Houston-based El Paso Corp. and its subsidiary Coastal Corp.said yesterday they had taken a combined charge of $1.28 billion asof January 1, 2001 under a new U.S. accounting rule related tohedging activities and derivative instruments for 2000 earnings.Net of taxes, El Paso’s charge was $821 million and Coastal’s was$457 million.

Under the Financial Accounting Standard (FAS) 133, the chargesare non-cash, net of taxes. El Paso said the charges do not affectthe company’s reported earnings, but they directly affectstockholder equity. The FAS charges mostly relate to the”opportunity” cost of natural gas hedges that were in place as ofDec. 31, 2000 for both El Paso and Coastal, versus natural gasfutures prices that existed on that date (see Daily GPI, March 26).

El Paso said that the hedges in place at the end of last yeareventually would be rolled over time and the remaining hedges wouldbe re-valued in the future, which would reduce the FAS 133 changes.El Paso said that based on current natural gas futures prices, itexpects its combined FAS 133 charges of $1.278 billion to bereduced by $500 million to $600 million by March 31 (Saturday),with further reductions in the next few quarters.

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