The name of the game for the next three weeks at El Paso Corp. will be “proxy,” as opposing sides argue their case to shareholders on whether to keep the current board of directors by voting their white proxy statement or throw out the incumbents by voting their blue proxy statement in time for the annual meeting June 17 in Houston.

Shareholders have been bombarded almost daily in the past week with salvos from both sides on their plans for El Paso’s future. All of the appeals are in preparation for what’s expected to be a lively annual meeting, now scheduled, appropriately, at the George R. Brown Convention Center in downtown Houston. Just last week, there were 10 El Paso filings to the SEC, nearly all having to do with the battle for the board.

A Securities and Exchange Commission (SEC) filing by El Paso on Friday offered “straight talk,” which detailed intranet web site postings on Friday. The questions ranged from whether El Paso employees could attend the annual meeting without taking paid time off (they can) to how the company planned to reduce its debt obligations going forward. Also on employees’ minds were questions about whether additional layoffs were ahead (most likely).

The dissident shareholders, led by Selim Zilkha and Oscar Wyatt, also sent out several letters to shareholders last week in their attempt to sway shareholders to their side. Zilkha, 76 and a former El Paso board member, sent a letter to shareholders on Thursday stating, “You have to decide which of the two slates is more likely to make a success. One which has a history of write offs, bad business decisions and overcompensating executives, or our nominees who have years of experience, in management and in the field, and a history of success in the oil, gas and pipeline business.”

To be fair, many of El Paso’s liquidity problems stemmed from the incredible meltdown in the energy merchant business following Enron Corp.’s demise. However, after several years of a spending spree to pick up pipelines and production assets, the meltdown particularly affected El Paso, which had at one time pinned a lot of its growing strength to a prosperous energy trading business. Now, with long-time CEO William Wise ousted, numerous assets on the block and a revamped business plan, the current board argues that it is making a lot of head way in moving El Paso forward.

In an SEC filing last Tuesday, El Paso announced it would cut its debt by at least $10 billion by mid-2005, a third higher than the $7.5 billion target it set just two weeks ago, according to a proxy statement sent to shareholders.

El Paso had sent out a detailed letter to shareholders in mid-May that included most of the information in Tuesday’s letter, but reiterated that it plans to sell more assets and cut more capital spending to reduce debt by another $2.5 billion, up from $7.5 billion announced two weeks ago (see NGI, May 19). El Paso said in its shareholder letter that it plans to sell at least $3.4 billion in assets this year. It now carries about $25 billion in debt, and the new figures would put its debt at around $5 billion if it were to hit its targets by 2005.

“We are targeting a minimum of $400 million of annual pre-tax cost savings and business efficiencies by the end of 2004, which includes the pre-tax target of at least $150 million that we will achieve in 2003,” said interim CEO Ronald L. Kuehn Jr. “Our recent action to eliminate four of our 10 senior executive positions underscores our commitment to this process.”

Kuehn said the company is in “discussions with a number of outstanding candidates who are currently senior executives (including chief executive officers and chief operating officers) of large energy companies. We expect to complete this process promptly once the Zilkha/Wyatt proxy contest is behind us.”

Also on Tuesday, El Paso Corp. said it has repaid a $1.2 billion two-year secured interim term loan that it had obtained in March after subsidiary El Paso Production Holding Co. obtained its own 10-year unsecured loan at a lower interest rate so that it could make an intracompany debt payment.

CFO Dwight Scott said the transaction would reduce El Paso’s annual interest expense by $24 million and would eliminate debt maturity obligations of $300 million in June 2004, $300 million in September 2004 and $600 million in March 2005.

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