Writedowns totaling $342 million related to investments in power generation assets and oil reserves in financially-troubled Argentina in the first half of the year added up to a net loss of $99 million for El Paso Tennessee Pipeline Co. for the six-month period ending June 30, the company announced Wednesday.

The pipeline, “a separate entity that is 100% owned by El Paso Corp.,” took part of those charges, plus a charge of $12 million related to employee restructuring, in the second quarter 2002, reporting net income of $8 million, compared to net income for the second quarter of 2001 of $158 million. Consolidated earnings before interest, income taxes, and other charges (EBIT) was $74 million for the quarter ended June 30, 2002, and consolidated EBIT was $276 million for the same period in 2001.

The losses in Argentina were offset by $97 million of income attributable to a cumulative effect of an accounting change, resulting from the elimination of negative goodwill in accordance with the adoption of Statement of Financial Accounting Standards No. 141. Net income for the six months ended June 30, 2001 was $326 million. Consolidated EBIT for the first six months of 2002 was a net loss of $169 million compared to $622 million in earnings in 2001, the announcement said.

Since it is a separate entity, the earnings of Tennessee Pipeline were not included in El Paso Corp.’s earnings, which were reported Aug. 8, according to an El Paso spokesman (see Daily GPI, Aug. 9). At that time, the corporation reported a net loss for the second quarter of $45 million or 8 cents/share, including $279 million of non-recurring charges. The most significant of those items, the company said, was a $234 million (pre-tax), or $0.29 per diluted share, ceiling test charge, primarily for Canadian oil and natural gas properties. El Paso’s pro forma earnings for the quarter were $234 million, or 44 cents per diluted share, down nearly half from the second quarter of 2001, when it reported earnings of 414 million, or 79 cents in the second quarter of 2001.

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