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Filed Pursuant to rule 424(b)(3)
Registration No. 333-84975
PROSPECTUS
EL PASO ENERGY CORPORATION
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 6 5/8% SERIES B SENIOR NOTES DUE 2001
FOR EACH $1,000 PRINCIPAL AMOUNT OF OUTSTANDING
6 5/8% SERIES A SENIOR NOTES DUE 2001
($600,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)
THE EXCHANGE OFFER
- Expires 5:00 p.m., New York City time, September 30, 1999, unless
extended.
- Subject to certain customary conditions, which we may waive, the exchange
offer is not conditioned upon a minimum aggregate principal amount of
Series A Notes being tendered.
- All outstanding Series A Notes validly tendered and not withdrawn will be
exchanged.
- The exchange offer is not subject to any condition other than that the
exchange offer not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange Commission.
THE EXCHANGE NOTES
- The terms of the Series B Notes to be issued in the exchange offer are
substantially identical to the Series A Notes, except that we have
registered the Series B Notes with the Securities and Exchange
Commission. In addition, the Series B Notes will not be subject to
certain transfer restrictions.
- Interest on the Series B Notes will accrue from July 12, 1999 at the rate
of 6 5/8% per annum, payable semi-annually in arrears on each January 15
and July 15, beginning January 15, 2000.
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 7 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 30, 1999.
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TABLE OF CONTENTS
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PAGE
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Table of Contents........................................... i
Cautionary Statement Regarding Forward-looking Statements... ii
Where Can You Find More Information......................... iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Capitalization.............................................. 11
Use of Proceeds............................................. 12
The Exchange Offer.......................................... 12
Description of the Notes.................................... 24
Plan of Distribution........................................ 35
Legal Matters............................................... 35
Experts..................................................... 36
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We refer to the series B senior notes in this prospectus as "exchange
notes," and the series A senior notes as "senior notes." We sometimes refer to
the exchange notes and the senior notes together as the "notes." El Paso Energy
sold the senior notes on July 12, 1999, to Donaldson, Lufkin & Jenrette, ABN
AMRO Incorporated, Banc of America Securities LLC, and Chase Securities Inc (the
"initial purchasers"). The sale was not registered under the Securities Act in
reliance upon the exemption provided in Section 4(2) of the Securities Act. The
initial purchasers placed the senior notes with qualified institutional buyers
(as defined in Rule 144A under the Securities Act). The qualified institutional
buyers all agreed to comply with certain transfer restrictions and other
restrictions. One of the restrictions is that the senior notes cannot be
reoffered, resold or otherwise transferred in the United States unless the
transaction is registered under the Securities Act or there is an exemption
under the Securities Act which applies to the transaction. We are now offering
the exchange notes in order to satisfy our obligations under the registration
rights agreement between El Paso Energy and the initial purchasers.
NOTICE TO NEW HAMPSHIRE RESIDENTS: Neither the fact that a registration
statement or an application for a license has been filed under RSA 421-B with
the state of New Hampshire nor the fact that a security is effectively
registered or a person is licensed in the state of New Hampshire constitutes a
finding by the secretary of state that any document filed under RSA 421-B is
true, complete and not misleading. Neither any such fact nor the fact that any
exemption or exception is available for a security or a transaction means that
the Secretary of State of New Hampshire has passed in any way upon the merits or
qualifications of, or recommended or given approval to, any person, security or
transaction. It is unlawful to make, or cause to be made, to any prospective
purchaser, customer or client, any representation inconsistent with the
provisions of this paragraph.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this prospectus and in documents that are
incorporated by reference into this prospectus 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 prospectus. 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.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include:
- 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;
- the risk that the merger with Sonat will not occur;
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- the risk that Sonat's businesses may not be successfully integrated with
El Paso Energy's businesses;
- the risk that the integration of Sonat's marketing activities may not be
successful;
- 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 filings
with the Securities and Exchange Commission (SEC), including the 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 this prospectus. 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
us or any person acting on our behalf are expressly qualified in their entirety
by the cautionary statements contained or referred to in this section. We do 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.
WHERE YOU CAN FIND MORE INFORMATION
We file 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:
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Public Reference Room Room New York Regional Office Chicago Regional Office
1024 450 Fifth Street, Suite 100 7 World Trade Citicorp Center Suite 1400
N.W. Washington, D.C. Center New York, New York 500 West Madison Street
20549 10048 Chicago, Illinois
60661-2511
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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.
