<PAGE>

--------------------------------------------------------------------------------
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                _______________


                                   FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended September 30, 2001              Commission File Number 0-23977


                           DUKE CAPITAL CORPORATION
            (Exact name of Registrant as Specified in its Charter)


          Delaware                                          51-0282142
(State or Other Jurisdiction of                (IRS Employer Identification No.)
        Incorporation)


                            526 South Church Street
                           Charlotte, NC 28202-1904
                   (Address of Principal Executive Offices)
                                  (Zip code)

                                 704-594-6200
             (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes  X  No ___
                                        ---

All of the Registrant's common shares are directly owned by Duke Energy
Corporation (File No. 1-4928), which files reports and proxy materials pursuant
to the Securities Exchange Act of 1934.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.

Number of shares of Common Stock, no par value, outstanding at October 31, 2001
 .......................1,010
<PAGE>

                           DUKE CAPITAL CORPORATION
              FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001
                                     INDEX

<TABLE>
<CAPTION>
Item                                                                                          Page
----                                                                                          ----

                                PART I. FINANCIAL INFORMATION
<S>                                                                                           <C>
1.   Financial Statements...................................................................    1
         Consolidated Statements of Income for the Three and Nine Months Ended
           September 30, 2001 and 2000......................................................    1
         Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
           September 30, 2001 and 2000......................................................    2
         Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000.........    3
         Consolidated Statements of Comprehensive Income for the Three and Nine Months
           Ended September 30, 2001 and 2000................................................    5
         Notes to Consolidated Financial Statements.........................................    6
2.   Management's Discussion and Analysis of Results of Operations and Financial Condition..   17

                                 PART II. OTHER INFORMATION

1.   Legal Proceedings......................................................................   28
5.   Other Information......................................................................   28
6.   Exhibits and Reports on Form 8-K.......................................................   29
     Signatures.............................................................................   30
</TABLE>



SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

From time to time, the Company's reports, filings and other public announcements
may include assumptions, projections, expectations, intentions or beliefs about
future events. These statements are intended as "forward-looking statements"
under the Private Securities Litigation Reform Act of 1995. The Company cautions
that assumptions, projections, expectations, intentions or beliefs about future
events may and often do vary from actual results and the differences between
assumptions, projections, expectations, intentions or beliefs and actual results
can be material. Accordingly, there can be no assurance that actual results will
not differ materially from those expressed or implied by the forward-looking
statements. Some of the factors that could cause actual achievements and events
to differ materially from those expressed or implied in such forward-looking
statements include state, federal and foreign legislative and regulatory
initiatives that affect cost and investment recovery, have an impact on rate
structures and affect the speed and degree to which competition enters the
natural gas industry; industrial, commercial and residential growth in the
service territories of the Company's subsidiaries; the weather and other natural
phenomena; the timing and extent of changes in commodity prices, interest rates
and foreign currency exchange rates; changes in environmental and other laws and
regulations to which the Company is subject or other external factors over which
the Company has no control; the results of financing efforts, including the
Company's ability to obtain financing on favorable terms, which can be affected
by the Company's credit rating and general economic conditions; level of
creditworthiness of counterparties to transactions; growth in opportunities for
the Company's business units; and the effect of accounting policies issued
periodically by accounting standard-setting bodies.

                                       i
<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)
                                 (In millions)

<TABLE>
<CAPTION>
                                                          Three Months Ended             Nine Months Ended
                                                             September 30,                 September 30,
                                                       ------------------------      -------------------------
                                                          2001          2000            2001           2000
                                                       ----------    ----------      ----------     ----------
<S>                                                    <C>           <C>             <C>            <C>
Operating Revenues
    Sales, trading and marketing of natural gas
       and petroleum products                          $    5,183    $    6,177      $   21,962     $   15,115
    Trading, marketing and generation of
       electricity                                          7,025         5,906          16,475          9,943
    Transportation and storage of natural gas                 253           253             732            779
    Gain on sale of equity interest                             -           407               -            407
    Other                                                     614           268           1,262            865
                                                       ----------    ----------      ----------     ----------
          Total operating revenues                         13,075        13,011          40,431         27,109
                                                       ----------    ----------      ----------     ----------

Operating Expenses
    Natural gas and petroleum products
      purchased                                             4,745         6,018          20,961         14,519
    Purchased power                                         6,178         5,332          14,244          8,744
    Other operation and maintenance                           871           576           2,015          1,602
    Depreciation and amortization                             216           155             545            432
    Property and other taxes                                   41            39             125            112
                                                       ----------    ----------      ----------     ----------
          Total operating expenses                         12,051        12,120          37,890         25,409
                                                       ----------    ----------      ----------     ----------

Operating Income                                            1,024           891           2,541          1,700

Other Income and Expenses                                      32            13             100             49
Interest Expense                                              155           187             470            455
Minority Interest Expense                                      51            20             234            118
                                                       ----------    ----------      ----------     ----------

Earnings Before Income Taxes                                  850           697           1,937          1,176
Income Taxes                                                  320           276             705            447
                                                       ----------    ----------      ----------     ----------

Income Before Cumulative Effect of Change
  in Accounting Principle                                     530           421           1,232            729
Cumulative Effect of Change in Accounting
  Principle, Net of Tax                                         -             -             (69)             -
                                                       ----------    ----------      ----------     ----------

Net Income                                             $      530    $      421      $    1,163     $      729
                                                       ==========    ==========      ==========     ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       1
<PAGE>

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (In millions)

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                              September 30,
                                                                        -------------------------
                                                                           2001          2000
                                                                        ----------    ----------
<S>                                                                     <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                    $   2,566     $    1,006
                                                                        ---------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES
      Capital expenditures, net of cash acquired                           (3,302)        (2,997)
      Investment expenditures                                              (1,014)          (920)
      Proceeds from sale of equity interest                                     -            400
      Proceeds from sales and other, net                                      303            (97)
                                                                        ---------     ----------
                     Net cash used in investing activities                 (4,013)        (3,614)
                                                                        ---------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Proceeds from the issuance of long-term debt                          2,025          2,202
      Payments for the redemption of long-term debt                          (505)          (641)
      Net change in notes payable and commercial paper                       (703)         1,372
      Distributions to minority interests                                       -         (1,217)
      Contributions from minority interests                                     -            741
      Capital contributions from parent                                       650            200
      Other, net                                                              (10)            26
                                                                        ---------     ----------
                     Net cash provided by financing activities              1,457          2,683
                                                                        ---------     ----------

Net increase in cash and cash equivalents                                      10             75
Cash and cash equivalents at beginning of period                              587            585
                                                                        ---------     ----------
Cash and cash equivalents at end of period                              $     597     $      660
                                                                        =========     ==========

Supplemental Disclosures
      Cash paid for interest, net of amount capitalized                 $     450     $      420
      Cash paid for income taxes                                        $     194     $       71
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       2
<PAGE>

                          CONSOLIDATED BALANCE SHEETS
                                 (In millions)


<TABLE>
<CAPTION>
                                                                                 September 30,        December 31,
                                                                                     2001                 2000
                                                                                  (unaudited)
                                                                                 -------------        ------------
<S>                                                                              <C>                  <C>
ASSETS
Current Assets
      Cash and cash equivalents                                                  $         597        $        587
      Receivables                                                                        7,776               7,588
      Inventory                                                                            420                 350
      Unrealized gains on trading and hedging transactions                               2,141              10,248
      Other                                                                                660               1,243
                                                                                 -------------        ------------
           Total current assets                                                         11,594              20,016
                                                                                 -------------        ------------

Investments and Other Assets
      Investments in affiliates                                                          1,293               1,336
      Goodwill, net                                                                      1,624               1,504
      Notes receivable                                                                     501                 462
      Unrealized gains on trading and hedging transactions                               2,561               3,621
      Other                                                                              2,597               1,789
                                                                                 -------------        ------------
           Total investments and other assets                                            8,576               8,712
                                                                                 -------------        ------------

Property, Plant and Equipment
      Cost                                                                              19,647              17,160
      Less accumulated depreciation and amortization                                     2,987               2,621
                                                                                 -------------        ------------
           Net property, plant and equipment                                            16,660              14,539
                                                                                 -------------        ------------

Regulatory Assets and Deferred Debits                                                      181                 255
                                                                                 -------------        ------------







Total Assets                                                                     $      37,011        $     43,522
                                                                                 =============        ============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       3
<PAGE>

                          CONSOLIDATED BALANCE SHEETS
                      (In millions, except share amounts)

<TABLE>
<CAPTION>
                                                                        September 30,      December 31,
                                                                            2001               2000
                                                                         (unaudited)
                                                                        -------------      ------------
<S>                                                                     <C>                <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
      Accounts payable                                                  $       6,955      $      6,804
      Notes payable and commercial paper                                          906             1,570
      Taxes accrued                                                               599               407
      Interest accrued                                                            165               146
      Current maturities of long-term debt                                        244               284
      Unrealized losses on trading and hedging transactions                     1,670            10,226
      Other                                                                     1,890             1,634
                                                                        -------------      ------------
           Total current liabilities                                           12,429            21,071
                                                                        -------------      ------------

Long-term Debt                                                                  8,763             7,254
                                                                        -------------      ------------

Deferred Credits and Other Liabilities
      Deferred income taxes                                                     2,314             1,645
      Unrealized losses on trading and hedging transactions                     1,091             3,222
      Other                                                                       582               611
                                                                        -------------      ------------
           Total deferred credits and other liabilities                         3,987             5,478
                                                                        -------------      ------------

Guaranteed Preferred Beneficial Interests in Subordinated
      Notes of Duke Capital Corporation                                           824               823
                                                                        -------------      ------------

Minority Interests                                                              2,528             2,435
                                                                        -------------      ------------

Common Stockholder's Equity
      Common stock, no par, 3,000 shares authorized,
           1,010 shares outstanding                                                 -                 -
      Paid-in capital                                                           4,176             3,400
      Retained Earnings                                                         4,328             3,185
      Accumulated other comprehensive loss                                        (24)             (124)
                                                                        -------------      ------------
           Total common stockholder's equity                                    8,480             6,461
                                                                        -------------      ------------


