its Subsidiaries "beneficially owns" (as defined in Rule 13d-3 under the
Exchange Act) any outstanding shares of Duke Common Stock.

5.21. Brokers. Except for the fees and expenses payable to Merrill Lynch and
Lehman, which fees are reflected in their agreements with PanEnergy (copies of
which have been delivered to Duke), no broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of PanEnergy.

5.22. Article Seventh of the Restated Certificate of Incorporation of
PanEnergy and Section 203 of the DGCL Not Applicable. Neither the provisions
of Article Seventh of PanEnergy's Restated Certificate of Incorporation, nor
the provisions of Section 203 of the DGCL are applicable to this Agreement,
the Merger or any other transaction contemplated hereby. No other "fair
price", "moratorium", "control share acquisition" or similar anti-takeover
statute or regulation is applicable to PanEnergy, the Merger or any other
transaction contemplated hereby.

5.23. Properties. Except for liens arising in the ordinary course of
business after the date hereof and properties and assets disposed of in the
ordinary course of business after the date of the most recent balance sheet
contained in PanEnergy's most recent Report on Form 10-Q filed prior to the
date hereof, PanEnergy, its Subsidiaries and, to PanEnergy's knowledge, its
Joint Ventures have defensible title (or, with respect to pipelines,

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equipment and other tangible personal property used in connection with
PanEnergy's pipeline operations (collectively, "PanEnergy Pipeline Assets"),
title to or interest in the applicable PanEnergy Pipeline Asset sufficient to
enable PanEnergy, its Subsidiaries and, to PanEnergy's knowledge, its Joint
Ventures to conduct their business with respect thereto without material
interference as it is currently being conducted or as described in the
PanEnergy SEC Documents) on all their material properties and assets, whether
tangible or intangible, real, personal or mixed, free and clear of all liens,
except for liens disclosed in the PanEnergy SEC Documents and liens the
existence of which would not have a Material Adverse Effect on PanEnergy.

5.24. Easements. The businesses of PanEnergy and each of its Subsidiaries
are being operated in a manner which does not violate (in any manner which
would, or which would be reasonably likely to, have a Material Adverse Effect
on PanEnergy) the terms of any easements, rights of way, permits, servitudes,
licenses, leasehold estates and similar rights relating to real property
(collectively, "Easements") used by PanEnergy and each of its Subsidiaries in
such businesses. All Easements are valid and enforceable, except as the
enforceability thereof may be affected by bankruptcy, insolvency or other laws
of general applicability affecting the rights of creditors generally or
principles of equity, and grant the rights purported to be granted thereby and
all rights necessary thereunder for the current operation of such business
where the failure of any such Easement to be valid and enforceable or to grant
the rights purported to be granted thereby or necessary thereunder would have
a Material Adverse Effect on PanEnergy. There are no spacial gaps in the
Easements which would impair the conduct of such business in a manner which
would, or which would be reasonably likely to, have a Material Adverse Effect
on PanEnergy, and no part of PanEnergy Pipeline Assets is located on property
which is not owned in fee by PanEnergy or a Subsidiary or subject to an
Easement in favor of PanEnergy or a Subsidiary, where the failure of such
PanEnergy Pipeline Assets to be so located would have a Material Adverse
Effect on PanEnergy.

5.25. Futures Trading and Fixed Price Exposure. The Risk Management
Committee of PanEnergy has established risk parameters to restrict the level
of risk that PanEnergy and its Subsidiaries are authorized to take with
respect to the net position resulting from all physical commodity
transactions, exchange traded futures and options and over-the-counter
derivative instruments (the "Net PanEnergy Position") and monitors the
compliance by PanEnergy and its Subsidiaries with such risk parameters. The
risk parameters established by PanEnergy's Risk Management Committee on the
date hereof are set forth in Section 5.25 of the PanEnergy Disclosure Schedule
and may be modified only by PanEnergy's Risk Management Committee. The Net
PanEnergy Position is within the risk parameters which have been established
by PanEnergy's Risk Management Committee. All guaranties by PanEnergy or any
of its Subsidiaries (other than the Mobil Joint Venture) of indebtedness of
the Mobil Joint Venture are described in Section 5.25 of the PanEnergy
Disclosure Schedule. As used herein, "Mobil Joint Venture" means PanEnergy
Trading and Market Services, L.L.C. and PanEnergy Marketing Canada Ltd.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF DUKE

Except as set forth in the disclosure schedule dated as of the date hereof
and signed by an authorized officer of Duke and delivered to PanEnergy by or
on behalf of Duke on or prior to the date hereof (the "Duke Disclosure
Schedule") (each of which exceptions shall specifically identify the relevant
Section hereof to which it relates), Duke represents and warrants to PanEnergy
as follows:

6.1. Organization, Standing and Power. Each of Duke and its Subsidiaries is
a corporation or partnership duly organized, validly existing and in good
standing under the laws of its state of incorporation or organization, has all
requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which
the business it is conducting, or the operation, ownership or leasing of its
assets and properties, makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a Material
Adverse Effect on Duke. As used in this Agreement a "Material Adverse Effect"
shall mean, in respect

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of Duke, any effect or change that is, or is reasonably likely to be,
materially adverse to the business, operations, assets, financial condition or
results of operations of Duke and its Subsidiaries taken as a whole. Duke has
heretofore made available to PanEnergy complete and correct copies of its
Restated Articles of Incorporation and By-Laws and the certificates of
incorporation and bylaws (or similar governing documents) of each of its
Subsidiaries, in each case as in effect at the date hereof.

6.2. Capital Structure. (a) The authorized capital stock of Duke consists of
300,000,000 shares of Duke Common Stock, 12,500,000 shares of Preferred Stock,
par value $100 (the "Duke Preferred Stock"), 10,000,000 shares of Preferred
Stock A, par value $25 (the "Duke Preferred Stock A"), and 1,500,000 shares of
Preference Stock, $100 par value (the "Duke Preference Stock"). At the close
of business on September 30, 1996: (A) 201,589,596 shares of Common Stock were
issued and outstanding; (B) 5,240,000 shares of Duke Preferred Stock were
issued and outstanding, consisting of 350,000 shares of 4.50%, Series C;
350,000 shares of 5.72%, Series D; 350,000 shares of 6.72%, Series E; 850,000
shares of 7.50%, Series R; 600,000 shares of 7.85%, Series S; 130,000 shares
of 6.20%, Series T; 130,000 shares of 6.30%, Series U; 130,000 shares of
6.40%, Series V; 500,000 shares of 7.00%, Series W; 500,000 shares of 6.75%,
Series X; 600,000 shares of 7.04%, Series Y; and 750,000 shares of Auction
Series A; (C) 6,400,000 shares of Duke Preferred Stock A were issued and
outstanding, consisting of 1,600,000 shares of 7.72%, 1992 Series; 800,000
shares of 5.95%, 1992 Series B; 800,000 shares of 6.10%, 1992 Series C;
800,000 shares of 6.20%, 1992 Series D; and 2,400,000 shares of 6.375%, 1993
Series; (D) no shares of Duke Preference Stock were issued and outstanding;
(E) 2,000,000 shares of Duke Common Stock were reserved for issuance pursuant
to Duke's Stock Incentive Plan; 2,266,424 shares of Duke Common Stock were
reserved for issuance pursuant to Duke's Stock Purchase-Savings Program;
3,673,247 shares of Common Stock were reserved for issuance pursuant to Duke's
Employee Stock Ownership Plan; and 1,064,998 shares of Duke Common Stock were
reserved for issuance pursuant to Duke's Stock Purchase and Dividend
Reinvestment Plan (together with any successor plans, the "Duke Stock Plans");
and (F) no Voting Debt of Duke was outstanding. Since September 30, 1996, Duke
has not issued: (A) any additional shares of capital stock, any Voting Debt or
other voting securities or (B) any securities convertible into or exchangeable
for shares of capital stock, Voting Debt or other voting securities. The
authorized capital stock of each wholly-owned Subsidiary of Duke and the
number of shares of the capital stock of each such Subsidiary that are issued
and outstanding as of the date hereof, are set forth in Section 6.2(a) of the
Duke Disclosure Schedule. All outstanding shares of Duke capital stock are,
and the shares of Duke Common Stock issued in accordance with this Agreement
and upon exercise of the PanEnergy Stock Options to be assumed by Duke
pursuant to this Agreement, will be, and all outstanding shares of the capital
stock of each Subsidiary are, validly issued, fully paid and nonassessable and
not subject to any preemptive rights. Except as set forth in Section 6.2(a) of
the Duke Disclosure Schedule, all outstanding shares of the capital stock of
the Subsidiaries of Duke are owned by Duke or wholly-owned Subsidiaries of
Duke, free and clear of all liens, charges, encumbrances, claims, security
interests, equities and options of any nature whatsoever. Except as set forth
in Section 6.2(a) of the Duke Disclosure Schedule, as of the date hereof,
there are no outstanding subscriptions, options, warrants, calls, rights,
commitments or agreements to which Duke or any Subsidiary of Duke is a party
or by which Duke or any Subsidiary of Duke is bound, obligating Duke or any
Subsidiary of Duke to issue, deliver, sell, purchase, redeem or acquire, or
cause to be issued, delivered, sold, purchased, redeemed or acquired, any
additional shares of capital stock, any Voting Debt or other voting securities
of Duke or of any Subsidiary of Duke or obligating Duke or any Subsidiary of
Duke to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. There are no stockholder agreements, voting trusts,
proxies or other agreements or understandings to which Duke or any Subsidiary
of Duke is a party or by which Duke or any Subsidiary of Duke is bound
relating to the voting of any shares of the capital stock of Duke or any
Subsidiary of Duke by any person other than Duke or a Subsidiary of Duke.

(b) Section 6.2(b) of the Duke Disclosure Schedule lists as of the date
hereof all Subsidiaries of Duke, including the name of each Subsidiary, the
state or jurisdiction of its incorporation or organization, the states or
jurisdictions in which they are qualified or licensed to do business and
Duke's interest therein.

(c) Section 6.2(c) of the Duke Disclosure Schedule lists as of the date
hereof all Joint Ventures of Duke, including the name of each such entity, the
state or jurisdiction of its organization, the states or jurisdictions in
which they are qualified or licensed to do business and Duke's interest
therein.

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6.3. Authority; No Violations; Consents and Approvals. (a) The Board of
Directors of Duke has approved this Agreement, the Merger and the other
transactions contemplated hereby by the unanimous vote of all of the directors
present, and has declared this Agreement, the Merger and the other
transactions contemplated hereby to be in the best interests of the holders of
Duke Common Stock. The directors have advised PanEnergy and Duke that they
intend to vote or cause to be voted all of the shares of Duke Common Stock
beneficially owned by them in favor of approval of the Duke Vote Matter (as
defined below). Duke has all requisite corporate power and authority to enter
into this Agreement and, subject to approval of the amendment of the Articles
of Incorporation of Duke for the purpose of changing the name of Duke to Duke
Energy Corporation and increasing the number of authorized shares of Duke
Common Stock and subject to approval of the issuance of the shares of Duke
Common Stock that are to be issued in connection with the Merger (together,
sometimes herein called the "Duke Vote Matter") by the holders of Duke Common
Stock in accordance with the North Carolina Business Corporation Act ("NCBCA")
and the NYSE listing requirements and subject to due and timely receipt of all
required federal and state regulatory consents and approvals set forth in
Section 6.3(c)(E), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including, but not limited to, the issuance
of the Duke Common Stock pursuant to the Merger, have been duly authorized by
all necessary corporate action on the part of Duke, subject to approval of the
Duke Vote Matter by the holders of Duke Common Stock in accordance with the
NCBCA and NYSE listing requirements and subject to due and timely receipt of
the regulatory consents and approvals specified above. This Agreement has been
duly executed and delivered by Duke and, subject, with respect to approval of
the Duke Vote Matter by the holders of Duke Common Stock in accordance with
the NCBCA and NYSE listing requirements and subject to due and timely receipt
of the regulatory consents and approvals specified above, and assuming this
Agreement constitutes the valid and binding obligation of PanEnergy,
constitutes a valid and binding obligation of Duke enforceable in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.

(b) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
to the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Duke, any of its Subsidiaries or, to Duke's knowledge, any of its
Joint Ventures under, any provision of (A) the Restated Articles of
Incorporation or By-Laws of Duke or the comparable charter or organizational
documents of any of its Subsidiaries or, to Duke's knowledge, any of its Joint
Ventures, (B) subject to obtaining the third-party consents, if any, set forth
in Section 6.3(b) of the Duke Disclosure Schedule (the "Duke Required
Consents"), any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Duke, any of its Subsidiaries or, to Duke's knowledge, any of
its Joint Ventures or any of their respective properties or assets or (C)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 6.3(c) are duly and timely obtained or
made and the approval of the Duke Vote Matter by the holders of Duke Common
Stock has been obtained, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Duke, any of its Subsidiaries or, to Duke's
knowledge, any of its Joint Ventures or any of their respective properties or
assets, other than, in the case of clause (B) or (C), any such conflicts,
violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on Duke, materially impair the ability of Duke to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity is required
by or with respect to Duke, any of its Subsidiaries or, to Duke's knowledge,
any of its Joint Ventures in connection with the execution and delivery of
this Agreement by Duke, or the consummation by Duke of the transactions
contemplated hereby, as to which the failure to obtain or make would have a
Material Adverse Effect on Duke, would impair the ability of Duke to perform
its obligations hereunder or would prevent the consummation of any of the
transactions contemplated hereby, except for: (A) the filing of

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a premerger notification report by Duke under the HSR Act and the expiration
or termination of the applicable waiting period with respect thereto; (B) the
filing with the SEC of the Joint Proxy Statement, the S-4, such reports under
Section 13(a) of the Exchange Act and such other compliance with the
Securities Act and the Exchange Act and the rules and regulations thereunder
as may be required in connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of such orders as may be
so required; (C) the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware; (D) such filings and approvals as may be
required by any applicable state securities or "blue sky" laws; and (E) any
required approvals of the North Carolina Utilities Commission (the "NCUC"),
The Public Service Commission of South Carolina (the "PSCSC") and FERC (the
"Duke Required Statutory Approvals").

6.4. SEC Documents. The filings required to be made by Duke and its
Subsidiaries since December 31, 1993 under the Securities Act, the Exchange
Act, the Power Act, the Atomic Energy Act of 1954, as amended (the "Atomic
Energy Act"), the 1935 Act, and applicable North Carolina and South Carolina
laws and regulations have been filed with the SEC, FERC, the Nuclear
Regulatory Commission, the NCUC and the PSCSC, as the case may be, and Duke
has complied in all material respects with all requirements of such acts, laws
and rules and regulations thereunder with such exceptions as would not in the
aggregate have a Material Adverse Effect on Duke. Duke has made available to
PanEnergy a true and complete copy of each report, schedule, registration
statement, definitive proxy statement or other document filed by Duke or any
of its Subsidiaries with the SEC since December 31, 1993 (the "Duke SEC
Documents"). As of their respective dates, the Duke SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Duke SEC Documents, with such exceptions as
would not in the aggregate have a Material Adverse Effect on Duke, and none of
the Duke SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of Duke included in the
Duke SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Rule 10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which will be material)
the consolidated financial position of Duke and its consolidated subsidiaries
as of their respective dates and the consolidated results of operations and
the consolidated cash flows of Duke and its consolidated subsidiaries for the
periods presented therein.

6.5. Information Supplied. None of the information supplied or to be
supplied by Duke for inclusion or incorporation by reference in the S-4 will,
at the time the S-4 becomes effective under the Securities Act or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information supplied or to
be supplied by Duke and included or incorporated by reference in the Joint
Proxy Statement will, at the date mailed to the holders of Duke Common Stock
and the holders of PanEnergy Common Stock or at the time of the meetings of
such holders to be held in connection with the Merger or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any event with
respect to Duke or any of its Subsidiaries, or with respect to other
information supplied by Duke for inclusion in the Joint Proxy Statement or S-
4, shall occur which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement or the S-4, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the holders of Duke Common Stock.
The Joint Proxy Statement, insofar as it relates to Duke or its Subsidiaries
or other information supplied by Duke for inclusion therein, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.

6.6. Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the Duke SEC Documents, or
except as contemplated by this Agreement, from December 31, 1995

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through the date hereof, each of Duke, its Subsidiaries, and, to Duke's
knowledge, its Joint Ventures has conducted its business only in the ordinary
course of business consistent with past practice and there has not been: (i)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to (x) any
shares of Duke's capital stock, except for regular quarterly cash dividends
consistent with past practice on Duke Common Stock with usual record and
payment dates for such dividends, (y) any shares of Duke Preferred Stock,
except for regular cash dividends pursuant to the terms of such series of Duke
Preferred Stock with usual record and payment dates for such dividends or (z)
any shares of Duke Preferred Stock A, except for regular cash dividends
pursuant to the terms of such series of Duke Preferred Stock with usual record
and payment dates for such dividends; (ii) any repurchase, redemption or other
acquisition by Duke or any Subsidiary of Duke of any outstanding shares of
capital stock or other equity securities of, or other ownership interests in,
Duke or any Subsidiary of Duke, except pursuant to Duke's Common Stock
repurchase program publicly announced by Duke on March 12, 1996 (the "Duke
Stock Repurchase Program") or in accordance with the terms of the Duke Stock
Plans or the Duke Benefit Plans as defined in Section 6.12(a); (iii) any
material change in any method of accounting or accounting practice by Duke or
any Subsidiary of Duke; or (iv) any other transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) that could reasonably be expected to
have a Material Adverse Effect on Duke.

6.7. No Undisclosed Material Liabilities. Except as disclosed in the Duke
SEC Documents, as of the date hereof, there are no liabilities or obligations
of Duke, any of its Subsidiaries or, to Duke's knowledge, any of its Joint
Ventures of any kind whatsoever, whether accrued, contingent or otherwise,
that would constitute, and there have been no events, changes or effects with
respect to Duke, any of its Subsidiaries or, to Duke's knowledge, any of its
Joint Ventures constituting or which are reasonably likely to constitute,
whether individually or in the aggregate, a Material Adverse Effect on Duke.

6.8. No Default. Neither Duke, nor any of its Subsidiaries nor, to Duke's
knowledge, any of its Joint Ventures is in default or violation (and no event
has occurred which, with notice or the lapse of time or both, would constitute
a default or violation) of any term, condition or provision of (i) their
respective charters, bylaws or other governing documents, (ii) any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which Duke, any of its Subsidiaries, or to Duke's knowledge, any of its Joint
Ventures is now a party or by which Duke, any of its Subsidiaries or, to
Duke's knowledge, any of its Joint Ventures or any of their respective
properties or assets may be bound or (iii) any order, writ, injunction,
decree, statute, rule or regulation applicable to Duke, any of its
Subsidiaries or, to Duke's knowledge, any of its Joint Ventures, except in the
case of (ii) and (iii) for defaults or violations which in the aggregate would
not have a Material Adverse Effect on Duke.

6.9. Compliance with Applicable Laws. Duke and its Subsidiaries and, to
Duke's knowledge, its Joint Ventures hold all permits, licenses, variances,
exemptions, orders, franchises, consents and approvals of all Governmental
Entities necessary for them to own, lease and operate their properties and
assets, and to lawfully conduct their respective businesses (the "Duke
Permits"), except where the failure so to hold would not have a Material
Adverse Effect on Duke. Duke and its Subsidiaries and, to Duke's knowledge,
its Joint Ventures are in compliance with the terms of the Duke Permits,
except where the failure so to comply would not have a Material Adverse Effect
on Duke. Except as disclosed in the Duke SEC Documents, the businesses of
Duke, its Subsidiaries and, to Duke's knowledge, its Joint Ventures are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on Duke. No action, proceeding, investigation or
review of any Governmental Entity with respect to Duke, any of its
Subsidiaries or, to Duke's knowledge, any of its Joint Ventures is pending,
and, to Duke's knowledge, no investigation or review by any Governmental
Entity with respect to Duke, any of its Subsidiaries or any of its Joint
Ventures is threatened which would, or would be reasonably likely to, have a
Material Adverse Effect on Duke.

6.10. Litigation. Except as disclosed in the Duke SEC Documents or as set
forth in Section 6.10 of the Duke Disclosure Schedule, there is no suit,
action or proceeding pending, or, to the knowledge of Duke,

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threatened against or affecting Duke, any of its Subsidiaries, or any of its
Joint Ventures ("Duke Litigation") and Duke, its Subsidiaries and, to Duke's
knowledge, its Joint Ventures have no knowledge of any facts that are likely
to give rise to any Duke Litigation, that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on Duke or its ability
to consummate the transactions contemplated by this Agreement, nor are there
any judgments, decrees, injunctions, rules or orders of any Governmental
Entity or arbitrator outstanding against Duke, any of its Subsidiaries or, to
Duke's knowledge, any of its Joint Ventures ("Duke Orders") that are,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on Duke or its ability to consummate the transactions contemplated by
this Agreement.

6.11. Tax Matters. Except (i) as disclosed in Section 6.11 of the Duke
Disclosure Schedule or (ii) where the failure of the following representations
to be true would not, either individually or in the aggregate, have a Material
Adverse Effect on Duke:

(a) Filing of Timely Tax Returns. All material Tax Returns required to be
filed by Duke and each of its Subsidiaries under applicable law have been
(and, as to Tax Returns not filed as of the date hereof, will be) filed on a
timely basis. All such Tax Returns were and are in all material respects (and,
as to Tax Returns not filed as of the date hereof, will be) true, complete and
correct.

(b) Payment of Taxes. Duke and each of its Subsidiaries have, within the
time and in the manner prescribed by law, paid (and until the Closing Date
will pay within the time and in the manner prescribed by law) all material
Taxes that are currently due and payable except for those being contested in
good faith or for which adequate reserves have been established. No written
claim (and, to Duke's knowledge, no other claim) has ever been made by an
authority in a jurisdiction where any of Duke and its Subsidiaries does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction.

