1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-42713
PROSPECTUS SUPPLEMENT
MAY 5, 1999
(TO PROSPECTUS DATED MAY 3, 1999)
EL PASO ENERGY CORPORATION
$500,000,000
6 3/4% SENIOR NOTES DUE 2009
- --------------------------------------------------------------------------------
EL PASO ENERGY CORPORATION:
- - El Paso Energy is a diversified energy holding company. It is engaged through
its subsidiaries in the interstate and intrastate transportation, gathering,
and processing of natural gas, marketing of natural gas, power and other
energy-related commodities, power generation, and the development and
operation of energy infrastructure facilities worldwide. El Paso Energy owns
the only integrated coast-to-coast natural gas pipeline system in the United
States.
- - El Paso Energy Corporation
El Paso Energy Building
1001 Louisiana Street
Houston, Texas 77002
(713) 420-2131
THE NOTES AND THE OFFERING:
- - Maturity: May 15, 2009.
- - Interest Payments: semi-annually on May 15 and November 15, beginning on
November 15, 1999.
- - Ranking: equally with any other unsecured indebtedness of El Paso Energy that
is not specifically subordinated to the senior notes.
- - Use of Proceeds: to repay short-term bank debt and commercial paper.
- - Closing: May 10, 1999.
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Per senior note Total
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Public offering price: 99.819% $499,095,000
Underwriting fees: 0.650% $ 3,250,000
Proceeds to El Paso Energy: 99.169% $495,845,000
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" ON PAGE S-12.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. NOR HAVE THEY MADE, NOR WILL THEY MAKE, ANY
DETERMINATION AS TO WHETHER ANYONE SHOULD BUY THESE SECURITIES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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DONALDSON, LUFKIN & JENRETTE
ABN AMRO INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary....... S-3
Risk Factors........................ S-12
Cautionary Statement Regarding
Forward-Looking Statements........ S-15
Capitalization...................... S-17
Use of Proceeds..................... S-18
Description of the Senior Notes..... S-18
Underwriting........................ S-23
Legal Matters....................... S-24
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PROSPECTUS
Cautionary Statement Regarding
Forward-Looking Statements........ 2
The Company......................... 3
The EPE Trusts...................... 4
Use of Proceeds..................... 4
Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Combined
Fixed Charges and Preferred and
Preference Stock Dividend
Requirements...................... 5
Description of the Senior Debt
Securities........................ 5
Description of the Subordinated Debt
Securities........................ 14
Description of Capital Stock of the
Company........................... 20
Description of the Trust Preferred
Securities........................ 24
Description of the Trust
Guarantees........................ 25
Relationship Among the Trust
Preferred Securities, the
Subordinated Debt Securities and
the Guarantees.................... 27
Plan of Distribution................ 29
Where You Can Find More
Information....................... 30
Legal Matters....................... 32
Experts............................. 32
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PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information appearing in other sections of this
prospectus supplement or the accompanying prospectus. It is not complete and may
not contain all of the information that you should consider before investing in
the senior notes. You should read the entire prospectus supplement and the
accompanying prospectus carefully, including the "Risk Factors" section and the
financial statements and the footnotes to those statements incorporated by
reference in the accompanying prospectus. For purposes of this prospectus
supplement, unless the context otherwise indicates, when we refer to "us," "we,"
"our," "ours," or "El Paso Energy," we are describing El Paso Energy Corporation
and its subsidiaries.
OUR BUSINESS
Our principal operations include:
- the interstate and intrastate transportation, gathering, and processing
of natural gas;
- the marketing of natural gas, power, and other energy-related
commodities;
- power generation; and
- the development and operation of energy infrastructure facilities
worldwide.
We own or have interests in over 28,000 miles of interstate and intrastate
pipeline connecting the nation's principal natural gas supply regions to four of
the largest consuming regions in the United States, namely the Gulf Coast,
California, the Northeast, and the Midwest. Our interstate natural gas
transmission operations include one of the nation's largest and only
coast-to-coast mainline natural gas transmission systems which is comprised of
five interstate pipeline systems: the El Paso Natural Gas pipeline, the
Tennessee Gas pipeline, the Midwestern Gas Transmission pipeline, the East
Tennessee Natural Gas pipeline, and the Mojave pipeline.
In addition to our interstate transmission services, we provide related
services, including natural gas gathering, products extraction, dehydration,
purification, compression, and intrastate transmission. These services include
gathering of natural gas from more than 10,000 natural gas wells with
approximately 11,000 miles of gathering lines, and 23 natural gas processing and
treating facilities located in some of the most prolific and active production
areas of the United States, including the San Juan and Permian Basins and in
east Texas, south Texas, Louisiana, and the Gulf of Mexico. We conduct
intrastate transmission operations through our interests in four Texas
intrastate systems, which include the Oasis pipeline running from west Texas to
Katy, Texas, the Channel pipeline extending from south Texas to the Houston Ship
Channel, and the Shoreline and Tomcat gathering systems which gather gas from
offshore Texas. We also provide intrastate transportation in north Louisiana
through our Gulf States pipeline that runs from the Texas border to Ruston,
Louisiana. Our marketing activities include the marketing and trading of natural
gas, power, and other energy-related commodities, as well as providing
integrated price risk management services associated with these commodities. We
also participate in the development and ownership of domestic power generation
facilities and other power-related assets and joint ventures.
Our international activities focus on the development and operation of
international energy infrastructure projects and include ownership interests in
three major operating natural gas transmission systems in Australia and natural
gas transmission systems and power generation facilities currently in operation
or under construction in Argentina, Bolivia, Brazil, Chile, the Czech Republic,
Hungary, Indonesia, Mexico, Pakistan, Peru, the United Kingdom, Bangladesh, the
Philippines, and China.
Our principal executive offices are in the El Paso Energy Building, located
at 1001 Louisiana Street, Houston, Texas 77002, and our telephone number at that
address is (713) 420-2131.
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OUR BUSINESS STRATEGY
We seek to be a leader in the North American energy industry and an active
participant in the development of energy infrastructure internationally. To
achieve our business and financial objectives, our strategy is to:
- generate stable earnings and significant free cash flow from our
interstate pipeline systems through long-term customer relationships,
cost reengineering, and throughput maximization;
- reinvest our free cash flow in projects that complement and expand our
non-regulated businesses, as well as in selected projects in regulated
businesses that are capable of generating incremental returns; and
- develop new areas for expansion in the energy industry, including
strategic acquisitions and joint ventures. We are pursuing this strategy
to capitalize on emerging trends in the energy industry, including the
growing worldwide demand for energy infrastructure, the deregulation of
the natural gas and electricity industries in the United States, and the
active oil and gas development in those domestic basins where we have
significant existing assets and operations.
RECENT DEVELOPMENTS
PRELIMINARY RESULTS OF OPERATIONS FOR THE FIRST QUARTER ENDED MARCH 31, 1999
On April 23, 1999, we announced our preliminary results of operations for
the first quarter ended March 31, 1999. Our reported consolidated earnings
before interest expense and income taxes for the first quarter of 1999 rose 17%
to $190 million, up from $163 million reported for the first quarter of 1998. We
also reported that diluted earnings per common share rose 21% to $.58, compared
to $.48 reported for the first quarter of 1998, excluding the cumulative effect
of an accounting change implemented in the first quarter of 1999. The accounting
change, which relates to the treatment of certain project development costs that
newly adopted accounting standards require be expensed rather than capitalized,
resulted in a non-recurring $13 million after-tax charge, or a charge of $.10
per diluted share.
MERGER WITH SONAT INC.
We entered into the second amended and restated agreement and plan of
merger with Sonat Inc. dated as of March 13, 1999 (the "Merger Agreement"),
pursuant to which Sonat will merge into El Paso Energy, and we will issue to
Sonat stockholders one share of El Paso Energy common stock for each share of
Sonat common stock owned by them, and our certificate of incorporation will be
amended to authorize us to issue up to 750 million shares of common stock and 50
million shares of preferred stock. We are planning to hold a special meeting of
our stockholders to consider and vote on a proposal to adopt the Merger
Agreement. If our stockholders do not approve the Merger Agreement, but Sonat
stockholders do approve the Merger Agreement, Sonat will instead merge with a
subsidiary of El Paso Energy under an alternative merger structure, and we will
issue a combination of (1) a fraction of a share of El Paso Energy common stock
and (2) a fraction of a depositary share representing a fractional interest in a
new series of senior voting preferred stock of El Paso Energy for each share of
Sonat common stock. We will complete the merger with Sonat only if a number of
conditions are satisfied or waived, including:
- Sonat stockholders adopt the Merger Agreement;
- no law or court order prohibits the transaction;
- all waiting periods under federal antitrust laws applicable to the merger
expire or terminate;
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- all other regulatory approvals are received without conditions that would
have a materially adverse effect on the financial condition, results of
operations or cash flow of our combined businesses; and
- attorneys for El Paso Energy and Sonat issue opinions that the merger is
expected to be tax free.
However, we cannot assure you that we will complete the merger even if such
conditions are satisfied.
If the El Paso Energy and Sonat stockholders both approve the Merger
Agreement, El Paso Energy and Sonat will complete the merger on an all common
stock basis, and we expect to account for the merger using the pooling of
interests method of accounting in accordance with United States generally
accepted accounting principles. If our stockholders do not approve the Merger
Agreement, El Paso Energy and Sonat will complete the merger under the
alternative merger structure, and we will account for the merger using the
purchase method of accounting in accordance with United States generally
accepted accounting principles. Therefore, the selected unaudited pro forma
condensed combined financial information included in this prospectus supplement
summary reflects the all common stock merger using the pooling of interests
method of accounting and the merger under the alternative structure using the
purchase method of accounting.
Sonat Inc. is a diversified energy holding company. It is engaged through
its subsidiaries and joint ventures in domestic oil and natural gas exploration
and production, in the transmission and storage of natural gas, and in natural
gas and power marketing. Sonat has interests in oil and gas producing properties
in Louisiana, Texas, Oklahoma, Arkansas, Alabama, New Mexico, and the Gulf of
Mexico. Sonat owns approximately 1.6 trillion cubic feet equivalent of proved
reserves.
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THE OFFERING
Issuer........................ El Paso Energy Corporation. Our principal
executive offices are located in the El Paso
Energy Building, at 1001 Louisiana Street,
Houston, Texas 77002, and our telephone number
at that address is (713) 420-2131.
Securities Offered............ $500,000,000 aggregate principal amount of
6 3/4% senior notes due 2009.
Maturity Date................. The senior notes will mature on May 15, 2009.
Interest Payment Dates........ We will pay interest on the senior notes
semi-annually on May 15 and November 15 of each
year, commencing November 15, 1999.
Optional Redemption........... We may redeem all or any portion of the senior
notes at any time at a redemption price equal
to the "Make-Whole Price." The Make-Whole Price
is the greater of (i) 100% of the principal
amount of such senior notes and (ii) as
determined by an Independent Investment Banker,
the sum of the present values of the remaining
scheduled payments of principal and interest on
such senior notes discounted to the date of
redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate, plus, in
each case, accrued and unpaid interest to the
redemption date.
Ranking....................... The senior notes rank equally with any other
unsecured indebtedness of El Paso Energy that
is not specifically subordinated to the senior
notes.
Sinking Fund.................. None.
Certain Covenants............. The indenture governing the senior notes will
contain certain covenants, including, but not
limited to, covenants limiting (i) the creation
of liens securing indebtedness, and (ii) sale
and leaseback transactions.
Use of Proceeds............... Repayment of short-term bank debt and
commercial paper.
Certain Definitions........... "Adjusted Treasury Rate" means, with respect to
any redemption date, the rate per annum equal
to the semi-annual equivalent yield to maturity
of the Comparable Treasury Issue, assuming a
price for the Comparable Treasury Issue
(expressed as a percentage of its principal
amount) that is the same as the Comparable
Treasury Price for such redemption date, plus
0.25%.
"Comparable Treasury Issue" means the United
States Treasury security selected by an
Independent Investment Banker that (i) has a
maturity comparable to the remaining term of
the senior notes to be redeemed and (ii) that
would be used, at the time of selection and in
accordance with customary financial practice,
to price new issues of corporate
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debt securities with a maturity comparable to
the remaining term of the senior notes to be
redeemed.
"Comparable Treasury Price" means, with respect
to any redemption date, (i) the average of the
bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a
percentage of its principal amount) on the
third business day prior to such redemption
date, as set forth in the daily statistical
release (or any successor release) published by
the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities," or (ii) if the
daily statistical release (or any successor
release) is not published or does not contain
such prices on such business day, (A) the
average of the Reference Treasury Dealer
Quotations for such redemption date, after
excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all
such Reference Treasury Dealer Quotations.
"Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the
Trustee after consultation with El Paso Energy.
"Reference Treasury Dealer" means each of
Donaldson, Lufkin & Jenrette Securities
Corporation, ABN AMRO Incorporated, Chase
Securities Inc. and NationsBanc Montgomery
Securities LLC, and their respective
successors; provided, however, that if any of
them ceases to be a primary United States
Government securities dealer in New York City
(a "Primary Treasury Dealer"), El Paso Energy
will substitute another Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer
and any redemption date, the average, as
determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its
principal amount) quoted in writing to the
Trustee by the Reference Treasury Dealer at
5:00 p.m. on the third business day preceding
such redemption date.
Risk Factors.................. You should read the "Risk Factors" section on
page S-12, as well as the other cautionary
statements throughout this prospectus
supplement and the accompanying prospectus, to
ensure you understand the risks involved with
an investment in these notes.
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SUMMARY HISTORICAL FINANCIAL DATA
We have derived the summary historical consolidated financial data set
forth below for each of the three fiscal years ended December 31, 1998, from our
financial statements. Our financial statements for each of the three fiscal
years for the period ended December 31, 1998, have been audited by
PricewaterhouseCoopers LLP, independent public accountants. You should read the
following information together with our historical financial statements and
related notes contained in the El Paso Energy 1998 Annual Report on Form 10-K,
which is incorporated by reference in the accompanying prospectus.
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1996 1997 1998
-------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS AND RATIOS)
OPERATING RESULTS DATA(A)
Operating revenues........................................ $3,012 $5,638 $5,782
Depreciation, depletion and amortization.................. 101 236 269
Employee separation and asset impairment charge(b)........ 99 -- --
Operating income.......................................... 170 521 506
Income before income taxes and minority interest.......... 65 340 377
Income tax expense........................................ 25 129 127
Minority interest......................................... 2 25 25
Net income................................................ 38 186 225
Basic earnings per common share(c)........................ .53 1.64 1.94
Diluted earnings per common share(b)(c)................... .52 1.59 1.85
Basic average common shares outstanding(c)................ 72 114 116
Diluted average common shares outstanding(c).............. 73 117 126
Ratio of earnings to combined fixed charges and preferred
stock dividend requirements(d)......................... 1.59 2.26 2.01
AS OF DECEMBER 31,
-------------------
1997 1998
------- --------
(IN MILLIONS)
FINANCIAL POSITION DATA(A)
Total assets.............................................. $9,532 $10,069
Short-term debt (including current maturities of long-term
debt).................................................. 885 812
Long-term debt, less current maturities................... 2,119 2,552
Company-obligated mandatorily redeemable convertible
preferred securities of El Paso Energy Capital Trust
I...................................................... -- 325
Minority interest......................................... 365 365
Stockholders' equity...................................... 1,959 2,108
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(a) Our operating results and financial position data reflect the acquisitions
in June 1996 of Cornerstone Natural Gas, Inc., in December 1996 of El Paso
Tennessee Pipeline Co., and in August 1998 of DeepTech International Inc.
(b) We had a charge in 1996 of $99 million pre-tax ($60 million after tax) to
reflect costs associated with the implementation of a workforce reduction
plan and the impairment of certain long-lived assets. Diluted earnings per
common share for the year ended December 31, 1996, would have been $1.41
(compared to the reported $.52) before giving effect to this charge and an
$8 million pre-tax ($5 million after-tax) charge taken in the fourth quarter
for relocating the corporate headquarters from El Paso, Texas to Houston,
Texas in connection with the acquisition of El Paso Tennessee Pipeline Co.
(c) We adjusted all common share and per share amounts to give retroactive
effect to a two-for-one stock split in the form of a 100% stock dividend
that occurred on April 1, 1998.
(d) The ratios for the year ended December 31, 1994 and 1995 were 2.87 and 2.51,
respectively.
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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
We present on the following pages selected unaudited pro forma financial
information reflecting the all common stock merger of El Paso Energy and Sonat
using the pooling of interests method of accounting and selected unaudited pro
forma financial information reflecting the alternative merger using the purchase
method of accounting. We have included this information to give you a better
understanding of what the combined results of operations and financial position
of El Paso Energy and Sonat may have looked like had the merger occurred on an
earlier date. You should read this information together with our consolidated
financial statements and related notes thereto contained in the El Paso Energy
1998 Annual Report on Form 10-K, which is incorporated by reference in the
accompanying prospectus. You should also read this information together with
Sonat's consolidated financial statements and notes thereto and the unaudited
pro forma condensed combined financial information contained in our Current
Report on Form 8-K/A dated April 30, 1999, which is incorporated by reference in
the accompanying prospectus.
In accordance with the requirements of the pooling of interests method, the
unaudited pro forma operating results data reflecting the merger combines
information from the historical consolidated statements of income of El Paso
Energy and Sonat giving effect to the merger as if it had been completed on
January 1, 1996. In accordance with the requirements of the purchase method, the
unaudited pro forma operating results data reflecting the alternative merger
combines information from the historical consolidated statements of income of El
Paso Energy and Sonat giving effect to the alternative merger as if it had been
completed on January 1, 1998. Both the unaudited pro forma financial position
data reflecting the merger and the unaudited pro forma financial position data
reflecting the alternative merger combine information from the historical
consolidated balance sheets of El Paso Energy and Sonat giving effect to the
merger or the alternative merger, as applicable, as if it had been completed on
December 31, 1998.
We derived the pro forma information reflecting the all common stock merger
assuming (1) each share of Sonat common stock will be converted into one share
of El Paso Energy common stock and (2) El Paso Energy will issue a total of 110
million shares in the merger.
We derived the pro forma information reflecting the alternative merger
assuming (1) each share of Sonat common stock will be converted into (x) .170 of
a share of El Paso Energy common stock and (y) .299 of a depositary share
determined assuming an implied price per share of El Paso Energy common stock of
$36, (2) El Paso Energy will issue in the alternative merger a total of 18.7
million shares of common stock and 32.9 million depositary shares, which
depositary shares would entitle the holders thereof to receive up to $3.29
billion of value if El Paso Energy were liquidated, (3) each share of El Paso
Energy common stock issued will have a value of $36 on completion of the
alternative merger structure, and (4) the annual dividend rate on the senior
voting preferred stock will be 8.75%. The actual dividend rate will be a rate
that our respective financial advisors believe will cause the depositary shares,
when fully distributed after completion of the alternative merger, to trade
initially at approximately $100 per share, considering the pro forma
capitalization and credit profile of the combined company after the completion
of the alternative merger.
We are providing this information for illustrative purposes only. It does
not necessarily reflect what the results of operations or financial position of
the combined company would have been if the merger or alternative merger had
actually occurred at the beginning of the periods presented. This information
also does not necessarily indicate what the combined company's future operating
results or consolidated financial position will be. This information does not
reflect (1) the effect of any operating income improvements that we may achieve
by combining our companies or (2) cost savings associated with the combining of
our companies.