Total Liabilities and Stockholder's Equity                              $      37,011      $     43,522
                                                                        =============      ============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       4
<PAGE>

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (Unaudited)
                                 (In millions)

<TABLE>
<CAPTION>
                                                                           Three Months Ended            Nine Months Ended
                                                                              September 30,                September 30,
                                                                        ------------------------     ------------------------
                                                                           2001          2000           2001          2000
                                                                        ----------    ----------     ----------    ----------
<S>                                                                     <C>           <C>            <C>           <C>
Net Income                                                              $      530    $      421     $    1,163    $      729

Other Comprehensive Income (Loss), Net of Tax
      Cumulative effect of change in accounting principle                        -             -           (908)            -
      Foreign currency translation adjustment                                 (125)          (24)          (309)          (72)
      Net unrealized (losses) gains on cash flow hedges                        (20)            -          1,122             -
      Reclassification into earnings                                          (285)            -            195             -
                                                                        ----------    ----------      ---------    ----------
          Total other comprehensive (loss) income                             (430)          (24)           100           (72)
                                                                        ----------    ----------      ---------    ----------

Total Comprehensive Income                                              $      100    $      397      $   1,263    $      657
                                                                        ==========    ==========      =========    ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       5
<PAGE>

                  Notes to Consolidated Financial Statements
                                  (Unaudited)

1.  General

Duke Capital Corporation (collectively with its subsidiaries, "the Company") is
a wholly owned subsidiary of Duke Energy Corporation (Duke Energy) and serves as
the parent for certain of Duke Energy's  non-utility and other operations. The
Company provides financing and credit enhancement services for its subsidiaries
and conducts its operating activities through its six business segments.

Natural Gas Transmission provides interstate transportation and storage of
natural gas for customers primarily in the Mid-Atlantic, New England and
southeastern states. Its operations are conducted primarily through Duke Energy
Gas Transmission Corporation. The interstate natural gas transmission and
storage operations are subject to the rules and regulations of the Federal
Energy Regulatory Commission (FERC).

Field Services gathers, processes, transports, markets and stores natural gas
and produces, transports, markets and stores natural gas liquids (NGLs). Its
operations are conducted primarily through Duke Energy Field Services, LLC
(DEFS), a limited liability company that is approximately 30% owned by Phillips
Petroleum. Field Services operates gathering systems in western Canada and 11
contiguous states that serve major natural gas-producing regions in the Rocky
Mountain, Permian Basin, Mid-Continent, East Texas-Austin Chalk-North Louisiana,
as well as onshore and offshore Gulf Coast areas.

North American Wholesale Energy's (NAWE's) activities include asset development,
operation and management, primarily through Duke Energy North America, LLC
(DENA), and commodity sales and services related to natural gas and power,
primarily through Duke Energy Trading and Marketing, LLC (DETM). DETM is a
limited liability company that is approximately 40% owned by Exxon Mobil
Corporation. NAWE conducts its business throughout the U.S. and Canada.

International Energy conducts its operations through Duke Energy International,
LLC. International Energy's activities include asset development, operation and
management of natural gas and power facilities and energy trading and marketing
of natural gas and electric power. This activity is targeted in the Latin
American, Asia-Pacific and European regions.

Other Energy Services is a combination of businesses that provide engineering,
consulting, construction and integrated energy solutions worldwide, primarily
through Duke Engineering & Services, Inc., Duke/Fluor Daniel (D/FD) and
DukeSolutions, Inc. D/FD is a 50/50 partnership between the Company and Fluor
Enterprises, Inc.

Duke Ventures is comprised of other diverse businesses, primarily operating
through Crescent Resources, LLC (Crescent), DukeNet Communications, LLC
(DukeNet) and Duke Capital Partners, LLC (DCP). Crescent develops high-quality
commercial, residential and multi-family real estate projects and manages land
holdings primarily in the southeastern U.S. DukeNet provides fiber optic
networks for industrial, commercial and residential customers. DCP, a wholly
owned merchant finance company, provides financing, investment banking and asset
management services to wholesale and commercial energy markets.

2.  Summary of Significant Accounting Policies

Consolidation. The Consolidated Financial Statements include the accounts of the
Company and all majority-owned subsidiaries after the elimination of significant
intercompany transactions and balances. These Consolidated Financial Statements
reflect all normal recurring adjustments that are, in the opinion of management,
necessary to present fairly the financial position and results of operations for
the respective periods. Amounts reported in the Consolidated Statements of
Income are not necessarily indicative of amounts expected for the respective
annual periods due to the effects of seasonal temperature variations on energy
consumption and the timing of maintenance of certain electric generating units.

                                       6
<PAGE>

Accounting for Hedges and Commodity Trading Activities. All derivatives are
recorded on the Consolidated Balance Sheets at their fair value as Unrealized
Gains or Unrealized Losses on Trading and Hedging Transactions, as appropriate.
On the date swaps, futures, forwards or option contracts are entered into, the
Company either designates the derivative as held for trading (trading
instruments); as a hedge of a forecasted transaction or future cash flows (cash
flow hedges); as a hedge of a recognized asset, liability, or firm commitment
(fair value hedge); as a normal purchase or sale contract; or leaves the
derivative undesignated for contracts not afforded special hedge accounting.

The Company also formally assesses, both at the hedge's inception and on an
ongoing basis, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged
items. The time value of options of $3 million was excluded in the assessment of
hedge effectiveness for the three months ended September 30, 2001.

Commodity Trading. Prior to settlement of any energy contract held for trading
purposes, favorable or unfavorable price movement is reported as Natural Gas and
Petroleum Products Purchased, or Purchased Power, as appropriate, in the
Consolidated Statements of Income. An offsetting amount is recorded on the
Consolidated Balance Sheets as Unrealized Gains or Unrealized Losses on Trading
and Hedging Transactions. When a contract to sell energy is physically settled,
the fair value entries are reversed and the gross amount invoiced to the
customer is included as Sales, Trading and Marketing of Natural Gas and
Petroleum Products, or Trading and Marketing of Electricity, as appropriate, in
the Consolidated Statements of Income. Similarly, when a contract to purchase
energy is physically settled, the purchase price is included as Natural Gas and
Petroleum Products Purchased, or Purchased Power, as appropriate, in the
Consolidated Statements of Income. If a contract is not physically settled, the
unrealized gain or loss on the Consolidated Balance Sheets is reversed and
reclassified to a receivable or payable account. For income statement purposes,
the contract is treated as a pure financial instrument, so financial settlement
has no effect on the Consolidated Statements of Income.

Cash Flow Hedges. Changes in the fair value of a derivative that is designated
and qualifies as a cash flow hedge are included in the Consolidated Statements
of Comprehensive Income as Other Comprehensive Income (OCI) until earnings are
affected by the hedged item. Settlement amounts and ineffective portions of cash
flow hedges are removed from OCI and recorded in the Consolidated Statements of
Income in the same accounts as the item being hedged. The Company discontinues
hedge accounting prospectively when it is determined that the derivative no
longer qualifies as an effective hedge, or when it is no longer probable that
the hedged transaction will occur. When hedge accounting is discontinued, the
derivative will continue to be carried on the Consolidated Balance Sheets at its
fair value with subsequent changes in its fair value recognized in current-
period earnings. Gains and losses related to discontinued hedges that were
accumulated in OCI will remain in OCI until earnings are affected by the hedged
item, unless it is no longer probable that the hedged transaction will occur.
Under these circumstances, gains and losses that were accumulated in OCI will be
recognized in current-period earnings.

Fair Value Hedges. The Company enters into interest rate swaps to convert some
of its fixed-rate long-term debt to floating rate debt and designates such
interest rate swaps as fair value hedges. The Company also enters into
electricity derivative instruments such as swaps, futures and forwards to manage
the fair value risk associated with certain of its unrecognized firm commitments
to sell generated power due to changes in the market price of power. Upon
designation of such derivatives as fair value hedges, prospective changes in
fair value of the derivative and the hedged item are recognized in current
earnings. All components of each derivative gain or loss are included in the
assessment of hedge effectiveness, unless otherwise noted.

                                       7
<PAGE>

Cumulative Effect of Change in Accounting Principle. The Company adopted
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," on January 1, 2001. In
accordance with the transition provisions of SFAS No. 133, the Company recorded
a net-of-tax cumulative effect adjustment of $69 million as a reduction in
earnings. The net-of-tax cumulative effect adjustment reducing OCI and Common
Stockholder's Equity was $908 million. For the nine months ended September 30,
2001, the Company reclassified as earnings $504 million of losses from OCI for
derivatives included in the transition adjustment related to hedge transactions
that settled. The amount reclassified out of OCI will be different from the
amount included in the transition adjustment due to market price changes since
January 1, 2001.

Currently, there are ongoing discussions surrounding the implementation and
interpretation of SFAS No. 133 by the Financial Accounting Standards Board's
(FASB) Derivative Implementation Group. In June 2001, the FASB approved Issue
C15, "Scope Exceptions: Normal Purchases and Normal Sales Exception for Option-
Type Contracts and Forwards Contracts in Electricity." Under the guidance of
Issue C15, buyers and sellers of electricity are not required to mark-to-market
contracts meeting certain criteria. Option-type contracts include capacity
contracts that allow the electric industry to meet volatile demand by providing
the option to purchase electricity as needed. The FASB concluded if such
contracts meet the criteria outlined in Issue C15, they could qualify as a
normal purchase or sale under SFAS No. 133. This new SFAS No. 133 implementation
guidance became effective July 1, 2001. For contracts previously designated as
hedges, the Company treated the change as a de-designation under SFAS No. 133,
and the fair value for each qualifying contract on July 1 became the contract's
net carrying amount. On October 10, 2001 the FASB approved revisions to the
qualifying criteria outlined in Issue C15. The revised guidance becomes
effective January 1, 2002. The Company is continuing to determine the impact on
its future results of the revision.

New Accounting Standards. In June 2001, the FASB issued SFAS No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets."

SFAS No. 141 requires all business combinations initiated (as defined by the
standard) after June 30, 2001 to be accounted for using the purchase method.
Companies may no longer use the pooling method of accounting for future
combinations.

SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and
will be adopted by the Company as of January 1, 2002. SFAS No. 142 requires that
goodwill no longer be amortized over an estimated useful life, as previously
required. Instead, goodwill amounts will be subject to a fair-value-based annual
impairment assessment. The standard also requires acquired intangible assets to
be recognized separately and amortized as appropriate. The Company expects that
the adoption of SFAS No. 142 will have an impact on future financial statements
due to the discontinuation of goodwill amortization expense. For the nine months
ended September 30, 2001, amortization expense for goodwill was $102 million.
The FASB and the Emerging Issues Task Force continue to field questions
surrounding the transition provisions and clarification of key aspects of the
standard. The Company is preparing to implement the new standard and has not yet
determined the impact on its consolidated results of operations, cash flows or
financial position.

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 provides the accounting requirements for retirement
obligations associated with tangible long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, and early adoption is
permitted. The Company is currently assessing the new standard and has not yet
determined the impact on its consolidated results of operations, cash flows or
financial position.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."  The new rules supersede SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The new rules retain many of the fundamental recognition and
measurement provisions, but significantly change the criteria for classifying an

                                       8
<PAGE>

asset as held-for-sale. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The Company is currently assessing the new standard and
has not yet determined the impact on its consolidated results of operations,
cash flows or financial position.

Reclassifications. Certain prior period amounts have been reclassified in the
Consolidated Financial Statements and in Note 5 to conform to the current
presentation.

Excise and Other Pass Through Taxes. The Company generally presents revenues net
of pass through taxes on the Consolidated Statements of Income.

3.  Derivative Instruments, Hedging Activities and Credit Risk

Commodity Cash Flow Hedges. Certain subsidiaries of the Company are exposed to
market fluctuations in the prices of various commodities related to their
ongoing power generating and natural gas gathering, processing and marketing
activities. The Company closely monitors the potential impacts of commodity
price changes, and where appropriate, uses various instruments to lock in
margins for a portion of its future sales and generation revenues. These
commodity instruments, consisting of swaps, futures, forwards and collared
options, serve as cash flow hedges for natural gas, electricity and NGL
transactions. The maximum term over which the Company is hedging exposures to
the price variability of these commodities is 12 years.

For the nine months ended September 30, 2001, the ineffective portion of
commodity cash flow hedges and the amount recognized for transactions that no
longer qualified as cash flow hedges were not material. As of September 30,
2001, $47 million of after-tax deferred net losses on derivative instruments
accumulated in OCI are expected to be reclassified to earnings during the next
three months as the hedged transactions occur. These losses will generally be
more than offset by the related sales and generation revenues. However, due to
the volatility of the commodities markets, the value of the derivative
instrument is subject to change prior to its reclassification into earnings.

Commodity Fair Value Hedges. Certain subsidiaries of the Company are exposed to
changes in fair value of certain if its unrecognized firm commitments to sell
generated power due to market fluctuations of the underlying commodity prices.
The Company actively evaluates such changes in fair value of such unrecognized
firm commitments due to commodity price changes, and where appropriate, uses
various instruments to hedge its market risk associated with those firm
commitments. These commodity instruments, consisting of swaps, futures and
forwards, serve as fair value hedges for the firm commitments associated with
generated power sales. The maximum term over which the Company is hedging
exposures to the market risk of such items is ten years. For the nine months
ended September 30, 2001, the ineffective portion of commodity fair value hedges
was not material.

Energy Trading Contracts. The Company provides energy supply, structured
origination, trading and marketing, risk management and commercial optimization
services to large energy customers, energy aggregators and other wholesale
companies. These services require the Company to utilize natural gas,
electricity, NGL and transportation derivatives and contracts that expose it to
a variety of market risks.  The Company manages its trading exposure with strict
policies that limit its market risk and require daily reporting to management of
potential financial exposure. These policies include statistical risk tolerance
limits using historical price movements to calculate a daily earnings at risk
measurement.

Interest Rate (Fair Value or Cash Flow) Hedges. The Company is exposed to risk
resulting from changes in interest rates as a result of its issuance of
variable-rate debt, fixed-rate securities, commercial paper and auction market
preferred stock, as well as interest rate swaps and interest rate lock
agreements. The Company manages its interest rate exposure by limiting its
variable-rate and fixed-rate exposures to certain percentages of total
capitalization, as set by policy, and by monitoring the effects of market
changes in interest rates. For the nine months ended September 30, 2001, the
Company's existing interest rate derivative instruments and related

                                       9
<PAGE>

ineffectiveness were not material to its results of operations, cash flows or
financial position.

Foreign Currency (Fair Value or Cash Flow) Hedges. The Company is exposed to
foreign currency risk that arises from investments in international affiliates
and businesses owned and operated in foreign countries. To mitigate risks
associated with foreign currency fluctuations, when possible, contracts are
denominated in or indexed to the U.S. dollar, or investments may not be hedged
through debt denominated in the foreign currency. The Company also uses foreign
currency derivatives, when possible, to manage its risk related to foreign
currency fluctuations. For the nine months ended September 30, 2001, the impact
of the Company's existing foreign currency derivative instruments were not
material to its results of operations, cash flows or financial position.

Market and Credit Risk. The Company's principal markets for power and natural
gas marketing services are industrial end-users and utilities located throughout
the U.S., Canada, Asia Pacific, Europe and Latin America. The Company has
concentrations of receivables from natural gas and electric utilities and their
affiliates, as well as industrial customers throughout these regions. These
concentrations of customers may affect the Company's overall credit risk in that
certain customers may be similarly affected by changes in economic, regulatory
or other factors. Where exposed to credit risk, the Company analyzes the
counterparties' financial condition prior to entering into an agreement,
establishes credit limits and monitors the appropriateness of these limits on an
ongoing basis. As of September 30, 2001, the Company had a pre-tax provision of
$90 million related to energy sales in California. See Note 8 for further
information regarding credit exposure.

The change in market value of New York Mercantile Exchange-traded futures and
options contracts requires daily cash settlement in margin accounts with
brokers. Physical forward contracts and financial derivatives are generally
settled at the expiration of the contract term or each delivery period; however,
these transactions are also generally subject to margin agreements with the
majority of the Company's counterparties.

4.  Related Party Transactions

Certain balances due to or from related parties included in the Consolidated
Balance Sheets at September 30, 2001 and December 31, 2000 are as follows:

===============================================================
                                September 30,     December 31,
(In millions)                       2001              2000
---------------------------------------------------------------
Receivables                        $ 545             $ 317
Notes receivable                       6                 -
Accounts payable                     841               322
Taxes accrued                        438               290
===============================================================

Related parties consist of entities within the consolidated groups of the
Company and Duke Energy, as well as entities accounted for under the equity
method. Intercompany transactions include, but are not limited to, intercompany
sales, notes, management fees and tax payments made on behalf of related
parties.

                                      10
<PAGE>

5.  Business Segments

The Company's reportable segments are strategic business units that offer
different products and services and are each managed separately. Management
evaluates segment performance based on earnings before interest and taxes (EBIT)
after deducting related minority interests. EBIT is calculated as follows:

===============================================================================
Reconciliation of Operating Income to EBIT (In millions)
-------------------------------------------------------------------------------
                                    Three Months Ended      Nine Months Ended
                                       September 30,          September 30,
                                   --------------------------------------------
                                      2001       2000       2001         2000
                                   --------------------------------------------
Operating income                     $1,024      $ 891     $2,541       $1,700
Other income and expenses                32         13        100           49
                                   --------------------------------------------
EBIT                                 $1,056      $ 904     $2,641       $1,749
===============================================================================

EBIT should not be considered as an alternative to, or more meaningful than, net
income or cash flow as determined in accordance with generally accepted
accounting principles as an indicator of the Company's operating performance or
liquidity. The Company's EBIT is not necessarily comparable to a similarly
titled measure of another company.

Beginning January 1, 2001, the Company discontinued allocating corporate
governance costs for its business segment analysis. Certain reclassifications
have been made to information for the period ended September 30, 2000 to conform
to the current year presentation.

                                      11
<PAGE>

<TABLE>
<CAPTION>
============================================================================================================================
Business Segment Data (In millions)
----------------------------------------------------------------------------------------------------------------------------
                                                                                              Depreciation     Capital and
                                 Unaffiliated   Intersegment       Total                           and         Investment
                                   Revenues       Revenues       Revenues        EBIT/a/      Amortization   Expenditures/c/
                               ---------------------------------------------------------------------------------------------
<S>                              <C>            <C>            <C>            <C>             <C>            <C>
Three Months Ended
September 30, 2001
Natural Gas Transmission            $   238       $    33        $   271         $  143           $ 35           $  238
Field Services                        1,343           361          1,704             75             81              148
North American
     Wholesale Energy                10,744            69         10,813            657             28            1,104
International Energy                    390             5            395             74             24              106
Other Energy Services                   102            41            143            (22)            34                2
Duke Ventures                           258             -            258             51              6              192
Other Operations/b/                       -            (4)            (4)            41              8               25
Eliminations and
     Minority interests                   -           (505)         (505)            37              -                -
                               ---------------------------------------------------------------------------------------------
   Total consolidated               $13,075       $     -        $13,075         $1,056           $216           $1,815
----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
September 30, 2000
Natural Gas Transmission            $   247       $    32        $   279         $  132           $ 33           $  447
Field Services                        2,087           440          2,527             85             67               53
North American
     Wholesale Energy                 9,883            43          9,926            192             16              529
International Energy                    270             -            270             83             25               99
Other Energy Services                   (14)           90             76            (69)             3                6
Duke Ventures                           538             -            538            445              4              188
Other Operations/b/                       -           (68)           (68)            (9)             7              206
Eliminations and
     Minority interests                   -          (537)          (537)            45              -                -
                               ---------------------------------------------------------------------------------------------
   Total consolidated               $13,011       $     -        $13,011         $  904           $155           $1,528
============================================================================================================================
</TABLE>

/a/EBIT includes intersegment sales accounted for at prices representative of
unaffiliated party transactions.
/b/Includes certain unallocated corporate items.
/c/Capital and Investment Expenditures are gross of cash received from
acquisitions.