(c) Tax Reserves. Except as previously disclosed by Duke to PanEnergy, Duke
and its Subsidiaries have established (and until the Closing Date will
maintain) on their books and records (i) reserves adequate to pay all material
Taxes and all deficiencies in material Taxes asserted, proposed or threatened
against Duke or its Subsidiaries and (ii) reserves for deferred income taxes,
in each case in accordance with GAAP.

(d) Tax Liens. There are no Tax liens upon the assets of Duke or any of its
Subsidiaries except liens for Taxes not yet due.

(e) Withholding Taxes. Duke and each of its Subsidiaries have complied (and
until the Closing Date will comply) in all material respects with the
provisions of the Code relating to the withholding of Taxes, including,
without limitation, the withholding and reporting requirements under Sections
1441 through 1464, 3401 through 3406, and 6041 through 6049 of the Code, as
well as any similar provisions under any other laws, and have, within the time
and in the manner prescribed by law, withheld from employee wages and paid
over to the proper governmental authorities all material amounts required.

(f) Extensions of Time for Filing Tax Returns. Neither Duke nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.

(g) Waivers of Statute of Limitations. Neither Duke nor any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.

(h) Expiration of Statute of Limitations. The statute of limitations for the
assessment of all material Taxes has expired for all applicable material Tax
Returns of Duke and each of its Subsidiaries or those Tax Returns have been
examined by the appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any material Taxes has been proposed,
asserted or assessed (or, to Duke's knowledge, threatened) against Duke or any
of its Subsidiaries that has not been resolved and paid in full or previously
disclosed by Duke to PanEnergy.

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(i) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or material Tax Returns of Duke or any of its
Subsidiaries. Neither Duke nor any of its Subsidiaries has any knowledge of
any threatened action, audit or administrative or court proceeding with
respect to any such Taxes or Tax Returns. Further, to the best of the
knowledge of Duke, no state of facts exists or has existed which would
constitute grounds for the assessment of any material liability for Taxes with
respect to the periods which have not been audited by the IRS or other taxing
authority.

(j) Tax Rulings. Neither Duke nor any of its Subsidiaries has received a Tax
Ruling or entered into a Closing Agreement with any taxing authority that
would have a continuing material adverse effect after the Closing Date.

(k) Availability of Tax Returns. To the extent not previously provided, as
soon as practicable after the date hereof, Duke and its Subsidiaries will make
available to PanEnergy complete and accurate copies of such of the following
materials as PanEnergy may reasonably request: (i) material Tax Returns, and
any amendments thereto, filed by Duke or any of its Subsidiaries since January
1, 1994, (ii) audit reports received from any taxing authority relating to any
material Tax Return filed by Duke or any of its Subsidiaries and (iii) Closing
Agreements entered into by Duke or any of its Subsidiaries with any taxing
authority.

(l) Tax Sharing Agreements. Neither Duke nor any of its Subsidiaries is a
party to any Tax allocation or sharing agreement with any person other than
Duke and its Subsidiaries.

(m) Liability for Others. Neither Duke nor any of its Subsidiaries has any
liability for Taxes of any person other than Duke and its Subsidiaries under
Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.

(n) Section 341(f). Neither Duke nor any of its Subsidiaries has filed (or
will file prior to the Closing) a consent pursuant to Section 341(f) of the
Code or has agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by Duke or any of its Subsidiaries.

(o) Section 168. No property of Duke or any of its Subsidiaries is property
that Duke or any such Subsidiary or any party to this transaction is or will
be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Section 168 of the Code.

(p) Section 481 Adjustments. Neither Duke nor any of its Subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by Duke or
any of its Subsidiaries, and to the best of the knowledge of Duke, the IRS has
not proposed any such adjustment or change in accounting method.

(q) Tax-Exempt Interest. None of the assets of Duke or its Subsidiaries
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.

(r) Sections 6661 and 6662. All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of
the Code for Tax Returns due (without regard to extensions) on or before
December 31, 1989, and within the meaning of Section 6662 of the Code for Tax
Returns due (without regard to extensions) after December 31, 1989) have been
adequately disclosed (or, with respect to Tax Returns not yet filed will be
adequately disclosed) on the Tax Returns of Duke and its Subsidiaries in
accordance with Section 6661(b)(2)(B) of the Code for Tax Returns due (without
regard to extensions) on or prior to December 31, 1989, and in accordance with
Section 6662(d)(2)(B) of the Code for Tax Returns due (without regard to
extensions) after December 31, 1989.

(s) Section 280G. Neither Duke nor any of its Subsidiaries is a party to any
agreement, contract, or arrangement that could result, either directly or
indirectly, on account of the transactions contemplated hereunder,

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separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code (except for such
payments as may be payable pursuant to certain provisions in contracts
contemplated by Section 8.16).

(t) Acquisition Indebtedness. No indebtedness of Duke or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.

(u) NOLs. As of September 30, 1996, Duke and its Subsidiaries had net
operating loss carryovers available to offset future income as set forth in
Section 6.11(u) of the Duke Disclosure Schedule. Section 6.11(u) of the Duke
Disclosure Schedule sets forth the amount of and year of expiration of each
company's net operating loss carryovers.

(v) Credit Carryover. As of September 30, 1996, Duke and its Subsidiaries
had tax credit carryovers available to offset future tax liability as set
forth in Section 6.11(v) of the Duke Disclosure Schedule. Section 6.11(v) of
the Duke Disclosure Schedule sets forth the amount and year of expiration of
each company's tax credit carryovers.

(w) The Merger. Neither Duke nor any of its Subsidiaries has taken any
action or has any knowledge of any fact or circumstance that would, or would
be reasonably likely to, adversely affect the status of the Merger as a
reorganization under Section 368(a) of the Code.

6.12. Employee Benefits; Labor Matters.

(a) Except as disclosed in the Duke SEC Documents, as set forth in Section
6.12(a) of the Duke Disclosure Schedule, or as would not have a Material
Adverse Effect on Duke, (i) all employee benefit plans, policies, practices,
arrangements and programs maintained for the benefit of the current or former
employees or directors of Duke or any of its Subsidiaries ("Duke Personnel")
that are sponsored, maintained or contributed to by Duke or any of its
Subsidiaries, or with respect to which Duke or any of its Subsidiaries has
incurred or could be reasonably expected to incur any liability, including
without limitation any such plan that is an "employee benefit plan" as defined
in Section 3(3) of ERISA ("Duke Benefit Plans"), are in compliance with all
applicable requirements of law, including ERISA and the Code, and have been
administered and operated in compliance with their terms, and (ii) neither
Duke nor any of its Subsidiaries has any liabilities or obligations with
respect to any such Duke Benefit Plans or any employee benefit plan which is
not a Duke Benefit Plan because (x) such plan has been terminated and/or (y)
such plan is or was maintained or contributed to by any entity (other than a
Subsidiary of Duke) required to be aggregated with Duke pursuant to Section
414 of the Code or Section 4001(b) of ERISA, whether accrued, contingent or
otherwise, nor, to the knowledge of Duke, are any such liabilities or
obligations expected to be incurred.

(b) Except as set forth in Section 6.12(b) of the Duke Disclosure Schedule,
the execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any plan, policy, arrangement or
agreement, including but not limited to the Duke Benefit Plans, or any trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any Duke
Personnel.

(c) Except as set forth in Schedule 6.12(c) of the Duke Disclosure Schedule,
neither Duke nor any of its Subsidiaries is a party to any collective
bargaining agreement or other labor agreement with any union or labor
organization, nor does Duke know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to represent or
organize any Duke Personnel. Except as set forth in Section 6.12(c) of the
Duke Disclosure Schedule, (i) there is no unfair labor practice, employment
discrimination or other complaint against Duke pending, or, to the knowledge
of Duke, threatened, which has or could reasonably be expected to have a
Material Adverse Effect on Duke and (ii) there is no strike, dispute,
slowdown, work stoppage or lockout pending, or, to the knowledge of Duke,
threatened, against or involving Duke or any of its Subsidiaries which has or
could reasonably be expected to have, a Material Adverse Effect on Duke.

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6.13. Environmental Matters.

(a) Compliance. (i) Except as set forth in the Duke SEC Documents, Duke and
each of its Environmental Subsidiaries and any real or personal property
(including, without limitation, any vessel) that any of them owns, operates,
occupies, leases or manages, in whole or in part, directly or indirectly, are
in compliance with all applicable Environmental Laws, except where the failure
to be so in compliance would not be reasonably likely to have a Material
Adverse Effect on Duke.

(ii) Except as set forth in the Duke SEC Documents, neither Duke nor any of
its Environmental Subsidiaries has received any written communication from any
person or Governmental Entity that alleges that Duke or any of its
Environmental Subsidiaries or any real or personal property (including,
without limitation, any vessel) that any of them owns, operates, occupies,
leases or manages, in whole or in part, directly or indirectly, is not in
compliance with applicable Environmental Laws, except where the failure to be
so in compliance would not be reasonably likely to have a Material Adverse
Effect on Duke.

(b) Environmental Permits. Except as set forth in the Duke SEC Documents,
Duke and each of its Environmental Subsidiaries has obtained, and will
maintain through the Closing Date, all Environmental Permits necessary for the
construction and operation of their facilities (including, without limitation,
any vessel) and the conduct of their operations, and all such Environmental
Permits are in good standing or, where applicable, an application or renewal
application has been timely filed, is pending and agency approval is expected
to be obtained, and Duke and its Environmental Subsidiaries are in compliance
with all terms and conditions of all such Environmental Permits and are not
required to make any expenditure in order to obtain or renew any Environmental
Permits, except where the failure to obtain or be in compliance with such
Environmental Permits and the requirement to make such expenditures would not
be reasonably likely to have a Material Adverse Effect on Duke.

(c) Environmental Claims. Except as set forth in the Duke SEC Documents,
there is no Environmental Claim pending or, to the knowledge of Duke and its
Environmental Subsidiaries, threatened:

(i) against Duke or any of its Environmental Subsidiaries,

(ii) against any person or entity whose liability for, or whose
obligation to satisfy, an Environmental Claim Duke or any of its
Environmental Subsidiaries has retained, assumed or guaranteed, either
contractually or by operation of law, or

(iii) against any real or personal property (including, without
limitation, any vessel) or operations that Duke or any of its Environmental
Subsidiaries owns, operates, occupies, leases or manages, in whole or in
part, directly or indirectly,

that would be reasonably likely to have a Material Adverse Effect on Duke.

(d) Releases. Except as set forth in the Duke SEC Documents, and except for
Releases of Hazardous Materials the liability for which would not be
reasonably likely to have a Material Adverse Effect on Duke, Duke has no
knowledge of any Release of any Hazardous Materials that has occurred on, at,
from or to any of the real or personal property (including, without
limitation, any vessel) owned, operated, occupied, leased or managed by Duke
or any Environmental Subsidiary of Duke or any predecessor of Duke or any
Environmental Subsidiary of Duke or any other property which requires
investigation, assessment, monitoring, remediation, response, removal,
corrective action, cleanup or any similar action under Environmental Laws.

(e) Disclosure. Duke has disclosed to PanEnergy all material facts that Duke
reasonably believes would be reasonably likely to form the basis of a Material
Adverse Effect on Duke arising from (x) the cost of pollution control
equipment currently required or known to be required in the future, (y)
investigation, assessment, monitoring, remediation, response, removal,
corrective action, cleanup, or remediation costs and any related costs
currently required or known to be required in the future, or (z) any other
environmental, health or safety matter affecting Duke or its Environmental
Subsidiaries.

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6.14. Insurance. Each of Duke and its Subsidiaries is, and has been
continuously since December 31, 1993, insured by reputable and financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting their respective businesses during such
time period. Neither Duke nor any of its Subsidiaries has received any notice
of cancellation or termination with respect to any material insurance policy
thereof and neither Duke nor any of its Subsidiaries has received notice that
any such policy is invalid or unenforceable.

6.15. Contracts. Duke has set forth in Section 6.15 of the Duke Disclosure
Schedule a list of all contracts to which Duke or any of its Subsidiaries is a
party as of the date hereof, and which, in the reasonable judgment of Duke, is
likely (on an annualized basis) in the fiscal year ending December 31, 1996 to
(i) provide gross revenues in excess of the Duke 1995 Revenue Threshold, (ii)
require payments in excess of the Duke 1995 Revenue Threshold, or (iii)
provide a contribution to the gross margin in excess of the Duke 1995 Margin
Threshold. As used herein, "Duke 1995 Revenue Threshold" means an amount equal
to 5% of Duke's gross revenues for the fiscal year ended December 31, 1995,
and "Duke 1995 Margin Threshold" means an amount equal to 5% of Duke's gross
margin for the fiscal year ended December 31, 1995.

6.16. Regulatory Proceedings. Except as set forth in the Duke SEC Documents,
neither Duke nor any of its Subsidiaries nor, to Duke's knowledge, any of its
Joint Ventures, all or part of whose rates or services are regulated by a
Governmental Entity, is a party to any proceeding before a court or other
Governmental Entity which is reasonably likely to result in orders having a
Material Adverse Effect on Duke nor has any such proceeding been noticed.

6.17. Regulation as a Utility. (a) Duke is a public utility holding company
as defined in the 1935 Act exempt from all provisions of the 1935 Act, except
Section 9(a)(2), pursuant to Section 3(a)(2) of the 1935 Act and is a "public
utility company" within the meaning of Section 2(a)(5) of the 1935 Act. With
the exception of Nantahala Power and Light Company ("NP&L"), no Subsidiary or
Joint Venture of Duke is a "public utility holding company" or a "public
utility company" within the meaning of Section 2(a)(5) of the 1935 Act.

(b) Duke is regulated as a public utility in the States of North Carolina
and South Carolina and in no other states, and NP&L is regulated as a public
utility in the State of North Carolina and in no other states. Except as set
forth in Section 6.17(b) of the Duke Disclosure Schedule, neither Duke nor any
"subsidiary company" or "affiliate" (as each such term is defined in the 1935
Act) of Duke is subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United States or
any foreign country.

6.18. Opinions of Financial Advisors. The Board of Directors of Duke has
received (i) the opinion of Barr Devlin & Co. Incorporated ("Barr Devlin"),
dated November 24, 1996, to the effect that, as of November 24, 1996, the
Exchange Ratio is fair from a financial point of view to the holders of Duke
Common Stock and (ii) the opinion of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), dated November 24, 1996, to the effect that, as of
November 24, 1996, the Exchange Ratio is fair from a financial point of view
to Duke.

6.19. Vote Required. Approval by a majority of the votes cast on the Duke
Vote Matter by the holders of Duke Common Stock (provided that the total vote
cast represents a majority of the outstanding shares of Duke Common Stock
entitled to vote thereon) is the only vote of the holders of any class or
series of Duke capital stock necessary to approve the Duke Vote Matter.

6.20. Beneficial Ownership of PanEnergy Common Stock. Neither Duke nor any
of its Subsidiaries "beneficially owns" (as defined in Rule 13d-3 under the
Exchange Act) any outstanding shares of PanEnergy Common Stock.

6.21. Brokers. Except for the fees and expenses payable to Barr Devlin and
Morgan Stanley, which fees are reflected in their agreements with Duke (copies
of which have been delivered to PanEnergy), no broker, investment banker or
other person is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Duke.

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6.22. Properties. (a) Duke has good title (fee simple in the case of real
property other than easements and rights of way) to all properties reflected
in the balance sheet contained in Duke's most recent Report on Form 10-Q filed
prior to the date hereof, as owned by it and which have not been disposed of
in the ordinary course of business, which properties include all properties
owned at that date upon which the First and Refunding Mortgage dated as of
December 1, 1927 between Duke and The Chase Manhattan Bank, as successor
Trustee, as supplemented and amended (the "Mortgage") purports to create a
lien (except such as have been released pursuant to the terms of the
Mortgage), subject only (i) to the lien of the Mortgage, (ii) to permitted
encumbrances as defined in the Mortgage, (iii) to minor exceptions and defects
which do not, in the aggregate, materially interfere with the use by Duke of
such properties for the purposes for which they are held, materially detract
from the value of said properties or in any material way impair the security
afforded by the Mortgage, and (iv) in the case of Duke's existing
hydroelectric plants, to provisions of licenses issued by FERC and to the
provisions of the Power Act. All buildings, and all fixtures, equipment and
other property and assets, which are material to the business of Duke and
which are held under leases by Duke are held under valid instruments
enforceable by Duke in accordance with their respective terms, except as the
enforceability thereof may be affected by bankruptcy, insolvency or other laws
of general applicability affecting the rights of creditors generally or
principles of equity.

(b) The electric generating stations of Duke (the "Duke Generating
Stations") have been maintained in good repair and working order consistent
with customary practice in the industry, except where the failure so to
maintain the Duke Generating Stations would not, or would not be likely to,
whether individually or in the aggregate, have a Material Adverse Effect on
Duke. Duke has made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as may be necessary so that the operations
carried on in connection therewith may be conducted at all times in accordance
with industry standards and all applicable legal requirements, except where
the failure so to repair, renew, replace, better or improve the Duke
Generating Stations would not, or would not be likely to, whether individually
or in the aggregate, have a Material Adverse Effect on Duke. Duke has no
knowledge of any conditions existing in respect of the Duke Generating
Stations which would require Duke to incur any capital expenditures relating
thereto which are materially in excess of the amounts budgeted by Duke (as
reflected in existing budgets of Duke, copies of which were delivered to
PanEnergy) for maintenance, repair or renewal of the Duke Generating Stations.

6.23. Franchises, Licenses, Etc. Duke holds valid and subsisting franchises,
licenses and permits in all communities wherein it operates its properties,
which are free from unduly burdensome restrictions, are individually
satisfactory and vest in Duke adequate authority to operate its public utility
system therein, except that in a few municipalities Duke is operating either
without franchises or with franchises the validity of which might possibly be
called into question. The franchises, licenses and permits relating to Duke's
public utility business, as a system, are satisfactory for the adequate
conduct of the business of Duke in the territory which it serves, the rights
of Duke to maintain transmission lines through unincorporated communities and
over public lands not located in incorporated communities and over private
rights of way are, as a system, satisfactory for the adequate conduct of the
business of Duke in the territory which it serves, and, as a public utility
corporation operating under the laws of the States of North Carolina and South
Carolina, Duke has adequate rights to operate its system.

6.24. Nuclear Operations. Except as set forth in Section 6.24 of the Duke
Disclosure Schedule, to the knowledge of Duke, the operations of its Nuclear
Steam Generating Stations ("Nuclear Stations") are and have at all times been
conducted in material compliance with applicable health, safety, regulatory
and other legal requirements. To the knowledge of Duke, the Nuclear Stations
maintain emergency plans designed to respond to an unplanned release therefrom
of radioactive materials into the environment and liability insurance to the
extent required by law, and such further insurance (other than liability
insurance) as is consistent with Duke's view of the risks inherent in the
operation of a nuclear power facility. To the knowledge of Duke, plans for the
decommissioning of each of the Nuclear Stations and for the short-term storage
of spent nuclear fuel conform with applicable regulatory or other legal
requirements, and such plans have at all times been funded to the extent
required by law, which is consistent with Duke's reasonable budget projections
for such plans.

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6.25. Duke/Louis Dreyfus L.L.C. ("D/LD") Obligations. The exposure of Duke
and its Subsidiaries with respect to D/LD's net position resulting from all
physical commodity transactions, exchange traded futures and options and over-
the-counter derivative instruments is not, to Duke's knowledge, on the date
hereof, material to Duke and will not, after the date hereof, result in a
Material Adverse Effect on Duke.

6.26. Representations with Respect to Merger Sub. (a) Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities, has no obligations or liabilities, has no other
assets and has no subsidiaries.

(b) As of the date hereof, the authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, par value $1.00 per share, of Merger
Sub, all of which are validly issued, fully paid and nonassessable and are
owned by Duke.

(c) Merger Sub has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by Merger Sub of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Merger Sub. This Agreement has been
duly executed and delivered by Merger Sub and, assuming this Agreement
constitutes the valid and binding obligation of Duke and PanEnergy,
constitutes a valid and binding obligation of Merger Sub enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.

ARTICLE 7

CONDUCT OF BUSINESS PENDING THE MERGER

7.1. Conduct of Business of PanEnergy Pending the Merger. During the period
from the date hereof and continuing until the Effective Time, PanEnergy agrees
as to itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, as provided in the PanEnergy Disclosure Schedule
(each of which exceptions shall specifically identify the relevant Section
hereof to which it relates) or to the extent that Duke shall otherwise consent
in writing):

(a) Ordinary Course of Business. Each of PanEnergy and its Subsidiaries
shall carry on its businesses (i) in the usual, regular and ordinary course
consistent with past practice or (ii) in accordance with the capital budget
and business plan of PanEnergy and its Subsidiaries delivered by PanEnergy to
Duke prior to the date hereof (the "PanEnergy Capital Budget") and shall use
all commercially reasonable efforts to preserve intact its present business
organizations and goodwill, keep available the services of its current
officers and employees, endeavor to preserve its relationships with customers,
suppliers and others having business dealings with it, maintain and keep its
material properties and assets in as good repair and condition as at present,
subject to ordinary wear and tear, and maintain supplies and inventories in
quantities consistent with past practice, and, with respect to wholesale power
and energy trading and transactions, comply with the risk parameters
established from time to time by PanEnergy's Risk Management Committee, all to
the end that its goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Notwithstanding the foregoing, the
risk parameters established by PanEnergy's Risk Management Committee may be
revised by PanEnergy only after consultation by PanEnergy with Duke.