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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION REFLECTING
COMPLETION OF THE MERGER ON AN ALL COMMON STOCK BASIS
(POOLING OF INTERESTS METHOD OF ACCOUNTING)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
-------- --------- --------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
OPERATING RESULTS DATA:
Operating revenues.................................... $6,216 $10,010 $9,492
Depreciation, depletion and amortization.............. 485 634 618
Employee separation and asset impairment charge....... 99 -- --
Ceiling test charges.................................. -- -- 1,035
Net income (loss)..................................... 294 404 (306)
Basic earnings (loss) per common share................ 1.62 1.80 (1.35)
Diluted earnings (loss) per common share.............. 1.59 1.76 (1.35)(a)(b)
Cash dividends declared per share of common
stock(c)............................................ .70 .73 .76
Basic average common shares outstanding............... 182 224 226
Diluted average common shares outstanding............. 185 229 237
AS OF
DECEMBER 31, 1998
-----------------
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNT)
FINANCIAL POSITION DATA:
Total assets................................................ $14,430
Short-term debt (including current maturities of long-term
debt)..................................................... 1,642
Long-term debt, less current maturities..................... 3,651
Company-obligated mandatorily redeemable convertible
preferred securities of El Paso Energy Capital Trust I.... 325
Minority interest........................................... 374
Stockholders' equity........................................ 3,375
Book value per common share................................. 14.66
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(a) As required by the accounting rules, we have excluded additional dilutive
securities such as options in determining diluted earnings (loss) per common
share. If we had included those securities, we would have shown less of a
loss per common share.
(b) If we had excluded the non-cash ceiling test charges in determining diluted
earnings (loss) per common share, we would have shown diluted earnings per
share of $1.55.
(c) For purposes of calculating cash dividends declared per share of common
stock we have assumed that those dividends are the same as the historical
dividends declared by El Paso Energy during the periods presented.
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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION REFLECTING
COMPLETION OF THE MERGER UNDER THE ALTERNATIVE MERGER STRUCTURE
(PURCHASE METHOD OF ACCOUNTING)
FOR THE YEAR
ENDED
DECEMBER 31, 1998
-----------------
(IN MILLIONS,
EXCEPT PER SHARE
AND RATIO
AMOUNTS)
OPERATING RESULTS DATA:
Operating revenues.......................................... $9,492
Depreciation, depletion and amortization.................... 706
Ceiling test charges........................................ 1,035
Net loss available to common stockholders(a)(f)............. (649)
Basic loss per common share(a)(f)........................... (4.81)
Diluted loss per common share(a)(b)(c)(f)................... (4.81)
Cash dividends declared per share of common stock(d)........ .76
Cash dividends per El Paso Energy preferred depositary
share..................................................... 8.75
Basic average common shares outstanding..................... 135
Diluted average common shares outstanding................... 150
Ratio of earnings to combined fixed charges
and preferred stock dividend requirements(e).............. --
AS OF
DECEMBER 31, 1998
-----------------
(IN MILLIONS,
EXCEPT PER SHARE
AMOUNT)
FINANCIAL POSITION DATA:
Total assets................................................ $18,356
Short-term debt (including current maturities of long-term
debt)..................................................... 1,642
Long-term debt, less current maturities..................... 3,700
Company-obligated mandatorily redeemable convertible
preferred securities of El Paso Energy Capital Trust I.... 325
Mandatorily redeemable preferred stock...................... 3,288
Minority interest........................................... 374
Stockholders' equity........................................ 2,508
Book value per common share................................. 18.04
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(a) Each percentage point change to the assumed annual dividend rate for the
senior voting preferred stock would impact net loss available to common
stockholders by $33 million and loss per common share by $.24.
(b) If we had excluded the non-cash ceiling test charges in determining diluted
loss per common share, we would have shown diluted earnings per share of
$.16.
(c) As required by the accounting rules, we have excluded additional dilutive
securities such as options in determining diluted loss per common share. If
we had included those securities, we would have shown less of a loss per
common share.
(d) For purposes of calculating cash dividends declared per share of common
stock we have assumed that those dividends are the same as the historical
dividends declared by El Paso Energy.
(e) Earnings would be inadequate to cover fixed charges by $1.1 billion. If we
had excluded the non-cash ceiling test charges in determining the ratio of
earnings to combined fixed charges and preferred stock dividend
requirements, we would have shown a ratio of .92 and earnings would be
inadequate to cover fixed charges by $77 million.
(f) Each one dollar increase (or decrease) to the $36 assumed implied price per
share of El Paso Energy common stock used to determine the fraction of a
depositary share to be exchanged for each share of Sonat common stock would
increase (or decrease) net loss available to common stockholders, basic loss
per common share and diluted loss per common share by $11 million, $.08 per
share, and $.08 per share, respectively.
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RISK FACTORS
RISKS RELATED TO EL PASO ENERGY'S OPERATIONS
WE ARE A HOLDING COMPANY AND DEPEND ON OUR SUBSIDIARIES TO MEET OUR DEBT
SERVICE OBLIGATIONS.
As a holding company, we conduct all of our operations exclusively through
our subsidiaries. Our only significant assets are the capital stock of our
subsidiaries. This means that we are dependent on dividends or other
distributions of funds from these subsidiaries to meet our debt service and
other obligations, including the payment of principal and interest on the senior
notes. The indenture governing the senior notes, subject to certain
restrictions, permits El Paso Energy to incur additional secured indebtedness
and our subsidiaries to incur additional secured and unsecured indebtedness,
which would in effect be senior to the senior notes. The indenture will also
permit certain subsidiaries to pledge assets in order to secure indebtedness of
El Paso Energy and to agree with lenders under any secured indebtedness to
restrictions on repurchases of the senior notes and on the ability of such
subsidiaries to make distributions, loans, other payments or asset transfers to
El Paso Energy. The total long-term indebtedness of our subsidiaries as of
December 31, 1998 was approximately $2.6 billion on a historical basis, and
approximately $3.1 billion and $3.7 billion, respectively, on a pro forma
combined basis giving effect to the merger on an all common stock basis and
under the alternative structure.
Other risks, uncertainties and factors which may adversely affect us are
discussed more completely under the caption "Risk Factors -- Cautionary
Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995" in the El Paso Energy 1998 Annual Report on Form
10-K, which is incorporated by reference in the accompanying prospectus.
RISKS RELATED TO THE PROPOSED MERGER WITH SONAT AND SONAT'S OPERATIONS
THE STRUCTURE OF THE MERGER WILL NOT BE KNOWN UNTIL AFTER THE EL PASO ENERGY
STOCKHOLDERS' SPECIAL MEETING.
Because the structure of the merger depends on the vote of our
stockholders, we will not know until after the special meeting the structure of
the merger and type of consideration we will be required to pay for shares of
Sonat common stock.
PAYMENTS OF DIVIDENDS ON SENIOR VOTING PREFERRED STOCK ISSUED UNDER THE
ALTERNATIVE MERGER STRUCTURE WOULD REDUCE THE FUNDS AVAILABLE TO THE COMBINED
COMPANY TO FUND GROWTH AND OPERATIONS.
We currently estimate that, if we complete the alternative merger, dividend
payments in respect of the senior voting preferred stock would be between
approximately $256 million and $356 million annually based on the number of
shares of El Paso Energy common stock, shares of Sonat common stock and Sonat
options outstanding as of March 5, 1999, and an assumed annual dividend rate of
8.75%. The actual dividend rate will be set at a rate that our financial
advisors believe would cause the depositary shares, when fully distributed after
completion of the alternative merger, to trade initially at approximately $100
per share. Because we would be using cash to pay these dividends, the amount of
cash we would have available for expansion opportunities and ongoing operations
would be significantly reduced.
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EL PASO ENERGY AND SONAT COULD BE REQUIRED TO EFFECT SIGNIFICANT DIVESTITURES
OR COMPLY WITH OTHER REGULATORY REQUIREMENTS.
We cannot complete the merger until the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired or
terminated. We are also required to obtain the approval of the FERC in order to
complete the merger.
El Paso Energy and Sonat are both obligated, under the terms of the merger
agreement, to use their "reasonable best efforts" to take all action to ensure
that the waiting period under the HSR Act and all extensions of that period
expire or are terminated and other required approvals are obtained. Neither of
us is obligated, however, to take actions that would reasonably be likely to
have a material adverse effect on the business, financial condition, or results
of operations of the combined company after the merger, and El Paso Energy is
not obligated to take actions that would reasonably be likely to have a material
adverse effect on its subsidiary, Tennessee Gas Pipeline Company. Governmental
authorities could require the companies to effect significant divestitures as a
condition to approving the transaction or impose other conditions that would
affect subsequent operations of the combined company.
We cannot assure you that these and any other required regulatory approvals
will be obtained or, if they are obtained, as to the terms, conditions and
timing of these approvals. These requirements for regulatory approvals could
delay completion of the merger for a significant period of time after the Sonat
and El Paso Energy stockholders have approved the merger at the special
meetings.
IF THE MERGER IS COMPLETED UNDER THE ALTERNATIVE MERGER STRUCTURE, THE MERGER
WILL BE DILUTIVE TO OUR EARNINGS PER SHARE FOR AT LEAST THREE YEARS.
THE RATES THAT SONAT'S PIPELINE SUBSIDIARY IS ABLE TO CHARGE ITS CUSTOMERS MAY
BE REDUCED BY GOVERNMENTAL AUTHORITIES.
The pipeline transportation business conducted by Sonat's subsidiary,
Southern Natural Gas Company, is regulated by the FERC and various state and
local regulatory agencies. In particular, the FERC generally limits the rates
such Sonat subsidiary is permitted to charge its customers for interstate
transportation and, in some cases, sales of natural gas. If the rates such Sonat
subsidiary is permitted to charge its customers for transportation are lowered,
the profitability of Sonat's pipeline business may be reduced. Under the terms
of a settlement approved by the FERC, Sonat's subsidiary is required to file a
new rate case no later than September 1, 1999, to become effective by March 1,
2000. We cannot predict the outcome of that rate case.
MANY OF THE CONTRACTS FOR NATURAL GAS TRANSMISSION BY SONAT'S SUBSIDIARY WILL
EXPIRE WITHIN THE NEXT FEW YEARS.
Substantially all of the revenues of Sonat's subsidiary, Southern Natural
Gas Company, are generated under long-term natural gas transportation contracts.
Contracts representing approximately 58% of Southern Natural Gas Company's firm
transportation capacity will expire by their terms by September 1, 2003.
Contracts with one gas distribution customer account for 46% of these expiring
contracts. Although we expect such Sonat subsidiary to negotiate to extend these
contracts, there can be no assurance that it will be able to extend or replace
these contracts or that the terms of any renegotiated contracts will be as
favorable as the existing contracts. If such Sonat subsidiary is unable to renew
these contracts or if it renews them on less favorable terms, it may suffer a
material reduction in revenue and earnings.
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THE SUCCESS OF SONAT'S EXPLORATION AND PRODUCTION BUSINESS IS DEPENDENT ON
FACTORS WHICH CANNOT BE PREDICTED WITH CERTAINTY.
The performance of Sonat's exploration and production business is dependent
upon a number of factors that cannot be predicted with certainty. These factors
include:
- the effect of oil and natural gas prices on revenues;
- the results of future drilling activity;
- Sonat's ability to identify and precisely locate prospective geologic
structures and to drill and successfully complete wells in those
structures; and
- Sonat's ability to expand leased land positions in desirable areas, which
often are subject to intensely competitive leasing conditions.
KEY PERSONNEL COULD TERMINATE THEIR EMPLOYMENT WITH THE COMBINED COMPANY.
El Paso Energy's senior management has limited experience in the oil and
gas exploration and production business. Although we expect Sonat personnel who
currently operate Sonat's exploration and production business to remain with the
combined company, we cannot assure you that any of these personnel will remain
with the combined company after we complete the merger.
All of the executive officers and other key employees of Sonat are parties
to severance agreements and have the right to receive substantial payments if
their employment is terminated by the combined company, if they terminate their
employment for good reason after the merger or, in the case of its executive
officers and two other key executives, if they terminate employment for any
reason during the 30-day period immediately following the first anniversary of
the merger. Executive officers and certain other key employees of El Paso Energy
have similar rights under applicable plans, unless the merger is completed under
the alternative merger structure. In addition, several Sonat executive officers
are eligible to participate in a voluntary reduction-in-force window program if
they (1) give notice of intent to terminate their employment within a 45-day
period currently expected to end on December 31, 1999, and (2) terminate their
employment during a 6-month period currently expected to end on June 30, 2000.
These individuals will be entitled to severance payments under their severance
agreements if they elect to take early retirement. Accordingly, El Paso Energy
expects that a substantial number of Sonat executive officers and other
employees will likely terminate their employment within the year following
completion of the merger.
We cannot assure you that, if executive officers and other key employees of
either El Paso Energy or Sonat leave the combined company, we will be able to
find adequate replacements.
WE CANNOT ASSURE YOU THAT EL PASO ENERGY AND SONAT WILL BE SUCCESSFULLY
COMBINED INTO A SINGLE ENTITY.
If we cannot successfully combine our operations we may experience a
material adverse effect on our business, financial condition or results of
operations. The merger involves the combining of two companies that have
previously operated separately. The combining of companies such as Sonat and El
Paso Energy involves a number of risks, including:
- the diversion of management's attention to the combining of operations;
- difficulties in the combining of operations and systems, including plans
to update and test systems for "Year 2000" compliance;
- difficulties in the assimilation and retention of employees;
- challenges in keeping customers; and
- potential adverse short-term effects on operating results.
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Among the factors considered by the boards of directors of each company in
approving the merger agreement were the opportunities for economies of scale and
scope and operating efficiencies that could result from the merger. Although we
expect the combined company to achieve significant annual savings in operating
costs as a result of the merger, we may not be able to maintain the levels of
operating efficiency that we each previously achieved or might achieve if we
remain separate. Because of difficulties in combining operations, we may not be
able to achieve the cost savings and other size-related benefits that we hope to
achieve after the merger.
In addition, because (1) Sonat's marketing operations are held through a
joint venture in which Sonat has a 65% interest and (2) its Florida pipeline is
held through a joint venture that is operated by a subsidiary of Enron Corp. and
in which Sonat has a 50% interest, the combined company may not be able to
effectively integrate these operations with similar operations of El Paso Energy
to achieve cost savings in these operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this prospectus supplement, the accompanying
prospectus and in documents that are incorporated by reference into this
document that constitute forward-looking statements, as that term is defined in
the Private Securities Litigation Reform Act of 1995. These statements are
subject to risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future results of operations of El
Paso Energy, Sonat or the combined company. These statements may relate to, but
are not limited to, information or assumptions about earnings per share, capital
and other expenditures, dividends, financing plans, capital structure, cash
flow, pending legal proceedings and claims, including environmental matters,
future economic performance, operating income, cost savings, management's plans,
goals and objectives for future operations and growth and markets for the common
stock of El Paso Energy. These forward-looking statements generally are
accompanied by words such as "intend," "anticipate," "believe," "estimate,"
"expect," "should" or similar expressions. You should understand that these
forward-looking statements are necessarily estimates reflecting the best
judgment of senior management of El Paso Energy, not guarantees of future
performance. They are subject to a number of assumptions, risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements.
Important factors that could cause actual results to differ materially from
estimates or projections contained in forward-looking statements include, among
others, the following:
- the risk that revenues may be affected by fluctuating energy prices;
- the risk that rates charged to customers may be reduced by governmental
authorities;
- the highly competitive nature of the natural gas transportation,
gathering, processing, storage and energy marketing industries;
- the risk of favorable customer contracts expiring or being renewed on
less attractive terms;
- the uncertainty concerning the future success of exploration and
production activities;
- the costs of environmental liabilities, regulations and litigation;
- the impact of operational hazards;
- the risk that required regulatory approvals for proposed pipeline,
storage and power generation projects may be delayed or may only be
granted on terms that are unacceptable or significantly less favorable
than anticipated;
- the risks associated with future weather conditions;
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- the risk that the merger with Sonat may not occur;
- the risk that Sonat's businesses may not be successfully integrated with
El Paso Energy's businesses;
- the risk that we may not fully realize the benefits expected to result
from the merger;
- the impact of the loss of key employees;
- the risk that other firms will further expand into markets in which El
Paso Energy or Sonat operate; and
- other risks, uncertainties and factors, including the effect of the year
2000 date change, discussed more completely in El Paso Energy's other
filings with the Securities and Exchange Commission, including the El
Paso Energy 1998 Annual Report on Form 10-K.
Certain of these factors are more fully described in "Risk Factors." Other
factors that could cause actual results to differ materially from estimates and
projections contained in forward-looking statements are described in the
documents that we incorporated by reference into the accompanying prospectus.
You should not place undue reliance on forward-looking statements, which speak
only as of the date of this prospectus supplement, or, in the case of documents
incorporated by reference, the date of those documents.
All subsequent written and oral forward-looking statements attributable to
El Paso Energy or any person acting on its behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. El Paso Energy does not undertake any obligation to release publicly
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this prospectus supplement or to reflect the
occurrence of unanticipated events.
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CAPITALIZATION
The following table sets forth the historical capitalization of El Paso
Energy at December 31, 1998, and such capitalization (i) as adjusted to reflect
this offering and El Paso Energy's application of the estimated proceeds it
receives and (ii) as further adjusted to give effect to the El Paso Energy and
Sonat merger (x) on an all common stock basis (using the pooling of interests
method of accounting) and (y) under the alternative merger structure (using the
purchase method of accounting). This table should be read in conjunction with
our consolidated financial statements and related notes thereto contained in the
El Paso Energy 1998 Annual Report on Form 10-K, which is incorporated by
reference in the accompanying prospectus. This table should also be read in
conjunction with Sonat's historical financial statements and notes thereto and
with the unaudited pro forma condensed combined financial information contained
in our Current Report on Form 8-K/A dated April 30, 1999, which is also
incorporated by reference in the accompanying prospectus.
DECEMBER 31, 1998
-----------------------------------------------------------
(IN MILLIONS)
AS FURTHER ADJUSTED
AS ADJUSTED -------------------------------
FOR THE ALL COMMON STOCK ALTERNATIVE
HISTORICAL OFFERING(a) MERGER(b) MERGER(c)
---------- ------------ ---------------- ------------
Short-term debt:
Short-term debt................................ $ 750 $ 250 $ 970 $ 970
Current maturities of long term-debt........... 62 62 172 172
------ ------ ------ -------
Total short-term debt....................... 812 312 1,142 1,142
------ ------ ------ -------
Long-term debt, less current maturities.......... 2,552 3,052 4,151 4,200
------ ------ ------ -------
Company-obligated mandatorily redeemable
convertible preferred securities of El Paso
Energy Capital Trust I......................... 325 325 325 325
------ ------ ------ -------
Mandatorily redeemable preferred stock........... -- -- -- 3,288
------ ------ ------ -------
Minority interest................................ 365 365 374 374
------ ------ ------ -------
Stockholders' equity:
Common stock, par value $3.00 per share;
275,000,000 shares authorized; 124,434,110
shares issued(d)............................ 373 373 703 429
Additional paid-in capital..................... 1,436 1,436 1,234 2,054
Retained earnings.............................. 460 460 1,551 186
Other.......................................... (161) (161) (113) (161)
------ ------ ------ -------
Total stockholders' equity.................. 2,108 2,108 3,375 2,508
------ ------ ------ -------
Total capitalization........................ $6,162 $6,162 $9,367 $11,837
====== ====== ====== =======
- -------------------------
(a) Adjusted to reflect the application of $500 million of proceeds from the
issuance by El Paso Energy of the senior notes.