                                      12
<PAGE>

<TABLE>
<CAPTION>
============================================================================================================================
Business Segment Data (In millions)
----------------------------------------------------------------------------------------------------------------------------
                                                                                              Depreciation     Capital and
                                 Unaffiliated   Intersegment       Total                           and         Investment
                                   Revenues       Revenues       Revenues        EBIT/a/      Amortization   Expenditures/c/
                               ---------------------------------------------------------------------------------------------
<S>                              <C>            <C>            <C>            <C>             <C>            <C>
Nine Months Ended
September 30, 2001
Natural Gas Transmission            $   712       $   105        $   817         $  460            $106          $  524
Field Services                        6,230         1,410          7,640            282             219             455
North American
     Wholesale Energy                31,492           333         31,825          1,335              68           2,430
International Energy                  1,287             9          1,296            218              72             264
Other Energy Services                   317            76            393             (9)             41              10
Duke Ventures                           393             -            393             94              15             555
Other Operations/b/                       -           118            118             69              24              84
Eliminations and
     Minority interests                   -        (2,051)        (2,051)           192               -               -
                               ---------------------------------------------------------------------------------------------
   Total consolidated               $40,431       $     -        $40,431         $2,641            $545          $4,322
----------------------------------------------------------------------------------------------------------------------------

Nine Months Ended
September 30, 2000
Natural Gas Transmission            $   748       $    98        $   846         $  418            $ 94          $  914
Field Services                        5,231           917          6,148            229             176             268
North American
     Wholesale Energy                19,426           235         19,661            348              46           1,224
International Energy                    725             2            727            274              74             929
Other Energy Services                   370           119            489            (52)              9              22
Duke Ventures                           609             -            609            478              12             352
Other Operations/b/                       -           (62)           (62)           (74)             21             308
Eliminations and
     Minority interests                   -        (1,309)        (1,309)           128               -               -
                               ---------------------------------------------------------------------------------------------
   Total consolidated               $27,109       $     -        $27,109         $1,749            $432          $4,017
============================================================================================================================
</TABLE>

/a/ EBIT includes intersegment sales accounted for at prices representative of
unaffiliated party transactions.
/b/ Includes certain unallocated corporate items.
/c/ Capital and Investment Expenditures are gross of cash received from
acquisitions.

Segment assets in the accompanying table are net of intercompany advances,
intercompany notes receivable and investments in subsidiaries.

==========================================================================
Segment Assets (In millions)
--------------------------------------------------------------------------
                                            September 30,    December 31,
                                                2001             2000
                                          --------------------------------
Natural Gas Transmission                       $ 4,960         $ 4,995
Field Services                                   7,205           6,266
North American Wholesale Energy                 15,719          25,989
International Energy                             4,226           4,551
Other Energy Services                              192             543
Duke Ventures                                    1,842           1,967
Other Operations and eliminations/a/             2,867            (789)
                                          --------------------------------
   Total consolidated                          $37,011         $43,522
==========================================================================

/a/ Includes certain unallocated corporate items.

                                      13
<PAGE>

6.  Debt

In February 2001, DEFS issued $250 million of 6.875% Senior Unsecured Notes due
2011. The proceeds were used to repay DEFS' remaining balance of commercial
paper that was issued in connection with the March 2000 combination of Field
Services' natural gas gathering, processing and marketing business with Phillips
Petroleum's gas gathering, processing and marketing unit. In addition, in
November 2001 DEFS issued $300 million of 5.75% Senior Unsecured Notes due 2006.
The proceeds will be used to repay short-term debt.

The Company had a $141 million note payable to D/FD as of December 31, 2000. As
of September 30, 2001, the note had increased $412 million to $553 million. The
weighted average interest rates were 3.87% and 4.44% for the quarter and nine
months ended September 30, 2001, respectively.

7.  Equity Offerings

In March 2001, Duke Energy completed an offering of approximately 31 million
units of mandatorily convertible securities (Equity Units) at a price of $25 per
unit before underwriting discount and other offering expenses. The Equity Units
consist of senior notes of the Company and Duke Energy purchase contracts
obligating the investors to purchase shares of Duke Energy's common stock in
2004. Also in March 2001, the underwriters exercised options granted to them to
purchase an additional four million  Equity Units at the original issue prices,
less underwriting discounts, to cover over-allotments made during the offering.
Total net proceeds from the offering were approximately $850 million and were
used to repay short-term debt and for other corporate purposes.

8.  Commitments and Contingencies

California Issues. Duke Energy, certain of the Company's subsidiaries, and three
current or former executives have been named as defendants, among numerous other
corporate and individual defendants, in one or more of a total of six lawsuits
brought by or on behalf of electricity consumers in the State of California who
seek damages as a result of the defendants' alleged unlawful manipulation of the
California wholesale electricity markets. DENA and DETM have been named among 16
defendants in a class action lawsuit (the Gordon lawsuit) filed against
companies identified as "generators and traders" of electricity in California
markets. DETM also was named as one of numerous defendants in four additional
lawsuits, including two class actions (the Hendricks and Pier 23 Restaurant
lawsuits), filed against generators, marketers and traders and other unnamed
providers of electricity in California markets. A sixth lawsuit (the Bustamante
lawsuit), was brought by the Lieutenant Governor of the State of California and
a State Assemblywoman, and includes Duke Energy, certain of the Company's
subsidiaries and three current or former executives of Duke Energy among the
numerous other corporate and individual defendants. The Gordon and Hendricks
class action lawsuits were filed in the Superior Court of the State of
California, San Diego County, in November 2000. Three other lawsuits were filed
in January 2001, one in Superior Court, San Diego County, and the other two in
Superior Court, County of San Francisco. The Bustamante lawsuit was filed in May
2001 in Superior Court, Los Angeles County. These lawsuits generally allege that
the defendants manipulated the wholesale electricity markets in violation of
state laws against unfair and unlawful business practices and state antitrust
laws. Plaintiffs in these lawsuits seek aggregate damages of billions of
dollars. The lawsuits each seek the disgorgement of alleged unlawfully obtained
revenues for sales of electricity and, in four lawsuits, an award of treble
damages. While these matters referenced above are in their earliest stages,
management believes, based on its analysis to date of the factual background and
the claims asserted in these matters, that their resolution will not have a
material adverse effect on the Company's consolidated results of operations,
cash flows or financial position.

In addition to the lawsuits described in the preceding paragraph, several
investigations and regulatory proceedings have commenced at the state and
federal levels into the causes of the high wholesale electricity prices in the
western U.S. At the federal level, there are numerous proceedings before the
FERC. Some parties to those proceedings have made claims for billions of dollars
of refunds from sellers of wholesale electricity, including DETM. Some parties

                                      14
<PAGE>

have also sought to revoke the authority of DETM and other DENA-affiliated
electricity marketers to sell electricity at market-based rates. The FERC is
also conducting its own investigation to determine the causes of the high
wholesale electricity prices. As a result of these proceedings, the FERC has
ordered some sellers, including DETM, to refund, or offset against outstanding
accounts receivable, certain amounts billed for sales of electricity in excess
of a FERC established proxy price. The proxy price is intended to represent what
the FERC believes would have been the market- clearing price in a perfectly
competitive market. In June 2001, DETM offset approximately $20 million against
amounts owed to it by the California Independent System Operator and the
California Power Exchange for sales of electricity during January and February
2001. This offset reduced the $110 million reserve established in the fourth
quarter of 2000 to $90 million. Proceedings are ongoing to determine, among
other things, the amount of any refunds or offsets for periods prior to January
2001 and the method to be used to determine the proxy price in future months.

At the state level, the California Public Utilities Commission has formal and
informal investigations in place primarily to determine if power plant operators
in California, including DENA, have improperly "withheld," either economically
or physically, generation output from the market to manipulate market prices. In
addition, the California State Senate formed a Select Committee to Investigate
Price Manipulation of the Wholesale Energy Market (Select Committee). The Select
Committee has served a subpoena on several of the Company's subsidiaries seeking
data concerning their California market activities. The Select Committee has
heard testimony from several witnesses but no one from the Company has been
called to testify to date.

The California Attorney General also has an investigation under way to determine
if any market participants engaged in illegal activity, including antitrust
activity, in the course of their sales of electricity into the wholesale markets
in the western U.S. The Attorneys General of Washington and Oregon have joined
the California Attorney General in a joint investigation of the electricity
markets.

The California Attorney General has also convened a grand jury to determine
whether criminal charges should be brought against any market participants. To
date, no Company employee has been called to testify before the grand jury nor
have any criminal charges been filed against the Company or any of its officers,
directors or employees in connection with the wholesale electricity markets in
the western U.S.

Throughout 2001, the Company has conducted its business in California to supply
the maximum possible electricity to meet the needs of the state while limiting
its exposure to non-creditworthy counterparties and managing the output
limitations on its power plants imposed by applicable permits and laws. Since
December 31, 2000, the Company has closely managed the balance of questionable
receivables, and believes that the current pre-tax provision of $90 million is
appropriate. No additional provisions for California receivables have been
recorded in 2001. Management believes, based on its analysis to date of the
factual background and the claims asserted in these matters, that their
resolution will not have a material adverse effect on the Company's consolidated
results of operations, cash flows or financial position.

Litigation. Exxon Mobil Corporation Arbitration. In December 2000, three
subsidiaries of the Company initiated binding arbitration against three
subsidiaries of the Exxon Mobil Corporation (collectively, the "Exxon Mobil
entities") concerning the parties' joint ownership of DETM and certain related
affiliates (collectively, the "Ventures"). At issue is a buy-out right provision
in the parties' agreement. The agreements governing the ownership of the
Ventures contain provisions giving the Company the right to purchase the Exxon
Mobil entities' 40% interest in the Ventures in the event material business
disputes arise between the Ventures' owners. Such disputes have arisen, and
consequently, the Company exercised its right to buy the Exxon Mobil entities'
interest in the Ventures. The Company claims that refusal by the Exxon Mobil
entities to honor the exercise is a breach of the buy-out right provision, and
seeks specific performance of the provision. The Company has also asserted
various additional claims against the Exxon Mobil entities for breach of the
agreements governing the Ventures.