(b) Dividends; Changes in Stock. PanEnergy shall not, and it shall not
permit any of its Subsidiaries to: (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock or any other
interests specified in Section 5.2 or set forth in Section 5.2 of the
PanEnergy Disclosure Schedule, except for the declaration and payment, with
Record Dates and usual payment dates, of regular quarterly cash dividends on
PanEnergy Common Stock not in excess, in any fiscal year, of the dividends for
the prior fiscal year increased at a rate consistent with past practice,
dividends payable by a Subsidiary of PanEnergy to PanEnergy or to a wholly-

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owned Subsidiary of PanEnergy, or dividends by a less than wholly-owned
Subsidiary consistent with past practice; (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock; or (iii) repurchase, redeem or otherwise acquire, or permit
any of its Subsidiaries to purchase, redeem or otherwise acquire, any shares
of its capital stock or Voting Debt or other voting securities or any
securities convertible into, or any rights, warrants, calls, subscriptions or
options to acquire, shares of capital stock or Voting Debt or other voting
securities of PanEnergy or any of its Subsidiaries, except (x) pursuant to the
terms of the PanEnergy Stock Plans, the PanEnergy Benefit Plans or the
PanEnergy DRIP, as in effect on the date hereof, in the ordinary course of
business consistent with past practice or (y) as required by the terms of any
such securities outstanding on the date hereof. As used herein, "Record Date"
means each February 15, May 15, August 15 or November 15 (or, if such date is
not a business day, the first business day immediately following such date).

(c) Issuance of Securities. PanEnergy shall not, and it shall not permit any
of its Subsidiaries to, issue, deliver, sell, pledge, dispose of or encumber,
or authorize or propose to issue, deliver, sell, pledge, dispose of or
encumber, any shares of its capital stock of any class, any Voting Debt or
other voting securities or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, any shares of capital
stock, Voting Debt or other voting securities or convertible securities of
PanEnergy or any of its Subsidiaries, other than: (i) the issuance of
PanEnergy Common Stock pursuant to stock grants or stock-based awards made in
the ordinary course of business consistent with past practice pursuant to the
PanEnergy Stock Plans or pursuant to the PanEnergy DRIP, in each case in
accordance with the present terms of such plans, (ii) the issuance of
PanEnergy Common Stock upon conversion of any Convertible Notes, or (iii) the
issuance of capital stock of a Subsidiary of PanEnergy to PanEnergy or to a
wholly-owned Subsidiary of PanEnergy.

(d) Capital Expenditures. Except for capital expenditures that PanEnergy or
any of its Subsidiaries are required to make under applicable law, PanEnergy
shall not, nor shall PanEnergy permit any of its Subsidiaries to, make capital
expenditures (including capital lease obligations) other than capital
expenditures to repair or replace facilities destroyed or damaged due to
casualty or accident (whether or not covered by insurance), in excess of such
aggregate amount as is set forth in the PanEnergy Capital Budget.

(e) No Acquisitions. Except for acquisitions resulting from capital
expenditures permitted pursuant to Section 7.1(d) or as to which the total
consideration is not in excess of $100 million individually (or in respect of
a series of related transactions) or $200 million in the aggregate, PanEnergy
shall not, and it shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by purchasing an equity
interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof. PanEnergy may not acquire any electric
utility assets or any retail gas assets or any properties relating thereto
unless (x) PanEnergy consults with Duke prior to any such acquisition and (y)
such acquisition will not, in the opinion of Duke, violate the covenant
contained in Section 7.1(q).

(f) No Dispositions. Other than dispositions as to which the aggregate
market value is not in excess of $50 million individually (or in respect of a
series of related transactions) or $100 million in the aggregate (exclusive of
like-kind exchanges with respect to which the aggregate market value shall not
be in excess of $100 million), PanEnergy shall not, and it shall not permit
any of its Subsidiaries to, sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of its assets.

(g) No Dissolution, Etc. PanEnergy shall not authorize, recommend, propose
or announce an intention to adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of PanEnergy or any of its Subsidiaries; provided that nothing
in this Section 7.1(g) shall preclude any such transaction which involves only
wholly-owned Subsidiaries of PanEnergy or the transactions permitted by
Section 7.1(f) hereof.

(h) Certain Employee Matters. Except as may be required by applicable law or
any agreement to which PanEnergy or any of its Subsidiaries is a party on the
date hereof or as expressly contemplated by this Agreement

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or as set forth in Section 7.1(h) of the PanEnergy Disclosure Schedule,
PanEnergy shall not, nor shall it permit any of its Subsidiaries to:

(i) increase the amount of (or accelerate the payment or vesting of) any
benefit or amount payable under, any employee benefit plan or any other
contract, agreement, commitment, arrangement, plan or policy providing for
compensation or benefits to any former, present or future director, officer
or employee of PanEnergy or any of its Subsidiaries and maintained by,
contributed to or entered into by, PanEnergy or any of its Subsidiaries on
or prior to the date hereof, including, without limitation, any PanEnergy
Benefit Plan outstanding on the date hereof;

(ii) increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe benefits,
or otherwise to extend, expand or enhance the engagement, employment or any
related rights, of any former, present or future director, officer or
employee of PanEnergy or any of its Subsidiaries, except for (x) normal
increases in the ordinary course of business consistent with past practice,
provided that the overall compensation budget shall not increase by more
than 3.5% on an annual basis or (y) increases required under applicable
law; or

(iii) adopt, establish, enter into, implement or amend any plan, policy,
employment agreement, severance agreement, or other contract, agreement or
other arrangement providing for any form of benefits or other compensation
to any former, present or future director, officer or employee of PanEnergy
or any of its Subsidiaries, other than in the ordinary course of business
consistent with past practice.

(i) Indebtedness; Leases. PanEnergy shall not, nor shall PanEnergy permit
any of its Subsidiaries to, (A) incur any indebtedness for borrowed money or
guarantee, or enter into a "keepwell" or similar arrangement with respect to,
any such indebtedness (including, without limitation, issuances or sales of
any debt securities or warrants or rights to acquire any debt securities of
PanEnergy or any of its Subsidiaries), other than (x) long-term indebtedness
incurred in connection with the refinancing of existing indebtedness either at
its stated maturity or at a lower cost of funds, (y) indebtedness between
PanEnergy or any of its Subsidiaries and another of its Subsidiaries and (z)
additional indebtedness in an amount not to exceed $1.2 billion, or (B) enter
into any material operating lease or create any mortgages, liens, security
interests or other encumbrances on the property of PanEnergy or any of its
Subsidiaries in connection with any indebtedness thereof, except with respect
to indebtedness permitted pursuant to this Section 7.1(i). The amount of
short-term indebtedness incurred by PanEnergy and its Subsidiaries shall not
exceed 75% of the committed facilities of PanEnergy and its Subsidiaries.

(j) Governing Documents. Neither PanEnergy nor any of its Subsidiaries shall
amend or propose to amend its certificate of incorporation or by-laws (or
similar governing documents).

(k) Accounting. PanEnergy shall not, nor shall it permit any of its
Subsidiaries to, make any changes in their accounting methods which would be
required to be disclosed under the rules and regulations of the SEC, except as
required by law, rule, regulation or GAAP.

(l) Rate Matters. Subject to applicable law and except for non-material
filings in the ordinary course of business consistent with past practice,
PanEnergy shall consult with Duke prior to implementing any changes in its or
any of its Subsidiaries' rates or charges (other than pass-through or tracking
rate charges under existing tariffs or rate schedules), standards of service
or accounting or executing any agreement with respect thereto that is
otherwise permitted under this Agreement and shall, and shall cause its
Subsidiaries to, deliver to Duke a copy of each such filing or agreement at
least five days prior to the filing or execution thereof so that Duke may
comment thereon. PanEnergy shall, and shall cause its Subsidiaries to, make
all such filings only in the ordinary course of business consistent with past
practice.

(m) Contracts. Except in the ordinary course of business consistent with
past practice, PanEnergy shall not, nor shall it permit any of its
Subsidiaries to, modify, amend or terminate any material contract or agreement
of the nature required to be disclosed in Section 5.15 of the PanEnergy
Disclosure Schedule and to which it or any of its Subsidiaries is a party or
waive, release or assign any material rights or claims under any such contract
or agreement.

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(n) Insurance. PanEnergy shall, and shall cause its Subsidiaries to,
maintain with financially responsible insurance companies (or through self-
insurance) insurance in such amounts and against such risks and losses as are
customary for companies engaged in their respective businesses.

(o) Permits. PanEnergy shall, and shall cause its Subsidiaries to, maintain
in effect all existing PanEnergy Permits (including Environmental Permits)
which are material to their respective operations.

(p) Discharge of Liabilities. PanEnergy shall not, nor shall it permit any
of its Subsidiaries to, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than (i) the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
(which includes the payment of final and unappealable judgments and the
refinancing of existing indebtedness for borrowed money either at its stated
maturity or at a lower cost of funds) as required by their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of PanEnergy
included in the PanEnergy SEC Documents, or incurred in the ordinary course of
business consistent with past practice and (ii) prepayment of the Convertible
Notes.

(q) 1935 Act. PanEnergy shall not, and shall not permit any of its
subsidiaries to, engage in any activities which would cause a change in its
status, or that of its subsidiaries, under the 1935 Act, or that would impair
the ability of Duke to continue to claim an exemption as of right under Rule 2
of the 1935 Act following the Merger.

(r) Tax Matters. PanEnergy shall inform Duke regarding the progress of any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit, or controversy relating to Taxes and shall consult with
Duke before entering into any settlements or compromises with regard to such
matters.

(s) Tax Status. PanEnergy shall not, and shall not permit any of its
Subsidiaries to, take any actions which would, or would be reasonably likely
to, adversely affect the status of the Merger as a reorganization under
Section 368(a) of the Code.

(t) Other Actions. PanEnergy shall not, and shall not permit any of its
Subsidiaries to, take or fail to take any action which would reasonably be
expected to prevent or materially impede, interfere with or delay the Merger.

(u) Agreements. PanEnergy shall not, nor shall it permit any of its
Subsidiaries to, agree in writing or otherwise take any action inconsistent
with the foregoing.

7.2. Conduct of Business of Duke Pending the Merger. During the period from
the date hereof and continuing until the Effective Time, Duke agrees as to
itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, as provided in the Duke Disclosure Schedule (each
of which exceptions shall specifically identify the relevant Section hereof to
which it relates) or to the extent that PanEnergy shall otherwise consent in
writing):

(a) Ordinary Course of Business. Each of Duke and its Subsidiaries shall
carry on its businesses (i) in the usual, regular and ordinary course
consistent with past practice or (ii) in accordance with the capital budget of
Duke delivered by Duke to PanEnergy prior to the date hereof (the "Duke
Capital Budget") and shall use all commercially reasonable efforts to preserve
intact its present business organizations and goodwill, keep available the
services of its current officers and employees, endeavor to preserve its
relationships with customers, suppliers and others having business dealings
with it, maintain and keep its material properties and assets in as good
repair and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past practice,
and, with respect to wholesale power and energy trading and transactions,
comply with prudent policies, practices and procedures with respect to risk
management and trading limitations, all to the end that its goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time.

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(b) Dividends; Changes in Stock. Duke shall not, and it shall not permit any
of its Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock or any other interests
specified in Section 6.2 or set forth in Section 6.2 of the Duke Disclosure
Schedule, except for (A) the declaration and payment, with Record Dates and
usual payment dates, of regular quarterly cash dividends on Duke Common Stock
of not more than, for such fiscal year or portion thereof, the dividends for
the prior fiscal year or portion thereof increased at a rate consistent with
past practice and not less than, for such fiscal year or portion thereof, the
dividends for the prior fiscal year or portion thereof, except that (x) the
Duke Board of Directors in good faith in the reasonable exercise of its
business judgment may determine that dividends on Duke Common Stock shall, as
a consequence of the occurrence of unforeseen circumstances or events, be, for
such fiscal year or portion thereof, less than the dividends for the prior
fiscal year or portion thereof and (y) any dividends on Duke Common Stock
shall not be in an amount prohibited by law; (B) the declaration and payment
of regular dividends on Duke Preferred Stock pursuant to the terms of the
relevant series and (C) the declaration and payment of regular dividends on
Duke Preferred Stock A pursuant to the terms of the relevant series; (D)
dividends payable by a Subsidiary of Duke to Duke or to a wholly-owned
Subsidiary of Duke; or (E) dividends by a less than wholly-owned Subsidiary
consistent with past practice; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (iii) repurchase, redeem or otherwise acquire, or permit any
of its Subsidiaries to purchase, redeem or otherwise acquire, any shares of
its capital stock or Voting Debt or other voting securities or any securities
convertible into, or any rights, warrants, calls, subscriptions or options to
acquire, shares of capital stock or Voting Debt or other voting securities of
Duke or any of its Subsidiaries, except (A) pursuant to the terms of the Duke
Stock Plans or the Duke Benefit Plans made in the ordinary course of business
consistent with past practice, (B) pursuant to the terms of the Duke Stock
Repurchase Program (subject to Section 8.18) or (C) as required by the terms
of any such securities outstanding on the date hereof.

(c) Issuance of Securities. Duke shall not, and it shall not permit any of
its Subsidiaries to, issue, deliver, sell, pledge, dispose of or encumber, or
authorize or propose to issue, deliver, sell, pledge, dispose of or encumber,
any shares of its capital stock of any class, any Voting Debt or other voting
securities or any securities convertible into, or any rights, warrants, calls,
subscriptions or options to acquire, any shares of capital stock, Voting Debt
or other voting securities or convertible securities of Duke or any of its
Subsidiaries, other than: (i) the issuance of Duke Common Stock under the Duke
Stock Plans or (ii) the issuance of capital stock of a Subsidiary of Duke to
Duke or to a wholly-owned Subsidiary of Duke.

(d) Capital Expenditures. Except for capital expenditures that Duke or any
of its Subsidiaries are required to make under applicable law and capital
expenditures to repair or replace facilities destroyed or damaged due to
casualty or accident (whether or not covered by insurance), (i) Duke shall not
make capital expenditures in excess of the aggregate amount of capital
expenditures set forth in the Duke Capital Budget, and (ii) Duke shall not
permit its Subsidiaries to make capital expenditures ("Subsidiary Capital
Expenditures") in excess of $200 million individually (or in respect of a
series of related capital expenditures) or $500 million in the aggregate.

(e) No Acquisitions. Except for acquisitions by Duke resulting from capital
expenditures permitted pursuant to Section 7.2(d) or as to which the total
consideration is not in excess of (i) $200 million individually (or in respect
of a series of related transactions) or (ii) $500 million in the aggregate
(reduced by the aggregate amount of Subsidiary Capital Expenditures that are
not acquisitions), Duke shall not, and it shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof. Duke may not acquire any
electric utility assets or any retail gas assets or any properties relating
thereto unless (x) Duke consults with PanEnergy prior to any such acquisition
and (y) such acquisition will not, in the opinion of PanEnergy, violate the
covenant contained in Section 7.2(q).

(f) No Dispositions. Other than dispositions as to which the aggregate
market value is not in excess of $150 million individually (or in respect of a
series of related transactions) or $200 million in the aggregate

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(exclusive of like-kind exchanges with respect to which the aggregate market
value shall not be in excess of $200 million), Duke shall not, and it shall
not permit any of its Subsidiaries to, sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets.

(g) No Dissolution, Etc. Duke shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of Duke or any of its Subsidiaries; provided that nothing in
this Section 7.2(g) shall preclude any such transaction which involves only
wholly-owned Subsidiaries of Duke or the transactions permitted by Section
7.2(f) hereof.

(h) Certain Employee Matters. Except as may be required by applicable law or
any agreement to which Duke or any of its Subsidiaries is a party on the date
hereof or as expressly contemplated by this Agreement or as set forth in
Section 7.2(h) of the Duke Disclosure Schedule, Duke shall not, nor shall it
permit any of its Subsidiaries to:

(i) increase the amount of (or accelerate the payment or vesting of) any
benefit or amount payable under, any employee benefit plan or any other
contract, agreement, commitment, arrangement, plan or policy providing for
compensation or benefits to any former, present or future director, officer
or employee of Duke or any of its Subsidiaries and maintained by,
contributed to or entered into by, Duke or any of its Subsidiaries on or
prior to the date hereof, including, without limitation, any Duke Benefit
Plan outstanding on the date hereof, other than in the ordinary course of
business consistent with past practice;

(ii) increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe benefits,
or otherwise to extend, expand or enhance the engagement, employment or any
related rights, of any former, present or future director, officer or
employee of Duke or any of its Subsidiaries, except for (i) normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to Duke or any of its Subsidiaries or (ii) increases
required under applicable law; or

(iii) adopt, establish, enter into, implement or amend any plan, policy,
employment agreement, severance agreement, or other contract, agreement or
other arrangement providing for any form of benefits or other compensation
to any former, present or future director, officer or employee of Duke or
any of its Subsidiaries, other than in the ordinary course of business
consistent with past practice.

(i) Indebtedness; Leases. Duke shall not, nor shall Duke permit any of its
Subsidiaries to, (i) incur any indebtedness for borrowed money or guarantee,
or enter into a "keepwell" or similar arrangement with respect to, any such
indebtedness (including, without limitation, issuances or sales of any debt
securities or warrants or rights to acquire any debt securities of Duke or any
of its Subsidiaries), other than (a) long-term indebtedness incurred in
connection with the refinancing of existing indebtedness either at its stated
maturity or at a lower cost of funds, (b) indebtedness between Duke or any of
its Subsidiaries and another of its Subsidiaries and (c) additional
indebtedness in an amount not to exceed $2 billion, or (ii) enter into any
material operating lease or create any mortgages, liens, security interests or
other encumbrances on the property of Duke or any of its Subsidiaries in
connection with any indebtedness thereof except with respect to indebtedness
permitted by this Section 7.2(i). The amount of short-term indebtedness
incurred shall not exceed 75% of the committed facilities of Duke and its
Subsidiaries.

(j) Governing Documents. Neither Duke nor any of its Subsidiaries shall
amend or propose to amend its certificate of incorporation or by-laws (or
similar governing documents), except with respect to matters contemplated by
this Agreement.

(k) Accounting. Duke shall not, nor shall it permit any of its Subsidiaries
to, make any changes in their accounting methods which would be required to be
disclosed under the rules and regulations of the SEC, except as required by
law, rule, regulation or GAAP.

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(l) Rate Matters. Subject to applicable law and except for non-material
filings in the ordinary course of business consistent with past practice, Duke
shall consult with PanEnergy prior to implementing any changes in its or any
of its Subsidiaries' rates or charges (other than pass-through or tracking
rate charges under existing tariffs or rate schedules), standards of service
or accounting or executing any agreement with respect thereto that is
otherwise permitted under this Agreement and shall, and shall cause its
Subsidiaries to, deliver to PanEnergy a copy of each such filing or agreement
at least five days prior to the filing or execution thereof so that PanEnergy
may comment thereon. Duke shall, and shall cause its Subsidiaries to, make all
such filings only in the ordinary course of business consistent with past
practice.

(m) Contracts. Except in the ordinary course of business consistent with
past practice, Duke shall not, nor shall it permit any of its Subsidiaries to,
modify, amend or terminate any material contract or agreement of the nature
required to be disclosed in Section 6.15 of the Duke Disclosure Schedule to
which it or any of its Subsidiaries is a party or waive, release or assign any
material rights or claims under any such contract or agreement.

(n) Insurance. Duke shall, and shall cause its Subsidiaries to, maintain
with financially responsible insurance companies (or through self-insurance)
insurance in such amounts and against such risks and losses as are customary
for companies engaged in their respective businesses.

(o) Permits. Duke shall, and shall cause its Subsidiaries to, maintain in
effect all existing Duke Permits (including Environmental Permits) which are
material to their respective operations.

(p) Discharge of Liabilities. Duke shall not, nor shall it permit any of its
Subsidiaries to, pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice (which includes the payment
of final and unappealable judgments and the refinancing of existing
indebtedness for borrowed money either at its stated maturity or at a lower
cost of funds) as required by their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of Duke included in Duke SEC
Documents, or incurred in the ordinary course of business consistent with past
practice.

(q) 1935 Act. Duke shall not, and shall not permit any of its subsidiaries
to, engage in any activities which would cause a change in its status, or that
of its subsidiaries, under the 1935 Act.

(r) Tax Matters. Duke shall inform PanEnergy regarding the progress of any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit, or controversy relating to Taxes and shall consult with
PanEnergy before entering into any settlements or compromises with regard to
such matters.

(s) Tax Status. Duke shall not, and shall not permit any of its Subsidiaries
to, take any actions which would, or would be reasonably likely to, adversely
affect the status of the Merger as a reorganization under Section 368(a) of
the Code.

(t) Other Actions. Duke shall not, and shall not permit any of its
Subsidiaries to, take or fail to take any other action which would reasonably
be expected to prevent or materially impede, interfere with or delay the
Merger.

(u) Agreements. Duke shall not, nor shall it permit any of its Subsidiaries
to, agree in writing or otherwise to take any action inconsistent with the
foregoing.

7.3. Transition Committee. A committee comprised of one person designated by
Duke and one person designated by PanEnergy (the "Transition Committee") will
be established as soon after execution of this Agreement as is practicable to
examine various alternatives regarding the manner in which to best organize,
manage and integrate the businesses of Duke and PanEnergy after the Effective
Time. The person designated by Duke shall be the senior member of the
Transition Committee and shall coordinate the day-to-day activities of

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the Transition Committee with the concurrence of the person designated by
PanEnergy to serve on the Transition Committee. From time to time, the
Transition Committee shall report its findings to the Board of Directors of
each of Duke and PanEnergy.

