By OGJ editors
HOUSTON, Mar. 24 -- El Paso Corp. reported Friday that it signed a deal with California and other western states to resolve litigation and claims relating to the Houston-based energy company's alleged manipulation of the sale and delivery of natural gas and electricity to US western markets during September 1996 through the present.
Based on the deal—which is an agreement in principle—El Paso will pay the litigants more than $1.7 billion in cash, stock, and commodities. The settlement is expected to be finalized by yearend and requires approval by the courts and the US Federal Energy Regulatory Commission.
El Paso is admitting no wrongdoing.
Deal details
Based on the signed agreement, El Paso will take the following actions:
-- Present an up-front cash payment of $100 million to the state of California and other western states, including Washington, Oregon, and Nevada.
-- Make a $2 million payment from the company's officer bonus pool.
-- Pay $125 million in El Paso common stock (about 26.4 million shares).
-- Provide $900 million worth of natural gas over the course of 20 years starting in 2004.
-- Reduce by $125 million the price on power contracts with the California Department of Water Resources through 2005.
-- Pay $22 million/year for the next 20 years starting 1 year after the settlement becomes final
Reaction
Some analysts interpreted the news of the deal as a sign that the company could wipe the slate clean and begin anew following years of negative publicity and press.
"Though we have never been convinced of the case against El Paso," said Ronald Barone, analyst with UBS Warburg LLC, in a research note, "we believe the effective global nature of this pending settlement. . .removes a material overhang off (El Paso) that should substantially facilitate its ability to get back on its feet quickly."
Barone added, "We believe this is the route of choice for the company vs. waiting for the FERC ruling which—even if successful—would have likely resulted in litigation being dragged on for years."