(b) Gives effect to the merger of El Paso Energy and Sonat on an all common
stock basis, as if it occurred on December 31, 1998, and the application of
$500 million of proceeds from the issuance by El Paso Energy of the senior
notes.
(c) Gives effect to the merger of El Paso Energy and Sonat under the alternative
merger structure, as if it occurred on December 31, 1998, and the
application of $500 million of proceeds from the issuance by El Paso Energy
of the senior notes.
(d) If the merger is effected on an all common stock basis, El Paso Energy would
authorize an additional 475,000,000 shares and issue an additional
110,047,818 shares. If it is effected under the alternative merger
structure, El Paso Energy would issue an additional 18,726,782 shares. The
number of shares outstanding and to be issued does not include 9,851,243
shares (15,322,358 shares giving effect to the merger under either
structure) of El Paso Energy common stock issuable upon the exercise of
outstanding stock options.
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USE OF PROCEEDS
We will use the proceeds from the sale of the senior notes to repay
approximately $350 million of outstanding debt under our revolving credit
facility. This debt has a weighted average annual interest rate of 5.21% and
matures on May 14, 1999. We will use the remainder of the proceeds to repay
commercial paper having a weighted average annual interest rate of 5.07%. Funds
not required immediately for such purposes will be invested in marketable
securities and short-term, interest-bearing instruments.
DESCRIPTION OF THE SENIOR NOTES
The senior notes are to be issued under an indenture (as amended and
supplemented from time to time, the "senior indenture") between El Paso Energy
and The Chase Manhattan Bank, as trustee, the form of which is filed as an
exhibit to the registration statement of which this prospectus supplement is a
part, and copies of which may be obtained from the trustee at its corporate
trust office in New York, New York. The terms of the senior notes include those
stated in the senior indenture and made a part thereof by reference to the Trust
Indenture Act in effect on the date of the senior indenture. This summary and
the summary included under the caption "Description of the Senior Debt
Securities" in the accompanying prospectus of certain terms of the senior notes
and the senior indenture do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, the senior indenture, including
the definitions of certain terms therein, and the Trust Indenture Act. Terms
used in this section and not otherwise defined in this section have the
respective meanings assigned to them in the senior indenture.
You should read the section entitled "Description of the Senior Debt
Securities" in the accompanying prospectus for a more complete summary of the
provisions of the senior indenture.
GENERAL
The senior notes will be unsecured and will rank senior in right of payment
to all Subordinated Debt of El Paso Energy. The senior notes will be limited to
aggregate principal amount of $500 million. The senior indenture does not limit
the incurrence or issuance of other secured or unsecured debt of El Paso Energy,
whether under the senior indenture or any existing or other indenture that El
Paso may enter into in the future or otherwise.
The senior notes are not subject to any sinking fund provision. The entire
principal amount of the senior notes will mature, and become due and payable,
together with any accrued and unpaid interest thereon, on May 15, 2009.
INTEREST
The senior notes will bear interest at the annual rate of 6 3/4% per annum,
payable semi-annually in arrears on May 15 and November 15 of each year,
commencing on November 15, 1999 (each, an "interest payment date"), to the
person in whose name each senior note is registered at the close of business on
the first day (whether or not a business day) of the month of such interest
payment date (the "regular record date"), subject to certain exceptions. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the senior notes is not a business day, then payment of
the interest payable on such date will be made the next succeeding day that is a
business day (and without any interest or other payment in respect of any such
delay), except that if such business day is in the next succeeding calendar
year, then such payment shall be made on the immediately preceding business day,
in each case with the same force and effect as if made on such interest payment
date.
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REDEMPTION
The senior notes are redeemable, in whole or in part, at the option of El
Paso Energy at any time at a redemption price equal to the Make-Whole Price.
"Make-Whole Price" means an amount equal to the greater of (i) 100% of the
principal amount of such senior notes and (ii) as determined by an Independent
Investment Banker, the sum of the present values of the remaining scheduled
payments of principal and interest on such senior notes discounted to the date
of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
and unpaid interest thereon to the date of redemption. Notice of any redemption
will be mailed at least 30 days but not more than 60 days before the date of
redemption to each registered holder of the senior notes to be redeemed. Unless
El Paso Energy defaults in payment of the redemption price, on and after the
date of redemption, interest will cease to accrue on the senior notes or
portions thereof called for redemption. The senior notes do not provide for any
sinking fund.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) that is the same as the
Comparable Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that (i) has a maturity comparable
to the remaining term of the senior notes to be redeemed and (ii) that would be
used, at the time of selection and in accordance with customary financial
practice, to price new issues of corporate debt securities with a maturity
comparable to the remaining term of the senior notes to be redeemed.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day prior to such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if the daily statistical release (or any
successor release) is not published or does not contain such prices on such
business day, (A) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with El Paso Energy.
"Reference Treasury Dealer" means each of Donaldson, Lufkin & Jenrette
Securities Corporation, ABN AMRO Incorporated, Chase Securities Inc. and
NationsBanc Montgomery Securities LLC and their respective successors; provided,
however, that if any of them ceases to be a primary United States Government
securities dealer in New York City (a "Primary Treasury Dealer"), El Paso Energy
will substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
El Paso Energy may purchase senior notes in the open market, by tender or
otherwise. Senior notes so purchased may be held, resold or surrendered to the
Trustee for cancellation. If applicable,
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El Paso Energy will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other
securities laws and regulations in connection with any such purchase. The senior
notes may be defeased in the manner provided in the senior indenture.
BOOK-ENTRY SYSTEM
DTC will act as securities depositary for the senior notes. The senior
notes will be issued in fully registered form in the name of Cede & Co. (DTC's
nominee). One or more fully registered certificates will be issued as Global
Securities for the aggregate principal amount of the senior notes. Such senior
notes will be deposited with DTC.
DTC has advised El Paso Energy and the underwriters that it intends to
follow the procedures described below:
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("direct participants") deposit with DTC.
DTC also facilities the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("indirect participants" and, together with direct participants,
"participants"). The rules applicable to DTC and its participants are on file
with the Securities and Exchange Commission.
Purchases of senior notes under the DTC system must be made by or through
direct participants, which will receive a credit of the senior notes on DTC's
records. The ownership interest of each actual purchaser of senior notes
("beneficial owner") is in turn to be recorded on the participants' records.
Beneficial owners will not receive written confirmation from DTC on their
purchases, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant through which the beneficial owner entered into
the transaction. Transfers of ownership interests in the senior notes are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates representing
their ownership interests in the senior notes except in the event that use of
the book-entry system for the senior notes is discontinued.
To facilitate subsequent transfers, all senior notes deposited by direct
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of senior notes with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the senior notes. DTC's records
reflect only the identity of the direct participants to whose accounts such
senior notes are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by
participants to beneficial owners will be governed by
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arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the senior
notes. Under its usual procedures, DTC would mail an omnibus proxy to El Paso
Energy as soon as possible after the record date. The omnibus proxy assigns Cede
& Co.'s consenting or voting rights to those direct participants to whose
accounts the senior notes are credited on the record date (identified in a
listing attached to the omnibus proxy).
Principal and interest payments on the senior notes will be made to DTC.
DTC's practice is to credit direct participants' accounts on the payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payment date. Payments
by participants to beneficial owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participant and not of DTC, El Paso Energy or the
trustee, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal and interest to DTC is the
responsibility of El Paso Energy or the trustee, disbursement of such payments
to direct participants shall be the responsibility of DTC, and disbursements of
such payments to the beneficial owners shall be the responsibility of
participants.
Settlement for the senior notes will be made by the underwriters in
immediately available funds and all applicable payments of principal and
interest on the senior notes issued as Global Securities will be made by El Paso
Energy in immediately available funds. The Global Securities will be in the
Same-Day Funds Settlement System at DTC and, to the extent that secondary market
trading in beneficial interests in the Global Securities is effected through the
facilities of DTC, such trades will be settled in immediately available funds.
So long as DTC or its nominee is the registered owner of the Global
Securities, DTC or its nominee, as the case may be, will be considered the sole
owner or Holder of the senior notes represented by such Global Securities for
all purposes under the senior indenture. Except as set forth below, beneficial
owners of interests in a Global Security will not be entitled to have senior
notes represented by a Global Security registered in their names, will not
receive or be entitled to receive physical delivery of senior notes in
definitive form and will not be considered the owners or Holders thereof under
the senior indenture. Accordingly, each beneficial owner of an interest in a
Global Security must rely on the procedures of DTC and, if such person is not a
participant, those of the participants through which such beneficial owner owns
its interest, in order to exercise any rights of a Holder under the senior
indenture.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in the Global
Securities.
DTC may discontinue providing its services as securities depositary with
respect to the senior notes at any time by giving reasonable notice to El Paso
Energy or the trustee. Under such circumstances, if a successor securities
depositary is not obtained, certificates representing senior notes, in fully
registered form, are required to be printed and delivered.
El Paso Energy may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
certificates representing the senior notes, in fully registered from, will be
printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that El Paso Energy believes to be reliable
(including DTC), but El Paso Energy takes no responsibility for the accuracy
thereof.
Neither El Paso Energy, the trustee nor the underwriters will have any
responsibility or obligation to participants, or the persons for whom they act
as nominees, with respect to the accuracy of the records of DTC, its nominee or
any participant with respect to any ownership interest in the senior notes, or
payments to, or the providing of notice for participants or beneficial owners.
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UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, dated May
5, 1999, El Paso Energy has agreed to sell to each of the underwriters named
below and each of the underwriters severally agreed to purchase from El Paso
Energy the respective principal amount of senior notes set forth opposite their
names below.
PRINCIPAL
AMOUNT OF
UNDERWRITER SENIOR NOTES
- ----------- ------------
Donaldson, Lufkin & Jenrette Securities Corporation......... $251,000,000
ABN AMRO Incorporated....................................... 83,000,000
Chase Securities Inc........................................ 83,000,000
NationsBanc Montgomery Securities LLC....................... 83,000,000
------------
Total.................................................. $500,000,000
============
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the senior notes offered hereby
are subject to approval by their counsel of certain legal matters and to certain
other conditions. The underwriters are obligated to purchase and accept delivery
of all the senior notes offered hereby if any are purchased.
The underwriters initially propose to offer the senior notes in part
directly to the public at the initial public offering price set forth on the
cover page of this prospectus supplement and in part to certain dealers
(including the underwriters) at such price less a concession not in excess of
0.40% of the principal amount of the senior notes. The underwriters may allow,
and such dealers may re-allow, to any other underwriter and certain other
dealers a concession not in excess of 0.25% per senior note. After the initial
offering of the senior notes, the public offering price and other selling terms
may be changed by the underwriters at any time without notice.
El Paso Energy has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriters may be required to make in respect
thereof. Such indemnification provisions would require El Paso Energy to hold
the underwriters harmless from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement contained in this
prospectus supplement or by any omission to state a material fact herein, except
for untrue statements or omissions based upon information relating to the
underwriter furnished in writing to El Paso Energy by such underwriter expressly
for use in this prospectus supplement and subject to certain other limitations.
The senior notes are a new issue of securities with no established trading
market. El Paso Energy does not intend to apply for listing of the senior notes
on any securities exchange or the Nasdaq National Market. The underwriters have
advised El Paso Energy that they intend to make a market in the senior notes;
however, they are not obligated to do so, and they may discontinue any such
market making at any time without notice. Therefore, no assurance can be given
as to the liquidity of the trading market for the senior notes.
Other than in the United States, no action has been taken by El Paso Energy
or the underwriters that would permit a public offering of the senior notes in
any jurisdiction where action for that purpose is required. The senior notes
offered hereby may not be offered or sold, directly or indirectly, nor may this
prospectus or any other offering material or advertisements in connection with
the offer and sale of the senior notes be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of such
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jurisdiction. Persons into whose possession this prospectus supplement comes are
advised to inform themselves about and to observe any restrictions relating to
the offering of the senior notes and the distribution of this prospectus. This
prospectus supplement does not constitute an offer to sell or a solicitation of
an offer to buy any of the senior notes offered hereby in any jurisdiction in
which such an offer or a solicitation is unlawful.
In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
senior notes. Specifically, the underwriters may overallot the offering,
creating a syndicate short position. The underwriters may bid for and purchase
senior notes in the open market to cover such syndicate short position or to
stabilize the price of the senior notes. These activities may stabilize or
maintain the market price of the senior notes above independent market levels.
The underwriters are not required to engage in these activities, and may end
either of these activities at any time.
In the ordinary course of their respective businesses, certain of the
underwriters and their affiliates have engaged, and may in the future engage, in
investment banking or commercial banking transactions with El Paso Energy.
Donaldson, Lufkin & Jenrette Securities Corporation (DLJ) received customary
financial advisory fees in connection with the acquisition of DeepTech,
customary underwriting fees in connection with the March 1998 offering of Trust
Convertible Preferred Securities of El Paso Energy Capital Trust I and the
October 1998 offering of 7% Debentures of Tennessee Gas Pipeline Company. DLJ is
currently serving as financial advisor to El Paso Energy in connection with the
proposed merger with Sonat, for which DLJ will be paid a customary financial
advisory fee. Affiliates of ABN AMRO Incorporated, Chase Securities Inc. and
NationsBanc Montgomery Securities LLC are lenders under El Paso Energy's
revolving credit facility and will receive a portion of the amounts repaid with
the proceeds from the offering of the senior notes. An affiliate of Chase
Securities Inc. serves as the agent under the revolving credit facility. The
offering of the senior notes will be conducted in accordance with Conduct Rule
2710(c)(8) of the National Association of Securities Dealers, Inc. An affiliate
of Chase Securities Inc. is the trustee under the senior indenture.
LEGAL MATTERS
The validity of the senior notes offered hereby will be passed upon for El
Paso Energy by Andrews & Kurth L.L.P., Houston, Texas. Certain legal matters
with respect to the senior notes offered hereby will be passed upon for the
underwriters by Locke Liddell & Sapp LLP, Houston, Texas.
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PROSPECTUS
EL PASO ENERGY CORPORATION
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
---------------------
EL PASO ENERGY CAPITAL TRUST II
EL PASO ENERGY CAPITAL TRUST III
TRUST PREFERRED SECURITIES
(GUARANTEED TO THE EXTENT SET FORTH HEREIN BY EL PASO ENERGY CORPORATION)
El Paso Energy Corporation, a Delaware corporation, ("El Paso Energy" or the
"Company") is the successor corporation to and holding company of El Paso
Natural Gas Company ("EPG"). El Paso Energy may offer and sell from time to time
in one or more series its (i) unsecured debt securities which may be senior (the
"Senior Debt Securities") or subordinated (the "Subordinated Debt Securities")
consisting of notes, debentures or other evidences of indebtedness, (ii) shares
of preferred stock, par value $.01 per share (the "Preferred Stock"), and (iii)
shares of common stock, par value $3.00 per share (the "Common Stock").
El Paso Energy Capital Trust II and El Paso Energy Capital Trust III
(individually, an "EPE Trust" and collectively, the "EPE Trusts"), each a
statutory business trust formed under the laws of the State of Delaware, may
offer and sell, from time to time, trust preferred securities, representing
undivided beneficial interests in the assets of the respective EPE Trusts
("Trust Preferred Securities"). El Paso Energy will be the beneficial owner of
all the beneficial ownership interests represented by common securities of each
of the EPE Trusts (the "Trust Common Securities" and, together with the Trust
Preferred Securities, the "Trust Securities"). Holders of the Trust Preferred
Securities will be entitled to receive preferential cumulative cash
distributions accumulating from the date of original issuance and payable
periodically as specified in the applicable supplement to this prospectus (a
"Prospectus Supplement"). Subordinated Debt Securities may be issued and sold by
El Paso Energy from time to time in one or more series to an EPE Trust, or a
trustee of such EPE Trust, in connection with the investment of the proceeds
from the offering of Trust Securities of such EPE Trust. The Subordinated Debt
Securities purchased by an EPE Trust may be subsequently distributed pro rata to
holders of Trust Securities in connection with the dissolution of such EPE Trust
upon the occurrence of certain events as may be described in a related
Prospectus Supplement. The payment of distributions with respect to Trust
Preferred Securities of each of the EPE Trusts out of monies held by each of the
EPE Trusts, and payment on liquidation, redemption or otherwise with respect to
such Trust Preferred Securities, will be guaranteed by El Paso Energy to the
extent described herein (each a "Trust Guarantee"). See "Description of the
Trust Guarantees." El Paso Energy's obligations under the Trust Guarantees will
be subordinate and junior in right of payment to all other liabilities of El
Paso Energy and rank pari passu with the most senior preferred stock, if any,
issued from time to time by El Paso Energy.
The Senior Debt Securities, the Subordinated Debt Securities, the Preferred
Stock and the Common Stock offered hereby are collectively hereinafter referred
to as the "El Paso Energy Securities" and, together with the Trust Securities,
the "Securities." The Securities will be limited to an aggregate initial public
offering price not to exceed approximately $565 million, or, in the case of
Senior Debt Securities and Subordinated Debt Securities, the equivalent thereof
in one or more foreign currencies, including composite currencies. The
Securities may be offered, separately or together, in separate series, in
amounts, at prices and on terms to be determined at the time of sale and set
forth in a related Prospectus Supplement.
Certain specific terms of the particular Securities for which this
Prospectus is being delivered will be set forth in a related Prospectus
Supplement, including, where applicable: (i) in the case of Senior Debt
Securities or Subordinated Debt Securities, the specific designation, aggregate
principal amount, authorized denominations, maturities, interest rate or rates
(which may be fixed or variable), the date or dates on which interest, if any,
shall be payable, the place or places where principal of and premium, if any,
and interest, if any, on such Senior Debt Securities or Subordinated Debt
Securities of the series will be payable, terms of optional or mandatory
redemption or any sinking fund or analogous provisions, currency or currencies,
or currency unit or currency units of denomination and payment if other than
U.S. dollars, the initial public offering price, terms relating to temporary or
permanent global securities, provisions regarding convertibility or
exchangeability, if any, provisions regarding registration of transfer or
exchange, the proceeds to El Paso Energy and other special terms; (ii) in the
case of Preferred Stock, the specific designations, the number of shares,
dividend rights (including, if applicable, the manner of calculation thereof),
and any liquidation, redemption, conversion, exchange, voting and other rights,
the initial public offering price and other special terms; (iii) in the case of
Common Stock, the terms of the offering and sales thereof; and (iv) in the case
of the Trust Preferred Securities or the related Trust Guarantees, the specific
designation, aggregate offering amount, denomination, term, coupon rate, time of
payment of distributions, terms of redemption at the option of El Paso Energy or
repayment at the option of the holder, provisions regarding conversion or
exchange for capital stock of El Paso Energy, the designation of the Trustee(s)
acting under the applicable Indenture or Trust Guarantee and the public offering
price.