ARTICLE 8

COVENANTS

8.1 Alternative Proposals. Prior to the Effective Time, PanEnergy agrees (a)
that neither it nor any of its Subsidiaries shall, and it shall direct and use
reasonable efforts to cause its officers, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries or any of the
foregoing) not to initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with respect to
an Alternative Proposal (as defined below) or engage in any negotiations
concerning, or provide any non-public information or data to, or have any
discussions with, any person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
(b) that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and it will take the necessary steps to
inform the individuals or entities referred to above of the obligations
undertaken in this Section 8.1; and (c) that it will notify Duke immediately
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it; provided, however, that nothing contained in
this Section 8.1 shall prohibit the Board of Directors of PanEnergy from (i)
furnishing information (pursuant to a confidentiality letter deemed
appropriate by the Board of Directors of PanEnergy) to or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited bona fide proposal or offer to the stockholders of PanEnergy, to
acquire PanEnergy pursuant to a merger, consolidation, share purchase, share
exchange, purchase of a substantial portion of assets, business combination or
other similar transaction, if, and only to the extent that, (A) the Board of
Directors of PanEnergy determines in good faith upon the advice of outside
counsel that such action is required for the Board of Directors to comply with
its fiduciary duties to stockholders imposed by law, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, PanEnergy provides written notice to Duke of the identity of
the person or entity making the Alternative Proposal and that it intends to
furnish information to, or intends to enter into discussions or negotiations
with, such person or entity, (C) PanEnergy keeps Duke informed on a timely
basis of the status of any such discussions or negotiations and all terms and
conditions thereof and promptly provides Duke with copies of any written
inquiries or proposals relating thereto, and (D) in the event that the Board
of Directors of PanEnergy determines to accept any such Alternative Proposal
(in accordance with subclause (A) above), PanEnergy provides Duke with at
least three days' prior written notice thereof, during which time Duke may
make, and in such event, PanEnergy shall in good faith consider, a
counterproposal to such Alternative Proposal; and (ii) to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Alternative Proposal. Nothing in this Section 8.1 shall (x)
permit PanEnergy to terminate this Agreement (except as specifically provided
in Article 10 hereof), (y) permit PanEnergy to enter into any agreement with
respect to an Alternative Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, PanEnergy shall not enter into
any agreement with any person that provides for, or in any way facilitates, an
Alternative Proposal (other than a confidentiality agreement deemed
appropriate by the Board of Directors of PanEnergy)), or (z) affect any other
obligation of PanEnergy under this Agreement. "Alternative Proposal" shall
mean any merger, acquisition, consolidation, reorganization, share exchange,
tender offer, exchange offer or similar transaction involving PanEnergy or any
of PanEnergy's Significant Subsidiaries, or any proposal or offer to acquire
in any manner, directly or indirectly, a substantial equity interest in or a
substantial portion of the assets of PanEnergy or any of PanEnergy's
Significant Subsidiaries. Nothing herein shall prohibit a disposition
permitted by Section 7.1(f) hereof.

8.2. Preparation of S-4 and the Joint Proxy Statement. As promptly as
practicable after the date hereof, Duke and PanEnergy shall prepare and file
with the SEC the Joint Proxy Statement and Duke shall prepare and

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file with the SEC the S-4, in which the Joint Proxy Statement will be included
as part of a prospectus. Each of Duke and PanEnergy shall use all reasonable
efforts to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing and to cause the Joint Proxy
Statement to be mailed to the holders of Duke Common Stock and the holders of
PanEnergy Common Stock at the earliest practicable date. Duke shall use
reasonable efforts to obtain all necessary authorizations from state
regulatory authorities, all necessary authorizations under state securities
laws or "blue sky" permits, approvals and registrations in connection with the
issuance of Duke Common Stock in the Merger and upon the exercise of any
PanEnergy Stock Options assumed by Duke, and PanEnergy shall furnish all
information concerning PanEnergy and the holders of PanEnergy Common Stock as
may be reasonably requested in connection with obtaining such permits,
approvals and registrations.

8.3. Letter of PanEnergy's Accountants. PanEnergy shall use reasonable
efforts to cause to be delivered to Duke a letter of KPMG Peat Marwick LLP
("Peat Marwick"), PanEnergy's independent public accountants, dated a date
which is no earlier than two business days before, and no later than, the date
on which the S-4 shall become effective and addressed to Duke and PanEnergy,
in form and substance reasonably satisfactory to Duke and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.

8.4. Letter of Duke's Accountants. Duke shall use reasonable efforts to
cause to be delivered to PanEnergy a letter of Deloitte & Touche LLP
("Deloitte & Touche"), Duke's independent public accountants, dated a date
which is no earlier than two business days before, and no later than, the date
on which the S-4 shall become effective and addressed to Duke and PanEnergy,
in form and substance reasonably satisfactory to PanEnergy and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.

8.5. Access to Information. To the extent permitted by law, upon reasonable
notice, Duke and PanEnergy each shall, and shall cause each of their
respective Subsidiaries to, afford to the officers, employees, accountants,
counsel and other representatives of the other, access, during normal business
hours during the period prior to the Effective Time, to all of its properties,
books, contracts, commitments and records and, during such period, each of
Duke and PanEnergy shall (and shall cause each of their respective
Subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to SEC requirements and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Each of Duke and PanEnergy agrees that it will not, and
will cause its respective representatives not to, use any information obtained
pursuant to this Section 8.5 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement. The Confidentiality Agreement
dated November 6, 1996 between Duke and PanEnergy (the "Confidentiality
Agreement") shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby or hereby.

8.6. PanEnergy Stockholders' Meeting. PanEnergy shall (i) call the PanEnergy
Stockholders' Meeting to be held as promptly as practicable after the date
hereof for the purpose of voting upon the adoption of this Agreement, (ii)
through its Board of Directors, recommend to the holders of PanEnergy Common
Stock the adoption of this Agreement and not rescind such recommendation,
(iii) use all reasonable efforts to have the holders of PanEnergy Common Stock
adopt this Agreement and (iv) use all reasonable efforts to hold such meeting
as soon as practicable after the date upon which the S-4 becomes effective;
provided, however, that nothing herein obligates PanEnergy to take any action
that would cause its Board of Directors to act inconsistently with their
fiduciary duties as determined by the Board of Directors of PanEnergy in good
faith based on the advice of PanEnergy's outside counsel. The PanEnergy
Stockholders' Meeting shall be held on such date, as soon as practicable after
the date upon which the S-4 becomes effective, as Duke and PanEnergy shall
mutually determine, which shall be the same date as the Duke Shareholders'
Meeting.

8.7. Duke Shareholders' Meeting. Duke shall (i) call the Duke Shareholders'
Meeting to be held as promptly as practicable after the date hereof for the
purpose of voting upon the Duke Vote Matter, (ii) through

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its Board of Directors, recommend to the holders of Duke Common Stock the
approval of the Duke Vote Matter and not rescind such recommendation, (iii)
use all reasonable efforts to obtain approval of the Duke Vote Matter by the
holders of Duke Common Stock and (iv) use all reasonable efforts to hold such
meeting as soon as practicable after the date upon which the S-4 becomes
effective; provided, however, that nothing herein obligates Duke to take any
action that would cause its Board of Directors to act inconsistently with
their fiduciary duties as determined by the Board of Directors of Duke in good
faith based on the advice of Duke's outside counsel. The Duke Shareholders'
Meeting shall be held on such date, as soon as practicable after the date upon
which the S-4 becomes effective, as Duke and PanEnergy shall mutually
determine, which shall be the same date as the PanEnergy Stockholders'
Meeting.

8.8. Regulatory and Other Approvals.

(a) HSR Act. Duke and PanEnergy shall file or cause to be filed with the
Federal Trade Commission and the Department of Justice any notifications
required to be filed by them under the HSR Act and the rules and regulations
promulgated thereunder with respect to the transactions contemplated hereby.
Such parties will use all commercially reasonable efforts to make such filings
promptly and to respond on a timely basis to any requests for additional
information made by either of such agencies.

(b) Other Regulatory Approvals. Duke and PanEnergy shall cooperate and use
all reasonable efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to use all commercially reasonable efforts to
obtain (and will cooperate with each other in obtaining) any consent,
acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity required to be obtained or made by
Duke, PanEnergy or any of their Subsidiaries in connection with the Merger or
the taking of any action contemplated thereby or by this Agreement, including,
without limitation, the Duke Required Statutory Approvals.

(c) Other Approvals. Duke and PanEnergy shall, and shall cause each of their
respective Subsidiaries to, take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) all Duke Required Consents
and all PanEnergy Required Consents, as the case may be.

8.9. Agreements of Others. At least 30 days prior to the Closing Date,
PanEnergy shall cause to be prepared and delivered to Duke a list identifying
all persons who, at the record date for the PanEnergy Stockholders' Meeting,
may be deemed to be "affiliates" of PanEnergy as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). PanEnergy shall use all reasonable efforts to cause each person
who is identified as a Rule 145 Affiliate in such list to deliver to Duke,
prior to the Closing Date, a written agreement, in substantially the form
attached hereto as Exhibit A, that such Rule 145 Affiliate will not sell,
pledge, transfer or otherwise dispose of any shares of Duke Common Stock
issued to such Rule 145 Affiliate pursuant to the Merger, except pursuant to
an effective registration statement or in compliance with Rule 145 or an
exemption from the registration requirements of the Securities Act.

8.10. Authorization for Shares and Stock Exchange Listings. Prior to the
Effective Time, Duke shall have taken all action necessary to permit it to
issue the number of shares of Duke Common Stock required to be issued pursuant
to Sections 4.2 and 4.3. Duke shall use all reasonable efforts to cause the
shares of Duke Common Stock to be issued in the Merger and the shares of Duke
Common Stock to be reserved for issuance upon exercise of the PanEnergy Stock
Options to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Closing Date.

8.11. Indemnification; Directors' and Officers' Insurance. The Surviving
Corporation agrees that all rights to indemnification for acts or omissions
occurring prior to the Effective Time existing as of the date hereof, in favor
of the current or former directors or officers of PanEnergy as provided in its
Restated Certificate of Incorporation or By-Laws, shall survive the Merger and
shall continue in full force and effect in accordance with their terms from
the Effective Time until the expiration of the applicable statute of
limitations with respect to any claims against the current or former directors
or officers of PanEnergy arising out of such acts or omissions. Duke shall
cause to be maintained for a period of not less than six years from the
Effective Time PanEnergy's

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directors' and officers' insurance and indemnification policy in effect as of
the date hereof, to the extent that it provides coverage for events occurring
prior to the Effective Time (the "D&O Insurance") for all persons who are
directors or officers of PanEnergy who are covered persons under PanEnergy's
D&O Insurance policies in effect on the date hereof, so long as the annual
premium therefor would not be in excess of 200% of the last annual premium
paid prior to the date hereof (the "Maximum Premium"). If the existing D&O
Insurance expires, is terminated or canceled during such six-year period, the
Surviving Corporation shall use all reasonable efforts to cause to be obtained
as much D&O Insurance as can be obtained for the remainder of such period for
an annualized premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous to the covered persons than the existing D&O
Insurance.

8.12. Public Announcements. The initial press release relating to this
Agreement shall be a joint press release and thereafter PanEnergy and Duke
shall consult with each other, and use reasonable efforts to agree upon the
text of any press release, before issuing any such press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or transaction reporting system.

8.13. Other Actions. Except as contemplated by this Agreement, neither Duke
nor PanEnergy shall, and neither shall permit any of its respective
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Merger set forth in Article 9 not being satisfied. PanEnergy, Duke and
Merger Sub shall perform such further acts and execute such documents as may
be reasonably required to effect the Merger.

8.14. Cooperation; Notification. Duke and PanEnergy shall confer on a
regular basis with each other, report on operational matters and promptly
advise each other orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, could have, a Material Adverse
Effect on Duke or a Material Adverse Effect on PanEnergy, as the case may be.
Duke and PanEnergy shall promptly provide each other (or their respective
counsel) copies of all filings made by such party with the SEC or any other
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.

8.15. Governance. (a) Board of Directors of Duke. Duke shall take such
action as may be necessary to cause the number of directors comprising the
full Board of Directors of Duke at the Effective Time to be 18 persons, to be
allocated as equally as possible among the three classes of such Board of
Directors, eleven of whom shall be designated by Duke (each a "Duke Director")
and seven of whom shall be designated by PanEnergy (each a "PanEnergy
Director"). It is contemplated that one Duke Director and one PanEnergy
Director shall retire from the Duke Board of Directors in April 1998 if the
Merger has been consummated prior to such time and that the number of
directors comprising the full Board of Directors of Duke shall thereafter be
16, except as may be otherwise subsequently determined by the Duke Board of
Directors in accordance with applicable law and the Articles of Incorporation
and By-Laws of Duke. The Board of Directors of Duke at the Effective Time
shall consist of the Duke Directors designated by Duke and the PanEnergy
Directors designated by PanEnergy prior to the Effective Time; provided,
however, that if, prior to the Effective Time, any such designee shall decline
or be unable to serve, Duke or PanEnergy, as the case may be, shall designate
another person to serve as a Duke Director or a PanEnergy Director, as the
case may be, in such person's stead.

(b) Committees of the Board of Directors of Duke. The Duke Board of
Directors shall take such action as is necessary to cause the Chairman of each
Committee of the Board of Directors of Duke at the Effective Time to be a Duke
Director. At the Effective Time, the Management Committee of the Board of
Directors of Duke shall consist of the members of the Board of Directors of
Duke who are officers of Duke. At the Effective Time all other Committees of
the Board of Directors of Duke shall have two members designated by PanEnergy.

(c) Officers of Duke. From the Effective Time, pursuant to the terms hereof
and the employment agreements referred to in Section 8.16, Richard B. Priory
shall hold the position of Chairman of the Board and

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Chief Executive Officer of Duke and Paul M. Anderson shall hold the position
of President and Chief Operating Officer of Duke; provided, however, that if,
prior to the Effective Time, Richard B. Priory shall decline or be unable to
serve as Chairman of the Board and Chief Executive Officer, Duke shall
designate another person to serve in his stead, and if, prior to the Effective
Time, Paul M. Anderson shall decline or be unable to serve as President and
Chief Operating Officer, PanEnergy shall designate another person to serve in
his stead. From the Effective Time, all other officers of Duke shall be
determined by the Duke Board of Directors.

(d) Office of the Chief Executive; Policy Committee. At the Effective Time,
Duke shall establish an Office of the Chief Executive which shall exercise
executive management over Duke and shall consist of the Chief Executive
Officer of Duke and the President and Chief Operating Officer of Duke. The
final decision-making authority in the Office of the Chief Executive shall
reside with the Chief Executive Officer of Duke. At the Effective Time the
Office of the Chief Executive shall appoint a Policy Committee of senior
executive officers of Duke and PanEnergy which shall, in addition to the
Chairman of the Board and Chief Executive Officer of Duke and President and
Chief Operating Officer of Duke, consist of William A. Coley, Richard J.
Osborne and Ruth G. Shaw of Duke and James T. Hackett and Fred J. Fowler of
PanEnergy.

(e) Name; Corporate Headquarters. The parties hereto agree that, subject to
the approval of the holders of Duke Common Stock, the name of Duke shall be
changed to Duke Energy Corporation at the Effective Time, that the
headquarters of Duke Energy Corporation shall be located in Charlotte, North
Carolina, and that Duke Energy Corporation shall maintain significant
operations in Houston, Texas.

8.16. Employment Agreements. Concurrently with the execution and delivery of
this Agreement, Duke and/or PanEnergy have entered into employment agreements
in the forms set forth in Exhibits B1-B6 hereof with the persons listed in
Section 8.16 of the PanEnergy Disclosure Schedule and Duke has entered into
employment agreements in the forms set forth in Exhibits C1-C6 hereof with the
persons listed in Section 8.16 of the Duke Disclosure Schedule. Such
employment agreements shall become effective immediately at the Effective Time
in accordance with their terms.

8.17. Expenses. Subject to Section 10.5, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses except as expressly provided herein and except that (a) the
filing fee in connection with the filing of the Form S-4 and Joint Proxy
Statement with the SEC, (b) the filing fee under the HSR Act and (c) the
expenses incurred in connection with printing and mailing the Form S-4 and the
Joint Proxy Statement, shall be shared equally by PanEnergy and Duke.

8.18. Pooling. No party hereto shall, nor shall any such party permit any of
its Subsidiaries to, take any actions which would, or would be reasonably
likely to, prevent Duke from accounting for the Merger as a pooling of
interests in accordance with GAAP and applicable SEC regulations.

8.19. Tax Matters.

(a) Tax-Exempt Status. No party shall, nor shall any party permit any of its
Subsidiaries to, take any action that would be likely to jeopardize the
qualification of outstanding revenue bonds issued for the benefit of any party
or any Subsidiary thereof that qualify on the date hereof under Section 142(a)
of the Code as "exempt facility bonds" or as tax-exempt private activity bonds
under Section 103(b) of the Code or as tax-exempt industrial development bonds
under Section 103(b)(4) of the Internal Revenue Code of 1954, as amended prior
to the Tax Reform Act of 1986.

(b) Other Tax Matters. Without the consent of the other party (excluding
Merger Sub), which consent shall not be unreasonably withheld, no party or any
of its Subsidiaries shall (i) make or rescind any material express or deemed
election relating to Taxes, (ii) make a request for a Tax Ruling or enter into
a Closing Agreement with respect to any material Tax matter, or (iii) with
respect to any material Tax matter, change any of its methods of reporting
income or deductions for federal income tax purposes from those employed in
the

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preparation of its federal income Tax Return for the taxable year ending
December 31, 1995, except as may be required by applicable law.

8.20. Employee Benefit Plans.

(a) Maintenance of Benefits. For the period beginning at the Effective Time
and ending on the first anniversary of the Effective Time (the "Continuation
Period"), PanEnergy Employees (as defined below) shall continue to receive
active employee and retiree benefits under the PanEnergy Benefit Plans
(regardless of any transfer of employment to Duke or any affiliate of Duke) on
substantially the same terms and conditions as were in effect immediately
before the Effective Time, provided that the foregoing shall not prevent the
amendment of any PanEnergy Benefit Plan or the taking of other necessary
actions to comply with any applicable law or regulation, as necessary in order
to retain tax-qualified status where applicable, or as required by any
collective bargaining agreement; and provided, further, that the foregoing
shall not be construed to confer on any individual a right to remain employed
by PanEnergy or any of its affiliates. "PanEnergy Employees" means individuals
who are, as of the Effective Time, employees of PanEnergy and its Subsidiaries
or former employees of PanEnergy and its Subsidiaries entitled to present or
future benefits according to the provisions of any PanEnergy Benefit Plan as
of the Effective Time. For purposes of this Section 8.20, "affiliate" shall
mean any corporation, partnership or limited liability company controlled by,
controlling or under common control with PanEnergy and/or Duke, as the context
may require.

(b) Nonqualified Plans. Without limiting the generality of the foregoing,
during the Continuation Period: (i) PanEnergy's executive benefit plans and
programs as in effect at the Effective Time shall continue in effect without
any amendment that could adversely affect PanEnergy Employees who are
participants therein as of the Effective Time (including without limitation
any amendment that reduces the rate at which benefits are accrued), (ii)
PanEnergy Employees shall be entitled to severance benefits in amounts and
upon terms and conditions no less favorable than those in effect for such
individuals as of the Effective Time, including without limitation (A) any
severance benefits under plans or policies taking effect upon the Effective
Time, and (B) outplacement services consistent with the practice of PanEnergy
before the Effective Time. This paragraph (b) shall not apply with respect to
base salary, annual bonuses, stock options, restricted stock and/or severance
pay provided to any employee of PanEnergy who has entered into an employment
agreement in accordance with Section 8.16 of this Agreement.

(c) Continuity of Benefits. Duke shall provide, or shall cause PanEnergy or
their respective affiliates to provide, that (i) for all purposes under all
employee benefit plans and programs applicable to PanEnergy Employees at any
time following the Effective Time, all service by PanEnergy Employees with,
and all compensation of PanEnergy Employees from, PanEnergy or any of its
Subsidiaries before the Effective Time shall be treated in the same manner as
service with and compensation from Duke and its Subsidiaries before the
Effective Time for all purposes, including without limitation eligibility to
participate and eligibility and grow-ins for, and accrual and vesting of,
benefits, rights and features, except to the extent such treatment would
result in a duplication of benefits, and (ii) for purposes of any welfare
benefit plan maintained by any of them after the Effective Time, if any
PanEnergy Employee transfers from one such plan to another during a plan year,
the second such plan shall waive any waiting periods and limitations regarding
coverage for pre-existing conditions and recognize any out-of-pocket expenses
incurred by such PanEnergy Employee and his or her eligible dependents during
the portion of the plan year before such transfer for purposes of determining
their deductibles and out-of-pocket maximums for the remainder of such plan
year. Notwithstanding the foregoing, in the event that at any time after the
Effective Time, PanEnergy Employees begin to participate in any cash balance
defined benefit pension plan (a "Cash Balance Conversion"), the transition
from the traditional defined benefit pension plan in which they participated
before such Cash Balance Conversion shall be implemented using methodologies
designed so that such PanEnergy Employees (considered as an aggregate
population and not as individuals) are treated in a manner not materially less
favorable than employees of Duke and its affiliates (other than PanEnergy and
its Subsidiaries) (also considered as an aggregate population and not as
individuals) are or were treated in any Cash Balance Conversion occurring
after the date hereof and before or contemporaneously with the Cash

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Balance Conversion of such PanEnergy Employees, even if the achievement of
such treatment would not comply with the requirements of clause (i) of the
preceding sentence.

