El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
El Paso Corporation Announces Agreement to Sell Cedar Brakes I and II and Assign Associated Power Contracts
HOUSTON, TEXAS, December 22, 2004—El Paso Corporation (NYSE:EP) announced today that it has agreed to sell the equity interests in its Cedar Brakes I and Cedar Brakes II subsidiaries, which supply power to Public Service Electric and Gas Company, to a wholly-owned subsidiary of Arroyo Energy Investors LP, a Houston-based affiliate of The Bear Stearns Companies Inc., for cash proceeds of approximately $106 million. In addition, El Paso Marketing, El Paso's marketing subsidiary, has entered into an agreement to transfer its obligations to supply power to the Cedar Brakes I and II entities to Constellation Energy Commodities Group, Inc. and terminate a group of offsetting trades between El Paso Marketing and Constellation, resulting in a cash outflow by El Paso of approximately $240 million. The power supply contract associated with the Cedar Brakes I power purchase agreement requires the delivery of about 856,000 megawatt hours per year (MWh/y) through August 2013. The power supply contract associated with the Cedar Brakes II power purchase agreement requires the delivery of about 1,500,000 MWh/y through 2008, reducing to about 1,171,000 MWh/y through March 2013.
The transaction is expected to close in the first quarter of 2005 and is subject to Federal Energy Regulatory Commission approval and other consents. The sale will eliminate approximately $575 million of associated non-recourse debt from El Paso's balance sheet. The equity sale will result in a book loss of approximately $222 million, and there will also be a recognition of a loss on the transfer of the contracts.
This sale is part of El Paso's plan to sell its domestic power portfolio as part of its long-range plan to reduce the company's debt, net of cash, to approximately $15 billion by year-end 2005. To date, the company has announced or closed approximately $3.7 billion of the $3.3 billion to $3.9 billion of asset sales targeted under the plan. These asset sales will also eliminate approximately $1.6 billion of associated non-recourse debt from El Paso's balance sheet.
An asset sales tracker that shows all of the announced and completed asset sales is posted at www.elpaso.com under Investor Resources.
El Paso Corporation provides natural gas and related energy products in a safe, efficient, dependable manner. The company owns North America's largest natural gas pipeline system and one of North America's largest independent natural gas producers. For more information, visit www.elpaso.com.
Editor's Note: The Cedar Brakes I and II entities were created as part of El Paso's power restructuring business under which the company restructured above-market, long-term power purchase agreements originally tied to certain older power plants. El Paso is no longer engaged in restructuring power purchase contracts.
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, the ability to implement and achieve our objectives in the long-range plan, including achieving our debt-reduction targets; our ability to close our announced asset sales on a timely basis; the uncertainties associated with governmental regulation; 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 results. The company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the company, whether as a result of new information, future events, or otherwise.