The Securities may be offered and sold to or through underwriters, dealers,
or agents as designated from time to time, or through a combination of such
methods, and also may be offered and sold directly to one or more other
purchasers. See "Plan of Distribution." The names of, and the principal amounts
or number of shares to be purchased by, underwriters, dealers or agents, and the
compensation of such underwriters, dealers or agents, including any applicable
fees, commissions, and discounts, will be set forth in the related Prospectus
Supplement. No Securities may be sold without delivery of a Prospectus
Supplement describing such series or issue of Securities and the method and
terms of offering thereof.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is May 3, 1999
26
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
El Paso Energy has made statements in this prospectus, the accompanying
prospectus supplement and in documents that are incorporated by reference into
this document that constitute forward-looking statements, as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements are subject to risks and uncertainties. Forward-looking statements
include information concerning possible or assumed future results of operations
of El Paso Energy. These statements may relate to, but are not limited to,
information or assumptions about earnings per share, capital and other
expenditures, dividends, financing plans, capital structure, cash flow, pending
legal proceedings and claims, including environmental matters, future economic
performance, operating income, cost savings, management's plans, goals and
objectives for future operations and growth and markets for the common stock of
El Paso Energy. These forward-looking statements generally are accompanied by
words such as "intend," "anticipate," "believe," "estimate," "expect," "should"
or similar expressions. You should understand that these forward-looking
statements are necessarily estimates reflecting the best judgment of senior
management of El Paso Energy, not guarantees of future performance. They are
subject to a number of assumptions, risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements.
Important factors that could cause actual results to differ materially from
estimates or projections contained in forward-looking statements include, among
others, those risks, uncertainties and factors discussed in El Paso Energy's
1998 Annual Report on Form 10-K. Other factors that could cause actual results
to differ materially from estimates and projections contained in forward-looking
statements are described in the documents that have been incorporated by
reference into this document. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this prospectus,
or, in the case of documents incorporated by reference, the date of those
documents.
All subsequent written and oral forward-looking statements attributable to
El Paso Energy or any person acting on its behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. El Paso Energy does not undertake any obligation to release publicly
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events.
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THE COMPANY
El Paso Energy's principal operations include:
- the interstate and intrastate transportation, gathering, and processing
of natural gas;
- the marketing of natural gas, power, and other energy-related
commodities;
- power generation; and
- the development and operation of energy infrastructure facilities
worldwide.
El Paso Energy owns or has interests in over 28,000 miles of interstate and
intrastate pipeline connecting the nation's principal natural gas supply regions
to four of the largest consuming regions in the United States, namely the Gulf
Coast, California, the Northeast, and the Midwest. El Paso Energy's interstate
natural gas transmission operations include one of the nation's largest and only
coast-to-coast mainline natural gas transmission systems which is comprised of
five interstate pipeline systems: the El Paso Natural Gas pipeline, the
Tennessee Gas pipeline, the Midwestern Gas Transmission pipeline, the East
Tennessee Natural Gas pipeline, and the Mojave pipeline.
In addition to interstate transmission services, El Paso Energy provides
related services, including natural gas gathering, products extraction,
dehydration, purification, compression, and intrastate transmission. These
services include gathering of natural gas from more than 10,000 natural gas
wells with approximately 11,000 miles of gathering lines, and 23 natural gas
processing and treating facilities located in some of the most prolific and
active production areas of the United States, including the San Juan and Permian
Basins and in east Texas, south Texas, Louisiana, and the Gulf of Mexico. El
Paso Energy conducts intrastate transmission operations through its interests in
four Texas intrastate systems, which include the Oasis pipeline running from
west Texas to Katy, Texas, the Channel pipeline extending from south Texas to
the Houston Ship Channel, and the Shoreline and Tomcat gathering systems which
gather gas from offshore Texas. El Paso Energy also provides intrastate
transportation in north Louisiana through its Gulf States pipeline that runs
from the Texas border to Ruston, Louisiana. El Paso Energy's marketing
activities include the marketing and trading of natural gas, power, and other
energy-related commodities, as well as providing integrated price risk
management services associated with these commodities. El Paso Energy also
participates in the development and ownership of domestic power generation
facilities and other power-related assets and joint ventures.
El Paso Energy's international activities focus on the development and
operation of international energy infrastructure projects and include ownership
interests in three major operating natural gas transmission systems in Australia
and natural gas transmission systems and power generation facilities currently
in operation or under construction in Argentina, Bolivia, Brazil, Chile, the
Czech Republic, Hungary, Indonesia, Mexico, Pakistan, Peru, the United Kingdom,
Bangladesh, the Philippines, and China.
El Paso Energy's principal executive offices are in the El Paso Energy
Building, located at 1001 Louisiana Street, Houston, Texas 77002, and its
telephone number at that address is (713) 420-2131.
HOLDING COMPANY REORGANIZATION
EPG, a Delaware corporation which was incorporated in 1928, reorganized its
corporate structure on August 1, 1998, to establish El Paso Energy as the parent
corporation for the operating subsidiaries (the "Reorganization"). In order to
effect the Reorganization, EPG incorporated El Paso Energy as a new wholly owned
holding company of EPG and then merged EPG with an indirect, wholly owned
subsidiary of El Paso Energy. The merger was effected without a vote of
stockholders of EPG pursuant to the provisions of the General Corporation Law of
Delaware. The capital structure of El Paso Energy is the same as that of EPG
prior to the merger.
In connection with the Reorganization, El Paso Energy, as the new holding
company, assumed certain liabilities and obligations of EPG, including those
with respect to the $334,750,000 aggregate principal amount of 4 3/4%
Subordinated Convertible Debentures due 2028 and the guarantee with respect to
the $325,000,000 aggregate liquidation amount of 4 3/4% Trust Convertible
Preferred Securities of El Paso Energy Capital Trust I.
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THE EPE TRUSTS
Each of EPE Trust II and EPE Trust III is a statutory business trust
created under the laws of the State of Delaware pursuant to (i) a separate
original declaration of trust, each of which has been amended and restated (as
so amended and restated, each a "Declaration"), executed by El Paso Energy, as
sponsor for such EPE Trust (the "Sponsor"), and the Trustees (as defined herein)
for such EPE Trust, and (ii) the filing of a certificate of trust with the
Delaware Secretary of State. Each Declaration will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
Each EPE Trust exists for the exclusive purposes of (i) issuing and selling the
Trust Securities, (ii) investing the gross proceeds from the sale of the Trust
Securities in Subordinated Debt Securities issued by El Paso Energy, and (iii)
engaging in only those other activities necessary or incidental thereto.
All of the Trust Common Securities issued by each of the EPE Trusts will be
directly or indirectly owned by El Paso Energy. The Trust Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Trust
Preferred Securities except that upon an event of default under the applicable
Declaration, the rights of the holders of the Trust Common Securities to payment
in respect of distributions and payments upon liquidation, redemption, and
otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. El Paso Energy will, directly or indirectly, acquire Trust
Common Securities in an aggregate liquidation amount equal to 3% of the total
capital of each EPE Trust. A majority of the Trustees (the "Administrative
Trustees") of each EPE Trust will be persons who are employees or officers of or
affiliated with El Paso Energy. One trustee of each EPE Trust will be a
financial institution that will be unaffiliated with El Paso Energy and that
will act as property trustee and as indenture trustee for purposes of the Trust
Indenture Act, pursuant to the terms set forth in a Prospectus Supplement (the
"Property Trustee"). In addition, unless the Property Trustee maintains a
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law, one trustee of each EPE Trust will have its
principal place of business or reside in the State of Delaware (the "Delaware
Trustee" and, together with the Administrative Trustees and the Property
Trustee, the "Trustees"). Each EPE Trust's business and affairs will be
conducted by the Trustees appointed by the Company, as the direct or indirect
holder of all the Trust Common Securities. Except in certain limited
circumstances, the holder of the Trust Common Securities will be entitled to
appoint, remove or replace any of, or increase or reduce the number of, the
Trustees of an EPE Trust. The duties and obligations of the Trustees shall be
governed by the Declaration of each EPE Trust. El Paso Energy will pay all fees
and expenses related to the EPE Trusts and the offering of Trust Securities, the
payment of which will be guaranteed by El Paso Energy. The office of the
Delaware Trustee for each EPE Trust in the State of Delaware is 1201 Market
Street, Wilmington, Delaware 19801. The principal place of business of each EPE
Trust shall be c/o El Paso Energy Corporation, El Paso Energy Building, 1001
Louisiana Street, Houston, Texas 77002, and its telephone number is (713)
420-2131.
USE OF PROCEEDS
Unless otherwise specified in a Prospectus Supplement, the net proceeds
received by El Paso Energy from the sale of Senior Debt Securities, Subordinated
Debt Securities, Preferred Stock and Common Stock will be used for general
corporate purposes. Funds not required immediately for such purposes may be
invested in marketable securities and short-term investments. The EPE Trusts
will use all proceeds received from the sale of the Trust Preferred Securities
to purchase Subordinated Debt Securities from El Paso Energy.
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RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF
EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred and Preference
Stock Dividend Requirements(1)........... 2.01x 2.26x 1.59x 2.51x 2.87x
- ---------------
(1) The ratio of earnings to combined fixed charges and preferred and preference
stock dividend requirements for the periods presented is the same as the
ratio of earnings to fixed charges since El Paso Energy has no outstanding
preferred stock or preference stock and, therefore, no dividend
requirements.
For purposes of calculating these ratios: (i) "fixed charges" represent
interest cost (exclusive of interest on rate refunds), amortization of debt
costs, the estimated portion of rental expense representing the interest factor,
and the pre-tax preferred stock dividend requirements of majority-owned
subsidiaries; and (ii) "earnings" represent the aggregate of income from
continuing operations before income taxes, interest expense (exclusive of
interest on rate refunds), amortization of debt costs, the estimated portion of
rental expense representing the interest factor, and the actual amount of any
preferred stock dividend requirements of majority owned subsidiaries, adjusted
to reflect actual distributions from equity investments.
DESCRIPTION OF THE SENIOR DEBT SECURITIES
The Senior Debt Securities offered hereby will represent unsecured
obligations of El Paso Energy. The Senior Debt Securities offered hereby will be
issued under an indenture (the "Senior Indenture"), between El Paso Energy and
The Chase Manhattan Bank, as trustee (the "Senior Debt Trustee"), the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Senior Indenture does not limit the aggregate
principal amount of Senior Debt Securities that may be issued thereunder from
time to time in one or more series.
The terms of the Senior Debt Securities include those stated in the Senior
Indenture and those made part of the Senior Indenture by reference to the Trust
Indenture Act. The Senior Debt Securities are subject to all such terms, and
holders of Senior Debt Securities are referred to the Senior Indenture and the
Trust Indenture Act for a statement of those terms.
The statements set forth below in this section are brief summaries of
certain provisions contained in the Senior Indenture, do not purport to be
complete, and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Senior Indenture, including the definitions
therein of certain terms, a copy of which Senior Indenture is incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part. Capitalized terms used in this section and not otherwise defined in
this section have the respective meanings assigned to them in the Senior
Indenture.
GENERAL
Reference is made to the Prospectus Supplement relating to the particular
series offered thereby for the terms of such Senior Debt Securities, including
where applicable: (a) the form and title of the Senior Debt Securities; (b) the
aggregate principal amount of the Senior Debt Securities; (c) the date or dates
on which the Senior Debt Securities may be issued; (d) the date or dates on
which the principal of and premium, if any, on the Senior Debt Securities shall
be payable; (e) the rate or rates (which may be fixed or variable) at which the
Senior Debt Securities shall bear interest, if any, and the date or dates from
which such interest shall accrue; (f) the dates on which interest, if any, shall
be payable and the record dates for the interest payment dates; (g) the place or
places where the principal of and premium, if any, and interest, if any, on the
Senior Debt Securities of the series will be payable; (h) the period or periods,
if any, within which, the price or prices at which, and the terms and conditions
upon which, the Senior Debt Securities may be redeemed at
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the option of El Paso Energy or otherwise; (i) any optional or mandatory
redemption or any sinking fund or analogous provisions; (j) if other than
denominations of $1,000 and integral multiples thereof, the denominations in
which the Senior Debt Securities of the series shall be issuable; (k) if other
than the principal amount thereof, the portion of the principal amount of the
Senior Debt Securities which shall be payable upon declaration of the
acceleration of the maturity thereof in accordance with the provisions of the
Senior Indenture; (l) whether payment of the principal of and premium, if any,
and interest, if any, on the Senior Debt Securities shall be without deduction
for taxes, assessments, or governmental charges paid by the holders; (m) the
currency or currencies, or currency unit or currency units, in which the
principal of and premium, if any, and interest, if any, on the Senior Debt
Securities shall be denominated, payable, redeemable or purchasable, as the case
may be; (n) any Events of Default (as defined below) with respect to the Senior
Debt Securities that differ from those set forth in the Senior Indenture; (o)
whether the Senior Debt Securities will be convertible; (p) whether the Senior
Debt Securities of such series shall be issued as a global certificate or
certificates and, in such case, the identity of the depositary for such series;
(q) provisions regarding the convertibility or exchangeability of the Senior
Debt Securities; and (r) any other terms not inconsistent with the Senior
Indenture.
If any Senior Debt Securities offered hereby are sold for foreign
currencies or foreign currency units or if the principal of and premium, if any,
or interest, if any, on any series of Senior Debt Securities is payable in
foreign currencies or foreign currency units, the restrictions, elections, tax
consequences, specific terms and other information with respect to such issue of
Senior Debt Securities and such currencies and currency units will be set forth
in the Prospectus Supplement relating thereto.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Senior Debt Securities offered hereby will be issued only in fully
registered form in denominations of $1,000 or any integral multiple thereof. The
Senior Debt Securities of a series may be issuable in the form of one or more
global certificates, which will be denominated in an amount equal to all or a
portion of the aggregate principal amount of such Senior Debt Securities. See
"-- Global Senior Debt Securities."
One or more series of Senior Debt Securities offered hereby may be sold at
a substantial discount below their stated principal amount, bearing no interest
or interest at a rate that at the time of issuance is below market rates. The
federal income tax consequences and special considerations applicable to any
such series of Senior Debt Securities will be described generally in the
Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
No service charge will be made for any transfer or exchange of the Senior
Debt Securities, but the Company or the Senior Debt Trustee may require payment
of a sum sufficient to cover any tax or other government charge payable in
connection therewith. Where Senior Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special U.S. federal income tax considerations,
applicable to any such Senior Debt Securities and to payment on and transfer and
exchange of such Senior Debt Securities will be described in the applicable
Prospectus Supplement. Bearer Senior Debt Securities will be transferable by
delivery.
Unless otherwise provided in the applicable Prospectus Supplement,
principal and premium, if any, or interest, if any, will be payable and the
Senior Debt Securities may be surrendered for payment or transferred at the
offices of the Senior Debt Trustee as paying and authenticating agent, provided
that payment of interest on registered securities may be made at the option of
El Paso Energy by check mailed to the address of the person entitled thereto as
it appears in the Security Register, or by transfer to an account maintained by
the person entitled thereto, provided that the proper wire transfer instructions
have been received by El Paso Energy prior to the Record Date. Payment of Senior
Debt Securities in bearer form will be made at such paying agencies outside of
the United States as the Company may appoint.
GLOBAL SENIOR DEBT SECURITIES
The Senior Debt Securities of a series may be issued in whole or in part in
the form of one or more global certificates that will be deposited with, or on
behalf of, a depositary (the "Depositary"), or its nominee,
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identified in the Prospectus Supplement relating to such series. Unless and
until such global certificate or certificates are exchanged in whole or in part
for Senior Debt Securities in individually certificated form, a global Senior
Debt Security may not be transferred or exchanged except as a whole to a nominee
of the Depositary for such global Senior Debt Security, or by a nominee for the
Depositary to the Depositary, or to a successor of the Depositary or a nominee
of such successor, except in the circumstances described in the applicable
Prospectus Supplement.
The specific terms of the depositary arrangement with respect to a series
of Senior Debt Securities and the rights of, and limitations on, owners of
beneficial interests in a global Senior Debt Security representing all or a
portion of a series of Senior Debt Securities will be described in the
Prospectus Supplement relating to such series.
CERTAIN COVENANTS
Limitations on Liens. The Senior Indenture provides that El Paso Energy
will not, nor will it permit any Restricted Subsidiary (as defined below) to,
create, assume, incur or suffer to exist any Lien (as defined below) upon any
Principal Property (as defined below), whether owned or leased on the date of
the Senior Indenture or thereafter acquired, to secure any Debt (as defined
below) of El Paso Energy or any other Person (as defined below) (other than the
Senior Debt Securities issued thereunder), without in any such case making
effective provision whereby all of the Senior Debt Securities Outstanding
thereunder shall be secured equally and ratably with, or prior to, such Debt so
long as such Debt shall be so secured. There is excluded from this restriction:
(i) any Lien upon any property or assets of El Paso Energy or any
Restricted Subsidiary in existence on the date of the Senior Indenture or
created pursuant to an "after-acquired property" clause or similar term in
existence on the date of the Senior Indenture or any mortgage, pledge
agreement, security agreement or other similar instrument in existence on
the date of the Senior Indenture;
(ii) any Lien upon any property or assets created at the time of
acquisition of such property or assets by El Paso Energy or any Restricted
Subsidiary or within one year after such time to secure all or a portion of
the purchase price for such property or assets or Debt incurred to finance
such purchase price, whether such Debt was incurred prior to, at the time
of or within one year of such acquisition;
(iii) any Lien upon any property or assets existing thereon at the time
of the acquisition thereof by El Paso Energy or any Restricted Subsidiary
(whether or not the obligations secured thereby are assumed by El Paso
Energy or any Restricted Subsidiary);
(iv) any Lien upon any property or assets of a Person existing thereon
at the time such Person becomes a Restricted Subsidiary by acquisition,
merger or otherwise;
(v) the assumption by El Paso Energy or any Restricted Subsidiary of
obligations secured by any Lien existing at the time of the acquisition by
El Paso Energy or any Restricted Subsidiary of the property or assets
subject to such Lien or at the time of the acquisition of the Person which
owns such property or assets;
(vi) any Lien on property to secure all or part of the cost of
construction or improvements thereon or to secure Debt incurred prior to,
at the time of, or within one year after completion of such construction or
making of such improvements, to provide funds for any such purpose;
(vii) any Lien on any oil, gas, mineral and processing and other plant
properties to secure the payment of costs, expenses or liabilities incurred
under any lease or grant or operating or other similar agreement in
connection with or incident to the exploration, development, maintenance or
operation of such properties;
(viii) any Lien arising from or in connection with a conveyance by El
Paso Energy or any Restricted Subsidiary of any production payment with
respect to oil, gas, natural gas, carbon dioxide, sulphur, helium, coal,
metals, minerals, steam, timber or other natural resources;
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(ix) any Lien in favor of El Paso Energy or any Restricted Subsidiary;
(x) any Lien created or assumed by El Paso Energy or any Restricted
Subsidiary in connection with the issuance of Debt the interest on which is
excludable from gross income of the holder of such Debt pursuant to the
Internal Revenue Code of 1986, as amended, or any successor statute, for
the purpose of financing, in whole or in part, the acquisition or
construction of property or assets to be used by El Paso Energy or any
Subsidiary;
(xi) any Lien upon property or assets of any foreign Restricted
Subsidiary to secure Debt of that foreign Restricted Subsidiary;
(xii) Permitted Liens (as defined below);
(xiii) any Lien upon any additions, improvements, replacements, repairs,
fixtures, appurtenances or component parts thereof attaching to or required
to be attached to property or assets pursuant to the terms of any mortgage,
pledge agreement, security agreement or other similar instrument, creating
a Lien upon such property or assets permitted by clauses (i) through (xii),
inclusive, above; or
(xiv) any extension, renewal, refinancing, refunding or replacement (or
successive extensions, renewals, refinancing, refundings or replacements)
of any Lien, in whole or in part, that is referred to in clauses (i)
through (xiii), inclusive, above, or of any Debt secured thereby; provided,
however, that the principal amount of Debt secured thereby shall not exceed
the greater of the principal amount of Debt so secured at the time of such
extension, renewal, refinancing, refunding or replacement and the original
principal amount of Debt so secured (plus in each case the aggregate amount
of premiums, other payments, costs and expenses required to be paid or
incurred in connection with such extension, renewal, refinancing, refunding
or replacement); provided further, however, that such extension, renewal,
refinancing, refunding or replacement shall be limited to all or a part of
the property (including improvements, alterations and repairs on such
property) subject to the encumbrance so extended, renewed, refinanced,
refunded or replaced (plus improvements, alterations and repairs on such
property).
