Moody's may upgrade Duke Energy

Moody's Investors Service placed the long-term ratings of Duke Energy Corp. and its principal subsidiary, Duke Capital LLC, and Duke's Prime-2 short-term rating for commercial paper under review for possible upgrade. Duke Capital's Prime-3 short-term rating was affirmed.

Moody's also affirmed the ratings for Cinergy Corp., Cincinnati Gas and Electric, Union Light, Heat & Power Co. and PSI Energy Inc. The merger of Duke and Cinergy is now expected to be closed in April.

The review for possible upgrade of Duke reflects the lower business risk profile that will result from the reorganization associated with the merger with Cinergy and an expected reduction in the company's leverage, the agency said.

Commensurate with the merger's closing, Duke will distribute its ownership interests in Duke Capital to a new parent holding company with Duke and Duke Capital becoming affiliate subsidiaries of a new parent holding company. This new parent holding company will be named Duke Energy Corp. The remaining regulated utility business will be renamed Duke Power LLC and will be the obligor for the existing debt obligations of the pre-merger Duke. Duke Power LLC will have a relatively low business risk profile as an integrated regulated electric utility in a fairly supportive regulatory environment, the agency said.

The review for possible upgrade also reflects Moody's expectation that the new parent company will take additional actions to achieve a projected capital structure for Duke Power LLC of about 52% equity in 2007.

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