El Paso Energy earnings jumped 84% in the first quarter comparedto 1Q99 mainly because of cost savings from its merger with Sonatand the strong performance of its unregulated merchant energy andE&P segments.

Earnings rose to $0.70/share, excluding an after-tax gain of $89million, or $0.37 per diluted share, related to the divestiture ofthe East Tennessee and Sea Robin pipeline systems. The divestitureswere ordered by the Federal Trade Commission in return for itsapproval of the Sonat merger. The 1999 first quarter excludednon-recurring charges totaling $241 million, or $1.02 per share.EBIT for the first quarter increased 55% to $390 million, comparedto an adjusted $252 million in the year ago period.

“Accelerating growth in our non-regulated businesses, whichreported an almost six-fold increase in EBIT to $163 million,together with the successful realization of substantial costsavings from the Sonat merger, were the key drivers in thisquarter’s outstanding performance,” said CEO William A. Wise. “Thecontribution from the company’s non-regulated operationsrepresented 42% of consolidated EBIT, the highest level in ElPaso’s history, with each of these business units contributingsignificantly to this success.”

The Merchant Energy segment reported EBIT of $50 million in thefirst quarter of 2000, compared with $7 million in the same periodlast year. The increase was due to significant contributions fromall components of the business-new deal origination, powergeneration, energy trading, and management fees earned from ProjectElectron (the company’s off-balance sheet vehicle used for powergeneration investments).

During the quarter, the company completed its $1 billion ProjectElectron debt financing and closed four power acquisitionsrepresenting 547 MW. The company’s total operating domestic powerportfolio now exceeds 2,100 MW. Physical power volumes marketed inthe quarter grew 46% to 23.7 million MWh, while natural gas volumesaveraged 5.6 TBtu/d.

First quarter 2000 EBIT for the International segment totaled$33 million compared with $3 million in the first quarter of 1999.The Field Services segment reported EBIT of $25 million, up from$16 million in 1999. The Production segment reported EBIT of $55million in the first quarter of 2000, compared with an adjusted $2million in the year ago period, reflecting substantially higherrealized natural gas and oil prices, as well as lower operatingcosts. Realized gas prices rose 42% while realized oil pricesincrease 69%. Gas production totaled 517 MMcf/d, and oil productionaveraged 15,868 b/d. The Natural Gas Transmission segment —Tennessee Gas Pipeline, El Paso Natural Gas, and Southern NaturalGas — reported first quarter 2000 EBIT of $224 million, comparedto $227 million in 1999.

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