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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. )
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Rule14a-6(e)(2))
[ ] Definitive Proxy Statement
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[ ] 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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[ELPASO LOGO]
May 23, 2003
Dear Fellow El Paso Shareholder:
I would like to give you the latest update on the initiatives your Board of
Directors and management are pursuing to position El Paso for the future.
LOOKING BEYOND OUR 2003 OPERATIONAL AND FINANCIAL PLANS
We have made significant progress with our 2003 operational and financial
plan, as described in my previous letters. We are already implementing a further
series of initiatives that build upon the momentum we have generated.
CLEAN SLATE INITIATIVE
o On April 16, 2003, we announced our Clean Slate Initiative, a top to bottom
analysis of El Paso to achieve significant cost reductions and business
efficiencies designed to create the most cost-efficient structure possible
for our businesses.
o 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.
o Our recent action to eliminate four of our 10 senior executive positions
underscores our commitment to this process.
LONG RANGE PLANNING
El Paso's Board-level Long Range Planning Committee is focused on taking
further steps to position El Paso to pursue the solid growth opportunities that
we believe exist for our natural gas businesses. To that end, at the direction
of the Committee, we provided additional detail on May 13, 2003 about our plan
to reduce debt by $7.5 billion, more than $12 per share, by mid-2005.
Key areas of future focus for the Long Range Planning Committee include:
o REVIEWING OPTIONS TO REDUCE OUR INDEBTEDNESS TO A LEVEL APPROPRIATE FOR AN
INVESTMENT-GRADE COMPANY AND SUSTAINABLE BY OUR CURRENT BUSINESSES. The
Committee expects to raise our debt reduction target by at least $2.5
billion -- for a total of at least $10 billion.
o Selling additional assets.
o Achieving further capital expenditure reductions, while generating
substantial free cash flow from our core businesses. The Committee is
targeting reductions that will bring us to a level of annual capital
expenditures below $2 billion, a significant reduction in capital
expenditures.
AS A DIRECT RESULT OF THE ACTIONS WE ARE PROPOSING, WE BELIEVE THAT EL PASO
WILL HAVE THE FINANCIAL FLEXIBILITY TO TAKE ADVANTAGE OF STRATEGIC BUSINESS
OPPORTUNITIES IN THE NORTH AMERICAN NATURAL GAS MARKET AND TO ACHIEVE FUTURE
GROWTH.
FUTURE EARNINGS IMPACT
Completing our 2003 plan and meeting our additional cost reduction and debt
reduction targets are important steps in repositioning El Paso for the future.
The cost and debt reduction initiatives described above should generate
significant improvements in El Paso's earnings and
materially reduce the risks associated with higher leverage. We expect that El
Paso will benefit in the future from:
o Strong earnings power of our core businesses
o After-tax effects of annual cost reductions and business efficiencies
o Net after-tax interest savings from debt reduction
LEADERSHIP AND CORPORATE GOVERNANCE
The process of positioning El Paso for the future includes leadership change
and maintaining best practices in corporate governance.
o WE ARE CONDUCTING A THOROUGH PROCESS TO SELECT THE BEST CANDIDATE FOR THE
POSITION OF CHIEF EXECUTIVE OFFICER OF EL PASO. We are 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.
o WE HAVE TAKEN A SERIES OF ACTIONS TO PROVIDE CONTINUITY AND MEASURED CHANGE
IN THE COMPOSITION OF OUR BOARD OF DIRECTORS -- adding to our Board four
directors with outstanding backgrounds and substantial management expertise
in the energy industry -- and having three directors not standing for
re-election.
o WE HAVE ADOPTED CORPORATE GOVERNANCE STANDARDS that we believe place us in
the vanguard of corporate governance best practices.
THE ZILKHA/WYATT PROXY CONTEST
As you know, Selim Zilkha and Oscar Wyatt, who collectively own only 2 per
cent of our common stock, are seeking to take control of the entire El Paso
Board at our Annual Meeting by replacing your Board of Directors with their own
slate of nine nominees.
WE BELIEVE THAT ELECTING THE ZILKHA/WYATT SLATE IS NOT IN THE BEST INTERESTS
OF OUR STOCKHOLDERS AND OUR BOARD STRONGLY RECOMMENDS THAT YOU REJECT
ZILKHA/WYATT. WE ASK YOU TO CAREFULLY CONSIDER THE FOLLOWING:
o Mr. Zilkha served as a director of El Paso from October 1999 until January
2001 and as an advisory director of El Paso from January 2001 until June
2002, when he resigned in order to be free from limitations on his personal
sales of El Paso stock. MR. ZILKHA VOTED TO APPROVE ALL DECISIONS MADE BY
OUR BOARD WHEN HE WAS A DIRECTOR OF EL PASO AND DID NOT DISSENT FROM A
SINGLE DECISION MADE BY OUR BOARD WHEN HE WAS AN ADVISORY DIRECTOR.
o Remarkably, while criticizing the El Paso Board for these decisions, Mr.