Notwithstanding the foregoing, under the Senior Indenture, El Paso Energy
may, and may permit any Restricted Subsidiary to, create, assume, incur, or
suffer to exist any Lien upon any Principal Property to secure Debt of El Paso
Energy or any Person (other than the Senior Debt Securities) that is not
excepted by clauses (i) through (xiv), inclusive, above without securing the
Senior Debt Securities issued under the Senior Indenture, provided that the
aggregate principal amount of all Debt then outstanding secured by such Lien and
all similar Liens, together with all net sale proceeds from Sale-Leaseback
Transactions (as defined below) (excluding Sale-Leaseback Transactions permitted
by clauses (i) through (iv), inclusive, of the first paragraph of the
restriction on sale-leasebacks covenant described below) does not exceed 15% of
Consolidated Net Tangible Assets (as defined below).
Restriction on Sale-Leasebacks. The Senior Indenture provides that El Paso
Energy will not, nor will it permit any Restricted Subsidiary to, engage in a
Sale-Leaseback Transaction, unless: (i) such Sale-Leaseback Transaction occurs
within one year from the date of acquisition of the Principal Property subject
thereto or the date of the completion of construction or commencement of full
operations on such Principal Property, whichever is later; (ii) the
Sale-Leaseback Transaction involves a lease for a period, including renewals, of
not more than three years; (iii) El Paso Energy or such Restricted Subsidiary
would be entitled to incur Debt secured by a Lien on the Principal Property
subject thereto in a principal amount equal to or exceeding the net sale
proceeds from such Sale-Leaseback Transaction without securing the Senior Debt
Securities; or (iv) El Paso Energy or such Restricted Subsidiary, within a
one-year period after such Sale-Leaseback Transaction, applies or causes to be
applied an amount not less than the net sale proceeds from such Sale-Leaseback
Transaction to (A) the repayment, redemption or retirement of Funded Debt (as
defined below) of El Paso Energy or any such Restricted Subsidiary, or (B)
investment in another Principal Property.
Notwithstanding the foregoing, under the Senior Indenture El Paso Energy
may, and may permit any Restricted Subsidiary to, effect any Sale-Leaseback
Transaction that is not excepted by clauses (i) through
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(iv), inclusive, of the above paragraph, provided that the net sale proceeds
from such Sale-Leaseback Transaction, together with the aggregate principal
amount of outstanding Debt (other than the Senior Debt Securities) secured by
Liens upon Principal Properties not excepted by clauses (i) through (xiv),
inclusive, of the first paragraph of the limitation on liens covenant described
above, do not exceed 15% of the Consolidated Net Tangible Assets.
Certain Defined Terms. As used herein:
"Consolidated Net Tangible Assets" means, at any date of determination, the
total amount of assets after deducting therefrom (i) all current liabilities
(excluding (A) any current liabilities that by their terms are extendable or
renewable at the option of the obligor thereon to a time more than 12 months
after the time as of which the amount thereof is being computed, and (B) current
maturities of long-term debt), and (ii) the value (net of any applicable
reserves) of all goodwill, trade names, trademarks, patents and other like
intangible assets, all as set forth on the consolidated balance sheet of El Paso
Energy and its consolidated subsidiaries for El Paso Energy's most recently
completed fiscal quarter, prepared in accordance with generally accepted
accounting principles.
"Debt" means any obligation created or assumed by any Person for the
repayment of money borrowed and any purchase money obligation created or assumed
by such Person.
"Funded Debt" means all Debt maturing one year or more from the date of the
creation thereof, all Debt directly or indirectly renewable or extendible, at
the option of the debtor, by its terms or by the terms of any instrument or
agreement relating thereto, to a date one year or more from the date of the
creation thereof, and all Debt under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of one year or
more.
"Lien" means any mortgage, pledge, security interest, charge, lien or other
encumbrance of any kind, whether or not filed, recorded or perfected under
applicable law.
"Permitted Liens" means (i) Liens upon rights-of-way for pipeline purposes;
(ii) any governmental Lien, mechanics', materialmen's, carriers' or similar Lien
incurred in the ordinary course of business which is not yet due or which is
being contested in good faith by appropriate proceedings and any undetermined
Lien which is incidental to construction; (iii) the right reserved to, or vested
in, any municipality or public authority by the terms of any right, power,
franchise, grant, license, permit or by any provision of law, to purchase or
recapture or to designate a purchaser of, any property; (iv) Liens of taxes and
assessments which are (A) for the then current year, (B) not at the time
delinquent, or (C) delinquent but the validity of which is being contested at
the time by El Paso Energy or any Subsidiary in good faith; (v) Liens of, or to
secure performance of, leases; (vi) any Lien upon, or deposits of, any assets in
favor of any surety company or clerk of court for the purpose of obtaining
indemnity or stay of judicial proceedings; (vii) any Lien upon property or
assets acquired or sold by El Paso Energy or any Restricted Subsidiary resulting
from the exercise of any rights arising out of defaults on receivables; (viii)
any Lien incurred in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, temporary disability, social
security, retiree health or similar laws or regulations or to secure obligations
imposed by statute or governmental regulations; (ix) any Lien upon any property
or assets in accordance with customary banking practice to secure any Debt
incurred by El Paso Energy or any Restricted Subsidiary in connection with the
exporting of goods to, or between, or the marketing of goods in, or the
importing of goods from, foreign countries; or (x) any Lien in favor of the U.S.
or any state thereof, or any other country, or any political subdivision of any
of the foregoing, to secure partial, progress, advance, or other payments
pursuant to any contract or statute, or any Lien securing industrial
development, pollution control, or similar revenue bonds.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, other
entity, unincorporated organization, or government or any agency or political
subdivision thereof.
"Principal Property" means (a) any pipeline assets of El Paso Energy or any
Subsidiary, including any related facilities employed in the transportation,
distribution or marketing of natural gas, that are located in
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the U.S. or Canada, and (b) any processing or manufacturing plant owned or
leased by El Paso Energy or any Subsidiary that is located within the U.S. or
Canada, except, in the case of either clause (a) or (b), any such assets or
plant which, in the opinion of El Paso Energy's Board of Directors, is not
material in relation to the activities of El Paso Energy and its Subsidiaries as
a whole.
"Restricted Subsidiary" means any Subsidiary of El Paso Energy owning or
leasing any Principal Property.
"Sale-Leaseback Transaction" means the sale or transfer by El Paso Energy
or any Restricted Subsidiary of any Principal Property to a Person (other than
El Paso Energy or a Subsidiary) and the taking back by El Paso Energy or any
Restricted Subsidiary, as the case may be, of a lease of such Principal
Property.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Senior Indenture provides that El Paso Energy may, without the consent
of the Senior Debt Trustee or the holders of any Senior Debt Securities issued
thereunder, consolidate or merge with, or sell, lease or transfer its properties
and assets as, or substantially as, an entirety to, any Person, provided that
(i) either El Paso Energy is the surviving entity or such successor Person shall
expressly assume the due and punctual payment of the principal of, and any
premium and interest on, all the Senior Debt Securities and the performance or
observance of every covenant and condition of the Senior Indenture on the part
of El Paso Energy to be performed or observed, (ii) immediately after giving
effect to the transaction, no Default or Event of Default exists, and (iii) El
Paso Energy has delivered the Officer's Certificate and Opinion of Counsel
required by the Senior Indenture. Any such successor Person shall succeed to and
be substituted for, and may exercise every right and power of, El Paso Energy
under the Senior Indenture with the same effect as if it had been named a party
in the Senior Indenture and El Paso Energy shall, except in the case of a lease,
be released and discharged from all its obligations under the Senior Debt
Securities and the Senior Indenture. Notwithstanding the foregoing, El Paso
Energy currently anticipates that it will provide in any supplemental Senior
Indenture, including with respect to existing issuances of Senior Debt
Securities, that the predecessor Person may, in the alternative, elect not to be
so released from such obligations, provided that the predecessor Person and the
successor Person shall agree, pursuant to such supplemental Senior Indenture, to
be co-obligors jointly and severally with respect to all such obligations.
EVENTS OF DEFAULT
An "Event of Default" will occur under the Senior Indenture with respect to
Senior Debt Securities of a particular series issued thereunder upon: (a)
default in the payment of the principal of, or premium, if any, on, any Senior
Debt Security of such series at its maturity; (b) default in the payment of any
interest on any Senior Debt Security of such series when it becomes due and
payable and continuance of such default for a period of 30 days; (c) default in
the performance, or breach, of any term, covenant or warranty contained in the
Senior Indenture with respect to such series for a period of 60 days upon giving
written notice as provided in the Senior Indenture; (d) the occurrence of
certain events of bankruptcy; or (e) any other Event of Default applicable to
such series.
The Senior Indenture provides that if an Event of Default with respect to a
series of Senior Debt Securities issued thereunder shall have occurred and be
continuing, either the Senior Debt Trustee or the holders of not less than 25%
in principal amount of Senior Debt Securities of such series then outstanding
may declare the principal amount of all Senior Debt Securities of such series to
be due and payable immediately upon giving written notice as provided in the
Senior Indenture. The Senior Indenture provides that the holders of a majority
in principal amount of Senior Debt Securities then outstanding of such series
may rescind and annul such declaration and its consequences under certain
circumstances.
The holders of a majority in principal amount of Senior Debt Securities of
a series then outstanding may waive past defaults under the Senior Indenture
with respect to such series and its consequences (except a continuing default in
the payment of principal of or premium, if any, or interest on any series of
Senior Debt Securities or a default in respect of any covenant or provision of
the Senior Indenture which cannot be
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modified or amended by a supplemental Senior Indenture without the consent of
the holder of each outstanding Senior Debt Security affected thereby).
Pursuant to the Senior Indenture, the holders of a majority in aggregate
principal amount of all affected series of Senior Debt Securities then
outstanding may direct with respect to such series the time, method, and place
of conducting any proceeding for any remedy available to the Senior Debt Trustee
or exercising any trust or power conferred on the Senior Debt Trustee, provided
that such direction shall not be in conflict with any rule of law or the Senior
Indenture. Before proceeding to exercise any right or power under the Senior
Indenture at the direction of any holders, the Senior Debt Trustee shall be
entitled to receive from such holders reasonable security or indemnity against
the costs, expenses, and liabilities which might be incurred by it in compliance
with any such direction.
Under the terms of the Senior Indenture, El Paso Energy is required to
furnish to the Senior Debt Trustee annually an Officer's Certificate to the
effect that to the best of such officer's knowledge, El Paso Energy is not in
default in the performance and observance of the terms, provisions and
conditions of the Senior Indenture or, if such officer has knowledge that El
Paso Energy is in default, specifying such default. The Senior Indenture
requires the Senior Debt Trustee to give to all holders of Senior Debt
Securities outstanding thereunder notice of any Default by El Paso Energy in the
manner provided in the Senior Indenture, unless such Default shall have been
cured or waived; however, except in the case of a default in the payment of
principal of and premium, if any, or interest, if any, on any Senior Debt
Securities outstanding thereunder, the Senior Debt Trustee is entitled to
withhold such notice in the event that the board of directors, the executive
committee, or a trust committee of directors or certain officers of the Senior
Debt Trustee in good faith determine that withholding such notice is in the
interest of the holders of such outstanding Senior Debt Securities.
SATISFACTION AND DISCHARGE; LEGAL AND COVENANT DEFEASANCE
Under the terms of the Senior Indenture, El Paso Energy may satisfy and
discharge certain obligations to holders of Senior Debt Securities of any series
which have not already been delivered to the Senior Debt Trustee for
cancellation and which have either become due and payable or are by their terms
due and payable within one year or are to be called for redemption within one
year by (i) depositing or causing to be deposited with the Senior Debt Trustee
funds in an amount sufficient to pay the principal and any premium and interest
to the date of such deposit (in case of Senior Debt Securities of such series
which have become due and payable) or to the Stated Maturity or Redemption Date,
as the case may be, (ii) paying or causing to be paid all other sums payable
under the Senior Indenture with respect to such Senior Debt Securities, and
(iii) delivering to the Senior Debt Trustee an Officer's Certificate and Opinion
of Counsel relating to such satisfaction and discharge.
The Senior Indenture also provides that El Paso Energy and any other
obligor, if any, will be discharged from any and all obligations in respect of
any series of Senior Debt Securities issued thereunder (excluding, however,
certain obligations, such as the obligation to register the transfer or exchange
of such outstanding Senior Debt Securities of such series, to replace stolen,
lost, mutilated or destroyed certificates, to pay principal and interest on the
original stated due dates or specified redemption date, to make any sinking fund
payments, and to maintain paying agencies) on the 91st day following the deposit
referred to in the following clause (i), subject to the following conditions:
(i) the irrevocable deposit, in trust, of cash or U.S. Government Obligations
(or a combination thereof) which through the payment of interest and principal
thereof in accordance with their terms will provide cash in an amount sufficient
to pay the principal and interest and premium, if any, on the outstanding Senior
Debt Securities of such series and any mandatory sinking fund payments, in each
case, on the stated maturity of such payments in accordance with the terms of
the Senior Indenture and the outstanding Senior Debt Securities of such series
or on any Redemption Date established pursuant to clause (iii) below, (ii) El
Paso Energy's receipt of an Opinion of Counsel based on the fact that (A) El
Paso Energy has received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) since the date of the Senior Indenture, there
has been a change in the applicable federal income tax law, in either case, to
the effect that, and confirming that, the holders of the Senior Debt Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit
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and defeasance and will be subject to federal income tax on the same amount and
in the same manner and at the same times, as would have been the case if such
deposit and defeasance had not occurred, (iii) if the Senior Debt Securities are
to be redeemed prior to Stated Maturity (other than from mandatory sinking fund
payments or analogous payments), notice of such redemption shall have been duly
given pursuant to the Senior Indenture or provision therefor satisfactory to the
Senior Debt Trustee shall have been made, (iv) no Event of Default or event
which with notice or lapse of time or both would become an Event of Default will
have occurred and be continuing on the date of such deposit, and (v) El Paso
Energy's delivery to the Senior Debt Trustee of an Officer's Certificate and an
Opinion of Counsel, each stating that the conditions precedent under the Senior
Indenture have been complied with.
Under the Senior Indenture, El Paso Energy also may discharge its
obligations referred to above under the captions "-- Certain Covenants" and
"-- Consolidation, Merger and Sale of Assets" included in this Prospectus, as
well as certain of its obligations relating to reporting obligations under the
Senior Indenture, in respect of any series of Senior Debt Securities on the 91st
day following the deposit referred to in clause (i) in the immediately preceding
paragraph, subject to satisfaction of the conditions described in clauses (i),
(iii), (iv) and (v) in the immediately preceding paragraph with respect to such
series of Senior Debt Securities and the delivery of an Opinion of Counsel
confirming that the holders of the Senior Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and covenant defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the case
if such deposit and covenant defeasance had not occurred.
CHANGES IN CONTROL AND HIGHLY LEVERAGED TRANSACTIONS
The Senior Indenture does not contain provisions requiring redemption of
the Senior Debt Securities issued thereunder, or adjustment to any terms of such
Senior Debt Securities, upon any change in control of El Paso Energy.
Other than the limitations on Liens and the restriction on Sale-Leaseback
Transactions described above under the caption "-- Certain Covenants" included
in this Prospectus, the Senior Indenture does not contain any covenant or other
provisions designed to afford holders of the Senior Debt Securities issued
thereunder protection in the event of a highly leveraged transaction involving
El Paso Energy.
MODIFICATION OF THE SENIOR INDENTURE
The Senior Indenture provides that El Paso Energy and the Senior Debt
Trustee may enter into supplemental indentures without the consent of the
holders of Senior Debt Securities issued thereunder to: (a) secure any of such
Senior Debt Securities; (b) evidence the succession of another Person to El Paso
Energy under the Senior Indenture and the Senior Debt Securities and the
assumption by such successor Person of the obligations of El Paso Energy
thereunder; (c) add covenants and Events of Default for the benefit of the
holders of all or any series of such Senior Debt Securities or to surrender any
right or power conferred by the Senior Indenture upon El Paso Energy; (d) add
to, change or eliminate any of the provisions of the Senior Indenture, provided
that any such addition, change or elimination shall become effective only after
there are no such Senior Debt Securities of any series entitled to the benefit
of such provision outstanding; (e) establish the forms or terms of the Senior
Debt Securities of any series issued thereunder; (f) cure any ambiguity or
correct any inconsistency in the Senior Indenture; (g) evidence the acceptance
of appointment by a successor Senior Debt Trustee; and (h) qualify the Senior
Indenture under the Trust Indenture Act.
The Senior Indenture also contains provisions permitting El Paso Energy and
the Senior Debt Trustee, with the consent of the holders of a majority in
aggregate principal amount of all outstanding Senior Debt Securities affected by
such supplemental Senior Indenture (voting as one class), to add any provisions
to, or change in any manner or eliminate any of the provisions of, the Senior
Indenture, or modify in any manner the rights of the holders of such Senior Debt
Securities; provided that El Paso Energy and the Senior Debt Trustee may not,
without the consent of the holder of each outstanding Senior Debt Security
affected thereby, (a) change the stated maturity of the principal of or any
installment of principal of or interest, if any,
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on, any Senior Debt Security, or reduce the principal amount thereof or premium,
if any, on or the rate of interest thereon, (b) reduce the percentage in
principal amount of Senior Debt Securities required for any such supplemental
Senior Indenture or for any waiver provided for in the Senior Indenture, (c)
change El Paso Energy's obligation to maintain an office or agency for payment
of Senior Debt Securities and the other matters specified therein, or (d) modify
any of the provisions of the Senior Indenture relating to the execution of
supplemental indentures with the consent of holders of Senior Debt Securities
which are discussed in this paragraph or modify any provisions relating to the
waiver by holders of past defaults and certain covenants, except to increase any
required percentage or to provide that certain other provisions of the Senior
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Senior Debt Security affected thereby.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES OR STOCKHOLDERS
No director, officer, employee or stockholder, as such, of El Paso Energy
or any of its affiliates shall have any personal liability in respect of the
obligations of El Paso Energy under the Senior Indenture or the Senior Debt
Securities by reason of his, her or its status as such.
APPLICABLE LAW
The Senior Indenture is, and the Senior Debt Securities offered hereby will
be, governed by, and construed in accordance with, the laws of the State of New
York.
CONCERNING THE SENIOR DEBT TRUSTEE
The Senior Indenture provides that, except during the continuance of an
Event of Default, the Senior Debt Trustee will perform only such duties as are
specifically set forth in the Senior Indenture. If an Event of Default has
occurred and is continuing, the Senior Debt Trustee will use the same degree of
care and skill in its exercise of the rights and powers vested in it by the
Senior Indenture as a prudent person would exercise under the circumstances in
the conduct of such person's own affairs.