(d) Stock Plans. With respect to each PanEnergy Benefit Plan under which the
delivery of PanEnergy Common Stock is required upon payment of benefits, grant
of awards or exercise of options after the Effective Time (the "Stock Benefit
Plans"), Duke shall take or cause to be taken all corporate action necessary
or appropriate to (i) provide for the issuance or purchase in the open market
of Duke Common Stock rather than PanEnergy Common Stock, as applicable,
pursuant thereto, (ii) reserve for issuance under such plan or otherwise
provide a sufficient number of shares of Duke Common Stock for delivery upon
payment of benefits, grant of awards or exercise of options under such Stock
Benefit Plans and (iii) as soon as practicable after the Effective Time, file
registration statements on Form S-3 or Form S-8 or amendments on such forms to
the Form S-4 Registration Statement, as the case may be (or any successor or
other appropriate forms), with respect to the shares of Duke Common Stock
subject to such Stock Benefit Plans to the extent such registration statement
is required under applicable law, and Duke shall use all reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectuses contained therein) for so long as such
benefits and grants remain payable and such options remain outstanding.

(e) Severance Benefit Plan. At the Effective Time, the provisions of the
PanEnergy Change in Control Severance Benefits Plan shall be in effect on
terms and conditions that are not more favorable to employees than those set
forth in Section 8.20(e) of the PanEnergy Disclosure Schedule.

8.21. Transfer Taxes. On or before the Closing Date, the Board of Directors
of PanEnergy shall declare a special dividend (the "Special Dividend") to the
holders of PanEnergy Common Stock in an amount equal to the amount of any New
York State Real Estate Transfer Tax and New York City Real Property Transfer
Tax and any similar real property transfer taxes imposed on the holders of
PanEnergy Common Stock by any other State of the United States (and any
penalties and interest with respect to such taxes) (the "Transfer Taxes"),
which become payable in connection with the Merger. In satisfaction of the
Special Dividend, PanEnergy shall pay the Transfer Taxes on behalf of the
holders of PanEnergy Common Stock. PanEnergy and Duke shall cooperate in the
preparation, execution and filing of any required returns with respect to such
Transfer Taxes (including returns on behalf of the holders of PanEnergy Common
Stock) and in the determination of the portion of the consideration allocable
to the PanEnergy real property in New York State and New York City (or in any
other jurisdiction, if applicable). The Joint Proxy Statement shall provide
that the holders of PanEnergy Common Stock shall be deemed to have (i)
authorized PanEnergy to prepare, execute and file any Tax Returns relating to
Transfer Taxes and pay any Transfer Taxes arising in connection with the
Merger, in each case, on behalf of such holders, and (ii) agreed to be bound
by the values and allocations established by PanEnergy and Duke in the
preparation of any return with respect to the Transfer Taxes, if applicable.

ARTICLE 9

CONDITIONS

9.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:

(a) The PanEnergy Stockholders' Approval shall have been obtained and the
Duke Vote Matter shall have been approved by the holders of Duke Common
Stock.

(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.

(c) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the
event any such order or injunction shall have been issued, each party
agrees to use all reasonable efforts to have any such injunction lifted.

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(d) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form
S-4 shall have been issued, no action, suit, proceeding or investigation by
the SEC to suspend the effectiveness thereof shall have been initiated and
be continuing, and all necessary approvals under state securities laws
relating to the issuance or trading of the Duke Common Stock to be issued
to holders of PanEnergy Common Stock in connection with the Merger shall
have been received.

(e) All consents, authorizations, orders, permits and approvals of (or
registrations, declarations or filings with) any Governmental Entity
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made pursuant to Final Orders as
defined in Section 9.2(e), except for filings in connection with the Merger
and any other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a
Material Adverse Effect on Duke or the Surviving Corporation following the
Effective Time.

(f) PanEnergy shall have received from Peat Marwick and Duke shall have
received from Deloitte & Touche an opinion that the Merger will be treated
as a "pooling of interests" under applicable accounting standards.

(g) The Duke Common Stock to be issued to holders of PanEnergy Common
Stock in connection with the Merger shall have been approved for listing on
the NYSE, subject only to official notice of issuance.

9.2. Conditions to Obligation of PanEnergy to Effect the Merger. The
obligation of PanEnergy to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:

(a) Duke shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Closing Date, the representations and warranties of Duke and Merger Sub
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and PanEnergy
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of Duke, dated the Closing Date, certifying to such
effect.

(b) PanEnergy shall have received an opinion of LeBoeuf, Lamb, Greene &
MacRae, L.L.P., special counsel to PanEnergy, dated the Closing Date,
addressed to PanEnergy and in form and substance satisfactory to PanEnergy,
which opinion may be based on appropriate representations of Duke,
PanEnergy and Merger Sub which are in form and substance reasonably
satisfactory to such counsel, to the effect that the Merger will be treated
as a reorganization under Section 368(a) of the Code, and that Duke, Merger
Sub and PanEnergy will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.

(c) PanEnergy shall have received a "comfort letter" from Deloitte &
Touche, dated the Closing Date, in form and substance reasonably
satisfactory to PanEnergy, in connection with the procedures undertaken by
them with respect to the financial statements of Duke and its Subsidiaries
contained in the Form S-4 and such other matters as are customarily
included in comfort letters relating to transactions similar to the Merger.

(d) From the date hereof through the Effective Time, there shall not have
occurred any change in the financial condition, business, properties or
operations of Duke and its Subsidiaries, taken as a whole, that would have
or would be reasonably likely to have a Material Adverse Effect on Duke.

(e) The Duke Required Statutory Approvals shall have been obtained at or
prior to the Effective Time pursuant to Final Orders and no such Final
Order shall have imposed terms or conditions that would have a Material
Adverse Effect on Duke or the Surviving Corporation. As used in this
Agreement, a "Final Order" means any action by the relevant regulatory
authority (i) that has not been reversed, stayed, enjoined, set aside,
annulled or suspended, (ii) with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired, (iii) as to which all conditions to the
consummation of such transactions prescribed by law, regulation or order
have been satisfied and (iv) as to which all opportunities for rehearing
are exhausted (whether or not any appeal thereof is pending).

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(f) Duke Energy Marketing Corp., Duke Energy Corp., Louis Dreyfus Energy
Corp., and Louis Dreyfus Electric Power Inc. shall have entered into that
certain letter agreement dated November 24, 1996 among such parties (the
"D/LD Agreement") and the other agreements referred to therein, and the
transactions contemplated by paragraph (1) of the D/LD Agreement shall have
been consummated.

9.3. Conditions to Obligation of Duke and Merger Sub to Effect the
Merger. The obligations of Duke and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:

(a) PanEnergy shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of PanEnergy
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and Duke shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of PanEnergy, dated the Closing Date, certifying to such
effect.

(b) Duke shall have received a copy of the opinion of LeBoeuf, Lamb,
Greene & MacRae, L.L.P. referred to in Section 9.2(b) of this Agreement,
which opinion shall be in form and substance reasonably satisfactory to
Duke.

(c) Duke shall have received a "comfort letter" from Peat Marwick, dated
the Closing Date, in form and substance reasonably satisfactory to Duke, in
connection with the procedures undertaken by them with respect to the
financial statements and other financial information of PanEnergy and its
Subsidiaries contained in the Form S-4 and such other matters as are
customarily included in comfort letters relating to transactions similar to
the Merger.

(d) From the date hereof through the Effective Time, there shall not have
occurred any change in the financial condition, business, properties or
operations of PanEnergy and its Subsidiaries, taken as a whole, that would
have or would be reasonably likely to have a Material Adverse Effect on
PanEnergy.

(e) The regulatory consents and approvals specified in Section 5.3(c)(E)
shall have been obtained at or prior to the Effective Time pursuant to
Final Orders and no such Final Order shall have imposed terms or conditions
that would have a Material Adverse Effect on Duke or the Surviving
Corporation.

ARTICLE 10

TERMINATION

10.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the date on which the PanEnergy Stockholders' Approval has
been obtained and whether before or after the date on which the approval of
the Duke Vote Matter by the holders of Duke Common Stock has been obtained, by
the mutual written consent of Duke and PanEnergy.

10.2. Termination by Either Duke or PanEnergy. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Duke or PanEnergy if (a) the Merger shall not have been consummated
by June 30, 1998, or (b) the PanEnergy Stockholders' Meeting shall not have
been convened prior to June 30, 1998 or the PanEnergy Stockholders' Approval
shall not have been obtained at the PanEnergy Stockholders' Meeting or any
adjournment thereof, or (c) the approval by the holders of Duke Common Stock
of the Duke Vote Matter shall not have been obtained at the Duke Shareholders'
Meeting or at any adjournment thereof, or (d) a United States federal or state
court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; provided, that the party seeking to terminate this Agreement
pursuant to this clause (d) shall have used all reasonable efforts to remove
such injunction, order or decree; and provided, in the case of a termination
pursuant to clause (a) above, that the terminating party shall not have
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the failure to consummate
the Merger by June 30, 1998.

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10.3. Termination by PanEnergy. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, if (a) before
the date on which the PanEnergy Stockholders' Approval is obtained, by action
of the Board of Directors of PanEnergy, in the exercise of its good faith
judgment as to fiduciary duties to its stockholders imposed by law, as advised
by outside counsel to PanEnergy, the Board of Directors of PanEnergy
determines that such termination is required by reason of an Alternative
Proposal being made; provided, however, that PanEnergy shall (i) notify Duke
promptly of receipt of such Alternative Proposal and shall (ii) notify Duke
promptly of its intention to recommend such Alternative Proposal to
PanEnergy's stockholders, but in no event shall the notice referred to in
clause (ii) be given less than three days prior to the earlier of the public
announcement of such recommendation or PanEnergy's termination of this
Agreement, or (b) there has been a breach by Duke or Merger Sub of any
representation or warranty contained in this Agreement which would have or
would be reasonably likely to have a Material Adverse Effect on Duke, or (c)
there has been a material breach of any of the covenants or agreements set
forth in this Agreement on the part of Duke, which breach is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by PanEnergy to Duke.

10.4. Termination by Duke. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the holders of Duke Common Stock referred to in Section 9.1(a), by
action of the Board of Directors of Duke, if (a) the Board of Directors of
PanEnergy shall have withdrawn or modified in a manner materially adverse to
Duke its approval or recommendation of this Agreement or the Merger or shall
have recommended an Alternative Proposal to the holders of PanEnergy Common
Stock, or (b) there has been a breach by PanEnergy of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a Material Adverse Effect on PanEnergy, or (c) there has been a
material breach of any of the covenants or agreements set forth in this
Agreement on the part of PanEnergy, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Duke to PanEnergy.

10.5. Effect of Termination and Abandonment.

(a) In the event that (i) any person shall have made an Alternative
Proposal, (ii) this Agreement is terminated pursuant to Section 10.2(b),
10.3(a) or 10.4 and (iii) at the time of such termination the Alternative
Proposal shall not have been (A) rejected by PanEnergy and its Board of
Directors and (B) withdrawn by the person making the Alternative Proposal,
then PanEnergy shall, on the day of such termination, pay to Duke a fee of
$200 million (exclusive of any expenses to be paid pursuant to Section 8.17)
in cash by wire transfer of immediately available funds to an account
designated by Duke.

(b) PanEnergy acknowledges that the agreements contained in this Section
10.5 are an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, Duke and Merger Sub would not enter into
this Agreement; accordingly, if PanEnergy fails to promptly pay the amount due
pursuant to this Section 10.5, and, in order to obtain such payment, Duke or
Merger Sub commences a suit or other legal action taken to collect payment of
the fee set forth in this Section 10.5, PanEnergy shall pay to Duke its costs
and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the rate of 8% per annum
from the date such fee was required to be paid.

(c) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 10, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this
Section 10.5 and Section 8.17 and except for the provisions of Sections 11.3,
11.4, 11.6, 11.8, 11.9 and 11.11 through 11.15. Nothing herein shall prejudice
the ability of the non-breaching party from seeking damages from any other
party for any breach of this Agreement, including without limitation,
attorneys' fees and the right to pursue any remedy at law or in equity.

10.6. Extension, Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive

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compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.

ARTICLE 11

GENERAL PROVISIONS

11.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and shall not survive
the Merger; provided, however, that the agreements contained in Article 4,
Sections 8.11, 8.15, 8.16, 8.17 and 8.20 and this Article 11 shall survive the
Merger.

11.2. Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid), addressed as follows:

If to Duke or Merger Sub:

Steve C. Griffith, Jr., Esq.
Duke Power Company
422 South Church Street
Charlotte, NC 28242
Facsimile: (704) 382-8137

With copies to:

John Spuches, Esq.
Morton A. Pierce, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Facsimile: (212) 259-6333

If to PanEnergy:

Carl B. King, Esq.
PanEnergy Corp
5400 Westheimer Court
Houston, TX 77251-1642
Facsimile: (713) 627-4691

With copies to:

Steven H. Davis, Esq.
Douglas W. Hawes, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019
Facsimile: (212) 424-8500

and

Seth A. Kaplan, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Facsimile: (212) 403-2000

or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.

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11.3. Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Merger Sub may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any newly formed, direct wholly-owned Subsidiary of Duke, which
Subsidiary would then be substituted for Merger Sub for purposes of this
Agreement. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement
to the contrary, except for the provisions of Article 4 and Sections 8.11 and
8.16, nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

11.4. Entire Agreement. This Agreement, the Exhibits, the PanEnergy
Disclosure Schedule, the Duke Disclosure Schedule, the Confidentiality
Agreement and any agreements delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless made in
writing and signed by all parties hereto.

11.5. Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
holders of PanEnergy Common Stock and the holders of Duke Common Stock, but
after any such approval, no amendment shall be made which by law requires the
further approval of such holders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.

11.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its rules
of conflict of laws. Except as prohibited by law, each of PanEnergy and Duke
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States
of America located in the State of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating
thereto except in such courts), waives any objection to the laying of venue of
any such litigation in the Delaware Courts and agrees not to plead or claim in
any Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.

11.7. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.

11.8. Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.

11.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.

11.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.

A-46
<PAGE>

11.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.

11.12. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Delaware Court, this being
in addition to any other remedy to which they are entitled at law or in
equity.

11.13. Further Assurances. Each party hereto shall execute such further
documents and instruments and take such further actions as may reasonably be
requested by any other party hereto in order to consummate the transactions
contemplated by this Agreement in accordance with the terms hereof.

11.14. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY TO THE EXTENT
PERMITTED BY LAW HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.14.

11.15. Certain Definitions. As used in this Agreement, except as otherwise
provided in Sections 5.13(a) and 6.13(a), the word "Subsidiary" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly
owns or controls at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board
of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is
a general partner. As used in this Agreement, the term "Significant
Subsidiary" has the meaning ascribed to it under Rule 405 under the Securities
Act. As used in this Agreement, the term "Joint Venture" means, with respect
to any person, any corporation or other entity (including partnerships and
other business associations and joint ventures) in which such person or one or
more of its Subsidiaries owns an equity interest that is less than a majority
of any class of the outstanding voting securities or equity, other than equity
interests held for passive investment purposes that are less than 5% of any
class of the outstanding voting securities or equity of such entity.

A-47
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf as of the 10th day of March, 1997.

Attest: DUKE POWER COMPANY

By: /s/ Ellen T. Ruff By: /s/ William H. Grigg
---------------------------------- ----------------------------------
Ellen T. Ruff William H. Grigg
Secretary Chairman of the Board and
Chief Executive Officer

Attest: DUKE TRANSACTION CORPORATION

By: /s/ Peter C. Buck By: /s/ Steve C. Griffith, Jr.
---------------------------------- ----------------------------------
Peter C. Buck Steve C. Griffith, Jr.
Secretary President

Attest: PANENERGY CORP

By: /s/ Robert W. Reed By: /s/ Paul M. Anderson
---------------------------------- ----------------------------------
Robert W. Reed Paul M. Anderson
Secretary President and Chief
Executive Officer

A-48
<PAGE>

EXHIBIT B

[LETTERHEAD OF BARR DEVLIN & CO. INCORPORATED APPEARS HERE]

March 13, 1997

The Board of Directors
Duke Power Company
422 South Church Street
Charlotte, North Carolina 28242-0001

Dear Members of the Board:

We understand that Duke Power Company, a North Carolina corporation
("Duke"), Duke Transaction Corporation, a Delaware corporation and a wholly-
owned subsidiary of Duke ("Merger Sub") and PanEnergy Corp, a Delaware
corporation ("PanEnergy") have determined to enter into an Agreement and Plan
of Merger, dated as of November 24, 1996, as amended and restated as of March
10, 1997 (the "Merger Agreement") by and among Duke, Merger Sub and PanEnergy.
The Merger Agreement provides for, among other things, the merger (the
"Merger") of Merger Sub with and into PanEnergy whereby the common stock, $1
par value per share, of PanEnergy ("PanEnergy Common Stock") will be converted
into and exchanged for common stock, without par value, of Duke ("Duke Common
Stock") at the rate of 1.0444 shares of Duke Common Stock for each share of
PanEnergy Common Stock (the "Exchange Ratio"). Pursuant to the Merger
Agreement, the name of Duke shall be changed to Duke Energy Corporation at the
Effective Time. The terms and conditions of the Merger are set forth in more
detail in the Merger Agreement. Capitalized terms used herein without
definition have the respective meanings assigned to such terms in the Merger
Agreement.

We have been requested by Duke to render our opinion with respect to the
fairness, from a financial point of view, to holders of Duke Common Stock of
the Exchange Ratio to be offered in the Merger.

In arriving at our opinion, we have, among other things:

(1) Reviewed the Annual Reports, Forms 10-K and the related financial
information for the three-year period ended December 31, 1995, and the
Forms 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1996, June 30, 1996 and September
30, 1996, for Duke;

(2) Reviewed the Annual Reports, Forms 10-K and the related financial
information for the three-year period ended December 31, 1995, and the
Forms 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1996, June 30, 1996 and September
30, 1996, for PanEnergy and certain of its subsidiaries;

(3) Reviewed certain other filings with the Securities and Exchange
Commission and other regulatory authorities made by Duke, PanEnergy
and certain of PanEnergy's subsidiaries during the last three years,
including proxy statements, FERC Forms 1 and 2, Forms 8-K and
registration statements;

(4) Reviewed certain internal information, including financial forecasts,
relating to the business, earnings, capital expenditures, cash flow,
assets and prospects of Duke and PanEnergy furnished to us by Duke and
PanEnergy;

B-1
<PAGE>

(5) Conducted discussions with members of senior management of Duke and
PanEnergy concerning their respective businesses, regulatory
environments, prospects, strategic objectives and possible operating
and administrative synergies and other benefits which might be
realized for the benefit of Duke following the Merger;

(6) Reviewed the historical market prices and trading activity for shares
of Duke Common Stock and PanEnergy Common Stock and compared them with
those of certain publicly traded companies which we deemed to be
relevant;

(7) Compared the results of operations of Duke and PanEnergy with those of
certain companies which we deemed to be relevant;

(8) Compared the proposed financial terms of the Merger with the financial
terms of certain business combinations which we deemed to be relevant;

(9) Analyzed the respective contributions in terms of assets, earnings,
cash flow and shareholders' equity of Duke and PanEnergy to Duke
following the Merger;

(10) Analyzed the valuation of shares of Duke Common Stock and PanEnergy
Common Stock using various valuation methodologies which we deemed to
be appropriate;

(11) Considered the pro forma capitalization, earnings and cash flow of
Duke following the Merger;

(12) Compared the pro forma capitalization ratios, earnings per share,
dividends per share and payout ratio of Duke following the Merger with
each of the corresponding current and projected values for Duke and
PanEnergy on a stand-alone basis;

(13) Reviewed the Merger Agreement;

(14) Reviewed the Registration Statement, including the Joint Proxy
Statement-Prospectus of Duke and PanEnergy dated the date hereof; and

(15) Reviewed such other studies, conducted such other analyses, considered
such other financial, economic and market criteria, performed such
other investigations and taken into account such other matters as we
deemed necessary or appropriate for purposes of this opinion.

In rendering our opinion, we have relied, without independent verification,
upon the accuracy and completeness of all financial and other information
publicly available or otherwise furnished or made available to us by Duke and
PanEnergy and have further relied upon the assurances of management of Duke
and PanEnergy that they are not aware of any facts that would make such
information inaccurate or misleading. With respect to the financial
projections of Duke and PanEnergy (including, without limitation, projected
synergies), we have relied upon the assurances of management of Duke and
PanEnergy that such projections have been reasonably prepared and reflect the
best currently available estimates and judgments of the respective management
of Duke and PanEnergy as to the future financial performance of Duke and
PanEnergy, as the case may be, and as to the projected outcomes of legal,
regulatory and other contingencies. In arriving at our opinion, we have not
made or been provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Duke or PanEnergy, nor have
we made any physical inspection of the properties or assets of Duke or
PanEnergy. We have assumed that the Merger will be treated for federal income
tax purposes as a reorganization of the type described in Section 368(a) of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
We have also assumed that the Merger will qualify as a pooling of interests
for financial accounting purposes. Our opinion herein is necessarily based
upon financial, stock market and other conditions and circumstances existing
and disclosed to us as of the date hereof.

We have acted as financial advisor to Duke in connection with the Merger and
will receive certain fees for our services. In addition, we have in the past
rendered certain investment banking and financial advisory services to Duke
for which we received customary compensation.

B-2
<PAGE>

Our advisory services and the opinion expressed herein are for the
information of Duke's Board of Directors in evaluating the Merger. Except for
its publication in the Joint Proxy Statement-Prospectus dated the date hereof
which is being distributed to holders of Duke Common Stock and PanEnergy Common
Stock in connection with the Merger, our opinion may not be published or
otherwise used or referred to without our prior written consent. This opinion
is not intended to be and does not constitute a recommendation to any
shareholder as to how such shareholder should act with respect to the Merger.

