COMMERCIAL BUSINESS UNIT

Our Commercial Business Unit continued to make profitable contributions to Cinergy’s overall growth in 2004. For example, we experienced gross margins on power marketing, trading and origination contracts that were $24 million higher than the previous year. We accomplished this result by trading approximately 185 million megawatt-hours of electricity with 286 active counterparties, placing this business in the top 10 U.S. power trading businesses. And, we accomplished this result in a very low risk manner — with an average daily value at risk (VaR) of only $1.3 million.

We moved approximately 1.5 billion cubic feet of gas per day to U.S. markets, managed 38.5 billion cubic feet of storage capacity, and traded approximately 52 billion cubic feet per day with 661 active counterparties. This performance placed our gas business in the top 10 U.S. gas trading businesses.

We delivered these results while conservatively managing risk exposure. Daily VaR for commercial gas in 2004 averaged approximately $1.8 million. Although growth in our gas margins was essentially flat in 2004, we took steps — such as the expansion of gas trading into Canada with our March acquisition of Calgary-based ProMark — that will position gas margins to continue contributing solidly to Cinergy’s earnings in 2005 and beyond.

Cinergy Solutions, which provides cogeneration, combined heat and power, and energy management and outsourcing services, continued to build its customer base for future growth. In 2004, Cinergy Solutions began operating its largest project ever, the 755-megawatt, gas-fired Texas City plant near Houston, Texas. This state-of-the-art project, which is jointly owned by BP and Cinergy Solutions, is significantly reducing emissions and was named Power magazine’s top plant in 2004.

We remain strongly committed to growing this business unit. You have my commitment that we will manage the necessary incremental risk required to meet our growth expectations.