UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report: August 3, 2006
(Date
of Earliest Event Reported)
EL
PASO CORPORATION
(Exact
name of Registrant as specified in its charter)
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Delaware
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1-14365
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76-0568816
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(State
or
other jurisdiction of
incorporation
or organization)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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El
Paso Building
1001
Louisiana Street
Houston,
Texas 77002
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code (713) 420-2600
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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On
August 3, 2006, we
sold our interest in Midland Cogeneration Venture (MCV) to GSO Capital Partners
and Rockland Capital Energy Investments for $13 million. The sale includes
our
approximate 44-percent interest in MCV, a 1,575-megawatt natural gas-fired
power
plant located in Midland, Michigan. We previously wrote down our interest in
MCV
to zero; therefore, the sale will result in a third quarter 2006 pre-tax gain
of
approximately $13 million. In addition, we will record a non cash,
mark-to-market loss during the third quarter on natural gas supply agreements
with MCV as a result of this sale, as previously disclosed. Due to their
affiliated nature, we have not historically recognized gains or losses on these
gas supply contracts to the extent of our 44 percent ownership interest. Based
on our estimated value of these contracts as of June 30, 2006, the loss would
be
approximately $135 million. This loss represents the cumulative unrecognized
mark-to-market losses on these contracts attributable to our
interest.
This
Current Report
on Form 8-K is being filed to report the completion of the sale and present
the
pro forma impacts of the sale on our historical financial
statements.
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(b)
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Pro
forma
financial information.
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The accompanying unaudited pro forma financial statements are based on our historical condensed consolidated financial statements as of and for the six months ended June 30, 2006 and our consolidated financial statements for the year ended December 31, 2005, adjusted for the effects of the sale of MCV, as described above. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2006, assumes the disposition occurred on the balance sheet date. The unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2006 and year ended December 31, 2005, assume the disposition occurred on January 1, 2005. The unaudited pro forma financial statements should be read in conjunction with the historical consolidated financial statements included in our Current Report on Form 8-K dated May 12, 2006 (which updated the financial information originally presented in our 2005 Annual Report on Form 10-K) and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and should not be construed to be indicative of future results or results that actually would have occurred had the transaction occurred at the dates presented. In addition, these pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X. Accordingly, we have not assumed any cost savings or synergies that might occur related to the transaction.
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El
Paso
Corporation
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Unaudited
Pro
Forma Condensed Consolidated Balance Sheet
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As
of June
30, 2006
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(In
millions)
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El
Paso
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Pro
Forma
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As
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Historical
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Adjustments
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Adjusted
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Assets
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Current
assets
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Cash
and cash equivalents
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$
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1,762
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$
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13
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(a
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)
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$
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1,775
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Accounts
and notes receivable, net
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1,190
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-
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1,190
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Other
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1,277
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11
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(b | ) |
1,288
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Total
current
assets
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4,229
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24
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4,253
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Property,
plant and equipment, net
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19,355
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-
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19,355
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Other
assets
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Investments
in unconsolidated affiliates
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2,102
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-
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2,102
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Other
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3,091
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-
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3,091
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Total
assets
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$
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28,777
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$
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24
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$
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28,801
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Liabilities
and Stockholders’ Equity
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Current
liabilities
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Accounts
payable
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$
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986
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-
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$
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986
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Short-term
financing obligations, including current maturities
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838
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-
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838
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Other
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2,263
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32
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(c
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2,295
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Total
current
liabilities
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4,087
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32 |
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4,119
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Long-term
debt
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15,374
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-
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15,374
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Other
liabilities
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Deferred
income taxes
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1,653
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5
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(d
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1,622
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Other
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3,094
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103
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(c | ) |
3,197
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Commitments
and contingencies
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Securities
of
subsidiaries
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31
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-
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31
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Stockholders'
equity
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Preferred
stock
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750
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-
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750
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Common
stock
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2,113
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-
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2,113
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Additional
paid-in-capital
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4,860
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-
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4,860
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Accumulated
deficit
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(2,909
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8
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(e
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(2,989
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(f
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Other
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(276
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-
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(276
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Total
stockholders' equity
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4,538
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(80
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4,458
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Total
liabilities and stockholders’ equity
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$
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28,777
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$
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24
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$
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28,801
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See accompanying notes.