Based upon and subject to the foregoing, our experience as investment bankers
and other factors we deem relevant, we are of the opinion that, as of the date
hereof, the Exchange Ratio to be offered in connection with the Merger is fair,
from a financial point of view, to the holders of Duke Common Stock.

Very truly yours,

/S/ Barr Devlin & Co. Incorporated

B-3
<PAGE>

EXHIBIT C

MORGAN STANLEY

MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000

March 13, 1997

Board of Directors
Duke Power Company
422 South Church Street
Charlotte, North Carolina 28242-0001

Members of the Board:

We understand that PanEnergy Corp ("PanEnergy" or the "Company"), Duke Power
Company ("Duke") and Duke Transaction Corporation, a wholly owned subsidiary
of Duke ("Merger Sub"), have entered into an Agreement and Plan of Merger,
dated as of November 24, 1996, as amended and restated as of March 10, 1997
(the "Merger Agreement"), which provides, among other things, for the merger
(the "Merger") of Merger Sub with and into the Company. Pursuant to the
Merger, PanEnergy will become a wholly owned subsidiary of Duke and each
issued and outstanding share of common stock, par value $1.00 per share, of
PanEnergy (the "PanEnergy Common Stock"), other than shares held in treasury
or held by Duke or any affiliate of Duke, will be converted into the right to
receive 1.0444 (the "Exchange Ratio") shares of common stock, without par
value, of Duke (the "Duke Common Stock"), subject to adjustment in certain
instances as provided in the Merger Agreement. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.

You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to Duke.

For purposes of the opinion set forth herein, we have:

(i) reviewed certain publicly available financial statements and other
information of PanEnergy;

(ii) reviewed certain internal financial statements and other financial and
operating data concerning PanEnergy prepared by the management of
PanEnergy;

(iii) analyzed certain financial projections prepared by the management of
PanEnergy;

(iv) discussed the past and current operations and financial condition and
the prospects of PanEnergy with senior executives of PanEnergy;

(v) reviewed certain publicly available financial statements and other
information of Duke;

(vi) reviewed certain internal financial statements and other financial and
operating data concerning Duke prepared by the management of Duke;

(vii) analyzed certain financial projections prepared by the management of
Duke;

(viii) discussed the past and current operations and financial condition
and the prospects of Duke with senior executives of Duke, and
analyzed the pro forma impact of the Merger on Duke's earnings per
share, consolidated capitalization and financial ratios;

(ix) reviewed the reported prices and trading activity for the PanEnergy
Common Stock and the Duke Common Stock;

C-1
<PAGE>

(x) compared the financial performance of PanEnergy and the prices and
trading activity of the PanEnergy Common Stock and the Duke Common
Stock with that of certain other comparable publicly traded companies
and their securities;

(xi) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;

(xii) reviewed and discussed with the senior management of Duke and
PanEnergy the strategic rationale for the Merger and the synergies
and other benefits of the Merger to Duke;

(xiii) participated in discussions and negotiations among representatives
of PanEnergy and Duke and their financial and legal advisors;

(xiv) reviewed the Merger Agreement and certain related documents; and

(xv) performed such other analyses and considered such other factors as we
have deemed appropriate.

We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of Duke
and PanEnergy. We have also relied upon, without independent verification,
estimates by the management of Duke of the cost savings and other synergies
arising from the Merger. In addition, we have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement,
including among other things, that the Merger will be accounted for as a
"pooling-of-interests" business combination in accordance with U.S. generally
accepted accounting principles. Our opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made
available to us as of, the date hereof.

We have acted as financial advisor to the Board of Directors of Duke in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financing services for Duke and PanEnergy and have received fees for the
rendering of these services.

It is understood that this letter is for the information of the Board of
Directors of Duke and may not be used for any other purpose without our prior
written consent, except that this letter may be included in its entirety in
any filings made by Duke with the Securities and Exchange Commission in
connection with the Merger. In addition, we express no opinion or
recommendation as to how the holders of Duke Common Stock should vote at the
shareholders meeting held in connection with the Merger.

Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Duke.

Very truly yours,

Morgan Stanley & Co. Incorporated

By:
/s/ Jeffrey R. Holzschuh
----------------------------------
Jeffrey R. Holzschuh
Managing Director

C-2
<PAGE>

EXHIBIT D

Investment Banking

Corporate and
Institutional
Client Group

One Houston Center
1221 McKinney
Suite 2700
[LOGO OF MERRILL LYNCH APPEARS HERE] Houston, Texas 77010
713 759 2500
FAX 713 759 2580

March 13, 1997

Board of Directors
PanEnergy Corp
5400 Westheimer Court
Houston, Texas 77056-5310

Ladies and Gentlemen:

You have informed us that PanEnergy Corp (the "Company"), Duke Power Company
("Duke") and Duke Transaction Corporation, a wholly owned subsidiary of Duke
(the "Duke Sub"), have entered into an Agreement and Plan of Merger dated as
of November 24, 1996, as amended and restated as of March 10, 1997 (the
"Agreement"), pursuant to which Duke Sub will be merged with and into the
Company in a transaction (the "Merger") in which each outstanding share of the
Company's common stock, par value $1.00 per share (the "Shares"), will be
converted into the right to receive 1.0444 shares (the "Exchange Ratio") of
the common stock of Duke (the "Duke Shares"). The Merger is expected to be
considered by the common stockholders of the Company and Duke at their annual
stockholders' meetings and consummated following such meetings, subject to
obtaining regulatory approvals.

You have asked us whether, in our opinion, the Exchange Ratio to be received
by the holders of the Shares other than Duke and its affiliates in the Merger
is fair to such stockholders from a financial point of view.

In arriving at the opinion set forth below, we have, among other things;

(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1995 and the
Company's Forms 10-Q and the related unaudited financial information
for the quarterly periods ending March 31, 1996, June 30, 1996 and
September 30, 1996;

(2) Reviewed Duke's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1995 and
Duke's Forms 10-Q and the related unaudited financial information for
the quarterly periods ending March 31, 1996, June 30, 1996 and
September 30, 1996;

(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and Duke, furnished to us by the Company and Duke;

(4) Conducted discussions with members of senior management of the Company
and Duke concerning their respective businesses and prospects;

D-1
<PAGE>

[LOGO OF MERRILL LYNCH APPEARS HERE]

(5) Reviewed the historical market prices and trading activity for the
Shares and Duke Shares and compared them with that of certain publicly
traded companies which we deemed to be reasonably similar to the
Company and Duke, respectively;

(6) Compared the results of operations of the Company and Duke with that of
certain companies which we deemed to be reasonably similar to the
Company and Duke, respectively;

(7) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;

(8) Reviewed the Agreement and a draft of that certain Letter Agreement
among Louis Dreyfus Energy Corp., Louis Dreyfus Electric Power Inc.,
Duke Energy Marketing Corp. and Duke Energy Corp. dated November 24,
1996 (the "Joint Venture Agreement"); and

(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.

In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company and Duke, and we have not assumed any responsibility for
independent verification of such information or undertaken an independent
evaluation or appraisal of the assets or liabilities, whether contingent or
otherwise, of the Company or Duke. With respect to the financial forecasts
furnished by the Company and Duke, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's or Duke's management as to the expected future
financial performance of the Company or Duke, as the case may be. With respect
to the estimates of potential synergies furnished by the Company, we have
assumed that such estimates have been reasonably prepared and reflect the best
currently available estimates and judgment of management of the Company as to
the expected synergies from the Merger. We have also assumed that the Merger
will qualify for pooling-of-interests accounting treatment and as a tax-free
transaction for the common stockholders of the Company and Duke and that the
final form of the Joint Venture Agreement will not differ materially from the
draft of the Joint Venture Agreement dated November 24, 1996 reviewed by us.

In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.

We have, in the past, provided financial advisory and financing services to
the Company and Duke and have received fees for the rendering of such
services.

In the ordinary course of our business, we may actively trade the securities
of the Company or Duke for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.

D-2
<PAGE>

[LOGO OF MERRILL LYNCH APPEARS HERE]

On the basis of, and subject to the foregoing, we are of the opinion that
the Exchange Ratio to be received by the holders of the Shares other than Duke
and its affiliates pursuant to the Merger is fair to such stockholders from a
financial point of view.

Very truly yours,

Merrill Lynch, Pierce, Fenner &
Smith Incorporated

By /s/ Richard K. Gordon
-----------------------------------
Richard K. Gordon Vice Chairman
Investment Banking Group

D-3
<PAGE>

EXHIBIT E

Lehman Brothers

March 13, 1997

Board of Directors
PanEnergy Corp
5400 Westheimer Court
Houston, Texas 77056

Members of the Board:

We understand that Duke Power Company ("Duke") and PanEnergy Corp
("PanEnergy" or the "Company") have entered into an Agreement and Plan of
Merger dated as of November 24, 1996 as amended and restated as of March 10,
1997 (the "Merger Agreement"), which provides, among other things, for the
merger of PanEnergy with a wholly owned subsidiary of Duke. Pursuant to the
Merger Agreement, PanEnergy will become a wholly owned subsidiary of Duke and
each issued and outstanding share of PanEnergy's common stock, par value $1
per share, shall be converted into the right to receive 1.0444 shares of
common stock, without par value, of Duke (the "Exchange Ratio") (the "Proposed
Transaction"). The terms and conditions of the Proposed Transaction are set
forth in more detail in the Merger Agreement.

We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to
the Company's stockholders of the Exchange Ratio to be offered to such
stockholders in the Proposed Transaction. We have not been requested to opine
as to, and our opinion does not in any manner address, the Company's
underlying business decision to proceed with or effect the Proposed
Transaction.

In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement and the specific terms of the Proposed Transaction, (2) a draft of a
letter agreement among Louis Dreyfus Energy Corp., Louis Dreyfus Electric
Power Inc., Duke Energy Marketing Corp. and Duke Energy Corp. dated November
24, 1996, (3) publicly available information concerning Duke and the Company
that we believe to be relevant to our analysis, (4) financial and operating
information with respect to the business, operations and prospects of Duke
furnished to us by Duke, (5) financial and operating information with respect
to the business, operations and prospects of the Company furnished to us by
the Company, (6) a trading history of Duke's common stock from November 1,
1991 to the present and a comparison of that trading history with those of
other companies that we deemed relevant, (7) a trading history of the
Company's common stock from November 1, 1991 to the present and a comparison
of that trading history with those of other companies that we deemed relevant,
(8) a comparison of the historical financial results and present financial
condition of Duke with those of other companies that we deemed relevant, (9) a
comparison of the historical financial results and present financial condition
of the Company with those of other companies that we deemed relevant, (10)
estimates prepared by management of the Company relating to the cost savings,
operating synergies and other strategic benefits expected to result from a
combination of the businesses of Duke and the Company, (11) the potential pro
forma impact on Duke and the Company of the Proposed Transaction, including
the estimated increase in the dividend to be paid to the Company's
stockholders following the Proposed Transaction, and (12) a comparison of the
financial terms of the Proposed Transaction with the financial terms of
certain other recent transactions that we deemed relevant. In addition, we
have had discussions with the managements of Duke and the Company concerning
their respective businesses, operations, assets, financial conditions and
prospects and have undertaken such other studies, analyses and investigations
as we deemed appropriate.

In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such

E-1
<PAGE>

information. With respect to the financial projections of Duke, the Company
and the combined company following consummation of the Proposed Transactions,
upon advice of the management of Duke and the Company, we have assumed that
such projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the managements of the
respective companies as to the future financial performance of the respective
companies, and that Duke and the Company would perform, and the combined
company will perform, substantially in accordance with such projections. In
arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of Duke or the Company and have not made or obtained
any evaluations or appraisals of the assets or liabilities of Duke or the
Company. In addition, you have not authorized us to solicit, and we have not
solicited, any proposals or offers from any third party with respect to a
merger or business combination with, or the purchase of all or a part of the
business of, the Company. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of,
the date of this letter.

Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be
offered to the Company's stockholders in the Proposed Transaction is fair to
such stockholders.

We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is
contingent, in part, upon the consummation of the Proposed Transaction. In
addition, the Company has agreed to indemnify us for certain liabilities that
may arise out of the rendering of this opinion. In the ordinary course of our
business, we actively trade in the debt and equity securities of the Company
and Duke for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.

This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as
to how such stockholder should vote in connection with the Proposed
Transaction.

Very truly yours,

Lehman Brothers

/s/ H. E. McGee, III
By___________________________________
H. E. McGee, III

E-2
<PAGE>

EXHIBIT F

FORM OF AFFILIATE LETTER

Duke Power Company
422 South Church Street
Charlotte, NC 28242

Ladies and Gentlemen:

I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of PanEnergy Corp, a Delaware corporation ("PanEnergy"), as the
term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), or (ii) used in and for purposes of
Accounting Series, Releases 130 and 135, as amended, of the Commission.
Pursuant to the terms of the Agreement and Plan of Merger dated as of November
24, 1996 as amended and restated as of March 10, 1997 (the "Agreement"),
between Duke Power Company, a North Carolina corporation ("Duke"), Duke
Transaction Corporation, a Delaware corporation and a wholly-owned subsidiary
of Duke ("Merger Sub"), and PanEnergy, Merger Sub will be merged with and into
PanEnergy (the "Merger").

As a result of the Merger, I may receive shares of Common Stock, without par
value, of Duke (the "Duke Securities") in exchange for shares owned by me of
Common Stock, par value $1.00 per share, of PanEnergy (the "PanEnergy Common
Stock").

I represent, warrant and covenant to Duke that in the event I receive any
Duke Securities as a result of the Merger:

A. I shall not make any sale, transfer or other disposition of the Duke
Securities in violation of the Act or the Rules and Regulations.

B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Duke Securities to
the extent I felt necessary, with my counsel or counsel for PanEnergy.

C. I have been advised that the issuance of Duke Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger Agreement was submitted for a
vote of the holders of PanEnergy Common Stock, I may be deemed to have been
an affiliate of PanEnergy and the distribution by me of the Duke Securities
has not been registered under the Act, I may not sell, transfer or
otherwise dispose of the Duke Securities issued to me in the Merger unless
(i) such sale, transfer or other disposition has been registered under the
Act, (ii) such sale, transfer or other disposition is made in conformity
with Rule 145 promulgated by the Commission under the Act, or (iii) in the
opinion of counsel reasonably acceptable to Duke or pursuant to a "no
action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt
from registration under the Act.

D. I understand that Duke is under no obligation to register the sale,
transfer or other disposition of the Duke Securities by me or on my behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.

E. I also understand that stop transfer instructions will be given with
respect to the Duke Securities and that there will be placed on the
certificates for the Duke Securities issued to me, or any substitutions
therefor, a legend stating in substance:

F-1
<PAGE>

"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED ,
BETWEEN THE REGISTERED HOLDER HEREOF AND DUKE, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF DUKE."

F. I also understand that unless the transfer by me of my Duke Securities
has been registered under the Act or a sale is made in conformity with the
provisions of Rule 145, Duke reserves the right to put the following legend
on the certificates issued to my transferee:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."

It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act and this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) the applicable holding period shall
have elapsed in accordance with the provisions of Rule 145 with respect to the
Duke Securities received by me in the Merger or (ii) Duke has received either
an opinion of counsel, which opinion of counsel shall be reasonably
satisfactory to Duke, or a "no action" letter obtained by the undersigned from
the staff of the Commission, to the effect that the restrictions imposed by
Rule 145 under the Act no longer apply to the undersigned.

I further represent to and covenant with Duke that I will not sell, transfer
or otherwise dispose of any Duke Securities received by me in the Merger or
any other shares of the capital stock of Duke until after such time as
financial results covering at least 30 days of combined operations of
PanEnergy and Duke have been published by Duke, in the form of a quarterly
earnings report, an effective registration statement registered with the
Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined results of
operations. Duke shall notify the "affiliates" of the publication of such
results.

F-2
<PAGE>

Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of PanEnergy as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.

Very truly yours,

_____________________________________
Name:

Accepted this day of
, 199 by

Duke Power Company

By: _________________________________
Name:
Title:

F-3
<PAGE>

[LOGO OF DUKE POWER]

[LOGO OF RECYCLED PAPER]
<PAGE>

PART II.

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act and the By-Laws of the registrant permit indemnification of the
registrant's directors and officers in a variety of circumstances, which may
include liabilities under the Securities Act of 1933. In addition, the
registrant has purchased insurance permitted by the law of North Carolina on
behalf of directors, officers, employees or agents which may cover liabilities
under the Securities Act.

The Merger Agreement provides that, to the extent not prohibited by law, all
rights of indemnification in favor of current or former directors or officers
of PanEnergy as provided in the Certificate of Incorporation or By-Laws of
PanEnergy for acts or omissions occurring prior to the Effective Time will
continue in full force and effect from the Effective Time until the expiration
of the applicable statute of limitations with respect to any claims arising
out of such acts and omissions. The Merger Agreement also provides that for a
period of not less than six years from the Effective Time, the registrant will
cause to be maintained PanEnergy's directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time for directors and officers of PanEnergy
who were covered under such policy as in effect on November 24, 1996 so long
as the annual premium would not be in excess of 200% of the last annual
premium paid prior to November 24, 1996 (the Maximum Premium). If the existing
insurance expires, is terminated or is cancelled during such six-year period,
PanEnergy, as the surviving corporation in the Merger, has agreed in the
Merger Agreement to use all reasonable efforts to obtain as much insurance for
the remaining period for an annualized premium not in excess of the Maximum
Premium as may be obtained on terms no less advantageous to the covered
persons than provided in the existing policy.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

2 Agreement and Plan of Merger, dated as of November 24, 1996, as
amended and restated as of March 10 , 1997, by and among
registrant, Duke Transaction Corporation and PanEnergy (included
as Exhibit A to the Joint Proxy Statement-Prospectus forming part
of this Registration Statement).

3(a) Restated Articles of Incorporation of registrant, dated as of
October 6, 1993, incorporated herein by reference to Exhibit 4(A)
filed with registrant's Form S-3, File No. 33-50617, effective
October 20, 1993.

3(a)(1) Articles of Amendment of registrant, dated November 1, 1993,
relating to its 6.375% Cumulative Preferred Stock A, 1993
Series, incorporated herein by reference to Exhibit 4(B) filed
with registrant's Form S-3, File No. 33-52479, effective March
29, 1994.

3(b) By-Laws of registrant, incorporated herein by reference to Exhibit
3-C to registrant's Form 10-K for the year ended December 31, 1995
(File No. 1-4928).

5 Opinion of Steve C. Griffith, Jr., Esq., General Counsel of
registrant, regarding validity of securities being registered.

8 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. regarding
certain federal income tax matters.

10(a) Form of Employment Agreement for Paul M. Anderson of PanEnergy,
incorporated herein by reference to Exhibit B-1 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(b) Form of Employment Agreement for James T. Hackett of PanEnergy,
incorporated herein by reference to Exhibit B-2 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

II-1
<PAGE>

10(c) Form of Employment Agreement for Fred J. Fowler of PanEnergy,
incorporated herein by reference to Exhibit B-3 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(d) Form of Employment Agreement for L. B. Gatewood of PanEnergy,
incorporated herein by reference to Exhibit B-4 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(e) Form of Employment Agreement for Jim W. Mogg of PanEnergy,
incorporated herein by reference to Exhibit B-5 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(f) Form of Employment Agreement for Bruce Williamson of PanEnergy,
incorporated herein by reference to Exhibit B-6 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(g) Form of Employment Agreement for Richard B. Priory of registrant,
incorporated herein by reference to Exhibit C-1 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(h) Form of Employment Agreement for William A. Coley of registrant,
incorporated herein by reference to Exhibit C-2 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(i) Form of Employment Agreement for Richard J. Osborne of
registrant, incorporated herein by reference to Exhibit C-3 to
registrant's Form 8-K filed on December 9, 1996 (File No. 1-
4928).

10(j) Form of Employment Agreement for Ruth G. Shaw of registrant,
incorporated herein by reference to Exhibit C-4 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(k) Form of Employment Agreement for Michael S. Tuckman of
registrant, incorporated herein by reference to Exhibit C-5 to
registrant's Form 8-K filed on December 9, 1996 (FileNo. 1-4928).

10(l) Form of Employment Agreement for David L. Hauser of registrant,
incorporated herein by reference to Exhibit C-6 to registrant's
Form 8-K filed on December 9, 1996 (File No. 1-4928).

10(m) Agreement dated November 24, 1996 among Duke Energy Marketing
Corp., Duke Energy Corp., Louis Dreyfus Energy Corp. and Louis
Dreyfus Electric Power Inc. relating to Duke/Louis Dreyfus L.L.C.

23(a) Consent of Deloitte & Touche LLP with respect to registrant.

23(b) Consent of KPMG Peat Marwick LLP with respect to PanEnergy.

23(c) Consent of Steve C. Griffith, Jr., Esq. (included in Exhibit 5
and incorporated herein by reference).

23(d) Consent of Dewey Ballantine.

23(e) Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in
Exhibit 8 and incorporated herein by reference).

23(f) Consent of Barr Devlin & Co. Incorporated.

23(g) Consent of Morgan Stanley & Co. Incorporated.

23(h) Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.

23(i) Consent of Lehman Brothers Inc.

24(a) Copy of power of attorney authorizing Ellen T. Ruff and others to
sign this Registration Statement on behalf of the registrant and
certain of its directors and officers.

24(b) Certified copy of resolution of the Board of Directors of
registrant authorizing power of attorney.

99(a) Consent of Dennis R. Hendrix of PanEnergy pursuant to Rule 438.

99(b) Consent of Paul M. Anderson of PanEnergy pursuant to Rule 438.

II-2
<PAGE>

99(c) Forms of Proxies for Annual Meeting of Shareholders of
registrant.

99(d) Form of Proxy for Annual Meeting of Stockholders of PanEnergy.

