El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
El Paso Corporation Reaches Agreement in Principle to Resolve Claims Relating to Western Energy CrisisHOUSTON, Mar 21, 2003 /PRNewswire-FirstCall via COMTEX/ --
Summary -- Settlement will resolve the principal litigation and claims against El Paso relating to the sale or delivery of natural gas and/or electricity to or in the Western United States from September 1996 to present. -- Parties to the settlement include private class action litigants in California, the Governor and Lieutenant Governor of California, the attorneys general of California, Washington, Oregon and Nevada, the California Public Utilities Commission, the California Electricity Oversight Board, the California Department of Water Resources, Pacific Gas and Electric Company and Southern California Edison Company. -- The settlement, which was crafted to minimize current demands on El Paso's liquidity, will result in an estimated after-tax charge of approximately $650 million in the fourth quarter of 2002, and includes: -- No admission of wrongdoing; -- An up-fron El Paso Corporation
(NYSE: EP) today announced that it has reached an agreement in principle with
the state of California and other parties including the states of Washington,
Oregon and Nevada to resolve claims relating to the sale and delivery of natural
gas and electricity from September 1996 to present. The settlement has been
structured to minimize current demands on El Paso's liquidity and to utilize El
Paso's existing assets to reduce cash outlays.
"This agreement in principle is positive news for all stakeholders in El
Paso-our employees, customers, shareholders, bondholders, vendors and all those
with whom we do business," said Ronald L. Kuehn, Jr., chairman and chief
executive officer of El Paso Corporation. "This settlement will help resolve the
uncertainties that have surrounded El Paso in the market over the past few years
relating to the energy crisis in the Western United States. While I am convinced
that all of El Paso's actions have been consistent with both the letter and the
spirit of the law, this settlement allows us to put these issues behind us and
devote our full energies to executing the company's operational and financial
The following parties have been actively involved in the settlement discussions
and will be working to implement the agreement as quickly as possible:
representatives of private litigants that have brought lawsuits against El Paso
currently pending in San Diego Superior Court; the Governor and Lieutenant
Governor of the state of California; the attorneys general of California,
Washington, Oregon and Nevada; the California Public Utilities Commission
(CPUC); the California Electricity Oversight Board (EOB); the California
Department of Water Resources (DWR); Pacific Gas and Electric Company and
Southern California Edison Company.
Highlights of the settlement agreement in principle are as follows:
Up-Front Payments of Cash and Stock
-- El Paso agrees to pay $100 million in cash. The payment will be made
into an escrow account with interest, upon execution of the
definitive settlement agreement. El Paso will make a separate $2-
million payment from the company's officer bonus pool.
-- El Paso agrees to pay $125 million in common stock. An estimated
26.4 million shares will be issued, based on the average price for
the 30 trading days prior to the announcement of the settlement. The
stock will be issued once the settlement is effective.
-- El Paso agrees to deliver natural gas at the California border valued
at $45 million per year over 20 years commencing in 2004.
-- El Paso will reduce the sales price of its long-term power contracts
with the California Department of Water Resources by $125 million
Additional Company Payments
-- El Paso agrees to make additional payments of $22 million per year
for 20 years. The first payment will be made 12 months after the
effective date of the settlement.
-- At its option, El Paso may pay up to 50 percent of these payments in
-- For a period of five years, the El Paso Natural Gas pipeline system
will maintain its existing physical delivery capacity at the
California border of 3,290 million cubic feet per day. El Paso will
seek FERC authorization to assure that its shippers have the
contractual right to utilize that capacity on a primary delivery
-- El Paso, the CPUC, Pacific Gas & Electric and Southern California
Edison will submit this portion of the agreement to the FERC in final
resolution of the CPUC's pending complaint.
The proposed settlement will result in an estimated after-tax charge of
approximately $650 million, which will be taken in the fourth quarter of 2002.
The settlement is subject to the negotiation of definitive settlement agreements
and is subject to review and approval by the courts and the FERC.
