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El Paso, California
Reach Settlement Deal
The case has been one of the most visible of California's legal assaults on energy companies spawned by the 2000-2001 energy crisis, when the state's economy reeled from blackouts and soaring electricity and natural gas prices.
The Houston company said it expects the settlement, which includes no admission of wrongdoing, to result in a fourth-quarter after-tax charge of about $650 million.
The settlement includes payments of $100 million in cash, $125 million in El Paso common stock, or about 26.4 million shares, and additional payments of $22 million a year over a 20-year period.
The parties to the settlement include private class action litigants in California, the state's governor and lieutenant governor, the California Public Utilities Commission, the California Department of Water Resources, PG&E Corp.'s (NYSE:PCG - News) bankrupt Pacific Gas and Electric Co. utility and Edison International's (NYSE:EIX - News) Southern California Edison utility.
El Paso said the settlement is subject to review and approval by the courts and the Federal Energy Regulatory Commission. The final execution of the agreement and the approvals are expected by the end of this year.
In addition to its California woes, El Paso has been grappling with financial, legal and regulatory woes since a credit crunch prompted by the collapse of energy trader Enron Corp. (Other OTC:ENRNQ.PK - News).
Recent problems have included a credit rating downgrade to "junk" status and a tight cash situation. It is currently facing a proxy fight from its largest independent shareholder, Selim Zilkha, who is seeking to oust the entire board.
Shares of cash-strapped El Paso, one of the biggest shippers of gas into southern California, surged in Thursday trade on the New York Stock Exchange (News - Websites), closing up more than 16 percent at $6.40. as word of a possible deal became known.