By OGJ editors
HOUSTON, Nov. 8 -- El Paso Corp., Houston, reported Friday that it planned to exit its energy trading business, citing "substantially diminished business opportunities" and "higher capital costs" associated with the business as the reasons behind its decision.
The company also reported Friday a net loss of $69 million for the third quarter compared with a net gain of $211 million in third quarter 2001. The company—like many others in the energy merchant sector—has been methodically following an asset divestiture plan in recent months in an effort to shore up its balance sheet and raise much-needed capital.
While it works toward liquidating its trading portfolio, El Paso has created a new, separately capitalized unit, Travis Energy Services LLC. The new subsidiary will serve to separate both credit and balance sheet activity of trading from the rest of the company.
El Paso said that it would transfer a large portion of its trading portfolio to Travis Energy in first quarter 2003. The company expects the entire portfolio to be liquidated in 2 years' time. As of Sept. 30, El Paso's trading portfolio had a net asset value of $968 million, the company said. During the fourth quarter, El Paso also will implement new accounting rules that would eliminate the use of "mark-to-market" accounting "for certain energy contracts that are not derivatives," the company said.
As of Sept. 30, El Paso said it also had $4.5 billion in total available liquidity.