Zilkha has entirely ignored the fact that he sat in the same Board meetings
and made the same decisions.
o WE SOUGHT TO AVOID THIS PROXY CONTEST, BY ENGAGING MR. ZILKHA IN DIALOGUES
AND MEETINGS TO ADDRESS HIS CONCERNS. WE EVEN OFFERED MR. ZILKHA AN
OPPORTUNITY TO SUBMIT CANDIDATES FOR NOMINATION TO OUR BOARD.
o Messrs. Zilkha and Wyatt have not presented a detailed business plan.
Instead, they have offered a series of general statements about their ideas
for El Paso, WHICH THE HOUSTON CHRONICLE DESCRIBED AS 'STRIKINGLY SIMILAR'
TO EL PASO'S PLAN.
o We believe Stephen D. Chesebro', the CEO candidate proposed by Messrs.
Zilkha and Wyatt, is the WRONG CHOICE for CEO of El Paso. Mr. Chesebro's
ONLY experience as a public company CEO consists of LESS THAN EIGHT MONTHS
AS CEO OF PENNZENERGY IN 1999, since which time Mr. Chesebro' has been
unemployed. Mr. Chesebro' was Chairman and CEO of Tenneco Energy, a
subsidiary of Tenneco, Inc., for only approximately one year. We are in
discussions with a number of outstanding CEO candidates, all of whom we
believe have superior qualifications to those of Mr. Chesebro'.
o Messrs. Zilkha and Wyatt say their nominees are a 'world-class group with a
vast wealth of industry-specific experience and expertise.' A CLOSER LOOK
REVEALS THAT, AS A GROUP, THE ZILKHA/WYATT NOMINEES HAVE LIMITED KNOWLEDGE
OF EL PASO, LIMITED OR NO PUBLIC COMPANY BOARD EXPERIENCE, AND LIMITED
RECENT WORK EXPERIENCE RELEVANT TO EL PASO'S CORE BUSINESSES.
We think you should be concerned about Oscar Wyatt's leading role in
orchestrating this proxy contest and statements he has made to El Paso
representatives about his plans AFTER HE TAKES CONTROL OF EL PASO, because we
believe there are significant conflicts of interest between El Paso and Mr.
Wyatt:
o Mr. Wyatt is the lead plaintiff in a shareholder suit against El Paso and
the defendant in a lawsuit brought by El Paso resulting from his default on
payment of a company loan guarantee in the amount of $2.5 million plus
interest. Mr. Wyatt made an unsuccessful attempt to delay his deposition in
this lawsuit suggesting to the court that, if the Zilkha/Wyatt slate is
elected, the Board may not pursue collection of Wyatt's obligation.
o Mr. Wyatt formed an energy company in 2002 that has attempted to acquire
assets that compete with El Paso.
o Other concerns we have about Mr. Wyatt include his criminal guilty plea
relating to violations of federal crude oil pricing regulations and the
1979 permanent injunction against him arising from the failure to supply
natural gas to Texas municipalities. In addition, Mr. Wyatt has a history
of greenmail and other actions adverse to stockholder interests.
WE URGE YOU TO REJECT THE ZILKHA/WYATT SLATE
YOUR VOTE IS IMPORTANT IN DETERMINING THE FUTURE DIRECTION OF EL PASO. Our
Board of Directors recommends that El Paso shareholders vote 'FOR' El Paso's
slate of 12 highly qualified directors, WHO ARE COMMITTED TO RESTORING THE VALUE
INHERENT IN THE COMPANY'S STRONG ASSET BASE, and against the Zilkha/Wyatt
proposals.
We also urge you NOT to sign the BLUE proxy card sent to you by Messrs.
Zilkha and Wyatt and to DISCARD any proxy card they may send to you. Even if you
have previously signed a proxy card sent to you by Messrs. Zilkha and Wyatt, you
can revoke it by signing, dating and mailing the enclosed WHITE proxy card in
the envelope provided.
WE URGE YOU TO RETURN THE ENCLOSED WHITE PROXY CARD TO SUPPORT YOUR BOARD OF
DIRECTORS AND MANAGEMENT BY VOTING 'FOR' THE ELECTION OF OUR 12 DIRECTORS. YOUR
VOTE IS CRITICAL, NO MATTER HOW MANY SHARES YOU OWN.
If you have any questions about voting your proxy or need additional
information about El Paso or the stockholders meeting, please contact MacKenzie
Partners, Inc. at (800) 322-2885 or visit El Paso's website at www.elpaso.com.
On behalf of the entire El Paso Board of Directors, I thank you for your
continued support and promise that we will continue to act in the best interests
of all our shareholders.
Sincerely,
/s/ Ronald L. Kuehn, Jr.
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RONALD L. KUEHN, JR.
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; material and adverse impacts from our proxy contest with Selim
Zilkha/Oscar Wyatt; 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
To the extent that individual customers, independent industry researchers,
financial analysts, or El Paso commissioned research are quoted in this
document, 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. This document may contain expressions of opinion and belief. Except as
otherwise expressly attributed to another individual or entity, these opinions
and beliefs are the opinions and beliefs of El Paso. The quote from the Houston
Chronicle was excerpted from an article written by Laura Goldberg on May 7,
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:
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[MACKENZIE 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
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