(b) Financial Statement Schedules.

Not applicable.

Included in Part I as Exhibits B, C, D and E to the Joint Proxy
Statement-Prospectus included in this Registration Statement.

ITEM 22. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.

(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for the purposes of determining any
liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

(7) To respond to requests for information that is incorporated by reference
into the Joint Proxy Statement-Prospectus pursuant to Item 4, 10(b), 11 or 13
of this Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of responding
to the request.

(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement when
it became effective.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHARLOTTE, STATE OF
NORTH CAROLINA, ON THE 13TH DAY OF MARCH, 1997.

Duke Power Company
Registrant

By: W.H. Grigg
----------------------------------
Chairman of the Board and
Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
W.H. Grigg Chairman of the Board and March 13, 1997
Chief Executive Officer
(Principal Executive Officer)

Richard J. Osborne Senior Vice President and March 13, 1997
Chief Financial Officer
(Principal Financial Officer)

Jeffrey L. Boyer Controller (Principal March 13, 1997
Accounting Officer)
G. Alex Bernhardt
Robert J. Brown
W.A. Coley
Steve C. Griffith, Jr.
W.H. Grigg
George Dean Johnson, Jr. A majority of the Directors March 13, 1997
W.W. Johnson
Max Lennon
James G. Martin
Buck Mickel
R.B. Priory
Russell M. Robinson, II
</TABLE>

Ellen T. Ruff, by signing her name hereto, does hereby sign this document on
behalf of the registrant and on behalf of each of the above-named persons
pursuant to a power of attorney duly executed by the registrant and such
persons, filed with the Securities and Exchange Commission as an exhibit
hereto.

/s/ Ellen T. Ruff
-------------------------
Ellen T. Ruff
Attorney-in-fact

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
2 Agreement and Plan of Merger, dated as of November 24, 1996, as amended
and restated as of March 10, 1997, by and among registrant, Duke
Transaction Corporation and PanEnergy (included as Exhibit A to the
Joint Proxy Statement-Prospectus forming part of this Registration Statement).
3(a) Restated Articles of Incorporation of registrant, dated as of October 6,
1993, incorporated herein by reference to Exhibit 4(A) filed with
registrant's Form S-3, File No. 33-50617, effective October 20, 1993.
3(a)(1) Articles of Amendment of registrant, dated November 1, 1993, relating to
its 6.375% Cumulative Preferred Stock A, 1993 Series, incorporated
herein by reference to Exhibit 4(B) filed with registrant's Form S-3,
File No. 33-52479, effective March 29, 1994.
3(b) By-Laws of registrant, incorporated herein by reference to Exhibit 3-C
to registrant's Form 10-K for the year ended December 31, 1995 (File No.
1-4928).
5 Opinion of Steve C. Griffith, Jr., Esq., General Counsel of registrant,
regarding validity of securities being registered.
8 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. regarding certain
federal income tax matters.
10(a) Form of Employment Agreement for Paul M. Anderson of PanEnergy,
incorporated herein by reference to Exhibit B-1 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(b) Form of Employment Agreement for James T. Hackett of PanEnergy,
incorporated herein by reference to Exhibit B-2 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(c) Form of Employment Agreement for Fred J. Fowler of PanEnergy,
incorporated herein by reference to Exhibit B-3 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(d) Form of Employment Agreement for L. B. Gatewood of PanEnergy,
incorporated herein by reference to Exhibit B-4 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(e) Form of Employment Agreement for Jim W. Mogg of PanEnergy, incorporated
herein by reference to Exhibit B-5 to registrant's Form 8-K filed on
December 9, 1996 (File No. 1-4928).
10(f) Form of Employment Agreement for Bruce Williamson of PanEnergy,
incorporated herein by reference to Exhibit B-6 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(g) Form of Employment Agreement for Richard B. Priory of registrant,
incorporated herein by reference to Exhibit C-1 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(h) Form of Employment Agreement for William A. Coley of registrant,
incorporated herein by reference to Exhibit C-2 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
</TABLE>
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10(i) Form of Employment Agreement for Richard J. Osborne of registrant,
incorporated herein by reference to Exhibit C-3 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(j) Form of Employment Agreement for Ruth G. Shaw of registrant,
incorporated herein by reference to Exhibit C-4 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(k) Form of Employment Agreement for Michael S. Tuckman of registrant,
incorporated herein by reference to Exhibit C-5 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(l) Form of Employment Agreement for David L. Hauser of registrant,
incorporated herein by reference to Exhibit C-6 to registrant's Form 8-K
filed on December 9, 1996 (File No. 1-4928).
10(m) Agreement dated November 24, 1996 among Duke Energy Marketing Corp.,
Duke Energy Corp., Louis Dreyfus Energy Corp. and Louis Dreyfus Electric
Power Inc. relating to Duke/Louis Dreyfus L.L.C.
23(a) Consent of Deloitte & Touche LLP with respect to registrant.
23(b) Consent of KPMG Peat Marwick LLP with respect to PanEnergy.
23(c) Consent of Steve C. Griffith, Jr., Esq. (included in Exhibit 5 and
incorporated herein by reference).
23(d) Consent of Dewey Ballantine.
23(e) Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in Exhibit 8
and incorporated herein by reference).
23(f) Consent of Barr Devlin & Co. Incorporated.
23(g) Consent of Morgan Stanley & Co. Incorporated.
23(h) Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
23(i) Consent of Lehman Brothers Inc.
24(a) Copy of power of attorney authorizing Ellen T. Ruff and others to sign
this Registration Statement on behalf of the registrant and certain of
its directors and officers.
24(b) Certified copy of resolution of the Board of Directors of registrant
authorizing power of attorney.
99(a) Consent of Dennis R. Hendrix of PanEnergy pursuant to Rule 438.
99(b) Consent of Paul M. Anderson of PanEnergy pursuant to Rule 438.
99(c) Forms of Proxies for Annual Meeting of Shareholders of registrant.
99(d) Form of Proxy for Annual Meeting of Stockholders of PanEnergy.
</TABLE>

<PAGE>

Exhibit 5

March 13, 1997

Duke Power Company
422 South Church Street
Charlotte, North Carolina 28242

Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:

I am Vice Chairman of the Board and General Counsel of Duke Power Company
(the "Company"). This opinion is being furnished in connection with the
Company's Registration Statement on Form S-4 (the "Registration Statement")
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to the registration by the Company of shares (the
"Shares") of common stock, without par value (the "Common Stock"), of the
Company to be issued in connection with the merger of a wholly-owned
subsidiary of the Company with PanEnergy Corp (the "Merger") pursuant to the
terms of the Agreement and Plan of Merger, dated as of November 24, 1996, as
amended and restated as of March 10, 1997 (the "Merger Agreement").

In connection with this opinion, I have examined the Registration Statement
and the Joint Proxy Statement-Prospectus included therein, the Company's
Articles of Incorporation, as in effect on the date hereof, the Company's By-
Laws, as in effect on the date hereof, and certain of the Company's corporate
proceedings as reflected in its minute books. In my examination, I have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to me as originals, and the conformity with the originals of all
documents submitted to me as copies thereof. In addition, I have made such
other examinations of law and fact as I have deemed relevant in order to form
a basis for the opinion hereinafter expressed.

Based upon the foregoing, I am of the opinion that the Shares, when and to
the extent issued in accordance with the Merger Agreement, will be validly
issued, fully paid and nonassessable shares of Common Stock of the Company.

I hereby consent to the use of this opinion as Exhibit 5 to the Registration
Statement and to the reference to me in the Registration Statement.

Very truly yours,

/s/ Steve C. Griffith, Jr.
-------------------------------
Steve C. Griffith, Jr.

<PAGE>

Exhibit 8

[Letterhead of LeBoeuf, Lamb, Greene & MacRae, L.L.P.]

March 13, 1997

PanEnergy Corp
P.O. Box 1642
Houston, Texas 77251-1642

Certain Federal Income Tax Consequences of the Merger of Duke Transaction
Corporation with and into PanEnergy Corp

Ladies and Gentlemen:

You have requested our opinion relating to certain federal income tax
consequences arising out of the Agreement and Plan of Merger, as amended and
restated as of March 10, 1997, by and among PanEnergy Corp ("PanEnergy"), Duke
Power Company ("Duke") and Duke Transaction Corporation, a wholly-owned first
tier subsidiary of Duke ("Merger Sub") (the "Agreement"). Our conclusions are
based on (i) the facts and assumptions set forth below and (ii) the
representations made in your letter to us dated March 12, 1997 (the "PanEnergy
Letter") and the representations made in the letter from Duke to us of today
(the "Duke Letter"). If any of the stated facts or assumptions are not
correct, please advise us at once as our advice may be affected by a change in
the stated facts or assumptions. Capitalized terms not defined in this letter
have the meaning given to them in the Agreement.

The following opinion does not address (i) the tax consequences of the
Merger under state, local or foreign law or (ii) certain federal income tax
consequences applicable to special classes of taxpayers subject to special
rules, including, without limitation: foreign corporations; stockholders who
are not citizens or residents of the United States; estates the income of
which is not subject to United States taxation regardless of its source; for
taxable years beginning after December 31, 1996, trusts the administration of
which a court within the United States is not able to exercise primary
supervision and with respect to which one or more United States fiduciaries do
not have the authority to control all substantial decisions of such trust; for
taxable years beginning on or before December 31, 1996, any trust the income
of which is not subject to United States taxation regardless of its source;
financial institutions; insurance companies; tax-exempt entities; dealers in
securities; persons who acquired PanEnergy Common Stock pursuant to the
exercise of an employee option (or otherwise as compensation); persons holding
PanEnergy Common Stock as part of an integrated investment (including a
"straddle") comprised of shares of PanEnergy Common Stock and one or more
other positions; or persons who do not hold their PanEnergy Common Stock as
capital assets.

Facts

Pursuant to the Agreement, Merger Sub will be merged with and into PanEnergy
in accordance with the applicable provisions of the laws of the State of
Delaware. PanEnergy will be the surviving corporation in the Merger and will
continue its corporate existence under the laws of the State of Delaware. As a
result of the Merger, PanEnergy will become a subsidiary of Duke.

As a result of the Merger, each share of PanEnergy Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares
cancelled pursuant to Section 4.2(c) of the Agreement) will be converted into
the right to receive 1.0444 shares of Duke Common Stock.

Assumptions

In rendering our opinion, we have assumed that (i) the proposed transactions
will be consummated in the manner described in the Agreement and are on the
date hereof, and will be at the Effective Time, supported by a bona fide
business purpose as provided in the Joint Proxy Statement-Prospectus of
PanEnergy, Duke and Merger Sub; and (ii) the representations made to us by
PanEnergy in the PanEnergy Letter and by Duke in the Duke Letter, in each
case, are true on the date hereof and will be true at the Effective Time.
<PAGE>

Opinion

Based on the facts and assumptions set forth above and our examination of
the Agreement, the Joint Proxy Statement-Prospectus of PanEnergy, Duke and
Merger Sub, and relevant legal authorities, it is our opinion that:

(1) The Merger will qualify, for federal income tax purposes, as a
reorganization within the meaning of section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of the application
of section 368(a)(2)(E) of the Code, and that Duke, Merger Sub and
PanEnergy will each be a party to the reorganization within the meaning of
section 368(b) of the Code.

(2) A PanEnergy stockholder will not recognize gain or loss upon the
exchange of PanEnergy Common Stock solely for Duke Common Stock. Code
(S)354(a).

(3) The payment of cash to a PanEnergy stockholder in lieu of a
fractional share interest in Duke Common Stock will be treated as if the
fractional share had been distributed as part of the exchange and then
redeemed by Duke. The cash payment will be treated as having been received
as a distribution in payment for the Duke Common Stock hypothetically
redeemed as provided in Code section 302 and generally should result in the
recognition of capital gain or loss measured by the difference between the
amount of cash received and the portion of the tax basis of the share of
PanEnergy Common Stock allocable to such fractional share interest. Rev.
Rul. 66-365, 1966-2 C.B. 116.

(4) The basis of the Duke Common Stock to be received by a PanEnergy
stockholder generally will be the same, in each instance, as the basis in
the PanEnergy Common Stock surrendered in exchange therefor decreased by
any basis allocable to any fractional shares of Duke Common Stock received
in the Merger. Code (S)358(a)(1).

(5) The holding period of Duke Common Stock received by a PanEnergy
stockholder will include the period during which that stockholder held the
PanEnergy Common Stock surrendered in exchange therefor. Code (S)1223(1).

This opinion is based upon the federal income tax law as of the date hereof,
and no assurances can be given that changes in the law or the administrative
or judicial interpretation thereof will not occur so as to adversely affect
the conclusions expressed herein. This opinion is limited solely to the
federal income tax consequences of the Agreement specifically set forth
herein.

We hereby consent to the filing of this opinion as an exhibit to the Joint
Proxy Statement-Prospectus of PanEnergy, Duke and Merger Sub and the reference
to the above-mentioned opinion under "Summary of Joint Proxy Statement-
Prospectus--The Merger--Certain Federal Income Tax Consequences," "The
Merger--Certain Federal Income Tax Consequences" and "Legal Opinions." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended.

Very truly yours,

/s/ LeBoeuf, Lamb, Greene & MacRae,
L.L.P.

<PAGE>

Exhibit 10(m)

LOUIS DREYFUS ELECTRIC POWER INC.
Wilton, Connecticut

November 24,
1996

Duke Energy Marketing Corp.
Duke Energy Corp.

Dear Sirs:

You and we are parties to an agreement (the "Agreement") dated as of July
30, 1996, relating to Duke/Louis Dreyfus L.L.C. ("D/LD"). You have informed us
that one of your Affiliates proposes to enter into an agreement (the "Merger
Agreement") with PanEnergy Corp ("Pipe") pursuant to which Pipe will merge
into a subsidiary of Duke Power. Pipe, through its affiliates, and Mobil
Corporation ("Red"), through its affiliates, are members of PanEnergy Trading
and Market Services L.L.C., a Delaware limited liability company, and partners
of PanEnergy Marketing Limited Partnership, an Alberta, Canada, limited
partnership (collectively, the "Pipe Joint Venture"). The Pipe Joint Venture
is engaged in Power Marketing and Natural Gas Marketing. In connection with
the Merger Agreement, you have requested us to amend the Agreement.
Capitalized words not defined in this letter shall have the meanings given to
them in the Agreement.

We hereby agree that, in consideration for and fulfillment of all of the
terms of this letter, the Agreement is hereby amended by the addition of a new
Section 3.8 as follows:

Notwithstanding anything to the contrary in this Agreement (and in
particular Sections 3.2 and 3.4 hereof), Duke Power or any of its
Affiliates may merger with Pipe and own Pipe and may operate, through its
Affiliates or otherwise, the business of Pipe, including the business of
the Pipe Joint Venture.

In consideration of our agreement to this amendment, you agree that:

(1) Duke/Louis Dreyfus L.L.C. ("D/LD") shall continue to be operated
until the Effective Time, as defined in the Merger Agreement (the
"Effective Time"), in the same manner as it has been operated heretofore,
with each Member having a 50% ownership interest in D/LD. However, at or
prior to the Effective Time, D/LD operations, assets, and liabilities shall
be merged into, contributed to, or otherwise acquired by the Pipe Joint
Venture, or LD Electric and Duke Energy Marketing shall have contributed
their entire ownership interest in D/LD to the Pipe Joint Venture, in such
manner as Duke Energy and LD Electric shall reasonably agree (the
"Combination").

(2) In consideration of LD Electric's agreement to enter into the
Combination, and subject to paragraphs 3 and 4 of this letter, Duke Energy
Marketing, or, if the parties and Red shall mutually agree, the Pipe Joint
Venture, shall, beginning at the closing date of the Combination
("Combination Date"), pay to LD Electric annually an amount equal to ten
percent (10%) of the net income before taxes (the "10% Interest") of the
Pipe Joint Venture (inclusive of the operations, assets and liabilities of
D/LD). Duke Power hereby guarantees the obligations of Duke Energy
Marketing or the Pipe Joint Venture to pay the 10% Interest. The net income
before taxes of the Pipe Joint Venture shall be determined in accordance
with generally accepted accounting principles and as set forth in the
audited income statements of the Pipe Joint Venture. Duke Energy Marketing
will pay the amount of the 10% Interest annually to LD Electric within six
months following the conclusion of each fiscal year of the Pipe Joint
Venture. In the event that the Pipe Joint Venture incurs a net loss for any
year, the amount of such loss shall be deducted from the subsequent year's
or subsequent years' net income before taxes until the loss has been
eliminated. The 10% Interest represents only the contractual undertaking of
Duke Energy Marketing, or, if the parties and Red agree, the Pipe Joint
Venture, to make the payments described herein and shall not entitle LD
Electric to any board
<PAGE>

representation, voting rights, or any other right, title, benefit, or
interest in the Pipe Joint Venture; provided, however, that (i) LD Electric
shall be entitled to receive, subject to reasonable confidentiality
restrictions, copies of the Pipe Joint Venture's quarterly unaudited and
annual audited financial statements and, at LD Electric's expense, to have
an independent accounting firm audit the annual financial statements of the
Pipe Joint Venture, and (ii) LD Energy shall have a Co-Investment right,
consistent with the Co-Investment right set forth in Section 3.6 of the
Agreement, except that such Co-Investment shall be passive and will carry
no voting or governance rights, with respect to any Investment in an
Electricity-Generating Asset made by Duke Power Company or any of its
Affiliates, whether made through the Pipe Joint Venture or otherwise, in
North America up to a Co-Investment Percentage of 10 per cent, for so long
as LD Electric shall continue to receive the 10% Interest. LD Energy shall
respond promptly, and in any event within 30 days of receipt of notice
thereof, to any Co-Investment Opportunity.

(3) From and after this Combination Date, the restrictions of Power
Marketing and Natural Gas Marketing activities set forth in Sections 3.1
and 3.2 of the Agreement shall continue to apply to the Members and their
Affiliates until the 10% Interest has been acquired by Duke Energy
Marketing pursuant to Paragraphs 4 or 5 hereof, except that Duke Power and
its Affiliates may (i) conduct or perform any such activities through the
Pipe Joint Venture instead of D/LD, and (ii) conduct or perform outside the
Pipe Joint Venture certain activities permitted under the Pipe Joint
Venture Agreement.

(4) LD Electric shall be entitled to put the 10% Interest to Duke Energy
Marketing at any time between the third and fourth anniversaries of the
Effective Time at a price equal to the greater of (i) 10% of the Fair
Market Value of the Pipe Joint Venture (inclusive of the operations,
assets, and liabilities of D/LD), determined by appraisal and in accordance
with Sections 11.2 and 11.3 of the Agreement, or (ii) $150 million; and (b)
LD Electric shall be entitled to put the 10% Interest to Duke Energy
Marketing at any time between the fifth and sixth anniversaries of the
Effective Time at a price equal to the greater of (i) 10% of the Fair
Market Value of the Pipe Joint Venture (inclusive of the operations,
assets, and liabilities of D/LD), determined by appraisal and in accordance
with Sections 11.2 and 11.3 of the Agreement, or (ii) $250 million. After
April 1, 2006, the 10% Interest shall be subject to a put in LD Electric's
favor, and a call in Duke Energy Marketing's favor, at a price equal to 10%
of the Fair Market Value of the Pipe Joint Venture (inclusive of the
operations, assets, and liabilities of D/LD), determined by appraisal and
in accordance with Sections 11.2 and 11.3 of the Agreement. Duke Power
hereby guarantees the payment obligations of Duke Energy Marketing in
connection with any such put or call.

(5) From and after the Combination Date, (i) subject to LD Energy's Co-
Investment rights set forth in Paragraph 2 above, Duke Power and its
Affiliates shall have no obligation to make Investments in Electricity-
Generating Assets or other Energy Assets through the Pipe Joint Venture,
and (ii) LD Energy and its Affiliates shall not use the name Duke/Louis
Dreyfus or the name Duke in connection with any business activity.

(6) From and after the Combination Date, the Pipe Joint Venture shall
establish a Strategic Advisory Committee that shall include at least the
following persons: Simon Rich, Daniel Finn, William Louis-Dreyfus, Richard
Osborne or Richard Priory, James Hackett or Paul Anderson. The Strategic
Advisory Committee will meet periodically to discuss the strategic position
and planning of the Pipe Joint Venture, subject to reasonable
confidentiality restrictions. Any member of the Strategic Advisory
Committee who is not an employee of Duke Power or any of its Affiliates,
Red or any of its Affiliates, or the Pipe Joint Venture shall receive
reasonable compensation and reimbursement of expenses in connection with
such Committee participation.

(7) Duke Energy Marketing shall be responsible for and shall reimburse
D/LD and Louis Dreyfus Corp. for all renewable severance costs incurred
pursuant to employment agreements and policies in effect on the date of
this letter and all other reasonable costs, including lease payments,
incurred by D/LD or Louis Dreyfus Corp. directly as a result of the
Combination.

2
<PAGE>

(8)(i) Except as specifically set forth in this letter, the Agreement
shall remain in full force and effect and nothing herein shall constitute a
waiver or release of any party's rights or benefits under the Agreement.
(ii) The parties to this letter agreement shall, as expeditiously as
possible and in any event within 90 days after the date of this letter,
execute such further documents and instruments, including any further
amendment to the Agreement, reasonably requested by any other party and
shall take such further actions as any other party shall reasonably request
to effect the agreements set forth in this letter. (iii) This letter
agreement shall be subject to any required governmental approvals, and each
of the Members and their Affiliates shall use their best efforts, including
the restructurings of any FERC-jurisdictional entities if necessary, to
obtain all such approvals. (iv) Each party to this letter hereby
irrevocably waives and releases any and all causes of action for tortious
interference or any similar claim that such party might now or hereafter
have against any other party or any Affiliate, or against Pipe or Red or
any of their Affiliates or controlling persons, for or by reason of any
matter that relates to or arises out of the negotiations, discussions,
communications, and statements made in connection with this letter;
provided, however, that nothing herein shall limit, restrict, waive, or
affect any obligation of any party pursuant to the Agreement except as
specifically amended by this letter.

