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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Rule 14a-12
EL PASO CORPORATION
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(Name of Registrant as Specified in its Charter)
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Letter Sent to El Paso's Shareholders By Ronald L. Kuehn, El Paso's New
Chairman and Chief Executive Officer
[EL PASO LOGO]
March 28, 2003
Dear Fellow El Paso Shareholder:
As your new Chairman and CEO, I want to give you an update on the progress
that your company is making on its operational and financial plan. We know that
this has been a difficult time for our shareholders, and we are working hard to
restore the value of El Paso's stock.
WE HAVE MADE SUBSTANTIAL STRIDES SO FAR IN 2003 AND, ALTHOUGH THERE IS STILL
MUCH WORK TO DO, I AM CONFIDENT THAT WE WILL MEET OR EXCEED THE OBJECTIVES IN
OUR PLAN. BEGINNING IN DECEMBER 2001, EL PASO HAS RESPONDED AGGRESSIVELY TO THE
TUMULTUOUS CHANGES IN OUR INDUSTRY, WHICH HAVE NEGATIVELY AFFECTED NOT ONLY OUR
COMPANY BUT ALSO MANY OTHERS IN THE ENERGY BUSINESS. YOUR BOARD AND MANAGEMENT
ARE COMMITTED TO CONTINUING THIS PROCESS AND TO DELIVERING THE VALUE THAT IS
INHERENT IN THIS COMPANY.
EL PASO'S FIVE-POINT PLAN
As you know, El Paso's plan is based on five key principles:
PRESERVING AND ENHANCING THE VALUE
OF THE COMPANY'S CORE BUSINESSES
El Paso is continuing to invest in our core
businesses -- NATURAL GAS PIPELINES, NATURAL GAS PRODUCTION,
MIDSTREAM AND NON-MERCHANT POWER -- to maintain our
leadership positions.
EL PASO HAS ASSEMBLED NORTH AMERICA'S LEADING NATURAL GAS
FRANCHISE AND THE LARGEST NATURAL GAS PIPELINE NETWORK IN
THE UNITED STATES. The company is rich in assets and fully
integrated across the natural gas value chain.
Our planned capital expenditures reflect this commitment to
our core businesses -- WITH 87 PERCENT OF 2003 CAPITAL
DEVOTED TO THE PIPELINE AND PRODUCTION BUSINESSES.
Capital expenditures have been reduced substantially to $2.6
billion for 2003 -- WHICH REPRESENTS A DECREASE OF 35
PERCENT FROM 2002 AND A 54 PERCENT DECREASE FROM 2001.
At the same time, we continue to review all proposed capital
expenditures to ensure that the objective of enhancing and
preserving the value of core businesses is balanced with
near-term and intermediate-term capital needs.
EXITING NON-CORE BUSINESSES
QUICKLY, BUT PRUDENTLY
We are on schedule with our stated plan to divest non-core assets. WE HAVE
INCREASED OUR TARGET FOR SALES OF NON-CORE ASSETS TO $3.4 BILLION FROM THE
ORIGINALLY PLANNED $2.9 BILLION. The company has signed agreements for or closed
over $1.7 billion of this year's planned non-core asset sales.
In January, we closed $333 million of asset sales, including
the sale of our 50% interest in CE Generation L.L.C., our
remaining coal operations and our natural gas gathering
systems in Wyoming.
In late February, we completed the sale of our Corpus
Christi refinery, our South Texas refined petroleum products
pipeline and our Florida petroleum terminals and tug and
barge operations for a total of approximately $444 million.
We continued the process of exiting the trading business in
an orderly manner by selling our European natural gas
trading book. We will receive cash proceeds of $80 million,
including the recovery of cash collateral. We expect to
recover significantly larger amounts of our cash collateral
over time in connection with our exit from the trading
business.
In March, we sold our Mid-Continent natural gas and oil
reserves to Chesapeake Energy Corporation for $500 million.
We also sold certain oil and gas properties in the San Juan
basin for $138 million.