The Senior Indenture contains limitations on the rights of the Senior Debt
Trustee, should it become a creditor of El Paso Energy, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of such claims, as security or otherwise. The Senior Debt Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest, it must eliminate such conflict or resign.
The Chase Manhattan Bank, a New York banking corporation, is the Senior
Debt Trustee under the Senior Indenture, and is also the Subordinated Debt
Trustee (as defined below) under the Subordinated Debt Indenture (as defined
below). El Paso Energy maintains banking and other commercial relationships with
The Chase Manhattan Bank in the ordinary course of business.
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Subordinated Debt Securities may be issued from time to time in one or more
series under an indenture (the "Subordinated Indenture"), between the Company
and The Chase Manhattan Bank, as Trustee (the "Subordinated Debt Trustee"), the
form of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The terms of the Subordinated Debt Securities will include
those stated in the Subordinated Indenture and those made part of the
Subordinated Indenture by reference to the Trust Indenture Act. The Subordinated
Debt Securities are subject to all such terms, and holders of Subordinated Debt
Securities are referred to the Subordinated Indenture and the Trust Indenture
Act for those terms.
The statements set forth below in this section are brief summaries of
certain provisions contained in the Subordinated Indenture, do not purport to be
complete and are subject in all respects to the provisions of, and are qualified
in their entirety by reference to, the Subordinated Indenture, including the
definitions of certain terms therein, and the Trust Indenture Act. Capitalized
terms used in this section and not otherwise defined in this section have the
respective meanings assigned to them in the Subordinated Indenture.
GENERAL
The Subordinated Debt Securities will be unsecured, subordinated
obligations of the Company. The Subordinated Indenture does not limit the
aggregate principal amount of Subordinated Debt Securities which may be issued
thereunder and provides that the Subordinated Debt Securities may be issued from
time to time in one or more series. The Subordinated Debt Securities are
issuable in one or more series pursuant to an Subordinated Indenture
supplemental to the Subordinated Indenture or a resolution of the Company's
Board of Directors or a special committee appointed thereby (each, a
"Supplemental Subordinated Indenture").
In the event Subordinated Debt Securities are issued to an EPE Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such EPE Trust, such Subordinated Debt Securities subsequently may be
distributed pro rata to the holders of such Trust Securities in connection with
the dissolution of such EPE Trust upon the occurrence of certain events
described in the Prospectus Supplement relating to such Trust Securities. Only
one series of Subordinated Debt Securities will be issued to an EPE Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such EPE Trust.
Reference is made to the Prospectus Supplement relating to the particular
Subordinated Debt Securities being offered thereby for the following terms: (a)
the designation of such Subordinated Debt Securities; (b) the aggregate
principal amount of such Subordinated Debt Securities; (c) the percentage of
their principal amount at which such Subordinated Debt Securities will be
issued; (d) the date or dates on which such Subordinated Debt Securities will
mature and the right, if any, to extend such date or dates; (e) the rate or
rates, if any, per annum, at which such Subordinated Debt Securities will bear
interest, or the method of determination of such rate or rates; (f) the date or
dates from which such interest shall accrue, the interest payment dates on which
such interest will be payable or the manner of determination of such interest
payment dates and the record dates for the determination of holders to whom
interest is payable on any such interest payment dates; (g) the right, if any,
to extend the interest payment periods and the duration of such extension; (h)
provisions for a sinking purchase or other analogous fund, if any; (i) the
period or periods, if any, within which, the price or prices of which, and the
terms and conditions upon which such Subordinated Debt Securities may be
redeemed, in whole or in part, at the option of the Company or the holder; (j)
the form of such Subordinated Debt Securities; (k) provisions regarding
convertibility or exchangeability for capital stock of El Paso Energy (if any);
and (l) any other terms not inconsistent with the Subordinated Indenture.
Principal, premium, if any, and interest, if any, will be payable, and the
Subordinated Debt Securities offered hereby will be transferable, at the
corporate trust office of the Subordinated Debt Trustee in New York, New York,
provided that payment of interest, if any, may be made at the option of the
Company by check mailed to the address of the person entitled thereto as it
appears in the Security Register, or by transfer to an account maintained by the
person entitled thereto, provided that proper wire transfer instructions have
been received by the Company prior to the Record Date.
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If any Subordinated Debt Securities offered hereby are sold for foreign
currencies or foreign currency units or if the principal of and premium, if any,
or interest, if any, on any series of Subordinated Debt Securities is payable in
foreign currencies or foreign currency units, the restrictions, elections, tax
consequences, specific terms and other information with respect to such issue of
Subordinated Debt Securities and such currencies and currency units will be set
forth in the Prospectus Supplement relating thereto.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Subordinated Debt Securities offered hereby will be issued only in fully
registered form without coupons and in denominations of $1,000 or any integral
multiple thereof. The Subordinated Debt Securities of a series may be issuable
in the form of one or more global certificates, which will be denominated in an
amount equal to all or a portion of the aggregate principal amount of such
Subordinated Debt Securities. See "-- Global Subordinated Debt Securities."
One or more series of Subordinated Debt Securities offered hereby may be
sold at a substantial discount below their stated principal amount, bearing no
interest or interest at a rate that at the time of issuance is below market
rates. The federal income tax consequences and special considerations applicable
to any such series of Subordinated Debt Securities will be described generally
in the Prospectus Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
No service charge will be made for any transfer or exchange of the
Subordinated Debt Securities, but the Company or the Subordinated Debt Trustee
may require payment of a sum sufficient to cover any tax or other government
charge payable in connection therewith. Where Subordinated Debt Securities of
any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special U.S. federal
income tax considerations, applicable to any such Subordinated Debt Securities
and to payment on and transfer and exchange of such Subordinated Debt Securities
will be described in the applicable Prospectus Supplement. Bearer Subordinated
Debt Securities will be transferrable by delivery.
Unless otherwise provided in the applicable Prospectus Supplement,
principal and premium, if any, or interest, if any, will be payable and the
Subordinated Debt Securities may be surrendered for payment or transferred at
the offices of the Subordinated Debt Trustee as paying and authenticating agent,
provided that payment of interest on registered securities may be made at the
option of the Company by check mailed to the address of the person entitled
thereto as it appears in the Security Register, or by transfer to an account
maintained by the person entitled thereto, provided that the proper wire
transfer instructions have been received by the Company prior to the Record
Date. Payment of Subordinated Debt Securities in bearer form will be made at
such paying agencies outside of the United States as the Company may appoint.
GLOBAL SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities of a series may be issued in whole or in
part in the form of one or more global certificate(s) that will be deposited
with, or on behalf of, a depositary (the "Subordinated Depositary"), or its
nominee, identified in the Prospectus Supplement relating to such series. In
such a case, one or more global certificate(s) will be issued in a denomination
or aggregate denomination equal to the portion of the aggregate principal amount
of outstanding Subordinated Debt Securities of the series to be represented by
such global certificate(s). Unless and until such global certificate(s)
exchanged in whole or in part for Subordinated Debt Securities in individually
certificated form, a global Subordinated Debt Security may not be transferred or
exchanged except as a whole to a nominee of the Subordinated Depositary for such
global Subordinated Debt Security, or by a nominee for the Subordinated
Depositary to the Subordinated Depositary or to a successor of the Subordinated
Depositary or a nominee of such successor, except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to a series
of Subordinated Debt Securities and the rights of, and limitations on, owners of
beneficial interests in a global Subordinated Debt Security representing all or
a portion of a series of Subordinated Debt Securities will be described in the
Prospectus Supplement relating to such series.
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SUBORDINATION
The Subordinated Debt Securities will be subordinated and junior in right
of payment to all other Debt of El Paso Energy, except for such Debt that is by
its terms subordinate to or pari passu with the Subordinated Debt Securities
("Senior Debt"), and such other indebtedness of the Company to the extent set
forth in the applicable Prospectus Supplement.
CERTAIN COVENANTS
If Subordinated Debt Securities are issued to an EPE Trust or a Trustee of
such trust in connection with the issuance of Trust Securities by such EPE Trust
and (i) there shall have occurred any event that would constitute an Event of
Default (as defined herein), (ii) the Company shall be in default with respect
to its payment of any obligations under the related Trust Guarantee or the
guarantee of the Trust Common Securities (together with the Trust Guarantee, the
"Guarantees") or (iii) the Company shall have given notice of its election to
defer payments of interest on such Subordinated Debt Securities by extending the
interest payment period as provided in the Subordinated Indenture and such
period, or any extension thereof, shall be continuing, then the Company will be
subject to certain restrictions regarding (a) the declaration or payment of
dividends on, and the making of guarantee payments with respect to, any of its
capital stock; and (b) the making of any payment of interest, principal or
premium, if any, on or the repayment, repurchase or redemption of any debt
securities (including guarantees) issued by the Company which rank pari passu
with or junior to such Subordinated Debt Securities. Such restrictions will be
more fully described in the Prospectus Supplement applicable to such
Subordinated Debt Securities.
In the event Subordinated Debt Securities are issued to an EPE Trust or a
Trustee of such trust in connection with the issuance of Trust Securities of
such EPE Trust, for so long as such Trust Securities remain outstanding, the
Company will covenant in the Declaration, the Guarantees or the indenture
supplemental to the Subordinated Debt Indenture with respect to such EPE Trust
(i) to directly or indirectly maintain 100% ownership of the Common Securities
of such EPE Trust; provided, however, that any permitted successor of the
Company under the Subordinated Indenture may succeed to the Company's ownership
of such Trust Common Securities and (ii) not to voluntarily terminate, wind-up
or liquidate such EPE Trust, except in connection with (a) the distribution of
Subordinated Debt Securities to the holders of Trust Securities in liquidation
of such EPE Trust, (b) the redemption of all of the Trust Securities of such EPE
Trust or (c) certain mergers, consolidations or amalgamations, each as permitted
by the Declaration of such EPE Trust. The Company will also covenant to use its
commercially reasonable efforts, consistent with the terms and provisions of the
Declaration of such EPE Trust, to cause such EPE Trust to remain classified as a
grantor trust and not taxable as a corporation for U.S. federal income tax
purposes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Subordinated Indenture provides that El Paso Energy may, without the
consent of the Subordinated Debt Trustee or the holders of any Subordinated Debt
Securities issued thereunder, consolidate or merge with, or sell, lease or
transfer its properties and assets as, or substantially as, an entirety to, any
Person, provided that (i) either El Paso Energy is the surviving entity or such
successor Person expressly assumes or becomes a co-obligor jointly and severally
liable with respect to the due and punctual payment of the principal of, and any
premium and interest on, all the Subordinated Debt Securities and the
performance or observance of every covenant and condition of the Subordinated
Indenture on the part of El Paso Energy to be performed or observed, (ii)
immediately after giving effect to the transaction, no Default or Event of
Default exists, and (iii) El Paso Energy has delivered the Officer's Certificate
and Opinion of Counsel required by the Subordinated Indenture. Any such
successor Person shall succeed to and be substituted for, and may exercise every
right and power of, El Paso Energy under the Subordinated Indenture with the
same effect as if it had been named a party in the Subordinated Indenture and El
Paso Energy shall, except in the case of a lease, be released and discharged
from all its obligations under the Subordinated Debt Securities and the
Subordinated Indenture. Notwithstanding the foregoing, the predecessor Person
may, in the alternative, elect not to be so released from such obligations,
provided that the predecessor Person and the successor Person
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shall agree, pursuant to a supplemental Subordinated Indenture, to be
co-obligors jointly and severally with respect to all such obligations.
EVENTS OF DEFAULT
An "Event of Default" will occur under the Subordinated Indenture with
respect to Subordinated Debt Securities of a particular series issued thereunder
upon: (a) default in the payment of the principal of, or premium, if any, on,
any Subordinated Debt Security of such series at its maturity (whether or not
prohibited by the subordination provisions thereof); (b) default in the payment
of any interest on any Subordinated Debt Security of such series when it becomes
due and payable and continuance of such default for a period of 30 days (whether
or not prohibited by the subordination provisions thereof); (c) default in the
performance, or breach, of any term, covenant or warranty contained in the
Subordinated Indenture with respect to such series for a period of 60 days upon
giving written notice as provided in the Subordinated Indenture; or (d) the
occurrence of certain events of bankruptcy.
The Subordinated Indenture provides that if an Event of Default with
respect to a series of Subordinated Debt Securities issued thereunder shall have
occurred and be continuing, either the Subordinated Debt Trustee or the holders
of not less than 25% in principal amount of Subordinated Debt Securities of such
series then outstanding may declare the principal amount of all Subordinated
Debt Securities of such series to be due and payable immediately upon giving
written notice as provided in the Subordinated Indenture. The Subordinated
Indenture provides that the holders of a majority in principal amount of
Subordinated Debt Securities then outstanding of such series may rescind and
annul such declaration and its consequences under certain circumstances.
The holders of a majority in principal amount of Subordinated Debt
Securities of a series then outstanding may waive past defaults under the
Subordinated Indenture with respect to such series and its consequences (except
a continuing default in the payment of principal of or premium, if any, or
interest on any series of Subordinated Debt Securities or a default in respect
of any covenant or provision of the Subordinated Indenture which cannot be
modified or amended by a supplemental Subordinated Indenture without the consent
of the holder of each outstanding Subordinated Debt Security affected thereby).
Pursuant to the Subordinated Indenture, the holders of a majority in
aggregate principal amount of all affected series of Subordinated Debt
Securities then outstanding may direct with respect to such series the time,
method, and place of conducting any proceeding for any remedy available to the
Subordinated Debt Trustee or exercising any trust or power conferred on the
Subordinated Debt Trustee, provided that such direction shall not be in conflict
with any rule of law or the Subordinated Indenture. Before proceeding to
exercise any right or power under the Subordinated Indenture at the direction of
any holders, the Subordinated Debt Trustee shall be entitled to receive from
such holders reasonable security or indemnity against the costs, expenses, and
liabilities which might be incurred by it in compliance with any such direction.
Under the terms of the Subordinated Indenture, El Paso Energy is required
to furnish to the Subordinated Debt Trustee annually an Officer's Certificate to
the effect that to the best of such officer's knowledge, El Paso Energy is not
in default in the performance and observance of the terms, provisions and
conditions of the Subordinated Indenture or, if such officer has knowledge that
El Paso Energy is in default, specifying such default. The Subordinated
Indenture requires the Subordinated Debt Trustee to give to all holders of
Subordinated Debt Securities outstanding thereunder notice of any Default by El
Paso Energy in the manner provided in the Subordinated Indenture, unless such
Default shall have been cured or waived; however, except in the case of a
default in the payment of principal of and premium, if any, or interest, if any,
on any Subordinated Debt Securities outstanding thereunder, the Subordinated
Debt Trustee is entitled to withhold such notice in the event that the board of
directors, the executive committee, or a trust committee of directors or certain
officers of the Subordinated Debt Trustee in good faith determine that
withholding such notice is in the interest of the holders of such outstanding
Subordinated Debt Securities.
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CHANGE IN CONTROL AND HIGHLY LEVERAGED TRANSACTIONS
The Subordinated Indenture contains no covenants or other provisions to
afford protection to holders of the Subordinated Debt Securities in the event of
a highly leveraged transaction or a change in control of the Company.
MODIFICATION OF THE SUBORDINATED INDENTURE
The Subordinated Indenture provides that El Paso Energy and the
Subordinated Debt Trustee may enter into supplemental indentures without the
consent of the holders of Subordinated Debt Securities issued thereunder to: (a)
evidence the succession of another Person to El Paso Energy under the
Subordinated Indenture and the Subordinated Debt Securities and the assumption
by such successor Person of the obligations of El Paso Energy thereunder; (b)
evidence another Person's becoming a co-obligor with respect to the obligations
of El Paso Energy under the Subordinated Indenture and the Subordinated Debt
Securities; (c) add covenants and Events of Default for the benefit of the
holders of all or any series of such Subordinated Debt Securities or to
surrender any right or power conferred by the Subordinated Indenture upon El
Paso Energy; (d) add to, change or eliminate any of the provisions of the
Subordinated Indenture, provided that any such addition, change or elimination
shall become effective only after there are no such Subordinated Debt Securities
of any series entitled to the benefit of such provision outstanding; (e)
establish the forms or terms of the Subordinated Debt Securities of any series
issued thereunder; (f) cure any ambiguity or correct any inconsistency in the
Subordinated Indenture; (g) evidence the acceptance of appointment by a
successor (including as a co-obligor) Subordinated Debt Trustee; and (h) qualify
the Subordinated Indenture under the Trust Indenture Act.
The Subordinated Indenture also provides that El Paso Energy and the
Subordinated Debt Trustee, with the consent of the holders of a majority in
aggregate principal amount of all outstanding Subordinated Debt Securities of
all series affected by such modification (voting as one class), to modify the
Subordinated Indenture or the rights of the holders of such Subordinated Debt
Securities; provided that El Paso Energy and the Subordinated Debt Trustee may
not, without the consent of the holder of each outstanding Subordinated Debt
Security affected thereby: (a) change the stated maturity of the principal of or
any installment of principal of or interest, if any, on, any Subordinated Debt
Security, or reduce the principal amount thereof or premium, if any, on or the
rate of interest thereon; (b) reduce the percentage in principal amount of
Subordinated Debt Securities required for any such supplemental Subordinated
Indenture or for any waiver provided for in the Subordinated Indenture; (c)
change El Paso Energy's obligation to maintain an office or agency for payment
of Subordinated Debt Securities and the other matters specified therein; or (d)
modify any of the provisions of the Subordinated Indenture relating to the
execution of supplemental indentures with the consent of holders of Subordinated
Debt Securities which are discussed in this paragraph or modify any provisions
relating to the waiver by holders of past defaults and certain covenants, except
to increase any required percentage or to provide that certain other provisions
of the Subordinated Indenture cannot be modified or waived without the consent
of the holder of each outstanding Subordinated Debt Security affected thereby.
SATISFACTION AND DISCHARGE; LEGAL AND COVENANT DEFEASANCE
Under the terms of the Subordinated Indenture, El Paso Energy may satisfy
and discharge certain obligations to holders of Subordinated Debt Securities of
any series which have not already been delivered to the Subordinated Debt
Trustee for cancellation and which have either become due and payable or are by
their terms due and payable within one year or are to be called for redemption
within one year by (i) depositing or causing to be deposited with the
Subordinated Debt Trustee funds in an amount sufficient to pay the principal and
any premium and interest to the date of such deposit (in case of Subordinated
Debt Securities of such series which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be, (ii) paying or causing
to be paid all other sums payable under the Subordinated Indenture with respect
to such Subordinated Debt Securities, and (iii) delivering to the Subordinated
Debt Trustee an Officer's Certificate and Opinion of Counsel relating to such
satisfaction and discharge.
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The Subordinated Indenture also provides that El Paso Energy and any other
obligor, if any, will be discharged from any and all obligations in respect of
any series of Subordinated Debt Securities issued thereunder (excluding,
however, certain obligations, such as the obligation to register the transfer or
exchange of such outstanding Subordinated Debt Securities of such series, to
replace stolen, lost, mutilated or destroyed certificates, to pay principal and
interest on the original stated due dates or specified redemption date, to make
any sinking fund payments, and to maintain paying agencies) on the 91st day
following the deposit referred to in the following clause (i), subject to the
following conditions: (i) the irrevocable deposit, in trust, of cash or U.S.