(9) Except for the mutual releases set forth in Paragraph 8(iv) which
shall survive the termination of the Merger Agreement, if for any reason
the Merger Agreement is terminated, then this letter agreement shall be of
no effect and the Agreement shall remain in full force and effect without
regard to the amendments in this letter.

If you agree with the terms of this letter, please sign and return a copy to
us. Since D/LD was also a party to the Agreement, we shall arrange to have it
sign this letter as well. Each of us agrees that this is intended to be, and
is, a binding agreement and that Duke Power is relying on this Agreement in
entering into the Merger Agreement.

Yours truly,

Louis Dreyfus Energy Corp.

By: /s/ William Louis-Dreyfus
---------------------------------
Louis Dreyfus Electric Power Inc.

By: /s/ William Louis-Dreyfus
---------------------------------
Agreed:

Duke Energy Marketing Corp.

By: /s/ William H. Grigg
---------------------------
Duke Energy Corp.

By: /s/ William H. Grigg
---------------------------
Duke Power Company

By: /s/ William H. Grigg
---------------------------
Confirmed:

Duke/Louis Dreyfus L.L.C.

By: /s/ William Louis-Dreyfus
--------------------------------

<PAGE>

Exhibit 23(a)

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement
of Duke Power Company on Form S-4 of our report dated February 7, 1997
appearing in the Current Report on Form 8-K of Duke Power Company filed on
February 10, 1997 with the Securities and Exchange Commission, and to the
reference to us under the heading "Experts" in the Joint Proxy Statement-
Prospectus, which is part of this Registration Statement.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP

Charlotte, North Carolina
March 13, 1997

<PAGE>

Exhibit 23(b)

ACCOUNTANTS' CONSENT

The Board of Directors
PanEnergy Corp

We consent to the use in the Duke Power Company and PanEnergy Corp Joint
Proxy Statement-Prospectus and this Registration Statement on Form S-4 of our
reports on the consolidated financial statements of PanEnergy Corp and
subsidiaries incorporated by reference herein and to the references to our
firm under the headings "The Merger--Accounting" and "Experts" in the Joint
Proxy Statement-Prospectus.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Houston, Texas
March 13, 1997

<PAGE>

Exhibit 23(d)

CONSENT OF COUNSEL

We hereby consent to the reference to our firm under the heading "Legal
Opinions" in the Joint Proxy Statement-Prospectus forming a part of this
Registration Statement. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section
7 of the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.

/s/ Dewey Ballantine
Dewey Ballantine

March 13, 1997

<PAGE>

Exhibit 23(f)

CONSENT OF BARR DEVLIN & CO. INCORPORATED

We hereby consent to the use of our opinion in the Joint Proxy Statement-
Prospectus of Duke Power Company and PanEnergy Corp included in this
Registration Statement of Duke Power Company and to all references to our firm
included in or made a part of this Registration Statement. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder.

Barr Devlin & Co. Incorporated

/s/ Stephen R. Day
By: _____________________________
Managing Director

March 13, 1997

<PAGE>

Exhibit 23(g)

CONSENT OF MORGAN STANLEY & CO. INCORPORATED

March 13, 1997

Duke Power Company
422 South Church Street
Charlotte, North Carolina 28242

Dear Sirs and Mesdames:

We hereby consent to the inclusion in the Registration Statement of Duke
Power Company ("Duke"), on Form S-4 with respect to the shares of Common
Stock, without par value, of Duke, of our opinion letter appearing as Exhibit
C to the Joint Proxy Statement-Prospectus which is a part of the Registration
Statement, and to the references to our firm name therein. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder nor do we admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts"
as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

Morgan Stanley & Co. Incorporated

/s/ Jeffrey R. Holzschuh
By: _____________________________
Managing Director

<PAGE>

Exhibit 23(h)

CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

We hereby consent to the use of our opinion letter dated March 13, 1997 to
the Board of Directors of PanEnergy Corp included as Exhibit D to the Joint
Proxy Statement-Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed combination of Duke Power Company and
PanEnergy Corp and to the references to such opinion in such Joint Proxy
Statement-Prospectus under the captions "Summary of Joint Proxy Statement-
Prospectus--The Merger--Opinions of Financial Advisors," "The Merger--
Background of the Merger," and "The Merger--Opinions of Financial Advisors to
PanEnergy."

In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.

Merrill Lynch, Pierce, Fenner &
Smith Incorporated

/s/ Rob L. Jones
By: _____________________________

March 13, 1997

<PAGE>

Exhibit 23(i)

CONSENT OF LEHMAN BROTHERS INC.

We hereby consent to the use of our opinion letter dated March 13, 1997 to
the Board of Directors of PanEnergy Corp included as Exhibit E to the Joint
Proxy Statement-Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger between Duke Power Company and
PanEnergy Corp and to the references to such opinion in such Joint Proxy
Statement-Prospectus under the captions "Summary of Joint Proxy Statement-
Prospectus--The Merger--Opinions of Financial Advisors," "The Merger--
Background of the Merger" and "The Merger--Opinions of Financial Advisors to
PanEnergy." In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1993, as amended, or the rules and regulations of the
Securities Exchange Commission thereunder, nor do we thereby admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.

Lehman Brothers Inc.

/s/ H. E. McGee, III
By: ________________________
Managing Director

March 13, 1997

<PAGE>

Exhibit 24(a)

DUKE POWER COMPANY

POWER OF ATTORNEY

A maximum of 166,000,000 shares of common stock,
without par value, of Duke Power Company

(Common Stock)

The undersigned, DUKE POWER COMPANY, a North Carolina corporation, and
certain of its officers and/or directors, do each hereby constitute and
appoint W. H. Grigg, Richard J. Osborne, Ellen T. Ruff, and each of them, to
act as attorneys-in-fact for and in the respective names, places, and stead of
the undersigned, to execute, seal, sign and file with the Securities and
Exchange Commission a Registration Statement of said Duke Power Company on
Form S-4 and any and all amendments thereto for the purpose of registering
under the Securities Act of 1933 the Common Stock, hereby granting to said
attorneys-in-fact, and each of them, full power and authority to do and
perform all and every act and thing whatsoever requisite, necessary or proper
to be done in and about the premises, as fully to all intents and purposes as
the undersigned, or any of them, might or could do if personally present,
hereby ratifying and approving the acts of said attorneys-in-fact.

Executed the 25th day of February, 1997.

DUKE POWER COMPANY

By: /s/ William H. Grigg
----------------------------------
Chairman and Chief Executive
Officer

(Corporate Seal)

ATTEST:

/s/ Robert T. Lucas III
- ---------------------------------
Assistant Secretary
<PAGE>

/s/ W.H. Grigg Chairman and Chief Executive Officer
- ------------------------------------- (Principal Executive Officer and
W. H. Grigg Director)

/s/ Richard J. Osborne Senior Vice President and Chief
- ------------------------------------- Financial Officer (Principal
Richard J. Osborne Financial Officer)

/s/ Jeffrey L. Boyer Controller (Principal Accounting
- ------------------------------------- Officer)
Jeffrey L. Boyer

/s/ G. Alex Bernhardt (Director)
- -------------------------------------
G. Alex Bernhardt

/s/ Robert J. Brown (Director)
- -------------------------------------
Robert J. Brown

/s/ W. A. Coley (Director)
- -------------------------------------
William A. Coley

/s/ Steve C. Griffith, Jr. (Director)
- -------------------------------------
Steve C. Griffith, Jr.

/s/ George Dean Johnson, Jr. (Director)
- -------------------------------------
George Dean Johnson, Jr.

/s/ W.W. Johnson (Director)
- -------------------------------------
W.W. Johnson

/s/ Max Lennon (Director)
- -------------------------------------
Max Lennon
<PAGE>

/s/ James G. Martin (Director)
- -------------------------------------
James G. Martin

/s/ Buck Mickel (Director)
- -------------------------------------
Buck Mickel

/s/ R.B. Priory (Director)
- -------------------------------------
Richard B. Priory

/s/ Russell M. Robinson, II (Director)
- -------------------------------------
Russell M. Robinson, II

<PAGE>

Exhibit 24(b)

DUKE POWER COMPANY

----------------

CERTIFICATE

A MAXIMUM OF 166,000,000 SHARES OF COMMON STOCK, WITHOUT PAR VALUE

(THE SECURITIES)

The undersigned officer of Duke Power Company, a North Carolina corporation
(the Company), does hereby certify that attached hereto is a true and complete
copy of an extract from the minutes of a meeting of the Board of Directors of
the Company containing a resolution adopted with respect to the Securities,
which resolution is presently in full force and effect.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal of the Company this 13th day of March, 1997.

/s/ Robert T. Lucas III
---------------------------------
Assistant Secretary

[Corporate Seal]
<PAGE>

EXTRACT FROM THE MINUTES OF A MEETING
OF THE BOARD OF DIRECTORS OF DUKE
POWER COMPANY HELD ON FEBRUARY 25, 1997

FURTHER RESOLVED, that each officer and director who may be required to
execute such registration statement on Form S-4 (whether on behalf of the
Company or as an officer or director thereof or by attesting the seal of the
Company or otherwise) be and hereby is authorized to execute a power of
attorney appointing W. H. Grigg, Richard J. Osborne and Ellen T. Ruff, and
each of them, as true and lawful attorneys and agents to execute in his or her
name, place and stead (in any such capacity) such registration statement and
all instruments necessary or advisable in connection therewith, to attest the
seal of the Company thereon and to file the same with the Securities and
Exchange Commission, each of said attorneys and agents to have power to act
with or without the others and to have full power and authority to do and
perform in the name and on behalf of each of such officers and directors, or
both, as the case may be, every act whatsoever necessary or advisable to be
done in the premises as fully and to all intents and purposes as any such
officer or director might or could do in person.

* * *

<PAGE>

Exhibit 99(a)

I hereby consent to the use of my name in this Registration Statement on Form
S-4 of Duke Power Company and any amendment thereto, as the same appears
therein under the captions "Summary of Joint Proxy Statement-Prospectus--The
Merger" and "The Merger--Management and Operations after the Merger" with
respect to my becoming a director of Duke Power Company.

/s/ Dennis R. Hendrix
-------------------------------------
Dennis R. Hendrix

March 13, 1997

<PAGE>

Exhibit 99(b)

/s/ Paul M. Anderson
-------------------------------------
Paul M. Anderson

March 13, 1997

<PAGE>

EXHIBIT 99(C)

DUKE POWER COMPANY
ANNUAL MEETING OF SHAREHOLDERS
APRIL 24, 1997 AT 11:00 A.M.
O.J. MILLER AUDITORIUM--ELECTRIC CENTER
526 SOUTH CHURCH STREET
CHARLOTTE, NC

(MAP OF AREA OF DOWNTOWN CHARLOTTE, N.C.
SURROUNDING SITE OF ANNUAL MEETING)

DUKE POWER COMPANY

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints W.H. Grigg, R.J. Osborne and Ellen T. Ruff,
and each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all shares of
Common Stock of Duke Power Company of the undersigned at the annual meeting of
shareholders to be held in the Electric Center, 526 South Church Street,
Charlotte, North Carolina, on April 24, 1997, and at any postponement or
adjournment thereof, upon all subjects that may come before the meeting,
including the matters described in the Joint Proxy Statement-Prospectus
furnished herewith, subject to any directions indicated on the reverse side of
this card. IF NO DIRECTIONS ARE GIVEN, THE INDIVIDUALS DESIGNATED ABOVE WILL
VOTE FOR THE ELECTION OF ALL CLASS III DIRECTOR NOMINEES, IN ACCORD WITH THE
DIRECTORS' RECOMMENDATION ON THE OTHER SUBJECTS LISTED ON THE REVERSE OF THIS
CARD AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING.

Your vote for the election of Class III directors may be indicated on the
reverse. Nominees are Robert J. Brown, George Dean Johnson, Jr., James G.
Martin and R.B. Priory.

PLEASE SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>

DEAR SHAREHOLDER:

I hope you will plan to join me and your fellow shareholders at Duke Power's
annual meeting, which begins at 11 a.m., Thursday, April 24, 1997, in the O.J.
Miller Auditorium, located in the Electric Center, 526 South Church St.,
Charlotte.

Shareholders will be asked to vote on a number of important matters, including a
proposal relating to the proposed merger involving PanEnergy Corp. I encourage
you to take the time to read your Joint Proxy Statement-Prospectus carefully so
you will be fully informed about all the issues presented by your board of
directors.

Whether or not you are able to join us, please record your vote, sign and return
your completed ballot as soon as possible.

Thank you for your support. I hope to see you personally on April 24 in
Charlotte.

Sincerely,

W.H. Grigg
Chairman of the Board
and Chief Executive Officer

- --------------------------------------------------------------------------------

DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2 AND 3
- -------------------------------------------------

1. Approval of (i) the proposed issuance by Duke Power Company ("Duke") of
shares of its common stock (the "Duke Common Stock") pursuant to the terms of
an Agreement and Plan of Merger among Duke, Duke Transaction Corporation
("Duke Transaction"), and PanEnergy Corp ("PanEnergy"), pursuant to which
Duke Transaction will be merged with and into PanEnergy (the "Merger"), and
(ii) the amendment of Duke's Articles of Incorporation to increase the number
of authorized shares of Duke Common Stock from 300,000,000 to 500,000,000 and
to change the name of Duke to Duke Energy Corporation at the effective time
of the Merger.

2. Election of four directors who will constitute Class III of the Board of
Directors.

To vote your shares for all director nominees, or to withhold voting for all
nominees, mark the appropriate box. If you do not wish your shares voted for
a particular director nominee, mark the "For*" box and enter name(s) of the
exceptions in the space provided.

3. Ratification of appointment of auditors.

If you plan to attend this meeting, please indicate on the ballot below and
see reverse for additional information. This detachable portion may be
presented for admission to the meeting.

| | BEFORE MAILING, PLEASE DETACH THIS PORTION | |
\ / \ / \ / \ /
- --------------------------------------------------------------------------------

DUKE POWER

Withhold
1. For Against Abstain 2. For All For* Authority
[_] [_] [_] [_] [_] [_]

*Except for the following:
3. For Against Abstain
[_] [_] [_] ____________________________

____________________________

If you plan to attend the meeting, please mark: [_]

SHARES HELD AS OF FEBRUARY 28, 1997

SHARES ACCOUNT NUMBER

SIGN HERE AS
NAME(S) ____________________________________________
APPEARS ABOVE X ____________________________________________ Date ______,1997
Please sign this proxy and return it promptly whether or not you
plan to attend the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the
capacity in which you are signing. Each joint owner should sign. If
you do attend the meeting and decide to vote by ballot, such vote
will supersede this proxy.

<PAGE>

DUKE POWER COMPANY

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Your vote for the election of Class III directors may be indicated on the
reverse. Nominees are Robert J. Brown, George Dean Johnson, Jr., James G.
Martin and R.B. Priory.

PLEASE SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>

TO PARTICIPANTS IN THE DUKE POWER COMPANY RETIREMENT SAVINGS PLAN:

Because you are a participant in Duke Power's Retirement Savings Plan (the
"Plan"), we are sending the enclosed Joint Proxy Statement-Prospectus to you.
You have the right with respect to the shares credited to your Plan account to
direct voting of those shares on any issues presented at Duke Power's 1997
annual shareholders meeting on April 24 in Charlotte.

If you fail to return a completed proxy, shares held in your Plan account will
be voted by the Plan trustee acting in its discretion. Even though you may have
already returned a proxy for shares you own outside the Plan, I encourage you to
exercise your rights by completing and returning the enclosed proxy.

Sincerely,

W.H. Grigg
Chairman of the Board
and Chief Executive Officer

Directors recommend a vote "For" Items 1,2 and 3
- --------------------------------------------------------------------------------
1. Approval of (i) the proposed issuance by Duke Power Company ("Duke") of
shares of its common stock (the "Duke Common Stock") pursuant to the terms of
an Agreement and Plan of Merger among Duke, Duke Transaction Corporation
("Duke Transaction"), and PanEnergy Corp ("PanEnergy"), pursuant to which
Duke Transaction will be merged with and into PanEnergy (the "Merger"), and
(ii) the amendment of Duke's Articles of Incorporation to increase the number
of authorized shares of Duke Common Stock from 300,000,000 to 500,000,000 and
to change the name of Duke to Duke Energy Corporation at the effective time
of the Merger.

2. Election of four directors who will constitute Class III of the Board of
Directors.

3. Ratification of appointment of auditors.

[BEFORE MAILING, PLEASE DETACH THIS PORTION]

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DUKE POWER

Withhold
1. For Against Abstain 2. For All For* Authority
[_] [_] [_] [_] [_] [_]

*Except for the following:
3. For Against Abstain
[_] [_] [_] -------------------------

-------------------------

If you plan to attend the meeting, please mark: [_]

SHARES HELD AS OF FEBRUARY 28, 1997

SHARES ACCOUNT NUMBER

SIGN HERE AS
NAME(S) -------------------------------------------
APPEARS ABOVE X___________________________________________ Date ______,1997
Please sign this proxy and return it promptly whether or not you
plan to attend the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the
capacity in which you are signing. Each joint owner should sign. If
you do attend the meeting and decide to vote by ballot, such vote
will supersede this proxy.

<PAGE>

DUKE POWER COMPANY

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Your vote for the election of Class III directors may be indicated on the
reverse. Nominees are Robert J. Brown, George Dean Johnson, Jr., James G.
Martin and R.B. Priory.

PLEASE SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>

TO PARTICIPANTS IN THE DUKE POWER COMPANY EMPLOYEES' STOCK OWNERSHIP PLAN:

Because you are a participant in Duke Power's Employee Stock Ownership Plan
("ESOP"), we are sending the enclosed Joint Proxy Statement-Prospectus to you.
You have the right with respect to the shares credited to your ESOP account to
direct the voting of those shares on any issues presented at Duke Power's 1997
annual shareholders meeting on April 24 in Charlotte.

If you do not complete and return this proxy, shares held in your ESOP account
will be voted by the ESOP trustee acting in its discretion. Even though you may
have already returned another proxy for shares you own outside the ESOP, I
encourage you to exercise your voting rights by completing and returning the
enclosed proxy.

Sincerely,

W.H. Grigg
Chairman of the Board
and Chief Executive Officer

DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2 AND 3
- --------------------------------------------------------------------------------

2. Election of four directors who will constitute Class III of the Board of
Directors.

3. Ratification of appointment of auditors.

[BEFORE MAILING, PLEASE DETACH THIS PORTION]

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DUKE POWER

Withhold
1. For Against Abstain 2. For All For* Authority
[_] [_] [_] [_] [_] [_]

*Except for the following:
3. For Against Abstain
[_] [_] [_] ___________________

___________________

If you plan to attend the meeting, please mark: [_]

SHARES HELD AS OF FEBRUARY 28, 1997

SHARES ACCOUNT NUMBER

SIGN HERE AS
NAME(S) -----------------------------------------
APPEARS ABOVE X _________________________________________ Date ______,1997
Please sign this proxy and return it promptly whether or not you
plan to attend the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the
capacity in which you are signing. Each joint owner should sign. If
you do attend the meeting and decide to vote by ballot, such vote
will supersede this proxy.

<PAGE>

EXHIBIT 99(D)

- --------------------------------------------------------------------------------
PANENERGY CORP PROXY PLEASE MARK VOTE[_] OR [X]

P.O. BOX 1642, HOUSTON, TEXAS 77251-1642

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON APRIL 24, 1997.

As evidenced by the signature(s) on the reverse side hereof, the undersigned
hereby appoints Paul F. Ferguson, Jr., Carl B. King, and Robert W. Reed, and
any one of them, as Proxies, each with full power of substitution, to
represent and vote all shares of the Common Stock of PanEnergy Corp
("PanEnergy") which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of PanEnergy to be held at the
J.W. Marriott Hotel, 5150 Westheimer, Houston, Texas, on April 24, 1997, at
10:00 a.m., and at any postponements or adjournments thereof, with all powers
the undersigned would possess if personally present. This card also provides
voting instructions for shares, if any, held in PanEnergy's Dividend
Reinvestment and Stock Purchase Plan and, if applicable, shares held in the
various employee benefit plans.

ITEM 1--ADOPTION OF MERGER AGREEMENT

[_] FOR [_] AGAINST [_] ABSTAIN

ITEM 2--ELECTION OF DULY NOMINATED DIRECTORS

Nominees: Paul M. Anderson FOR all nominees Withheld
William T. Esrey (except as marked (as to all
Ann Maynard Gray to the contrary nominees)
Matthew R. Simmons as provided)
[_] [_]

(To withhold authority to vote for any individual nominee write that nominee's
name in the space provided below)

- --------------------------------------------------------------------------------

ITEM 3--AT THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING.

(Continued and to be signed on reverse side)

- --------------------------------------------------------------------------------

THIS PROXY WILL BE VOTED AS DIRECTED
OR, IF NO DIRECTION IS INDICATED,
WILL BE VOTED "FOR" ITEMS 1 AND

Dated ___________________________, 1997

_____________________________________
Signature(s) of Stockholder(s)

WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN,
OR IN OTHER REPRESENTATIVE
CAPACITIES, PLEASE GIVE YOUR FULL
TITLE AS SUCH. A PROXY FOR SHARES
HELD IN JOINT OWNERSHIP SHOULD BE
SIGNED BY EACH OWNER.

PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ABOVE, MARK ANY ADDRESS
CORRECTION, DATE, AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.