                                      15
<PAGE>

In January 2001, the Exxon Mobil entities asserted counterclaims in the
arbitration and claims in a separate Texas State court action alleging that the
Company breached its obligations to the Ventures and to the Exxon Mobil
entities. In April 2001, the state court entered an order staying the state
court action, and compelling the Exxon Mobil entities to arbitrate their state
court claims. To date, the Exxon Mobil entities have not sought to challenge
this order in an appellate court. In early October, a hearing was held before an
arbitration panel regarding the buyout right and the various claims of the
Company and Exxon Mobil against each other. Although the hearing is complete
from an evidentiary standpoint, both parties are submitting final briefs, and
oral arguments will take place before the panel in November 2001. The Company
expects a final decision from the panel before the end of the year. Management
believes that the final disposition of this action will not have a material
adverse effect on the Company's consolidated results of operations, cash flows
or financial position.

The Company and its subsidiaries are involved in other legal, tax and regulatory
proceedings before various courts, regulatory commissions and governmental
agencies regarding performance, contracts and other matters arising in the
ordinary course of business, some of which involve substantial amounts.
Management believes that the final disposition of these proceedings will not
have a material adverse effect on consolidated results of operations, cash flows
or financial position.

Proposed Acquisition of Westcoast Energy Inc. In September 2001, Duke Energy
announced the proposed acquisition of Westcoast Energy Inc. (Westcoast) for $8.5
billion, including assumed debt of approximately $5 billion. Westcoast,
headquartered in Vancouver, British Columbia, is a North American energy company
with interests in natural gas gathering, processing, transmission, storage and
distribution, as well as power generation, international energy businesses, and
financial, information technology, and energy services businesses. The proposed
transaction provides for the acquisition of all outstanding common shares of
Westcoast in exchange for a combination of cash, Duke Energy common shares and
exchangeable shares of a Canadian subsidiary of the Company such that 50% of the
consideration will be paid in cash and 50% will be paid in stock. The
transaction is expected to close by the end of the first quarter 2002, subject
to approval of Westcoast's shareholders and regulatory approvals. The
transaction will be accounted for using the purchase method of accounting.
Further details about the proposed acquisition are in the Company's report on
Form 8-K, filed with the Securities and Exchange Commission on September 21,
2001.

                                      16
<PAGE>

Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.

INTRODUCTION

Duke Capital Corporation (collectively with its subsidiaries, "the Company") is
a wholly owned subsidiary of Duke Energy Corporation (Duke Energy). The Company
provides financing and credit enhancement services for its subsidiaries. The
Company conducts its operation activities through its six business segments. See
Note 1 to the Consolidated Financial Statements for further descriptions.

Management's Discussion and Analysis should be read in conjunction with the
Consolidated Financial Statements.

RESULTS OF OPERATIONS

For the quarter ended September 30, 2001, net income was $530 million compared
to $421 million for 2000. The increase was primarily due to earnings from
business expansion and growth that occurred during 2001, and decreased interest
expense. Partially offsetting these items were the prior year pre-tax gain of
$407 million on the sale of the Company's 20% interest in BellSouth Carolina PCS
and increased minority interest expense.

For the nine months ended September 30, 2001, net income was $1,163 million
compared to $729 million for 2000. The increase was primarily due to earnings
from business expansion and growth that occurred during 2001, partially offset
by the prior year gain on the sale of the Company's interest in BellSouth
Carolina PCS, increased interest and minority interest expense, and a current
year one-time net-of-tax charge of $69 million. This one-time charge was the
cumulative effect of a change in accounting principle for the January 1, 2001
adoption of Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities."

Operating income increased $133 million to $1,024 million for the quarter, and
increased $841 million to $2,541 million for the nine months ended September 30,
2001. Earnings before interest and taxes (EBIT) increased $152 million to $1,056
million for the quarter, and increased $892 million to $2,641 million for the
nine months ended September 30, 2001. Operating income and EBIT are affected by
the same fluctuations for the Company and each of its business segments. Prior
year business segment EBIT amounts have been restated to conform to the current
year presentation of corporate cost allocations. See Note 5 for additional
information on business segments.

EBIT is calculated as follows:

===============================================================================
Reconciliation of Operating Income to EBIT (In millions)
-------------------------------------------------------------------------------
                               Three Months Ended          Nine Months Ended
                                  September 30,              September 30,
                              -------------------------------------------------
                                  2001      2000           2001         2000
                              -------------------------------------------------
Operating income                 $1,024     $ 891         $2,541       $1,700
Other income and expenses            32        13            100           49
                              -------------------------------------------------
EBIT                             $1,056     $ 904         $2,641       $1,749
===============================================================================

EBIT should not be considered as an alternative to, or more meaningful than, net
income or cash flow as determined in accordance with generally accepted
accounting principles as an indicator of the Company's operating performance or
liquidity. The Company's EBIT may not be comparable to a similarly titled
measure of another company.

                                      17
<PAGE>

Business segment EBIT is summarized in the following table and is discussed
thereafter.

<TABLE>
<CAPTION>
=============================================================================================
EBIT by Business Segment (In millions)
---------------------------------------------------------------------------------------------
                                             Three Months Ended          Nine Months Ended
                                                September 30,              September 30,
                                          ---------------------------------------------------
                                              2001        2000           2001         2000
                                          ---------------------------------------------------
<S>                                       <C>             <C>           <C>          <C>
Natural Gas Transmission                     $  143       $ 132         $  460       $  418
Field Services                                   75          85            282          229
North American Wholesale Energy                 657         192          1,335          348
International Energy                             74          83            218          274
Other Energy Services                           (22)        (69)            (9)         (52)
Duke Ventures                                    51         445             94          478
Other Operations                                 41          (9)            69          (74)
EBIT attributable to minority interests          37          45            192          128
                                          ---------------------------------------------------
Consolidated EBIT                            $1,056       $ 904         $2,641       $1,749
=============================================================================================
</TABLE>

Other Operations primarily include certain unallocated corporate costs. Included
in the amounts discussed hereafter are intercompany transactions that are
eliminated in the Consolidated Financial Statements.

Natural Gas Transmission

<TABLE>
<CAPTION>
=============================================================================================
                                             Three Months Ended          Nine Months Ended
                                                September 30,              September 30,
                                          ---------------------------------------------------
(In millions, except where noted)             2001        2000           2001         2000
---------------------------------------------------------------------------------------------
<S>                                       <C>             <C>           <C>          <C>
Operating revenues                           $  271       $ 279         $  817       $  846
Operating expenses                              131         144            363          439
                                          ---------------------------------------------------
Operating income                                140         135            454          407
Other income, net of expenses                     3          (3)             6           11
                                          ---------------------------------------------------
EBIT                                         $  143       $ 132         $  460       $  418
                                          ===================================================

Throughput - TBtu/a/                            376         346          1,221        1,223
=============================================================================================
</TABLE>

/a/ Trillion British thermal units

For the quarter and nine months ended September 30, 2001, EBIT for Natural Gas
Transmission increased $11 million and $42 million, respectively, compared to
the same periods in 2000. The quarterly results benefited from earnings of
Market Hub Partners, which was acquired in September 2000, increased earnings
from other miscellaneous projects, and lower operating expenses. The nine-month
period also benefited from earnings of Market Hub Partners as well earnings from
East Tennessee Natural Gas Company (East Tennessee), which was acquired in March
2000, and increased earnings from other miscellaneous projects.

For both the quarter and nine months ended September 30, 2001, the decrease in
operating revenues, which was offset by a decrease in operating expenses,
resulted from reduced rates that went into effect in December 2000. These
reduced rates reflect lower recovery requirements for operating costs at Texas
Eastern Transmission, LP, primarily system fuel and Federal Energy Regulatory
Commission (FERC) Order 636 transition costs.

                                      18
<PAGE>

Field Services

<TABLE>
<CAPTION>
=============================================================================================
                                             Three Months Ended          Nine Months Ended
                                                September 30,              September 30,
                                          ---------------------------------------------------
(In millions, except where noted)             2001        2000           2001         2000
---------------------------------------------------------------------------------------------
<S>                                       <C>             <C>           <C>          <C>
Operating revenues                           $1,704       $2,527        $7,640       $6,148
Operating expenses                            1,588        2,405         7,213        5,835
                                          ---------------------------------------------------
Operating income                                116          122           427          313
Other income, net of expenses                    (5)           9            (5)           5
Minority interest expense                        36           46           140           89
                                          ---------------------------------------------------
EBIT                                         $   75       $   85        $  282       $  229
                                          ===================================================

Natural gas gathered and
 processed/transported, TBtu/d/a/               8.8          8.2           8.5          7.4
Natural gas liquids (NGL)
 production, MBbl/d/b/                        412.8        417.0         396.9        349.9
Natural gas marketed, Tbtu/d                    1.6          0.5           1.6          0.5
Average natural gas price per MMBtu/c/       $ 2.88       $ 4.27        $ 4.88       $ 3.42
Average NGL price per gallon/d/              $ 0.39       $ 0.55        $ 0.49       $ 0.51
=============================================================================================
</TABLE>

/a/ Trillion British thermal units per day
/b/ Thousand barrels per day
/c/ Million British thermal units
/d/ Does not reflect results of commodity hedges

EBIT for Field Services decreased $10 million for the quarter ended September
30, 2001, compared to the same period in 2000, primarily due to commodity
prices. The decease in revenues was driven by a $1.39 decrease in the average
natural gas price per MMBtu and a $0.16 decrease in the average NGL price per
gallon. The decrease in expenses resulted primarily from the interaction of
Field Services' natural gas and NGL purchase contracts with lower commodity
prices, and increased cost reduction efforts and plant consolidation.

Field Services' EBIT increased $53 million for the nine months ended September
30, 2001. The increase was primarily due to the addition of Phillips Petroleum's
gas gathering, processing and marketing unit's midstream natural gas business in
March 2000, which accounted for the majority of the 13% increase in NGL
production. A $1.46 increase in the average natural gas price per MMBtu,
slightly offset by a $0.02 decrease in the average NGL price per gallon, also
contributed to increased revenues. Expenses also increased from the interaction
of Field Services' natural gas and NGL purchase contracts with higher natural
gas prices, but were slightly offset by increased cost reduction efforts and
plant consolidation.