Government Obligations (or a combination thereof) which through the payment of
interest and principal thereof in accordance with their terms will provide cash
in an amount sufficient to pay the principal and interest and premium, if any,
on the outstanding Subordinated Debt Securities of such series and any mandatory
sinking fund payments, in each case, on the stated maturity of such payments in
accordance with the terms of the Subordinated Indenture and the outstanding
Subordinated Debt Securities of such series or on any Redemption Date
established pursuant to clause (iii) below; (ii) El Paso Energy's receipt of an
Opinion of Counsel based on the fact that (A) El Paso Energy has received from,
or there has been published by, the Internal Revenue Service a ruling, or (B)
since the date of the Subordinated Indenture, there has been a change in the
applicable federal income tax law, in either case, to the effect that, and
confirming that, the holders of the Subordinated Debt Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance and will be subject to federal income tax on the
same amount and in the same manner and at the same times, as would have been the
case if such deposit and defeasance had not occurred; (iii) if the Subordinated
Debt Securities are to be redeemed prior to Stated Maturity (other than from
mandatory sinking fund payments or analogous payments), notice of such
redemption shall have been duly given pursuant to the Subordinated Indenture or
provision therefor satisfactory to the Subordinated Debt Trustee shall have been
made; (iv) no Event of Default or event which with notice or lapse of time or
both would become an Event of Default will have occurred and be continuing on
the date of such deposit; and (v) El Paso Energy's delivery to the Subordinated
Debt Trustee of an Officer's Certificate and an Opinion of Counsel, each stating
that the conditions precedent under the Subordinated Indenture have been
complied with.
Under the Subordinated Indenture, El Paso Energy also may discharge its
obligations referred to above under the captions "-- Certain Covenants" and
"-- Consolidation, Merger and Sale of Assets" included in this Prospectus, as
well as certain of its obligations relating to reporting obligations under the
Subordinated Indenture, in respect of any series of Subordinated Debt Securities
on the 91st day following the deposit referred to in clause (i) in the
immediately preceding paragraph, subject to satisfaction of the conditions
described in clauses (i), (iii), (iv) and (v) in the immediately preceding
paragraph with respect to such series of Subordinated Debt Securities and the
delivery of an Opinion of Counsel confirming that the holders of the
Subordinated Debt Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and covenant defeasance and will
be subject to federal income tax on the same amount and in the same manner and
at the same times, as would have been the case if such deposit and covenant
defeasance had not occurred.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES OR STOCKHOLDERS
No director, officer, employee or stockholder, as such, of El Paso Energy
or any of its affiliates shall have any personal liability in respect of the
obligations of El Paso Energy under the Subordinated Indenture or the
Subordinated Debt Securities by reason of his, her or its status as such.
APPLICABLE LAW
The Subordinated Indenture is, and the Subordinated Debt Securities offered
hereby will be, governed by, and construed in accordance with, the laws of the
State of New York.
CONCERNING THE SUBORDINATED DEBT TRUSTEE
The Subordinated Indenture provides that, except during the continuance of
an Event of Default, the Subordinated Debt Trustee will perform only such duties
as are specifically set forth in the Subordinated
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Indenture. If an Event of Default has occurred and is continuing, the
Subordinated Debt Trustee will use the same degree of care and skill in its
exercise of the rights and powers vested in it by the Subordinated Indenture as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Subordinated Indenture contains limitations on the rights of the
Subordinated Debt Trustee, should it become a creditor of El Paso Energy, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of such claims, as security or otherwise. The
Subordinated Debt Trustee is permitted to engage in other transactions;
provided, however, that if it acquires any conflicting interest, it must
eliminate such conflict or resign.
The Chase Manhattan Bank, a New York banking corporation, is the
Subordinated Debt Trustee under the Subordinated Indenture, and is also the
Senior Debt Trustee under the Senior Indenture. El Paso Energy maintains banking
and other commercial relationships with The Chase Manhattan Bank in the ordinary
course of business.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
The statements under this caption are brief summaries, do not purport to be
complete, and are subject to, and are qualified in their entirety by reference
to, the more complete descriptions contained in (a) El Paso Energy's Restated
Certificate of Incorporation, as amended (the "El Paso Energy Charter"), and the
Amended and Restated Shareholder Rights Agreement, dated as of January 20, 1999,
between El Paso Energy and BankBoston, N.A., as Rights Agent (the "Shareholder
Rights Agreement"), copies of which are incorporated by reference as exhibits to
the Registration Statement of which this Prospectus is a part, and (b) the
certificate of designation relating to each series of Preferred Stock, which
will be filed with the Commission at, or prior to, the time of the offering of
such series of Preferred Stock.
GENERAL
El Paso Energy currently is authorized by the El Paso Energy Charter to
issue up to 275,000,000 shares of Common Stock and up to 25,000,000 shares of
Preferred Stock. As of March 5, 1999, there were issued and outstanding
120,989,489 shares of Common Stock and no shares of Preferred Stock.
COMMON STOCK
El Paso Energy currently is authorized by the El Paso Energy Charter to
issue up to 275,000,000 shares of Common Stock. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. Subject to preferences that may be applicable to any
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors of El Paso
Energy out of funds legally available therefor. In the event of a liquidation,
dissolution, or winding up of El Paso Energy, holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preference of any outstanding Preferred Stock. Holders of Common
Stock have no preemptive rights and have no rights to convert their Common Stock
into any other securities. There are no redemption provisions with respect to
any shares of Common Stock. All of the outstanding shares of Common Stock are,
and the Common Stock offered hereby will be, upon issuance against full payment
of the purchase price therefor, fully paid and nonassessable.
The transfer agent and registrar for El Paso Energy's Common Stock is
BankBoston, N.A.
PREFERRED STOCK
El Paso Energy's Board of Directors, without any further action by the
stockholders of El Paso Energy, is authorized to issue up to 25,000,000 shares
of Preferred Stock, and to divide the Preferred Stock into one or more series,
and to fix by resolution or resolutions any of the designations, powers,
preferences and rights, and the qualifications, limitations, or restrictions of
the shares of each such series, including, but not limited to, dividend rates,
conversion rights, voting rights, terms of redemption and liquidation
preferences, and the
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number of shares constituting each such series. The issuance of Preferred Stock
may have the effect of delaying, deterring, or preventing a change in control of
El Paso Energy. Preferred Stock, upon issuance against full payment of the
purchase price therefor, will be fully paid and nonassessable. The specific
terms of a particular series of Preferred Stock will be described in the
Prospectus Supplement relating to that series. The description of Preferred
Stock set forth below and the description of the terms of the particular series
of Preferred Stock set forth in the related Prospectus Supplement do not purport
to be complete and are qualified in their entirety by reference to the
certificate of designation relating to the particular series of Preferred Stock.
The designations, powers, preferences and rights, and the qualifications,
limitations, or restrictions of the Preferred Stock of each series will be fixed
by the certificate of designation relating to such series. The Prospectus
Supplement relating to each series will specify the terms of the Preferred Stock
as follows:
(a) The maximum number of shares to constitute such series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of such series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate, and whether dividends will be
cumulative;
(c) The price at which, and the terms and conditions on which, the
shares of such series may be redeemed, including the time during which
shares of such series may be redeemed and any accumulated dividends thereon
that the holders of shares of such series shall be entitled to receive upon
the redemption thereof;
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of such series shall be entitled to
receive upon the liquidation, dissolution, or winding up of the affairs of
El Paso Energy;
(e) Whether or not the shares of such series will be subject to
operation of a retirement or sinking fund, and, if so, the extent and
manner in which any such fund shall be applied to the purchase or
redemption of the shares of such series for retirement or for other
corporate purposes, and the terms and provisions relating to the operation
of such fund;
(f) The terms and conditions, if any, on which the shares of such series
shall be convertible into, or exchangeable for, debt securities, shares of
any other class or classes of capital stock of El Paso Energy, or any
series of any other class or classes, or of any other series of the same
class, including the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
(g) The voting rights, if any, on the shares of such series; and
(h) Any or all other preferences and relative, participating,
operational, or other special rights, qualifications, limitations, or
restrictions thereof
The federal income tax consequences and special considerations applicable
to any such series of Preferred Stock will be generally described in the
Prospectus Supplement relating thereto.
As of the date of this Prospectus, no shares of Preferred Stock are
outstanding. Pursuant to the Shareholder Rights Agreement (as described below),
the Board of Directors of El Paso Energy has designated the Series A Preferred
Stock (as defined below).
SHAREHOLDER RIGHTS AGREEMENT
In July 1992, EPG's Board of Directors declared a dividend distribution of
one preferred stock purchase right (an "EPG Right") for each share of EPG's
common stock, par value $3.00 per share, then outstanding. In July 1997, EPG's
Board amended EPG's shareholders rights agreement pursuant to which the EPG
Rights were issued. All shares of EPG common stock issued subsequent to July
1992 also included these EPG Rights. In connection with the holding company
reorganization effected as of August 1, 1998, each one-half EPG Right then
associated with each outstanding share of EPG common stock was converted into
one
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preferred stock purchase right (a "Right") associated with each share of El Paso
Energy Common Stock. All shares of common stock issued after August 1, 1998 will
also include a Right. Under certain conditions, each Right may be exercised to
purchase from El Paso Energy one two-hundredth of a share of a series of El Paso
Energy's Preferred Stock, designated as Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), at a price of
$75 per one two-hundredth of a share, subject to adjustment.
The El Paso Energy Charter provides that the holders of a whole share of
Series A Preferred Stock are entitled to 200 votes per share on all matters
submitted to a vote of the stockholders of El Paso Energy, subject to
adjustment. In addition, during any period that dividends on the Series A
Preferred Stock are in arrears in an amount equal to six quarterly dividend
payments, the holders of Series A Preferred Stock will have the right to vote
together as a class to elect two directors of El Paso Energy as described above.
The Rights will separate from the common stock and will become exercisable
on the earlier of (1) the first date of the public announcement that a person or
group has acquired or obtained the right to acquire beneficial ownership of 15%
or more of the voting power of all outstanding voting securities of El Paso
Energy and (2) 10 business days (or such later date as the Board may determine)
after the commencement of, or announcement of an intention to commence, a tender
or exchange offer, after consummation of which such person or group would
beneficially own 15% or more of El Paso Energy's voting securities. If, after
the Rights become exercisable, El Paso Energy is involved in a merger or other
business combination transaction in which its Common Stock is exchanged or
changed, or it sells 50% or more of its assets or earning power, each Right will
entitle the holder thereof to purchase, at the Right's then-current exercise
price, common stock of the acquiring company having a value of twice the
exercise price of the Right. If a person becomes the beneficial owner of
securities having 15% or more of the voting power of all then-outstanding voting
securities of El Paso Energy (except pursuant to a "Permitted Offer"), or if,
during any period of such ownership, there shall be any reclassification of
securities or recapitalization of El Paso Energy, or any merger or consolidation
of El Paso Energy with any of its subsidiaries or any other transaction or
series of transactions which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding shares of
any class of equity securities of El Paso Energy or any of its subsidiaries
which is directly or indirectly owned by such person, then for a 60-day period
thereafter each Right not owned by such person will entitle the holder thereof
to purchase, at the Right's then-current exercise price, shares of Common Stock
or, in the discretion of the Board, the number of one two-hundredths of a share
of Series A Preferred Stock (or in certain circumstances other equity securities
of El Paso Energy with at least the same economic value as the Common Stock)
having a market value of twice the Right's then-current exercise price. The
Rights, which have no voting rights, expire no later than 5:00 p.m., New York
time on July 7, 2002. A "Permitted Offer" is a tender or exchange offer for all
outstanding shares of common stock which is at a price and on terms determined,
prior to the purchase of shares in such offer, by a majority of the
Disinterested Directors to be adequate and otherwise in the best interests of El
Paso Energy and its stockholders (other than the person and its affiliates
making the offer), taking into account all factors that such Disinterested
Directors deem relevant. "Disinterested Directors" are directors who are neither
officers of El Paso Energy nor an acquiring company or affiliate, associate or
representative thereof, or a person directly or indirectly proposed or nominated
as director by a Transaction Person (as defined in the Shareholder Rights
Agreement). The Rights may be redeemed by El Paso Energy under certain
circumstances prior to their expiration date at a purchase price of $.01 per
Right. It is possible that the existence of the Rights may have the effect of
delaying, deterring or preventing a takeover of El Paso Energy.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
El Paso Energy is subject to Section 203 of the Delaware General
Corporation Law ("Section 203") which restricts certain transactions and
business combinations between a corporation and an interested stockholder
(defined in Section 203, generally, as a person owning 15% or more of a
corporation's outstanding voting stock) for a period of three years from the
time such person becomes an interested stockholder. Subject to certain
exceptions, unless the transaction is approved by the board of directors and the
holders of at least 66 2/3% of the outstanding voting stock of the corporation
(excluding voting stock held by the interested stockholder), Section 203
prohibits certain business transactions, such as a merger with, disposition of
assets
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to, or receipt of disproportionate financial benefits by the interested
stockholder, or any other transaction that would increase the interested
stockholder's proportionate ownership of any class or series of the
corporation's stock for a period of three years after such person becomes an
interested stockholder. The statutory ban does not apply if, upon consummation
of the transaction in which any person becomes an interested stockholder, the
interested stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding voting stock held by persons who are both directors and
officers or by certain employee stock plans) or if either the proposed
transaction or the transaction by which the interested stockholder became such
is approved by the board of directors of the corporation prior to the time such
stockholder becomes an interested stockholder.
EL PASO ENERGY'S RESTATED CERTIFICATE OF INCORPORATION
The El Paso Energy Charter contains provisions applicable to a merger,
consolidation, asset sale, liquidation, recapitalization, or certain other
business transactions, including the issuance of stock of El Paso Energy
("Business Combinations"). The El Paso Energy Charter requires the affirmative
vote of 51% or more of the voting stock of El Paso Energy, excluding any voting
stock held by an interested stockholder (defined in the El Paso Energy Charter
as any person who owns 10% or more of the voting stock and certain defined
affiliates), with respect to all Business Combinations involving the interested
stockholder, unless directors who served as such prior to the time the
interested stockholder became an interested stockholder determine by a
two-thirds vote that (i) the proposed consideration meets certain minimum price
criteria, or (ii)(A) the interested stockholder holds 80% or more of the voting
stock and (B) the interested stockholder has not received (other than
proportionately as a stockholder) the benefit of any financial assistance from
El Paso Energy, whether in anticipation of or in connection with such Business
Combination. To meet the minimum price criteria, all stockholders must receive
consideration or retain value per share after the transaction which is not less
than the price per share paid by the interested stockholder. The El Paso Energy
Charter also requires the dissemination to stockholders of a proxy or
information statement describing the Business Combination.
The El Paso Energy Charter also prohibits the taking of any action by
written stockholder consent in lieu of a meeting and the subsequent amendment of
the El Paso Energy Charter to repeal or alter the above provisions without the
affirmative vote of 51% of El Paso Energy's voting stock, excluding voting stock
held by any interested stockholder.
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DESCRIPTION OF THE TRUST PREFERRED SECURITIES
Each EPE Trust may issue, from time to time, only one series of Trust
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each EPE Trust authorizes the
Administrative Trustees of such EPE Trust to issue on behalf of such EPE Trust
one series of Trust Preferred Securities. The Declaration will be qualified as
an indenture under the Trust Indenture Act. The Trust Preferred Securities will
have such terms, including distributions, redemption, voting, conversion,
exchange, liquidation rights and such other preferred, deferred or other special
rights or such restrictions as shall be set forth in the Declaration or made
part of the Declaration by the Trust Indenture Act. Reference is made to the
Prospectus Supplement relating to the Trust Preferred Securities of the EPE
Trust for specific terms, including: (a) the distinctive designation of such
Trust Preferred Securities; (b) the number of Trust Preferred Securities issued
by such EPE Trust; (c) the annual distribution rate (or method of determining
such rate) for Trust Preferred Securities issued by such EPE Trust and the date
or dates upon which such distributions shall be payable; provided, however, that
distributions on such Trust Preferred Securities shall be payable on a quarterly
basis to holders of such Trust Preferred Securities as of a record date in each
quarter during which such Trust Preferred Securities are outstanding; (d)
whether distributions on Trust Preferred Securities issued by such EPE Trust
shall be cumulative, and, in the case of Trust Preferred Securities having such
cumulative distribution rights, the date or dates or method of determining the
date or dates from which distributions on Trust Preferred Securities issued by
such EPE Trust shall be cumulative; (e) the amount or amounts which shall be
paid out of the assets of such EPE Trust to the holders of Trust Preferred
Securities of such EPE Trust upon voluntary or involuntary dissolution,
winding-up or termination of such EPE Trust; (f) the obligation, if any, of such
EPE Trust to purchase or redeem Trust Preferred Securities issued by such EPE
Trust and the price or prices at which, the period or periods within which, and
the terms and conditions upon which, Trust Preferred Securities issued by such
EPE Trust shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (g) the voting rights, if any, of Trust Preferred Securities issued
by such EPE Trust in addition to those required by law, including the number of
votes per Trust Preferred Security and any requirement for the approval by the
holders of Trust Preferred Securities, or of Trust Preferred Securities issued
by one or more EPE Trusts, or of both, as a condition to specified action or
amendments to the Declaration of such EPE Trust; (h) the terms and conditions,
if any, upon which the assets of such EPE Trust may be distributed to holders of
Trust Preferred Securities; (i) provisions regarding convertibility or
exchangeability of the Trust Preferred Securities for capital stock of El Paso
Energy; (j) if applicable, any securities exchange upon which the Trust
Preferred Securities shall be listed; and (k) any other relevant rights,
preferences, privileges, limitations or restrictions of Trust Preferred
Securities issued by such EPE Trust not inconsistent with the Declaration of
such EPE Trust or with applicable law. All Trust Preferred Securities offered
hereby will be guaranteed by the Company to the extent set forth below under
"Description of the Trust Guarantees." Any U.S. federal income tax
considerations applicable to any offering of Trust Preferred Securities will be
described in the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities, each EPE
Trust will issue one series of Trust Common Securities. The Declaration of each
EPE Trust authorizes the Administrative Trustees of such trust to issue on
behalf of such EPE Trust one series of Trust Common Securities having such terms
including distributions, redemption, voting, liquidation rights or such
restrictions as shall be set forth therein. The terms of the Trust Common
Securities issued by an EPE Trust will be substantially identical to the terms
of the Trust Preferred Securities issued by such EPE Trust, and the Trust Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Trust Preferred Securities except that, upon an event of default under
the Declaration, the rights of the holders of the Trust Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. Except in certain limited circumstances, the Trust Common
Securities will also carry the right to vote to appoint, remove or replace any
of the Trustees of an EPE Trust. All of the Trust Common Securities of each EPE
Trust will be directly or indirectly owned by the Company.
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DESCRIPTION OF THE TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust Guarantees
which will be executed and delivered by El Paso Energy from time to time for the
benefit of the holders of the Trust Preferred Securities. Each Trust Guarantee
will be qualified as an indenture under the Trust Indenture Act. The Chase
Manhattan Bank will act as indenture trustee under each Trust Guarantee (the
"Trust Guarantee Trustee"). The terms of each Trust Guarantee will be those set
forth in such Trust Guarantee and those made part of such Trust Guarantee by the
Trust Indenture Act. The summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the form of Trust Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Each Trust Guarantee will be held by the Trust Guarantee Trustee
for the benefit of the holders of the Trust Preferred Securities of the
applicable EPE Trust.
