Houston, Texas, December 20, 1999-El Paso Merchant Energy Company, a business unit of El Paso Energy Corporation (NYSE:EPG), announced today the execution of a long-term fuel supply contract with Fuerza y Energía De Hermosillo, S.A., a subsidiary of Spain's Unión Fenosa Group, to provide natural gas to the Hermosillo power plant located in Mexico. El Paso Merchant Energy will supply up to 43 million cubic feet a day to Unión Fenosa's 225-megawatt natural gas combined cycle power plant. The Hermosillo plant is expected to begin testing in early 2001 and to begin commercial operation during the summer of 2001.

El Paso Merchant Energy plans to transport the gas through El Paso Natural Gas Company's proposed Willcox lateral. El Paso Merchant Energy has executed a Transportation Service Agreement with El Paso Natural Gas for firm transportation on the lateral, and El Paso Natural Gas has filed its application for the lateral with the Federal Energy Regulatory Commission. Construction on the lateral will commence upon receipt of regulatory approval. The Willcox lateral will interconnect with the Pemex Gas y Petroquimica Basica pipeline near Naco, Arizona.

"This is El Paso's first fuels venture in Mexico, and we are pleased to partner with Union Fenosa on this important project," said Greg Jenkins, president of El Paso Merchant Energy Company. "Mexico has a number of additional power plants planned, and we are well positioned with this transaction to pursue additional fuel supply opportunities in the future."

"With this contract, we have secured the fuel supply to our Hermosillo power plant for the next 25 years," said Santiago Roura, general manager of Unión Fenosa ACEX, the international operations division of Unión Fenosa. "We are pleased to be working with El Paso Energy, a leading gas supplier in North America."

With over $15 billion in assets, El Paso Energy Corporation provides comprehensive energy solutions through its strategic business units: El Paso Natural Gas Company, Tennessee Gas Pipeline Company, Southern Natural Gas Company, El Paso Field Services Company, El Paso Merchant Energy Company, El Paso Production Company, and El Paso Energy International Company. The company owns North America's largest natural gas pipeline system, both in terms of throughput and miles of pipeline, and has operations in natural gas transmission, gas gathering and processing, gas and oil production, power generation, merchant energy services, and international project development. Visit El Paso Energy's web site at www.epenergy.com.

Unión Fenosa is a group of companies with revenues surpassing 1,900 million euros in 1998. It provides different services through its six business divisions: Unión Fenosa Generación, the generation division, which holds more than 5,100 MW in installed capacity in Spain, with more than 600 MW under construction; Unión Fenosa Distribución, which bills more than 23,000 GWh of electricity to the company's 2.9 million customers in Spain; Servicios Profesionales, the professional services arm, dedicated to engineering, consulting, and plant operation and maintenance; Inversiones Internacional, the international investments division, channeling professional services activities internationally while acting as operator and stake-holder in energy companies in Uruguay, Panama, Guatemala, Dominican Republic, Bolivia, Mexico, Kenya, and the Philippines; Telecomunicaciones, the telecomunications division, with stakes in mobile, cable, traditional telephony, trunking and others, which represents, with international partners, the second-largest telecoms group in Spain; and Industria, Minería, Inmobiliaria, the industry, mining and real estate division, holding investments in the oil company CEPSA, different mining entities, and real estate throughout Spain. Visit Unión Fenosa's web site at www.uef.es.

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 companies have 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. While the companies make these statements and projections in good faith, neither the companies nor their management can guarantee that the anticipated future results will be achieved. Reference should be made to the companies' (and their affiliates') Securities and Exchange Commission filings for additional important factors that may affect actual results.