STRENGTHENING AND SIMPLIFYING OUR BALANCE SHEET
WHILE MAXIMIZING LIQUIDITY
We are aggressively moving to improve our balance sheet and our liquidity in
order to meet debt maturities in 2003 and 2004 and increase our financial
flexibility.
In early March, two of our pipeline subsidiaries, Southern
Natural Gas (SNG) and ANR Pipeline, COMPLETED OFFERINGS OF
SEVEN-YEAR NOTES TOTALING $700 MILLION -- $400 MILLION BY
SNG AT A FIXED RATE OF 8 7/8 PERCENT AND $300 MILLION BY ANR
PIPELINE AT A FIXED RATE OF 8 7/8 PERCENT.
On March 13, the company closed a $1.2-billion two-year
secured loan that was used in part to retire our Trinity
River financing. This allowed the company full access to the
cash flow from the assets that formerly secured this
facility.
On March 17, we retired $1 billion of notes issued in
connection with our Electron power financing.
WE ARE ACTIVELY ENGAGED IN RENEGOTIATING OUR CREDIT
FACILITIES INCLUDING OUR $3 BILLION, 364-DAY REVOLVING
CREDIT FACILITY, WHICH MATURES IN MAY 2003. EL PASO HAS THE
OPTION TO CONVERT ANY OUTSTANDING BALANCE ON THIS FACILITY
INTO A ONE-YEAR TERM-LOAN MATURING IN MAY 2004.
AGGRESSIVELY PURSUING
ADDITIONAL COST REDUCTIONS
In 2002, the company reduced annual expenses by
approximately $300 million. THE COMPANY HAS TARGETED AND IS
MAKING PROGRESS ON AT LEAST AN ADDITIONAL $150 MILLION IN
ANNUAL COST REDUCTIONS IN 2003.
The company has sold its Gulfstream V corporate airplane for
a price in excess of $30 million.
We are undertaking a top-to-bottom analysis of the company
to achieve substantial further cost reductions. We are
committed to reducing expenses and designing the most
effective cost structure possible for our businesses.
WORKING DILIGENTLY TO RESOLVE LITIGATION
AND REGULATORY MATTERS
On March 20, the company reached an agreement in principle
to resolve the principal litigation and claims against the
company relating to the sale or delivery of natural gas
and/or electricity to or in the Western United States from
September 1996 to the present. The settlement is subject to
the negotiation of definitive settlement documents and
review and approval of the settlement by the courts and the
Federal Energy Regulatory Commission (FERC).
THIS SETTLEMENT WILL HELP RESOLVE THE UNCERTAINTIES THAT
HAVE SURROUNDED US IN THE MARKET OVER THE PAST FEW YEARS
RELATING TO THESE ISSUES. WITH THESE ISSUES BEHIND US, WE
WILL BE ABLE TO DEVOTE OUR FULL ENERGIES TO EXECUTING THE
REMAINING ELEMENTS OF OUR OPERATIONAL AND FINANCIAL PLAN.
The settlement was crafted to minimize current demands on
the company's liquidity, and will result in an estimated
after-tax charge of approximately $650 million to be taken
in the fourth quarter of 2002.
EL PASO'S BOARD OF DIRECTORS
WE RECENTLY ADDED THREE SEASONED ENERGY EXECUTIVES TO OUR BOARD, ROBERT W.
GOLDMAN, JOHN WHITMIRE, AND J. MICHAEL TALBERT. WE ARE CONTINUING TO LOOK FOR
ADDITIONAL HIGHLY QUALIFIED, INDEPENDENT DIRECTORS.
Mr. Goldman is the former senior vice president, finance and
chief financial officer of Conoco Inc.
Mr. Whitmire is the chairman of CONSOL Energy, Inc., former
executive vice president of Phillips Petroleum Company
responsible for worldwide exploration and production, and
former chairman and CEO of Union Texas Petroleum Holdings,
Inc.
Mr. Talbert is chairman and former CEO of Transocean Inc.
and previously served as President and CEO of Lone Star Gas
Company.
WE BELIEVE THAT OUR BOARD HAS AN IMPRESSIVE COMBINATION OF IN-DEPTH
KNOWLEDGE OF EL PASO, INDUSTRY AND FINANCIAL EXPERTISE, AND FRESH PERSPECTIVES.
