Even if the once high-flying Enron Corp. should cease to exist, either by being declared bankrupt or by being swallowed by Dynegy Corp. or another competitor, it is unlikely that this would have a significant “domino effect” on other companies in the energy business due to their limited financial exposure to Enron, El Paso Corp. executive Ralph Eads told Wall Street analysts Wednesday.

In El Paso’s case, “they [Enron] have a $50 million credit limit with us, and any business beyond that $50 million has to be collateralized with either a letter of credit or cash,” said Eads, president of El Paso Merchant Energy Group. “Others in our industry function the same way, so I think you would find that very few people have large aggregate exposures to Enron.”

In addition to fixed financial exposure, he also believes that Enron’s share of overall energy trading volume has been overstated by the Houston-based trader. “I know that they claim sometimes higher volumes, but the reality is we’ve actually done [the] homework to figure it out.” He estimated that Enron has about half of the trading market, and represents about 10% of El Paso’s trading volume.

“If Enron goes away — which we don’t think’s going to happen; we hope that doesn’t happen — we don’t see the market missing a beat, frankly,” he told analysts, following a presentation on El Paso’s third-quarter financial results.

Although it sees bankruptcy as a “remote” possibility, Eads conceded that El Paso has had to consider the impact of an “Enron bankruptcy-type scenario” on its company. For now, “we certainly have not reduced our business with them.”

El Paso, however, is profiting from what Eads referred to as the “brouhaha” at Enron. “Yes, we’re gaining market share because certain people don’t want to do as much business with Enron, so it’s coming our way. We’re definitely seeing that,” he said.

Enron has been a “good competitor in the provision of risk-management services, [but] none of that’s going on right now because people are just saying, ‘What’s going to happen to this company? We don’t want to do a long-term deal with them,'” Eads noted.

El Paso Chairman William Wise told analysts the company might be interested in acquiring some of Enron’s assets, but he dismissed the suggestion that it would take a position in the troubled trading company.

As fallout from the ongoing debacle at Enron, two new off-balance sheet entities of Houston-based El Paso — one called Gem Stone, which was set up last week, and another called Project Electron, which was formed last March — were put under the microscope by analysts.

Off-balance sheet transactions have come under close scrutiny in the wake of Enron’s announcement in October that it wrote down its assets by $1 billion and its shareholder equity by another $1.2 billion during the third quarter. The company’s actions were tied to its practice of complex off-balance sheet deals, through which it established partnerships with third-party investors to buy assets.

Wise assured analysts that the two El Paso-related off-balance sheet entities had “no hook back” to the parent company’s equity and assets. El Paso feels “completely comfortable with every aspect of our business, and [is] prepared to go into whatever level of detail anybody wants to go into,” Eads intoned.

The off-balance sheet partnerships are a “very exceptional tool” for doing business if they are “used appropriately,” said El Paso CFO Brent Austin. “We think that our vehicles are distinguished [from Enron’s]…by the quality of the assets that underlie these vehicles and [by] the reason these financings were put in place in the first place, as well as the cash-flow generation capability of the assets,” he noted.

“Importantly, we [also] don’t have any ownership interests by officers and directors in these vehicles…, and they provide low-cost, off-balance sheet financing that really [is] building businesses for us,” Austin said. Gem Stone, he noted, finances the company’s Brazilian generation business, while Project Electron is involved in its domestic PURPA restructuring business.

On an unrelated issue, Wise reaffirmed his belief that the Federal Energy Regulatory Commission will exonerate El Paso of allegedly exercising market power to drive up natural gas prices to Southern California. “We believe we will have an airtight finding on the part of FERC…that there was no exercise of market power.”

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