By ANDREA FELSTED

Nov. 21, 2000 (Financial Times)—El Paso Energy, the US group, is set to expand its energy trading operations in Europe, and could make selective acquisitions to support its growth.

El Paso, which is buying Coastal Corporation, the Houston-based energy company, for $16bn, has already begun trading gas in London. This will shortly be expanded to electricity trading, and the financial derivatives associated with gas and electricity.

On completion of the acquisition expected in early December El Paso will combine its trading operations with Coastal’s crude oil trading centre.

John Hushon, president of El Paso Energy International, and president and chief executive of El Paso Europe, said the new division, which would include 60-75 traders located on a new trading floor in central London, would be operational in the first quarter of next year.

As well as trading crude, gas, electricity and their derivatives, the new division will trade weather derivatives, coal and metals when directly associated with customers’ fuel requirements.

It will form part of El Paso’s merchant energy operation, which acquires and manages fuel.

This division either physically or virtually acquires assets to meet customers’ energy demands, and also engages in energy trading activities.

Mr Hushon said El Paso would consider “measured” acquisitions, which provided flexible assets to support its merchant energy business. These could include pipelines, power stations and related assets, which would help El Paso to move forward more rapidly with its merchant energy strategy.

Jay Hellums, senior vice-president, merchant energy, said the London-based trading operation was “the glue that holds the business together. It is the first stage in a measured approach to expansion in Europe.”

Mr Hushon said acquisitions were likely to be “selective and relatively small”, and would “fill gaps” in El Paso’s portfolio. However, it would also consider joint ventures with energy companies and larger European acquisitions.

The group already has interests in two gas-fired power stations in the UK, as well as power interests in Hungary and the Czech Republic.

Separately, El Paso is in talks on controlling a number of liquefied natural gas carriers, and is talking to shipowners, operators, shipyards and financiers about owning the ships or controlling them via long and short-term charters.

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