                                      19
<PAGE>

North American Wholesale Energy (NAWE)

<TABLE>
<CAPTION>
==================================================================================================
                                                Three Months Ended            Nine Months Ended
                                                   September 30,                September 30,
                                             -----------------------------------------------------
(In millions, except where noted)               2001         2000           2001           2000
--------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>           <C>            <C>
Operating revenues                            $10,813       $ 9,926       $ 31,825       $ 19,661
Operating expenses                             10,155         9,740         30,455         19,285
                                             -----------------------------------------------------
Operating income                                  658           186          1,370            376
Other income, net of expenses                      (5)           (2)            (1)            (7)
Minority interest (benefit) expense                (4)           (8)            34             21
                                             -----------------------------------------------------
EBIT                                          $   657       $   192       $  1,335       $    348
                                             =====================================================

Natural gas marketed, TBtu/d                     12.4          12.0           12.4           11.7
Electricity marketed and traded, GWh/a/        88,801        89,967        199,643        198,518
Proportional megawatt capacity in
 operation                                                                   6,799          5,115
Proportional megawatt capacity owned/b/                                     13,119          7,925
==================================================================================================
</TABLE>

/a/ Gigawatt-hours
/b/ Includes under construction or under contract at period end

For the quarter and nine months ended September 30, 2001, EBIT for NAWE
increased $465 million and $987 million, respectively, compared with the same
periods in 2000. The increases were a result of enhanced performance in natural
gas and electricity trading and services and increased earnings from generation
assets, resulting primarily from a 33% increase in proportional megawatt
capacity in operation. In addition, when compared to the prior year, EBIT
increased $60 million for the quarter and $78 million for the nine months from
the sale of interests in generating facilities as a result of NAWE executing its
portfolio management strategy.

Losses at Duke Energy Trading and Marketing, LLC (DETM) resulted in a minority
interest benefit for the quarter ended September 30, 2001 while year-to-date
earnings resulted in a $13 million increase in minority interest expense when
compared to the prior year.

                                      20
<PAGE>

International Energy

<TABLE>
<CAPTION>
==================================================================================================
                                                Three Months Ended            Nine Months Ended
                                                   September 30,                September 30,
                                             -----------------------------------------------------
(In millions, except where noted)               2001         2000           2001           2000
--------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>           <C>            <C>
Operating revenues                            $   395       $   270       $  1,296       $    727
Operating expenses                                331           187          1,093            470
                                             -----------------------------------------------------
Operating income                                   64            83            203            257
Other income, net of expenses                      15             7             33             35
Minority interest expense                           5             7             18             18
                                             -----------------------------------------------------
EBIT                                          $    74       $    83       $    218       $    274
                                             =====================================================

Proportional megawatt capacity in
 operation                                                                   4,370          4,306
Proportional megawatt capacity owned/a/                                      4,925          4,394
Proportional maximum pipeline
 capacity in operation , MMcf/d/b/                                             255            255
Proportional maximum pipeline
 capacity owned/a/, MMcf/d                                                     363            255
==================================================================================================
</TABLE>

/a/ Includes under construction or under contract at period end
/b/ Million cubic feet per day

International Energy's EBIT decreased $9 million for the quarter and $56 million
for the nine months ended September 30, 2001, compared to the same periods in
2000. The decrease for the nine months was due primarily to a $54 million gain
recognized in the first quarter of 2000 from the sale of liquefied natural gas
ships. The decrease for both periods includes the effects of reduced power
consumption in Brazil due to the government's mandatory energy rationing, which
started during the second quarter of 2001, caused by a period of severe drought
conditions. Both periods were also affected by the negative impact of foreign
currency devaluation on the earnings of the Latin American operations. The
effects of the water rationing in Brazil and the foreign currency devaluation
associated with Latin America investments were partially offset by inflation
adjustment clauses in certain Brazilian power contracts and stronger operational
results from other country operations in Latin America, Asia Pacific and Europe.

Other Energy Services

<TABLE>
<CAPTION>
==================================================================================================
                                                Three Months Ended            Nine Months Ended
                                                   September 30,                September 30,
                                             -----------------------------------------------------
(In millions)                                   2001         2000           2001           2000
--------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>           <C>
Operating revenues                              $143         $ 76            $393          $489
Operating expenses                               165          145             402           541
                                             -----------------------------------------------------
EBIT                                            $(22)        $(69)           $ (9)         $(52)
==================================================================================================
</TABLE>

EBIT for Other Energy Services improved $47 million for the quarter and $43
million for the nine months ended September 30, 2001, compared to the same
periods in 2000. The current year quarterly results included approximately $29
million of charges at Duke Engineering & Services, Inc. (DE&S) for goodwill
impairment. These charges were offset by the prior year's quarterly loss on a
Duke/Fluor Daniel (D/FD) project of approximately $42 million and an
approximately $27 million charge at DE&S to reflect a more conservative revenue
recognition approach on its projects. Year-to-date results were driven by the
same items that affected the quarter. Year-to-date operating revenues and
expenses also decreased compared to 2000 due to cessation of retail commodity
trading activity at DukeSolutions, Inc.

                                      21
<PAGE>

Duke Ventures

<TABLE>
<CAPTION>
==================================================================================================
                                                Three Months Ended            Nine Months Ended
                                                   September 30,                September 30,
                                             -----------------------------------------------------
(In millions)                                   2001         2000           2001           2000
--------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>           <C>
Operating revenues                              $ 258        $ 538           $ 393         $ 609
Operating expenses                                207           93             299           131
                                             -----------------------------------------------------
EBIT                                            $  51        $ 445           $  94         $ 478
==================================================================================================
</TABLE>

Duke Ventures EBIT decreased $394 million for the quarter and $384 million for
the nine months ended September 30, 2001, compared with the same periods in
2000. The decrease for both periods was primarily attributable to DukeNet
Communications' 2000 sale of its 20% interest in BellSouth Carolina PCS to
BellSouth Corporation for a pre-tax gain of $407 million. This decrease was
minimally offset by increased earnings at Crescent Resources, LLC, related
primarily to increased commercial project sales, and the absence of losses
related to DukeNet Communications' BellSouth PCS investment. Excluding the gain
on sale from the prior year results, operating revenues and expenses increased
due to Duke Capital Partners, which commenced operations in late 2000.

Other Impacts on Net Income

For the quarter and nine months ended September 30, 2001, interest expense
decreased $32 million and increased $15 million, respectively, compared to the
prior year. The decrease for the quarter was primarily due to lower interest
rates, and the increase for the nine-month period was primarily due to new debt
issuances.

Minority interest expense increased $31 million for the quarter and $116 million
for the nine months ended September 30, 2001 compared to the same periods in
2000. Minority interest expense related to joint ventures increased $20 million
for the quarter and $72 million for the nine-month period. The increase for both
periods was primarily attributable to increased minority interest expense
resulting from Field Services' joint venture. Minority interest expense also
increased $11 million for the quarter and $44 million for the nine-month period
due to the formation of Catawba River Associates, LLC in September 2000.

During the first quarter of 2001, the Company recorded a one time net-of-tax
charge of $69 million related to the cumulative effect of change in accounting
principle for the January 1, 2001 adoption of SFAS No. 133. This charge related
to contracts that either did not meet the definition of a derivative under
previous accounting guidance or do not qualify as hedges under new accounting
requirements. See Notes 2 and 3 for further discussion.

The net aggregate change in unrealized gains and losses since December 31, 2000
is due primarily to the implementation of SFAS No. 133 for hedge positions, as
well as price volatility and the magnitude of trading activity that the Company
has entered into to take advantage of that volatility.

LIQUIDITY AND CAPITAL RESOURCES

Operating Cash Flows

During the nine months ended September 30, 2001 cash flows from operating
activities increased $1,560 million over the same period in 2000. This increase
is due primarily to price risk management activities, including reduced margin
deposit requirements compared to 2000. Operating cash flows were also higher in
2001 due to tax payments made in 2000 related to the 1999 sale of the midwest
pipelines.

Investing Cash Flows

Net cash used in investing activities was $4,013 million for the nine months
ended September 30, 2001 compared to $3,614 million for the same period in 2000.
The increase in investing activities reflects additional expansion and
development expenditures, especially related to NAWE's generating facilities,

                                      22
<PAGE>

refurbishment and upgrades to existing assets and minor acquisitions of various
businesses and assets. These increases were partially offset by the $390 million
acquisition of East Tennessee, the $280 million tender offer for Companhia de
Geracao de Energia Eletrica Paranapanema and the $250 million acquisition of
Market Hub Partners in 2000. The prior year expenditures were also offset by
cash proceeds from the 2000 sale of the Company's 20% interest in BellSouth
Carolina PCS to BellSouth Corporation for approximately $400 million.

In February 2001, the Company and The Williams Companies, Inc. completed their
purchase of Gulfstream Natural Gas System, LLC from Coastal Corporation. The
proposed Gulfstream pipeline will be able to deliver approximately 1.1 billion
cubic feet of natural gas per day and will extend from Mobile, Alabama, across
the Gulf of Mexico and into Florida. The target in-service date for the $1.6
billion project, of which the Company owns half, is June 2002.

Financing Cash Flows

The Company's growth opportunities, along with debt repayments and operating
requirements, are expected to be funded by cash from operations, external
financing and the proceeds from certain asset sales. Growth opportunities are
dependent upon favorable market conditions. Management believes the Company has
adequate financial resources to meet its future needs.

In February 2001, Duke Energy Field Services, LLC (DEFS) issued $250 million of
6.875% Senior Unsecured Notes due 2011. The proceeds were used to repay DEFS'
remaining balance of commercial paper that was issued in connection with the
March 2000 combination of Field Services' natural gas gathering, processing and
marketing business and Phillips Petroleum's gas gathering, processing and
marketing unit. In addition, in November 2001 DEFS issued $300 million of 5.75%
Senior Unsecured Notes due 2006. The proceeds will be used to repay short-term
debt.

The Company had a $141 million note payable to D/FD as of December 31, 2000. As
of September 30, 2001, the note had increased $412 million to $553 million. The
weighted average interest rates were 3.87% and 4.44% for the quarter and nine
months ended September 30, 2001, respectively.