IN OUR VIEW, OUR BOARD IS PARTICULARLY WELL EQUIPPED TO OVERSEE THE EXECUTION OF
OUR OPERATIONAL AND FINANCIAL PLAN, WHICH WILL SUBSTANTIALLY ENHANCE THE VALUES
INHERENT IN EL PASO'S CORE BUSINESSES.
In addition, the El Paso board is conducting a careful process to select the
best candidate for the position of Chief Executive Officer. The board has
established a search committee and has engaged Spencer Stuart, a leading
executive search firm.
THE ZILKHA/WYATT PROXY CONTEST
As you know, Selim K. Zilkha, who is working closely with Oscar S. Wyatt,
Jr., has announced a proxy contest to replace our entire board with a slate of
nine designees, including himself. Mr. Zilkha, 75, of Bel Air, California,
served as a director of El Paso from November 1999 to February 2001, and as an
advisory director from February 2001 to June 2002.
MR. ZILKHA HAS NOT PROVIDED ANY BUSINESS PLAN UPON WHICH TO BE ELECTED.
HOWEVER, YOUR COMPANY, ITS BOARD AND ITS MANAGEMENT DO HAVE A DETAILED PLAN,
WHICH IS BASED UPON FACTS AND IN-DEPTH KNOWLEDGE OF EL PASO. SINCE EARLY 2003,
WE HAVE BEEN IMPLEMENTING THIS PLAN, AND AS THIS LETTER AND OUR RECENT
ANNOUNCEMENTS SHOW, WE ARE MAKING SOLID PROGRESS.
We have tried to avoid this proxy contest and we believe that you should
know the following:
We have consistently sought to engage Mr. Zilkha in a number
of dialogues to address his concerns, including a number of
meetings with him and his advisors. We offered Mr. Zilkha
the opportunity to submit candidates for nomination to our
board. DESPITE THESE NUMEROUS EFFORTS TO REACH OUT TO MR.
ZILKHA, HE REJECTED THE COMPANY'S PROPOSALS AND CHOSE TO
LAUNCH HIS PROXY CAMPAIGN.
AS A FORMER MEMBER OF THE EL PASO BOARD, AND LATER AS AN
ADVISORY DIRECTOR OF EL PASO, MR. ZILKHA SUPPORTED THE
STRATEGIC DECISIONS HE IS NOW CRITICIZING.
Mr. Zilkha voluntarily chose to relinquish his role as an
advisory director, so as to be free from limitations on his
personal sales of company stock. Since leaving the El Paso
board, Mr. Zilkha has disposed of more than 3.7 million
shares of El Paso stock.
MR. ZILKHA HAS NOW PROPOSED THE UNCONVENTIONAL STEP OF
HAVING A COMMITTEE OF FOUR OF HIS NOMINEES RUN EL PASO ON A
DAY-TO-DAY BASIS UNTIL A CEO IS HIRED.
Although Mr. Zilkha has said he does not have the
information to develop a detailed business plan or strategy,
and that it would be 'INAPPROPRIATE' for him to do so, he
may still decide to provide forecasts or projections for the
company before his nominees are elected.
BY HIS OWN ADMISSION, ANY BUSINESS STRATEGIES, PLANS OR
PROJECTIONS MR. ZILKHA MAY OFFER WILL BE BASED UPON
INCOMPLETE INFORMATION AND SUBJECT TO THE RESULTS OF THE NEW
BOARD AND FOUR-MAN MANAGEMENT COMMITTEE'S EDUCATION PROCESS.
We also think it is noteworthy that Oscar Wyatt, 78, is working with Mr.
Zilkha and sharing the costs of the proxy contest. In our opinion there are
clear conflicts between Mr. Wyatt's interests and those of other El Paso
shareholders given that:
Mr. Wyatt is a plaintiff in a shareholder suit against El
Paso. In addition, he is the defendant in a lawsuit brought
by El Paso resulting from his default on payment of a loan
guarantee in favor of the company in the amount of $2.5
million plus interest.
He has formed an energy company, NuCoastal, which has
attempted to acquire assets that compete with El Paso.
