Strengthened by its merger with The Coastal Corp. last week thatmade it the fourth largest U.S. energy company, the former El PasoEnergy Corp. unveiled an impressive show of strength yesterday asit began a two-day analysts’ conference in Houston, showcasing anew energy trading floor, new corporate identify and details togrow earnings at least 25% in the coming year.

Now doing business as El Paso Corp., the company also displayeda new logo, which CEO William A. Wise said reflects the company’s”emergence as a leader in all phases of the natural gas industry.”Wise said that the “combination of closing the Coastal merger,announcing yet another year of record earnings, simplifying thecompany name and presenting a new face to the world creates anunrivaled platform to sustain El Paso’s track record of success.”

Wise and members of the company’s management team laid out adetailed blueprint for its earnings backbone, the Merchant Energysegment, which now includes the company’s North American naturalgas and power merchant operations, international assets and thepetroleum assets and trading. El Paso said it expects to generate$1.7 billion of net income this year, about $3.25 a share, whichwill match First Call/Thomson Financial analysts’ averages for theyear. Long-term growth will exceed 25%, Wise said.

The growth will be tied to success is several areas, with a lotof hopes in trading activities, which now will be hubbed in a new80,000-square-foot energy trading facility in downtown Houston,adjacent to the company’s headquarters. The facility supports morethan 500 commercial, trading, risk management and administrativestaff to manage marketing and trading activities, including naturalgas, power, natural gas liquids, crude oil, refined products,weather derivatives and related commodities.

Ralph Eads, president of the Merchant Energy Group, called thecompletion of the facility and next-generation trading platform,dubbed THERMS, an important step in El Paso’s move to the front ofthe line in energy marketing and trading.

The long anticipated telecommunications strategy, first promisedlast July, also was detailed by the company’s Global Networkssegment. El Paso, which has already started acquiring fiber opticcable assets and building cable throughout the United States, plansto leverage its knowledge of commodity and capital markets withtelecommunications market skills to “identify and capture value” inthe young industry — a market in which El Paso’s Houstonneighbors Enron Corp. and Dynegy Corp. already are succeeding.

In the next four years, the Global Networks segment plans topour about $2 billion into its multi-pronged strategy that willleverage El Paso’s pipeline network — “end-to-end liquidity” —using three major components:

The first step is its home base, Texas, where El Paso isfinalizing its deployment of an extensive fiber optic network inthe state’s major markets. Once the Texas network is completed, ElPaso will branch out across the United States.

Using the business model that CEO Wise asserted has made ElPaso’s Merchant Energy platform a leader, he said that the GlobalNetworks segment would bring a “unique vision” to the bandwidthindustry, duplicating success already found in the natural gas andpower markets.

“We expect this business to generate positive operating cashflow by the end of 2003, but more important, we firmly believe thatEl Paso Global Networks has created $7 billion to $10 billion ofcurrent value based upon opportunities that have already beenidentified.”

El Paso now is also free of at least a few of the legal hasslesthat have pursued it in recent months. Last week, the Federal TradeCommission finalized a consent order against El Paso and PacificGas & Electric Corp. to remedy the “likely anti-competitiveeffects” from El Paso’s Jan. 27, 2000 announced acquisition of twoPG&E subsidiaries, PG&E Gas Transmission Teco Inc. andPG&E Gas Transmission Texas Corp. [No. C-3997, Jan. 30]. Inthose purchase agreements, El Paso proposed acquiring thesubsidiaries for $840 million.

The FTC had ordered the companies to divest themselves ofcertain properties because it said the original agreements wouldreduce competition in three natural gas transportation markets: thePermian Basin, Central Texas and Matagorda Island offshore.

The order, which will allow El Paso’s acquisition to proceed,requires El Paso and PG&E to divest to Duke Energy FieldServices LLC the PG&E Teco stock. The Teco pipeline is threesegments of natural gas pipeline that runs from the Permian Basinthrough Central Texas to a market trading area in Katy, TX nearHouston.

They also were ordered to divest interest in the El Paso OasisPipe Line to Oasis Pipe Line Co., Aquila Gas Pipeline Corp. and DowHydrocarbons and Resources Inc. and to divest to Panther PipelineLtd. the PG&E Matagorda Pipeline system.

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