We are incorporating by reference in this prospectus some information we
file with the SEC, which means that we are disclosing important information to
you by referring you to those
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documents. Specifically, we incorporate by reference the documents set forth
below that we have previously filed with the SEC:
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SEC FILINGS (FILE NO. 1-14365) DESCRIPTION OR PERIOD/AS OF DATE
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Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999, and June
30, 1999
Current Report on Form 8-K, dated March Discloses the entering into 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 the
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, and includes the
audited consolidated financial statements
of Sonat Inc. as of December 31, 1998 and
1997 and for the years ended December 31,
1998, 1997 and 1996
Current Report on Form 8-K, dated May 10, Contains exhibits related to our issuance
1999 of $500 million of 6 3/4% senior notes
due 2009
Current Report on Form 8-K dated June 11, Discloses approval by El Paso Energy's
1999 stockholders of the proposed merger with
Sonat Inc.
Current Report on Form 8-K, dated July 2, Discloses preliminary unaudited pro forma
1999 condensed financial information of El
Paso Energy and Sonat Inc. giving effect
to the proposed merger, and includes the
unaudited consolidated financial
statements of Sonat Inc. as of March 31,
1999 and for the quarters ended March 31,
1999 and 1998
Current Report on Form 8-K, dated July Discloses second quarter and year to date
26, 1999 operating results of El Paso Energy
Current Report on Form 8-K, dated August Discloses preliminary unaudited pro forma
24, 1999 condensed financial information of El
Paso Energy and Sonat Inc. giving effect
to the proposed merger, and includes the
unaudited consolidated financial
statements of Sonat Inc. as of June 30,
1999 and for the quarters ended June 30,
1999 and 1998.
Registration Statement on Form 8-A, dated Contains a description of the El Paso
August 3, 1998 Energy common stock
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SEC FILINGS (FILE NO. 1-14365) DESCRIPTION OR PERIOD/AS OF DATE
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Registration Statement on Form 8-A/A Contains a description of the El Paso
dated January 29, 1999 Energy preferred stock purchase rights
Definitive Proxy Statement on Schedule Definitive proxy statement relating to
14A the 1999 annual meeting of El Paso
Energy's stockholders (filed on March 11,
1999)
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We incorporate by reference additional documents that we may file with the
SEC until the consummation of the exchange offer discussed in this prospectus,
which information will be deemed to automatically update and supersede the
information in this prospectus. 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 prospectus. You can obtain documents incorporated by reference in this
prospectus 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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PROSPECTUS SUMMARY
This summary highlights information appearing in other sections of this
prospectus. It is not complete and may not contain all of the information that
you should consider before exchanging senior notes for exchange notes. You
should read this prospectus carefully, including the "Risk Factors" section and
the financial statements and the footnotes to those statements incorporated
herein by reference. For purposes of this prospectus, 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
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Czech Republic, Hungary, Indonesia, Mexico, India, Pakistan, Peru, the United
Kingdom, Bangladesh, the Philippines and China.
Our principal executive offices are located 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.
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 system 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
MERGER WITH SONAT INC.
On June 10, 1999, El Paso Energy's stockholders approved the second amended
and restated agreement and plan of merger with Sonat Inc. pursuant to which,
among other things, Sonat will merge with and into El Paso Energy, and El Paso
Energy will issue to Sonat stockholders one share of El Paso Energy common stock
for each share of Sonat common stock owned by them (approximately 110 million
shares), and El Paso Energy's certificate of incorporation will be amended to
authorize El Paso Energy to issue up to 750 million shares of common stock and
up to 50 million shares of preferred stock. The approval of the merger resulted
in a defined change in control for El Paso Energy. As a result, El Paso Energy
incurred a charge of $126 million in the second quarter of 1999. These charges
included $120 million for the accelerated vesting of certain employee benefits.
Approximately $8 million of this amount was paid in the second quarter of 1999,
and approximately $50 million will be paid in the third quarter of 1999. Also
included in the charge was $6 million of various legal, accounting and financial
advisory costs. El Paso Energy and Sonat will complete the merger only if a
number of conditions are satisfied or waived including:
- no law or court order prohibits the transaction;
- the waiting period under federal antitrust laws applicable to the merger
expires or terminates;
- all other regulatory approvals are received without conditions that would
be materially adverse to El Paso Energy's and Sonat's combined
businesses, financial condition or results of operations; and
- attorneys for El Paso Energy and Sonat issue opinions that the merger is
expected to be tax free.