In March 2001, Duke Energy completed an offering of approximately 31 million
units of mandatorily convertible securities (Equity Units) at a price of $25 per
unit before underwriting discount and other offering expenses. The Equity Units
consist of senior notes of the Company and purchase contracts obligating the
investors to purchase shares of Duke Energy's common stock in 2004. Also in
March 2001, the underwriters exercised options granted to them to purchase an
additional four million Equity Units at the original issue prices, less
underwriting discounts, to cover over-allotments made during the offering. Total
net proceeds from the offering were approximately $850 million and were used to
repay short-term debt and for other corporate purposes.

Under its commercial paper facilities and extendable commercial notes programs
(ECNs), the Company had the ability to borrow up to $3.6 billion and $4.0
billion at September 30, 2001 and December 31, 2000, respectively. These
facilities do not have termination dates.

A summary of the available commercial paper and ECNs as of September 30, 2001 is
as follows:

===============================================================================
                         Duke Capital   Duke Energy     Duke Energy
(In billions)            Corporation   Field Services  International     Total
-------------------------------------------------------------------------------
Commercial Paper             $1.55          $0.68           $0.37/a/     $2.60
ECNs                          1.00              -               -         1.00
                   ------------------------------------------------------------
Total                        $2.55          $0.68           $0.37        $3.60
===============================================================================

/a/ Includes ability to issue medium term notes.

                                      23
<PAGE>

Severe price movement in the energy markets for trading and hedging activities
may result in a rapid change in the availability of cash. To meet these demands,
in April 2001, the Company entered into a $1.075 billion unsecured bank credit
facility that allows it to issue letters of credit in lieu of actual cash
deposits to meet margin requirements. Half of this facility matures in 2002 and
the remainder matures in 2004.

The total amount of the Company's bank credit and construction facilities
available at September 30, 2001 and December 31, 2000, was approximately $3.4
billion and $3.0 billion, respectively. Certain of the credit facilities support
the issuance of commercial paper; therefore, the issuance of commercial paper
reduces the amount available under these credit facilities. At September 30,
2001, approximately $1.5 billion was outstanding under the commercial paper and
ECN programs, and approximately $38 million of borrowings were outstanding under
the bank credit and construction facilities. These facilities expire from 2001
to 2004 and the credit facilities are not subject to minimum cash requirements.

As of September 30, 2001, the Company and its subsidiaries had effective
Securities and Exchange Commission (SEC) shelf registrations for up to $3.3
billion in gross proceeds from debt and other securities. Such securities may be
issued as Senior Notes, Subordinated Notes or Trust Preferred Securities.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Policies. The Company is exposed to market risks associated with interest
rates, commodity prices, equity prices, counterparty credit and foreign currency
exchange rates. Management has established comprehensive risk management
policies to monitor and manage these market risks. Duke Energy's Policy
Committee is responsible for the overall approval of market risk management
policies and the delegation of approval and authorization levels. The Policy
Committee is comprised of senior executives who receive periodic updates from
the Chief Risk Officer (CRO) on market risk positions, corporate exposures,
credit exposures and overall results of the Company's risk management
activities. The CRO has responsibility for the overall management of interest
rate risk, foreign currency risk, credit risk and energy risk, including
monitoring of exposure limits. There have been no material changes in the
Company's market risk since December 31, 2000.

CURRENT ISSUES

Notice of Proposed Rulemaking (NOPR). On September 27, 2001 the FERC issued a
NOPR announcing that the FERC is considering new regulations regarding standards
of conduct that would apply uniformly to natural gas pipelines that are
currently subject to different gas standards. The proposed standards would
change how companies and their subsidiaries interact and share information by
broadening the definition of "affiliate" covered by the standards of conduct,
from the more narrow definition in the existing regulations. The Company is
currently evaluating the impact of this NOPR and will file comments with the
FERC suggesting appropriate revisions to the proposal.

Energy Trading Marketplace. As described in Note 3 to the Consolidated Financial
Statements, the Company has receivables and other exposures concentrated from
natural gas and electric industry counterparties. With recent changes in energy
industry market conditions, including recent developments regarding one of the
industry's largest traders and market makers, Enron Corporation, the Company has
continued to monitor exposures to credit and market risk using established
policies and procedures. The Company has both collateralized and non-
collateralized exposures to its counterparties, including Enron Corporation. The
Company will continue to monitor the situation closely.

California Issues. Duke Energy, certain of the Company's subsidiaries, and three
current or former executives have been named as defendants, among numerous other
corporate and individual defendants, in one or more of a total of six lawsuits
brought by or on behalf of electricity consumers in the State of California who
seek damages as a result of the defendants' alleged unlawful manipulation of the
California wholesale electricity markets. Duke Energy North America (DENA) and
DETM have been named among 16 defendants in a class action lawsuit (the Gordon
lawsuit) filed against companies identified as "generators and traders" of
electricity in California markets. DETM also was named as one of numerous
defendants in four additional lawsuits, including two class actions (the
Hendricks and Pier 23 Restaurant lawsuits), filed against generators, marketers
and traders and other unnamed providers of electricity in California markets. A
sixth lawsuit (the Bustamante lawsuit), was brought by the Lieutenant Governor
of the State of California and a State Assemblywoman, and includes Duke Energy,
certain of the Company's subsidiaries and three current or former executives of
Duke Energy among the numerous other corporate and individual defendants. The

                                      24
<PAGE>

Gordon and Hendricks class action lawsuits were filed in the Superior Court of
the State of California, San Diego County, in November 2000. Three other
lawsuits were filed in January 2001, one in Superior Court, San Diego County,
and the other two in Superior Court, County of San Francisco. The Bustamante
lawsuit was filed in May 2001 in Superior Court, Los Angeles County. These
lawsuits generally allege that the defendants manipulated the wholesale
electricity markets in violation of state laws against unfair and unlawful
business practices and state antitrust laws. Plaintiffs in these lawsuits seek
aggregate damages of billions of dollars. The lawsuits each seek the
disgorgement of alleged unlawfully obtained revenues for sales of electricity
and, in four lawsuits, an award of treble damages. While these matters
referenced above are in their earliest stages, management believes, based on its
analysis to date of the factual background and the claims asserted in these
matters, that their resolution will not have a material adverse effect on the
Company's consolidated results of operations, cash flows or financial position.

In addition to the lawsuits described in the preceding paragraph, several
investigations and regulatory proceedings have commenced at the state and
federal levels into the causes of the high wholesale electricity prices in the
western U.S. At the federal level, there are numerous proceedings before the
FERC. Some parties to those proceedings have made claims for billions of dollars
of refunds from sellers of wholesale electricity, including DETM. Some parties
have also sought to revoke the authority of DETM and other DENA-affiliated
electricity marketers to sell electricity at market-based rates. The FERC is
also conducting its own investigation to determine the causes of the high
wholesale electricity prices. As a result of these proceedings, the FERC has
ordered some sellers, including DETM, to refund, or offset against outstanding
accounts receivable, certain amounts billed for sales of electricity in excess
of a FERC established proxy price. The proxy price is intended to represent what
the FERC believes would have been the market-clearing price in a perfectly
competitive market. In June 2001, DETM offset approximately $20 million against
amounts owed to it by the California Independent System Operator and the
California Power Exchange for sales of electricity during January and February
2001. This offset reduced the $110 million reserve established in the fourth
quarter of 2000 to $90 million. Proceedings are ongoing to determine, among
other things, the amount of any refunds or offsets for periods prior to January
2001 and the method to be used to determine the proxy price in future months.

At the state level, the California Public Utilities Commission has formal and
informal investigations in place primarily to determine if power plant operators
in California, including DENA, have improperly "withheld," either economically
or physically, generation output from the market to manipulate market prices. In
addition, the California State Senate formed a Select Committee to Investigate
Price Manipulation of the Wholesale Energy Market (Select Committee). The Select
Committee has served a subpoena on several of the Company's subsidiaries seeking
data concerning their California market activities. The Select Committee has
heard testimony from several witnesses but no one from the Company has been
called to testify to date.

The California Attorney General also has an investigation under way to determine
if any market participants engaged in illegal activity, including antitrust
activity, in the course of their sales of electricity into the wholesale markets
in the western U.S. The Attorneys General of Washington and Oregon have joined
the California Attorney General in a joint investigation of the electricity
markets.

The California Attorney General has also convened a grand jury to determine
whether criminal charges should be brought against any market participants. To
date, no Company employee has been called to testify before the grand jury nor
have any criminal charges been filed against the Company or any of its officers,
directors or employees in connection with the wholesale electricity markets in
the western U.S.

Throughout 2001, the Company has conducted its business in California to supply
the maximum possible electricity to meet the needs of the state while limiting
its exposure to non-creditworthy counterparties and managing the output
limitations on its power plants imposed by applicable permits and laws. Since
December 31, 2000, the Company has closely managed the balance of questionable
receivables, and believes that the current pre-tax provision of $90 million is
appropriate. No additional provisions for California receivables have been

                                      25
<PAGE>

recorded in 2001. Management believes, based on its analysis to date of the
factual background and the claims asserted in these matters, that their
resolution will not have a material adverse effect on the Company's consolidated
results of operations, cash flows or financial position.

Litigation. Exxon Mobil Corporation Arbitration. In December 2000, three
subsidiaries of the Company initiated binding arbitration against three
subsidiaries of the Exxon Mobil Corporation (collectively, the "Exxon Mobil
entities") concerning the parties' joint ownership of DETM and certain related
affiliates (collectively, the "Ventures"). At issue is a buy-out right provision
in the parties' agreement. The agreements governing the ownership of the
Ventures contain provisions giving the Company the right to purchase the Exxon
Mobil entities' 40% interest in the Ventures in the event material business
disputes arise between the Ventures' owners. Such disputes have arisen, and
consequently, the Company exercised its right to buy the Exxon Mobil entities'
interest in the Ventures. The Company claims that refusal by the Exxon Mobil
entities to honor the exercise is a breach of the buy-out right provision, and
seeks specific performance of the provision. The Company has also asserted
various additional claims against the Exxon Mobil entities for breach of the
agreements governing the Ventures.

