El Paso More Than Doubles NOL Estimate

Company's net operating loss carry forward increases to $2.4 billion, which can be used to offset the company's proposed intial public offering in ...
Stephen TaubSeptember 4, 2007

El Paso Corp. more than doubled its original estimate of its net operating loss carry forward for taxes for year-end 2007.

The energy company Tuesday said in a regulatory filing that the new estimate is $2.4 billion, significantly greater than the prior estimate of $1 billion that was provided at the time the company sold ANR Pipeline Co. and its related assets.

Earlier this year, El Paso completed the sale of ANR Pipeline, its Michigan storage assets and its interest in Great Lakes Gas Transmission Co., to TransCanada Corp. and TC PipeLines, LP. The transaction closed in the first quarter of 2007.

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A net operating loss carry forward is a tax accounting technique that allows companies to apply current net operating losses to profits in future years to reduce tax liability.

The company explained that the increase in the NOL is primarily attributable to the filing of its 2006 federal tax return; the carryover of capital losses from the sale of certain power assets that offset the gain on the sale of ANR and its related assets; its intent to expense intangible drilling costs for its production segment that are expected to be incurred in 2007; and updating its NOL position since the sale of ANR and its related assets.

The projected increases in the NOL will be available to offset the expected gain on the proposed initial public offering of its master limited partnership, which is scheduled for the fourth quarter of 2007, according to a presentation to be delivered Tuesday at the Lehman Brothers CEO Energy/Power Conference in New York by El Paso CEO Doug Foshee.

Under this partnership, El Paso Pipeline Partners will own and operate natural gas transportation pipelines and storage assets consisting of Wyoming Interstate Co., Ltd., a wholly-owned interstate pipeline transportation business primarily located in Wyoming and Colorado, and 10 percent interests in two interstate pipeline transportation businesses: Colorado Interstate Gas Co. and Southern Natural Gas Co.

El Paso Pipeline Partners anticipates offering 25 million common units in the IPO, representing a 32.2 percent limited partner interest.

Following the offering, El Paso will own the 2 percent general partner interest, all of the incentive distribution rights, a 65.8 percent limited partner interest in El Paso Pipeline Partners as well as the remaining 90 percent interest in each of Colorado Interstate Gas and Southern Natural Gas.