El Paso has scheduled a live webcast to discuss this litigation settlement at
9:00 a.m. Central Standard Time today. This webcast may be accessed online
through our Web site at www.elpaso.com in the "For Investors" section. A limited
number of telephone lines will also be available to participants by dialing
(973) 935-8507 ten minutes prior to the start of the webcast.
The webcast replay will be available online through our Web site in the "For
Investors" section. A telephone audio replay will also be available through
March 28, 2003 by dialing (973) 341-3080 (access code 3825318).
El Paso Corporation is the leading provider of natural gas services and the
largest pipeline company in North America. The company has core businesses in
production, pipelines, midstream services, and power. El Paso Corporation, rich
in assets and fully integrated across the natural gas value chain, is committed
to developing new supplies and technologies to deliver energy. For more
information, visit www.elpaso.com.
Cautionary Statement Regarding Forward-Looking Statements
This release includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure that
the information and assumptions on which these statements and projections are
based are current, reasonable, and complete. However, a variety of factors could
cause actual results to differ materially from the projections, anticipated
results or other expectations expressed in this release, including, without
limitation, actions by credit rating agencies; the successful implementation of
the settlement announced in this release; receipt of all necessary judicial and
regulatory approvals of the settlement; our ability to divest of certain
non-core assets; changes in commodity prices for oil, natural gas, and power;
general economic and weather conditions in geographic regions or markets served
by El Paso Corporation and its affiliates, or where operations of the company
and its affiliates are located; the uncertainties associated with governmental
regulation; competition; the successful implementation of the 2003 business
plan; and other factors described in the company's (and its affiliates')
Securities and Exchange Commission filings. While the company makes these
statements and projections in good faith, neither the company nor its management
can guarantee that anticipated future results will be achieved. Reference must
be made to those filings for additional important factors that may affect actual
Additional Important Information
Prior to its 2003 annual meeting, El Paso will furnish to its shareholders El
Paso's definitive proxy statement relating to this meeting, together with a
WHITE proxy card. Shareholders are strongly advised to read this proxy statement
when it becomes available, as it will contain important information.
Shareholders will be able to obtain El Paso's proxy statement, any amendments or
supplements to the proxy statement and any other documents filed by El Paso with
the Securities and Exchange Commission for free at the Internet Web site
maintained by the Securities and Exchange Commission at www.sec.gov. Copies of
the proxy statement and any amendments and supplements to the proxy statement
will also be available for free at El Paso's Internet Web site at www.elpaso.com
or by writing to El Paso Corporation, Investor Relations, PO Box 2511, Houston,
TX 77252. In addition, copies of the proxy materials may be requested by
contacting our proxy solicitor, MacKenzie Partners, Inc. at (800) 322-2885
toll-free or by email at firstname.lastname@example.org.
To the extent that individual customers, independent industry researchers,
financial analysts, or El Paso commissioned research, are quoted, it is El
Paso's policy to use reasonable efforts to verify the source and accuracy of the
quote. El Paso has not, however, sought or obtained the consent of the quoted
source to the use of such quote as proxy soliciting material. Also, El Paso may
express opinions and beliefs. Except as otherwise expressly attributed to
another individual or entity, these opinions and beliefs are the opinions and
beliefs of El Paso.
Information regarding the names, affiliation and interests of individuals who
may be deemed participants in the solicitation of proxies of El Paso's
shareholders is contained in Schedule 14A filed by El Paso with the Securities
and Exchange Commission on February 18, 2003, as amended by a Schedule 14A filed
by El Paso on March 18, 2003.
SOURCE El Paso Corporation
CONTACT: Norma F. Dunn, Senior Vice President, Communications and
Government Affairs, +1-713-420-3750, fax, +1-713-420-3632, or Investor
Relations, Bruce L. Connery, Vice President, +1-713-420-5855, fax,
+1-713-420-4417, both of El Paso Corporation; or Joele Frank or Dan Katcher,
both of Joele Frank, Wilkinson Brimmer Katcher, +1-212-355-4449, fax,
+1-212-355-4554, for El Paso Corporation
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