Under Mr. Wyatt's leadership, Coastal Corp. made a number of
hostile takeover attempts and engaged in 'greenmail'
transactions.
Coastal's governance record under Mr. Wyatt included a
number of actions adverse to shareholder interests,
including the adoption of a staggered board structure and
the issuance of 'super-voting' stock that allowed Mr. Wyatt
personally to exercise substantial control over Coastal.
BASED UPON HIS PAST HISTORY, HIS CURRENT ADVERSARIAL RELATIONSHIP WITH EL
PASO AND HIS OWNERSHIP OF A COMPETING BUSINESS, WE DO NOT BELIEVE IT IS IN THE
INTERESTS OF OUR SHAREHOLDERS TO SUPPORT ANY PROPOSAL THAT COULD INCREASE MR.
WYATT'S INFLUENCE OVER EL PASO.
WE URGE YOU TO REJECT THE ZILKHA/WYATT SLATE
We believe that a wholesale change in our Board of Directors and a
subsequent change in management, followed by a 'schooling' process for the brand
new Zilkha/Wyatt directors, would be disruptive and would adversely affect the
execution of our plan. ACCORDINGLY, THE BOARD OF DIRECTORS STRONGLY RECOMMENDS
THAT YOU REJECT THE ZILKHA/WYATT ATTEMPT TO TAKE OVER THE BOARD BY REPLACING ALL
OF OUR DIRECTORS WITH THEIR SLATE OF NINE DESIGNEES.
This is a critical period for El Paso, during which we are continuing to
move forward with the negotiation and execution of numerous financings, asset
sales and other transactions necessary to meet the key objectives of our plan.
YOUR SUPPORT IS APPRECIATED
YOUR COMPANY, ITS BOARD AND ITS MANAGEMENT -- UNLIKE ZILKHA/WYATT -- DO HAVE
A DETAILED PLAN, WHICH IS BASED UPON FACTS AND IN-DEPTH KNOWLEDGE OF EL PASO.
El Paso is a great company with high-quality assets and the most qualified
and dedicated employees in the industry. We believe that this company has a
promising future. We also know that it takes hard work and dedication to
succeed. WE BELIEVE THAT, THROUGH THE HARD WORK OF OUR EMPLOYEES, EL PASO IS
MAKING STEADY PROGRESS WITH ITS PLAN TO REDUCE EXPENSES, STRENGTHEN ITS BALANCE
SHEET, ENHANCE LIQUIDITY AND FOCUS ON ITS CORE BUSINESSES.
We will be mailing you our proxy materials, including a WHITE proxy card for
you to vote. We encourage you to vote to support your Board. Your vote is
critical, no matter how many shares you own.
If you have any questions about the proxy solicitation or need additional
information about the El Paso stockholders' meeting, please contact MacKenzie
Partners, Inc. at (800) 322-2885 or visit El Paso's website at www.elpaso.com.
The company updates our website regularly.
On behalf of the entire El Paso board, I thank you for your continued
support and promise that we will continue to work hard on behalf of all our
shareholders.
Sincerely,
/s/ Ronald L. Kuehn
RONALD L. KUEHN
Chairman and Chief Executive Officer
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This letter 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, our ability to attract and retain qualified members of the Board of
Directors; the successful recruitment and retention of a qualified CEO; the
successful implementation of the 2003 operational and financial plan; the
successful implementation of the settlement related to the Western Energy
Crisis; actions by the credit rating agencies; the successful close of financing
transactions; our ability to successfully exit the energy trading business; 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; political and currency
risks associated with international operations of the company and its
affiliates; inability to realize anticipated synergies and cost savings
associated with restructurings and divestitures on a timely basis; difficulty in
integration of the operations of previously acquired companies; competition; 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.
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 this 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 proxy@mackenziepartners.com.
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 the 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.
If you have any questions about the proxy solicitation or
need additional information about the El Paso stockholders'
meeting, please contact MacKenzie Partners, Inc. as set
forth below:
[MACKENZIE PARTNERS LOGO]
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
E-mail: proxy@mackenziepartners.com