El Paso Energy Corp. will sell East Tennessee Natural Gas, theSea Robin Pipeline and its interest in Destin Pipeline to gainFederal Trade Commission (FTC) approval of its merger with SonatInc. El Paso said yesterday it has signed a consent agreement withthe FTC and expects the agency to sign “shortly.” Subject to FTCand FERC regulatory approval, El Paso Energy and Sonat expect toclose the merger in early October.

El Paso Energy is working toward completing these asset sales bythe end of the first quarter 2000. Marketing efforts are alreadyunderway.

Paula Delaney, a spokesperson for El Paso, said the combinedloss of earnings from these assets would be between $45-$50million, or around 3% of the company’s total earnings beforeinterest and taxes (EBIT). “Although we are losing those earnings,”Delaney said, “we are also conservatively estimating $60 million insavings after the two companies combine. That should more thanoffset the loss in earnings from these required sales.” Inaddition, Delaney said El Paso expects to realize $500 million inproceeds from these sales, which it will use to pay down debt.

East Tennessee owns and operates 1,200 miles of pipeline servingparts of Tennessee and Virginia. It has a capacity of 680 MMcf/d.The company also owns a liquefied natural gas (LNG) facility inKingsport, TN, which operates 1.2 Bcf of LNG storage.

Sea Robin Pipeline extends 440 miles from the western gulf tothe Sabine processing plant in Houma, LA.. The mainline has acapacity of 200 MMcf/d

Destin Pipeline, a joint venture owned by affiliates of AmocoCorp., Sonat, and Tejas Energy, an affiliate of Shell Oil, wasplaced in service last year. The $460 million, 250-mile pipelineconnects to five interstate pipelines. It has a capacity of closeto 1 Bcf/d.

The joining of El Paso and Sonat was agreed to last March (seeDaily GPI, March 16). If approved, themerger would unseat top players as measured by two industryyardsticks. El Paso-Sonat’s 40,600 miles of interstate pipe wouldsurpass Enron’s 32,000 miles, and El Paso-Sonat’s 12.4 Bcf/d ofinterstate transport volumes would better Williams and the stand-aloneEl Paso, both of which transport 9.2 Bcf/d. The combined company willbe headquartered in Houston. Sonat is currently headquartered inBirmingham, AL, and the headquarters of Sonat’s interstate pipeline,Southern Natural Gas, will remain in Birmingham.

Potential buyers or those who want more information on the assetsales should call John Somerhalder, president of El Paso’s easternpipeline group at (713) 420-6128.

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