In January 2001, the Exxon Mobil entities asserted counterclaims in the
arbitration and claims in a separate Texas State court action alleging that the
Company breached its obligations to the Ventures and to the Exxon Mobil
entities. In April 2001, the state court entered an order staying the state
court action, and compelling the Exxon Mobil entities to arbitrate their state
court claims. To date, the Exxon Mobil entities have not sought to challenge
this order in an appellate court. In early October, a hearing was held before an
arbitration panel regarding the buyout right and the various claims of the
Company and Exxon Mobil against each other. Although the hearing is complete
from an evidentiary standpoint, both parties are submitting final briefs, and
oral arguments will take place before the panel in November 2001. The Company
expects a final decision from the panel before the end of the year. Management
believes that the final disposition of this action will not have a material
adverse effect on the Company's consolidated results of operations, cash flows
or financial position.

The Company and its subsidiaries are involved in other legal, tax and regulatory
proceedings before various courts, regulatory commissions and governmental
agencies regarding performance, contracts and other matters arising in the
ordinary course of business, some of which involve substantial amounts.
Management believes that the final disposition of these proceedings will not
have a material adverse effect on consolidated results of operations, cash flows
or financial position.

New Accounting Standards. In June 2001, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill
and Other Intangible Assets."

SFAS No. 141 requires all business combinations initiated (as defined by the
standard) after June 30, 2001 to be accounted for using the purchase method.
Companies may no longer use the pooling method of accounting for future
combinations.

SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and
will be adopted by the Company as of January 1, 2002. SFAS No. 142 requires that
goodwill no longer be amortized over an estimated useful life, as previously
required. Instead, goodwill amounts will be subject to a fair-value-based annual
impairment assessment. The standard also requires acquired intangible assets to
be recognized separately and amortized as appropriate. The Company expects that
the adoption of SFAS No. 142 will have an impact on future financial statements
due to the discontinuation of goodwill amortization expense. For the nine months
ended September 30, 2001 amortization expense for goodwill was $108 million. The
FASB and the Emerging Issues Task Force continue to field questions surrounding
the transition provisions and clarification of key aspects of the standard. The
Company is preparing to implement the new standard and has not yet determined
the impact on its consolidated results of operations, cash flows or financial
position.

                                      26
<PAGE>

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 provides the accounting requirements for retirement
obligations associated with tangible long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, and early adoption is
permitted. The Company is currently assessing the new standard and has not yet
determined the impact on its consolidated results of operations, cash flows or
financial position.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The new rules supersede SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The new rules retain many of the fundamental recognition and
measurement provisions, but significantly changes the criteria for classifying
an asset as held-for-sale. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The Company is currently assessing the new standard and
has not yet determined the impact on its consolidated results of operations,
cash flows or financial position.

Proposed Acquisition of Westcoast Energy Inc. In September 2001, Duke Energy
announced the proposed acquisition of Westcoast Energy Inc. (Westcoast) for $8.5
billion, including assumed debt of approximately $5 billion. Westcoast,
headquartered in Vancouver, British Columbia, is a North American energy company
with interests in natural gas gathering, processing, transmission, storage and
distribution, as well as power generation, international energy businesses, and
financial, information technology, and energy services businesses. The proposed
transaction provides for the acquisition of all outstanding common shares of
Westcoast in exchange for a combination of cash, Duke Energy common shares and
exchangeable shares of a Canadian subsidiary of the Company such that 50% of the
consideration will be paid in cash and 50% will be paid in stock. The
transaction is expected to close by the end of the first quarter 2002, subject
to approval of Westcoast's shareholders and regulatory approvals. The
transaction will be accounted for using the purchase method of accounting.
Further details about the proposed acquisition are in the Company's report on
Form 8-K, filed with the SEC on September 21, 2001.

                                      27
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The Company's subsidiary, Duke Energy Field Services, LLC (DEFS), has resolved
its issues with the Colorado Air Pollution Control Division disclosed in the
Company's last Form 10-K regarding various asserted non-compliance issues
arising from agency inspections of DEFS' Colorado facilities in 2000 and 1999,
and arising from compliance issues disclosed to the agency pursuant to permit
requirements or voluntarily disclosed to the agency in 2000. These items relate
to various specific and detailed terms of the Title V Operating Permits at seven
gas plants and two compressor stations in Colorado, including, for example,
record keeping requirements, parametric monitoring requirements, delayed
filings, and operations inconsistent with throughput limits on particular pieces
of equipment. In October 2001, DEFS entered into a Compliance Order and Consent
which requires DEFS to pay a penalty of $97,000 and undertake supplemental
environmental projects totaling $388,000.

In June 2001, DEFS received two administrative Compliance Orders from the New
Mexico Environment Department (NMED) seeking civil penalties primarily for
historic air permit matters. One order alleges specific permit non-compliance at
eleven facilities that occurred periodically between 1996 and 1999. Allegations
under this order relate primarily to emissions from certain compressor engines
in excess of what were then new operating permit limits. The other order alleges
numerous unexcused excursions from an hourly permit limit arising from upset
events at one facility's sulfur recovery unit between 1997 and 2001. The NMED
applied its civil penalty policy to the alleged violations and calculated the
penalties to be approximately $10 million in the aggregate. The NMED has
initiated settlement discussions and offered to resolve these matters for an
amount lower than the calculated penalties. DEFS is continuing its discussions
with the NMED and anticipates that it will resolve all issues relating to the
alleged violations.

In September 2001, DEFS received a Proposed Agreed Order from the Texas Natural
Resource Conservation Commission to settle allegations reflected in a June 2001
notice from the agency relating to DEFS' Port Arthur natural gas processing
plant. The Proposed Agreed Order seeks penalties of  $278,000 for various items
of alleged-noncompliance relating to the facility's air permit and state air
regulations, including valve monitoring and repair requirements under 40 CFR 60,
subpart KKK. DEFS is discussing settlement terms with the agency.

For additional information concerning litigation and other contingencies, see
Note 8 to the Consolidated Financial Statements, "Commitments and
Contingencies," and Item 3, "Legal Proceedings," included in the Company's Form
10-K for December 31, 2000, which are incorporated herein by reference.

Management believes that the resolution of these matters discussed and referred
to above will not have a material adverse effect on consolidated results of
operations, cash flows or financial position.

Item 5. Other Information.

As previously announced on September 20, 2001, Duke Energy Corporation (Duke
Energy), two wholly owned subsidiaries of Duke Energy and Westcoast Energy Inc.
(Westcoast) entered into a combination agreement (Combination Agreement)
providing for the acquisition of all outstanding common shares of Westcoast in
exchange for a combination of cash, Duke Energy common shares and exchangeable
shares of a Canadian subsidiary of the Company. The material terms of the
Combination Agreement are set forth in the Form 8-K as filed by the Company with
the Securities and Exchange Commission on September 21, 2001.

On November 5, 2001, the parties to the Combination Agreement entered into an
amended and restated combination agreement (Amended and Restated Combination
Agreement). The Amended and Restated Combination Agreement made certain changes
to the Combination Agreement and related agreements,  including the Plan of
Arrangement. The changes include changes to the Westcoast shareholder election
date and

                                      28
<PAGE>

measurement periods for determining the exchange ratio, refinements of other
timing considerations in connection with the expected consummation of the
transaction by the end of the first quarter of 2002 and other technical
amendments and clarifications. A full description of the Amended and Restated
Combination Agreement is set forth in the Westcoast proxy circular dated
November 8, 2001 which is being mailed to Westcoast shareholders on November 16,
2001. This description of provisions of the Amended and Restated Combination
Agreement is qualified in its entirety by reference to the Amended and Restated
Combination Agreement, which is incorporated by reference herein as Exhibit
10.5.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits

Exhibit
Number
------
10.1      $537,500,000 364-Day Credit Agreement dated as of April 19, 2001,
          among Duke Capital Corporation, the Banks listed therein and Bank One,
          NA, as Administrative Agent (filed with Form 10-Q of Duke Energy
          Corporation for the quarter ended September 30, 2001, File No. 1-4928,
          as Exhibit 10.1).

10.2      $537,500,000 Three-Year Credit Agreement dated as of April 19, 2001,
          among Duke Capital Corporation, the Banks listed therein and Bank One,
          NA, as Administrative Agent (filed with Form 10-Q of Duke Energy
          Corporation for the quarter ended September 30, 2001, File No. 1-4928,
          as Exhibit 10.2).

10.3      $550,000,000 364-Day Credit Agreement dated as of August 20, 2001,
          among Duke Capital Corporation, the Banks listed therein and The Chase
          Manhattan Bank, as Administrative Agent (filed with Form 10-Q of Duke
          Energy Corporation for the quarter ended September 30, 2001, File
          No. 1-4928, as Exhibit 10.3).

10.4      $550,000,000 Three-Year Credit Agreement dated as of August 20, 2001,
          among Duke Capital Corporation, the Banks listed therein and The Chase
          Manhattan Bank, as Administrative Agent (filed with Form 10-Q of Duke
          Energy Corporation for the quarter ended September 30, 2001, File
          No. 1-4928, as Exhibit 10.4).

10.5      Amended and Restated Combination Agreement dated as of September 20,
          2001, among Duke Energy Corporation, 3058368 Nova Scotia Company,
          3946509 Canada Inc. and Westcoast Energy Inc. (filed with Form 10-Q of
          Duke Energy Corporation for the quarter ended September 30, 2001, File
          No. 1-4928, as Exhibit 10.7).

(b)  Reports on Form 8-K

          A Current Report on Form 8-K filed on September 21, 2001 contained
disclosures under Item 5, Other Events; Item 7, Financial Statements and
Exhibits; and Item 9, Regulation FD Disclosure.

                                      29
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        DUKE CAPITAL CORPORATION

November 13, 2001                       /s/  Robert P. Brace
                                        ---------------------------------
                                        Robert P. Brace
                                        Vice President and
                                        Chief Financial Officer


November 13, 2001                       /s/  Keith G. Butler
                                        ---------------------------------
                                        Keith G. Butler
                                        Controller

                                      30