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El
Paso
Corporation
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Unaudited
Pro
Forma Condensed Consolidated Statement of Income
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For
the Six
Months Ended June 30, 2006
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(In
millions,
except per common share amounts)
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El
Paso
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Pro
Forma
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As
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Historical
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Adjustments
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Adjusted
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Operating
revenues
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$
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2,745
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$
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42
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(g
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$
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2,787
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Operating
expenses
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Cost
of
products and services
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146
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-
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146
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Operation
and
maintenance
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719
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-
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719
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Depreciation,
depletion and amortization
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550
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-
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550
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Taxes,
other
than income taxes
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134
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-
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134
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1,549
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-
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1,549
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Operating
income (loss)
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1,196
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42
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1,238
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Earnings
from
unconsolidated affiliates
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97
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-
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97
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Other
income,
net
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82
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-
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82
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Interest
and
debt expense
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(680
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-
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(680
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Income
(loss)
before income taxes
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695
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42
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737
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Income
taxes
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167
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15
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(h
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182
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Income
(loss)
from continuing operations
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$
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528
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$
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27
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$
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555
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Basic income
per common share from continuing operations
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$
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0.77
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$
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0.81
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Diluted
income per common share from continuing operations
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$
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0.73 | $ | 0.77 | |||||||||
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Basic average common
shares outstanding
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664 | 664 | ||||||||||
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Diluted
average common shares outstanding
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732
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732
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See
accompanying
notes.
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El
Paso
Corporation
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Unaudited
Pro
Forma Condensed Consolidated Statement of Income
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For
the Year
Ended December 31, 2005
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(In
millions,
except per common share amounts)
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El
Paso
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Pro
Forma
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As
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Historical
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Adjustments
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Adjusted
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Operating
revenues
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$
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3,970
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$
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(96
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$
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3,874
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Operating
expenses
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Cost
of
products and services
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323
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-
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323
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Operation
and
maintenance
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2,032
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-
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2,032
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Depreciation,
depletion and amortization
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1,100
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-
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1,100
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Loss
on
long-lived assets
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74
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-
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74
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Taxes,
other
than income taxes
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262
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-
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262
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3,791
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-
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3,791
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Operating
income (loss)
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179
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(96
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83
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Earnings
from
unconsolidated affiliates
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342
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162
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(i
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504
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Other
income,
net
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239
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-
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239
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Interest
and
debt expense
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(1,354
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)
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-
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(1,354
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Distributions
on preferred interests of consolidated subsidiaries
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(9
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-
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(9
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Income
(loss)
before income taxes
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(603
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)
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66
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(537
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Income
taxes
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(251
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)
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23
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(h
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(228
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)
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Income
(loss)
from continuing operations
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$
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(352
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)
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$
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43
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$
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(309
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)
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Basic
and
diluted income per common share from continuing operations
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$
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(0.59
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)
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$
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(0.52
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)
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Basic
and
diluted average common shares outstanding
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646
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646
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See
accompanying
notes.
El
Paso
Corporation
Notes
to the
Unaudited Pro Forma Condensed
Consolidated
Financial Statements
El
Paso
Historical
These
amounts
represent our historical consolidated balance sheet amounts as of June 30,
2006
and income statement amounts for the six months ended June 30, 2006
and for the year ended December 31, 2005. The amounts as of and for
the
six months ended June 30, 2006 were derived from our Current Report on Form
10-Q
for the quarter ended June 30, 2006. The amounts for the year ended December
31,
2005 were derived from our Current Report on Form 8-K dated May 12,
2006.
Pro
Forma
Adjustments
The
pro forma
adjustments represent:
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the
receipt
of proceeds from the sale of our
investment;
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| (b) |
the
tax
effect of the mark-to-market liability using a statutory rate of
35
percent;
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| (c) |
the
current
and non-current portion of the mark-to-market liability of natural
gas
supply agreements with MCV based on estimated values of these agreements,
which represents the cumulative unrecognized mark-to-market losses
on
these contracts attributable to our
interest;
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| (d) |
the
tax
effect of the gain on sale using a statutory rate of 35
percent;
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| (e) |
the
impact of
the gain on the sale, net of taxes;
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| (f) |
the
impact of
the mark-to-market liability, net of
taxes;
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| (g) |
the
non cash
mark-to-market gains (losses) on natural gas supply agreements with
MCV
based on changes in the estimated values of these agreements for
the six
months ended June 30, 2006 and for the year ended December 31, 2005,
which
represents changes in the cumulative unrecognized mark-to-market
losses on
these contracts attributable to our interest during those
periods;
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| (h) |
the
tax
effect of the pro forma adjustments using the statutory rate of 35
percent; and
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| (i) |
the
elimination of our historical earnings from unconsolidated affiliates
related to MCV, net of impairments.
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SIGNATURES
Pursuant
to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto
duly
authorized.
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EL
PASO CORPORATION
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By:
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/s/
D. Mark Leland
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D.
Mark Leland
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Executive Vice
President and Chief Financial Officer
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(Principal
Financial Officer)
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Dated: August
9, 2006
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