GENERAL
Pursuant to each Trust Guarantee, El Paso Energy will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, to the
holders of the Trust Preferred Securities issued by an EPE Trust, the Trust
Guarantee Payments (as defined herein) (except to the extent paid by such EPE
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which such EPE Trust may have or assert. The following payments
with respect to Trust Preferred Securities issued by an EPE Trust to the extent
not paid by such EPE Trust (the "Trust Guarantee Payments"), will be subject to
the Trust Guarantee thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on such Trust Preferred Securities,
to the extent such EPE Trust shall have funds available therefor; (ii) the
redemption price, including all accrued and unpaid distributions (the
"Redemption Price"), to the extent such EPE Trust has funds available therefor
with respect to any Trust Preferred Securities called for redemption by such EPE
Trust; and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of such EPE Trust (other than in connection with the distribution of
the assets of such EPE Trust to the holders of Trust Preferred Securities or the
redemption of all of the Trust Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions on
such Trust Preferred Securities to the date of payment, to the extent such EPE
Trust has funds available therefor and (b) the amount of assets of such EPE
Trust remaining available for distribution to holders of such Trust Preferred
Securities in liquidation of such EPE Trust. El Paso Energy's obligation to make
a Trust Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of Trust Preferred Securities or by
causing the applicable EPE Trust to pay such amounts to such holders.
Each Trust Guarantee will be a full and unconditional guarantee with
respect to the Trust Preferred Securities issued by the applicable EPE Trust,
but will not apply to any payment of distributions except to the extent such EPE
Trust shall have funds available therefor. If El Paso Energy does not make
interest payments on the Subordinated Debt Securities purchased by an EPE Trust,
such EPE Trust will not pay distributions on the Trust Preferred Securities
issued by such EPE Trust and will not have funds available therefor. See
"Description of the Subordinated Debt Securities -- Certain Covenants" included
in the Prospectus.
El Paso Energy has also agreed separately to irrevocably and
unconditionally guarantee the obligations of the EPE Trusts with respect to the
Trust Common Securities (the "Trust Common Securities Guarantees") to the same
extent as the Trust Guarantees, except that upon an event of default under the
Subordinated Indenture, holders of Trust Preferred Securities shall have
priority over holders of Trust Common Securities with respect to distributions
and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS
In each Trust Guarantee, El Paso Energy will covenant that, so long as any
Trust Preferred Securities issued by the applicable EPE Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under such Trust Guarantee or the Declaration of such EPE
Trust, then (a) El Paso Energy shall not declare or pay any dividend on, make
any distributions with respect to, or
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redeem, purchase or make any liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of El Paso
Energy Common Stock in connection with the satisfaction by El Paso Energy of its
obligations under any employee benefit plans or the satisfaction by El Paso
Energy of its obligations pursuant to any contract or security requiring El Paso
Energy to purchase shares of Company Common Stock or, (ii) the purchase of
fractional interests in shares of Company capital stock as a result of a
reclassification of Company capital stock or the exchange or conversion of one
class or series of Company capital stock for another class or series of Company
capital stock or make any guarantee payments with respect to the foregoing and
(b) El Paso Energy shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by El Paso Energy which rank pari passu with or junior to the
Subordinated Debt Securities.
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation amount of the outstanding
Trust Preferred Securities issued by the applicable EPE Trust. The manner of
obtaining any such approval of holders of such Trust Preferred Securities will
be as set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in a Trust Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of El Paso Energy and shall inure to the
benefit of the holders of the Trust Preferred Securities of the applicable EPE
Trust then outstanding.
TERMINATION
Each Trust Guarantee will terminate as to the Trust Preferred Securities
issued by the applicable EPE Trust upon the first to occur of (a) full payment
of the Redemption Price of all Trust Preferred Securities of such EPE Trust, (b)
distribution of the assets of such EPE Trust to the holders of the Trust
Preferred Securities of such EPE Trust, and (c) full payment of the amounts
payable upon liquidation of such EPE Trust in accordance with the Declaration of
such EPE Trust. Each Trust Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Trust Preferred
Securities issued by the applicable EPE Trust must restore payment of any sums
paid under such Trust Preferred Securities or such Trust Guarantee.
EVENTS OF DEFAULT
An event of default under a Trust Guarantee will occur upon the failure of
El Paso Energy to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities relating to such Trust Guarantee have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trust Guarantee Trustee in respect of the Trust Guarantee or to direct the
exercise of any trust or power conferred upon the Trust Guarantee Trustee under
such Trust Preferred Securities. If the Trust Guarantee Trustee fails to enforce
such Trust Guarantee, any holder of Trust Preferred Securities relating to such
Trust Guarantee may institute a legal proceeding directly against El Paso Energy
to enforce the Trust Guarantee Trustee's rights under such Trust Guarantee,
without first instituting a legal proceeding against the relevant EPE Trust, the
Trust Guarantee Trustee or any other person or entity. Notwithstanding the
foregoing, if El Paso Energy has failed to make a guarantee payment, a holder of
Trust Preferred Securities may directly institute a proceeding against El Paso
Energy for enforcement of the Trust Guarantee for such payment. El Paso Energy
waives any right or remedy to require that any action be brought first against
such EPE Trust or any other person or entity before proceeding directly against
El Paso Energy.
STATUS OF THE TRUST GUARANTEES
The Trust Guarantees will constitute unsecured obligations of El Paso
Energy and will rank: (i) subordinate and junior in right of payment to all
other liabilities of El Paso Energy; (ii) pari passu with the
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most senior preferred or preference stock now or hereafter issued by El Paso
Energy and with any guarantee now or hereafter entered into by El Paso Energy in
respect of any preferred or preference stock of any affiliate of El Paso Energy;
and (iii) senior to the El Paso Energy Common Stock. The terms of the Trust
Preferred Securities provide that each holder of Trust Preferred Securities
issued by the applicable EPE Trust, by acceptance thereof, agrees to the
subordination provisions and other terms of the Trust Guarantee relating
thereto.
The Trust Guarantees will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The Trust Guarantee Trustee, prior to the occurrence of a default with
respect to a Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in such Trust Guarantee and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the Trust
Guarantee Trustee is under no obligation to exercise any of the powers vested in
it by a Trust Guarantee at the request of any holder of Trust Preferred
Securities, unless offered reasonable indemnity against the costs, expenses and
liabilities which might be incurred thereby.
The Company and certain of its affiliates may, from time to time, maintain
a banking relationship with the Trust Guarantee Trustee.
GOVERNING LAW
The Trust Guarantees will be governed by, and construed in accordance with,
the laws of the State of New York.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE SUBORDINATED DEBT SECURITIES AND THE GUARANTEES
As long as El Paso Energy makes payments of interest and other payments
when due on the Subordinated Debt Securities, such payments will be sufficient
to cover distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation
preference of the Trust Securities; (ii) the interest rate and interest and
other payment dates of the Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Trust
Preferred Securities; (iii) El Paso Energy shall pay for all and any costs,
expenses and liabilities of the EPE Trusts except the EPE Trusts' obligations to
holders of the Trust Preferred Securities under the Trust Preferred Securities
of the EPE Trusts; and (iv) the Declaration of each EPE Trust further provides
that such EPE Trust will not engage in any activity that is not consistent with
the limited purposes of such EPE Trust.
Payments of distributions and other amounts due on the Trust Preferred
Securities of an EPE Trust (to the extent such EPE Trust has funds available for
the payment of such distributions) are irrevocably guaranteed by El Paso Energy
as and to the extent set forth under "Description of Trust Guarantees." Taken
together, El Paso Energy's obligations under the Subordinated Debt Securities,
the Subordinated Indenture, the Declarations of the EPE Trusts and the Trust
Guarantees provide a full, irrevocable and unconditional guarantee of payments
of distributions and other amounts due on the Trust Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of each of the EPE Trust's obligations
under the Trust Preferred Securities. If and to the extent that El Paso Energy
does not make payments on the Subordinated Debt Securities, the EPE Trusts will
not pay distributions or other amounts due on the Trust Preferred Securities.
The Trust Guarantees do not cover payment of distributions when an EPE Trust
does not have sufficient funds to pay such distributions. In such event, the
remedies of a holder of the Trust Preferred Securities of
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such EPE Trust are described herein under "Description of the Trust
Guarantees -- Events of Default." The obligations of El Paso Energy under the
Trust Guarantees are unsecured and are subordinate and junior in right of
payment to all other liabilities of El Paso Energy.
Notwithstanding anything to the contrary in the Subordinated Indenture and
to the extent set forth therein, El Paso Energy has the right to set-off any
payment it is otherwise required to make thereunder with and to the extent El
Paso Energy has theretofore made, or is concurrently on the date of such payment
making, a payment under a Trust Guarantee.
A holder of Trust Preferred Securities of an EPE Trust may institute a
legal proceeding directly against El Paso Energy to enforce its rights under the
Trust Guarantee with respect to such EPE Trust without first instituting a legal
proceeding against the Trust Guarantee Trustee, such EPE Trust or any other
person or entity.
The Trust Preferred Securities of an EPE Trust evidence a beneficial
interest in such EPE Trust. The EPE Trusts exist for the sole purpose of issuing
the Trust Securities and investing the proceeds thereof in Subordinated Debt
Securities. A principal difference between the rights of a holder of Trust
Preferred Securities and a holder of Subordinated Debt Securities is that a
holder of Subordinated Debt Securities is entitled to receive from El Paso
Energy the principal amount of and interest accrued on Subordinated Debt
Securities held, while a holder of Trust Preferred Securities is entitled to
receive distributions from an EPE Trust (or from El Paso Energy under the Trust
Guarantee) if and to the extent such EPE Trust has funds available for the
payment of such distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
an EPE Trust involving the liquidation of the Subordinated Debt Securities, the
holders of the Trust Preferred Securities of such EPE Trust will be entitled to
receive, out of assets held by such EPE Trust and after satisfaction of
liabilities to creditors of such EPE Trust as provided by applicable law, the
liquidation distribution in cash. See "Description of Trust Preferred
Securities." Upon any voluntary or involuntary liquidation or bankruptcy of El
Paso Energy, the Property Trustee of an EPE Trust, as holder of the Subordinated
Debt Securities of such Trust, would be a subordinated creditor of El Paso
Energy, subordinated in right of payment to all Senior Debt of El Paso Energy,
but entitled to receive payment in full of principal and interest, before any
shareholders of El Paso Energy receive payments or distributions. Since El Paso
Energy is the guarantor under the Trust Guarantees and has agreed to pay for all
costs, expenses and liabilities of the EPE Trusts (other than the EPE Trusts'
obligations to the holders of the Trust Preferred Securities), the positions of
a holder of Trust Preferred Securities and a holder of Subordinated Debt
Securities relative to other creditors and to shareholders of El Paso Energy in
the event of liquidation or bankruptcy of El Paso Energy would be substantially
the same.
A default or event of default under any Senior Debt of El Paso Energy will
not constitute a default or Event of Default under the Subordinated Indenture.
However, in the event of payment defaults under, or acceleration of, Senior Debt
of El Paso Energy, the subordination provisions of the Subordinated Indenture
provide that no payments may be made in respect of the Subordinated Debt
Securities until Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Subordinated Debt Securities would constitute an Event of Default under the
Subordinated Indenture with respect thereto.
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PLAN OF DISTRIBUTION
El Paso Energy and any EPE Trust may offer or sell the El Paso Energy
Securities and the Trust Preferred Securities, respectively, to or through one
or more underwriters, dealers or agents as designated from time to time, or
through a combination of such methods and also may offer or sell the El Paso
Energy Securities and the Trust Preferred Securities, respectively, directly to
one or more other purchasers. El Paso Energy and any EPE Trust may sell the El
Paso Energy Securities and the Trust Preferred Securities, respectively, as soon
as practicable after effectiveness of the Registration Statement of which this
Prospectus is a part.
A Prospectus Supplement will set forth the terms of the offering of the
particular series of Securities offered thereby, including: (i) the name or
names of any underwriters or agents; (ii) the initial public offering or
purchase price of such series of Securities; (iii) any underwriting discounts,
commissions, and other items constituting underwriters' compensation and any
other discount, concessions, or commissions allowed or reallowed or paid by any
underwriters to other dealers; (iv) any commissions paid to any agents; (v) the
net proceeds to El Paso Energy from the sales; (vi) the net proceeds to an EPE
Trust from the sales; and (vii) any securities exchanges or markets on which the
Securities may be listed.
Unless otherwise set forth in the Prospectus Supplement relating to a
particular series of Securities, the obligations of the underwriters to purchase
such series of Securities will be subject to certain conditions precedent and
each of the underwriters with respect to such series of Securities will be
obligated to purchase all of the Securities of such series allocated to it if
any such Securities are purchased. Any initial public offering price and any
discounts or concessions allowed, reallowed, or paid to dealers may be changed
from time to time.
The El Paso Energy Securities and the Trust Securities may be offered and
sold by El Paso Energy or any EPE Trust, respectively, directly or through
agents designated by El Paso Energy or any EPE Trust from time to time. Unless
otherwise indicated in the related Prospectus Supplement, each such agent will
be acting on a best efforts basis for the period of its appointment. Any agent
participating in the distribution of Securities may be deemed to be an
"underwriter," as that term is defined in the Securities Act, of the Securities
so offered and sold. The Securities also may be sold to dealers at the
applicable price to the public set forth in the Prospectus Supplement relating
to such series of Securities. Such dealers may be deemed to be "underwriters"
within the meaning of the Securities Act. Underwriters, dealers and agents may
be entitled, under agreements entered into with El Paso Energy or an EPE Trust,
to indemnification by El Paso Energy or such EPE Trust against certain civil
liabilities, including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, El Paso Energy in the ordinary course
of business.
Other than Common Stock, all Securities offered will be a new issue of
securities with no established trading market. Any underwriter to whom
Securities are sold by El Paso Energy or any EPE Trust for public offering and
sale may make a market in such Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. The Securities may or may not be listed on a national securities
exchange or a foreign securities exchange, except that the Common Stock is
listed for trading on the NYSE. Any Common Stock sold pursuant to a Prospectus
Supplement will be listed for trading on the NYSE, subject to official notice of
issuance. No assurance can be given as to the liquidity of or the trading
markets for any Securities.
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WHERE YOU CAN FIND MORE INFORMATION
El Paso Energy has filed with the Securities and Exchange Commission (SEC)
a registration statement under the Securities Act of 1933 that registers the
securities offered by this prospectus. The registration statement, including the
attached exhibits, contains additional relevant information about El Paso
Energy. The rules and regulations of the SEC allows El Paso Energy to omit some
information included in the registration statement from this prospectus.
In addition, El Paso Energy files reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024 Suite 100 Citicorp Center
450 Fifth Street, N.W. 7 World Trade Center Suite 1400
Washington, D.C. 20549 New York, New York 10048 500 West Madison Street
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. The SEC also maintains an
Internet world wide web site that contains reports, proxy statements and other
information about issuers, including El Paso Energy, who file electronically
with the SEC. The address of that site is http://www.sec.gov. You can also
inspect reports, proxy statements and other information about each of us at the
offices of The New York Stock Exchange, Inc., located at 20 Broad Street, New
York, New York 10005.
The SEC allows El Paso Energy to "incorporate by reference" information
into this document. This means that El Paso Energy can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be part of
this document, except for any information that is superseded by information that
is included directly in this document.
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El Paso Energy incorporates by reference the documents listed below that it
has previously filed with the SEC. They contain important information about El
Paso Energy and its financial condition. Some of these filings have been amended
by later filings, which are also listed.
SEC FILINGS (FILE NO. 1-14365) DESCRIPTION OR PERIOD/AS OF DATE
------------------------------ --------------------------------
Annual Report on Form 10-K Year ended December 31, 1998
Current Report on Form 8-K, dated March Discloses the entering into of the merger
15, 1999 agreement between El Paso Energy and Sonat
Inc. and related matters
Current Report on Form 8-K, dated April Discloses preliminary unaudited pro forma
23, 1999 financial information of El Paso Energy
and Sonat Inc. giving effect to their
proposed merger
Current Report on Form 8-K, dated April Discloses first quarter operating results
23, 1999 of El Paso Energy
Current Report on Form 8-K/A, dated April Amends our Current Report on Form 8-K
30, 1999 dated April 23, 1999 disclosing pro forma
financial information
Registration Statement on Form 8-A, dated Contains a description of the El Paso
August 3, 1998 Energy common stock
Registration Statement on Form 8-A/A dated Contains a description of the El Paso
January 29, 1999 Energy preferred stock purchase rights
Definitive Proxy Statement on Schedule 14A Definitive proxy statement relating to the
1999 annual meeting of El Paso Energy's
stockholders (filed on March 11, 1999)
El Paso Energy incorporates by reference additional documents that it may
file with the SEC until all of the securities offered by this prospectus have
been sold. These documents include periodic reports, including Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through El Paso Energy or from the SEC through the SEC's web site at
the address provided above. Documents incorporated by reference are available
from El Paso Energy without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference as an exhibit in
this document. You can obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from El Paso Energy at
the following address:
El Paso Energy Corporation
Office of Investor Relations
El Paso Energy Building
1001 Louisiana Street
Houston, Texas 77002
Telephone No.: (713) 420-2131
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WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION IN THIS DOCUMENT
OR IN OUR DOCUMENTS THAT ARE PUBLICLY FILED WITH THE SEC. THEREFORE, IF ANYONE
DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
DOCUMENT, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE
ACTIVITIES, THEN THE OFFER PRESENTED BY THIS DOCUMENT DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF ITS DATE
UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
LEGAL MATTERS
The validity of the Common Stock, Preferred Stock, Senior Debt Securities,
Subordinated Debt Securities and Trust Guarantees will be passed upon for El
Paso Energy and the EPE Trusts by Andrews & Kurth L.L.P., Houston, Texas. The
validity of the Trust Preferred Securities under Delaware Law will be passed
upon for the EPE Trusts by Potter Anderson & Corroon, Wilmington, Delaware, as
special Delaware counsel. If the Securities are being distributed in an
underwritten offering, the validity of the Securities will be passed upon for
the underwriters by counsel identified in the related Prospectus Supplement.
EXPERTS
The consolidated financial statements and financial statement schedule of
El Paso Energy as of December 31, 1998 and 1997, and for the years ended
December 31, 1998, 1997 and 1996, incorporated by reference in this Prospectus,
have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Sonat Inc. as of December 31, 1998
and 1997, and for the years ended December 31, 1998, 1997 and 1996 included in
El Paso Energy's Current Report on Form 8-K/A dated April 30, 1999, have been
audited by Ernst & Young LLP, independent auditors, as set fourth in their
report thereon included therein and incorporated herein by reference, which, as
to the year ended December 31, 1996, is based on the report of KPMG LLP,
independent auditors. The report of KPMG LLP refers to a change by Zilkha Energy
Company in accounting for oil and gas properties from the full cost method to
the successful efforts method. Such restated consolidated financial statements
are incorporated herein by reference in reliance upon such reports given upon
the authority of such firms as experts in accounting and auditing.
32
57
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MAY 5, 1999
EL PASO ENERGY CORPORATION
$500,000,000
6 3/4% SENIOR NOTES DUE 2009
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PROSPECTUS SUPPLEMENT
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DONALDSON, LUFKIN & JENRETTE
ABN AMRO INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR
TO MAKE REPRESENTATIONS AS TO MATTERS NOT STATED IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED INFORMATION. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER TO SELL THESE
SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THAT WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALES MADE HEREUNDER AFTER
THE DATE OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THE AFFAIRS OF EL PASO
ENERGY HAVE NOT CHANGED SINCE THE DATE HEREOF.
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