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El Paso Eliminates Final Tolling Agreement

El Paso Corp. has eliminated what CEO Doug Foshee called the "most significant single long-dated position remaining" in the company's energy trading business and its only tolling agreement with the sale of the power purchase agreement (PPA) between El Paso Marketing LP and Cordova Energy Co. LLC to Constellation Energy Commodities Group Inc.

In the sale, which was effective Jan. 1, Constellation received $177 million in exchange for the assignment and assumption of the PPA. The Cordova PPA, which extends through 2019, is a tolling agreement associated with the 540 MW natural gas-fired plant in Rock Island County, IL. As a result of this transaction and the sale to the Morgan Stanley Capital Group Inc. announced Dec. 19, El Paso's only remaining exposure in its power trading book is to locational basis positions associated with delivery obligations in the PJM market (see NGI, Dec. 26, 2005).

"Combined with the previously announced sale of the bulk of our power book, this goes a long way toward achieving our goal of eliminating our exposure to trading and focusing on our two core businesses: pipelines and exploration and production," said Foshee.

The divestiture of the Cordova tolling agreement will result in annual savings for El Paso of between $27-32 million in demand charges. El Paso anticipates it will record an approximate $70 million loss in 4Q2005 as a result of mark-to-market changes since Sept. 30, 2005 and this divestiture.

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