The ratings on natural gas pipeline company Southern Natural Gas Co. (SNG), a subsidiary of El Paso Corp., are based on the credit quality of the consolidated entity. Thus, the ratings on SNG are expected to mirror those of parent El Paso. The ratings on El Paso reflect a weak business risk profile burdened by failed unregulated power ventures and the challenges of rehabilitating poorly performing exploration and production (E&P) operations, coupled with a highly overleveraged capital structure and considerable debt maturities through 2007. A history of accounting and governance issues, including large reserve write-downs, weaknesses in internal controls, and an SEC investigation, present a further drag on ratings. El Paso has made considerable progress in reducing exposure to unregulated
