81020--3/2/2006--UNION_LIGHT_HEAT_&_POWER

related topics

{cost, regulation, environmental}

{condition, economic, financial}

{loss, insurance, financial}

{competitive, industry, competition}

{cost, contract, operation}

{capital, credit, financial}

{operation, natural, condition}

{property, intellectual, protect}

{debt, indebtedness, cash}

{acquisition, growth, future}

{financial, litigation, operation}

We rely on access to short-term money markets and longer-term capital markets to finance our capital requirements and support our liquidity needs, and our access to those markets can be adversely affected by a number of conditions, many of which are beyond our control. We will be exposed to market risk and may incur losses from the trading operations and/or activities we take to mitigate our commodity exposure. We are exposed to credit risk of counterparties with whom we do business. Poor investment performance of pension plan holdings and other factors impacting pension plan costs could unfavorably impact our liquidity and results of operations. Under Cinergy s holding company structure, the payment of dividends to shareholders is subject to the ability of its subsidiaries to pay dividends to it. We could incur a significant tax liability and our results of operations and cash flows may be negatively affected if the Internal Revenue Service denies or otherwise makes unusable certain tax credits related to our coal and synthetic fuel business or if such credits are phased out based on crude oil prices. We are currently involved in litigation with the United States and several states and environmental groups regarding certain environmental matters. We are subject to numerous environmental laws and regulations that require significant capital expenditures, increase our cost of operations, and which may impact or limit our business plans, or expose us to environmental liabilities. Deregulation or restructuring in the electric industry may result in increased competition and unrecovered costs that could adversely affect our financial condition, results of operations, or cash flows and our utilities businesses. Efforts associated with completing the merger with Duke are complex and may divert management s focus and resources from other strategic opportunities. Risks Related to the Industry Our results of operations may be negatively affected by sustained downturns or sluggishness in the economy, including low levels in the market prices of commodities, all of which are beyond our control. Our business is subject to extensive regulation that will affect our operations and costs. Certain events in the energy markets beyond our control have increased the level of public and regulatory scrutiny in the energy industry and in the capital markets which could have a negative impact on our financial condition or results of operations or access to capital. Potential terrorist activities or military or other actions could adversely affect our business. Increased environmental regulation and liabilities could subject us to significant compliance and remediation costs that adversely affect our results of operations.

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81020--3/2/2006--UNION_LIGHT_HEAT_&_POWER_CO