El Paso Corp. said it paid out $570 million in cash Friday under a master agreement to settle charges that its subsidiaries manipulated natural gas and power prices in California and other western states during a span of more than six years.

The Houston-based energy company said the release of the $570 million under the settlement agreement will not impact its cash position because the funds had been held in escrow pending implementation of the agreement on June 11.

The $570 million was funded from $323 million of cash payments from the company; $195 million from the proceeds of 26.4 million shares of El Paso common stock that were issued on behalf of the settlement parties; $50 million related to price adjustments from June 24, 2003 to June 11 of this year under two power contracts with the California Department of Water Resources; and $2 million in accrued interest on deposited funds.

In July, El Paso said it also will make the first of 40 semi-annual payments to the settlement parties that will total about $876 million over the length of the obligation. El Paso Production Oil & Gas USA LP has pledged approximately 213 Bcf equivalent of proved natural gas and oil reserves located in South Texas as collateral for these payments, the company noted.

El Paso expects a second settlement agreement to take effect later this month. Under it, the company will make a cash payment of about $34 million. This payment will impact the company’s cash position, according to El Paso.

In June 2003, El Paso signed two definitive agreements to settle claims with California class-action litigants and the attorneys general of California, Washington, Oregon and Nevada, among others. In return for admitting no wrongdoing, the company agreed to multiple financial payouts over a number of years and reduced pricing.

The formal agreements call for El Paso to pay out approximately $1.6 billion over the years to resolve regulatory and legal actions related to the company’s sale or delivery of natural gas and electricity to the western states during the period from September 1996 to March 2003 (see Daily GPI, March 24, 2003).

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