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However, we cannot assure you that we will complete the merger even if such
conditions are satisfied.
Sonat Inc. is a diversified energy holding company engaged in domestic oil
and natural gas exploration and production, the transmission and storage of
natural gas, and natural gas and power marketing. Sonat owns interests in
approximately 14,000 miles of natural gas pipelines extending across the
southeastern United States from Texas to South Carolina and Florida. Also, Sonat
has interests in oil and gas producing properties in Louisiana, Texas, Oklahoma,
Arkansas, Alabama, New Mexico and the Gulf of Mexico. As of December 31, 1998,
Sonat owned approximately 1.6 trillion cubic feet equivalent of proved reserves.
ACQUISITION OF COGENERATION FACILITIES
In August 1999, we acquired ownership interests in the Newark Bay
Cogeneration Facility and East Coast Power for approximately $280 million. In
addition, we received proceeds of $75 million in exchange for an interest in
Chaparral Investors, L.L.C., a limited liability company formed for the purpose
of holding these assets. The Newark Bay facility is a 137 megawatt natural
gas-fired cogeneration plant located in New Jersey which sells power to a large
utility and steam to various local customers. East Coast Power has three natural
gas-fired plants located in New Jersey with a combined capacity of 1,037
megawatts and long-term power purchase agreements with three utilities.
THE EXCHANGE OFFER
Registration Rights
Agreement................ We sold the senior notes on July 12, 1999 to the
initial purchasers under a purchase agreement dated
July 7, 1999. Pursuant to the purchase agreement,
El Paso Energy and the initial purchasers entered
into a registration rights agreement which granted
the holders of the senior notes certain exchange
and registration rights. This exchange offer is
intended to satisfy certain of our obligations
under the registration rights agreement.
The Exchange Offer......... We are offering to exchange up to $600,000,000 of
the exchange notes for up to $600,000,000 of the
senior notes. Senior notes may be exchanged only in
$1,000 increments.
The terms of the exchange notes are identical in
all material respects to the senior notes except
for certain transfer restrictions and registration
rights relating to the senior notes.
Resale..................... We believe that you will be able to freely transfer
the exchange notes without registration or any
prospectus delivery requirement; however, certain
broker-dealers and certain of our affiliates may be
required to deliver copies of this prospectus if
they resell any exchange notes.
Expiration Date............ 5:00 p.m., New York City time, on September 30,
1999, unless the exchange offer is extended. You
may withdraw senior notes you tender pursuant to
the exchange offer at any time prior to September
30, 1999. See "The Exchange Offer -- Expiration
Date; Extensions; Termination; Amendments."
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Conditions to the Exchange
Offer.................... The exchange offer is subject only to the following
conditions:
- the compliance of the exchange offer with
securities laws;
- the tender of the senior notes;
- the representation by the holders of the senior
notes that the exchange notes they will receive
are being acquired by them in the ordinary course
of their business and that at the time the
exchange offer is completed the holder had no
plan to participate in the distribution of the
exchange notes; and
- no judicial or administrative proceedings shall
have been threatened that would limit us from
proceeding with the exchange offer.
Procedures for Tendering
Senior Notes............. If you wish to accept the exchange offer, sign and
date the letter of transmittal in accordance with
the instructions, and deliver the letter of
transmittal, along with the senior notes and any
other required documentation, to the exchange
agent. Alternatively, you can tender your
outstanding senior notes by following the
procedures for book-entry transfer, as described in
this prospectus. By executing the letter of
transmittal or by transmitting an agent's message
in lieu thereof, you will represent to us that,
among other things:
- the exchange notes you receive will be acquired
in the ordinary course of your business,
- you have no arrangement with any person to
participate in the distribution of the exchange
notes, and
- you are not an affiliate of El Paso Energy or, if
you are an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
Special Procedures for
Beneficial Owners........ If you are a beneficial owner whose senior notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
wish to tender such senior notes in the exchange
offer, please contact the registered holder as soon
as possible and instruct them to tender on your
behalf and comply with our instructions set forth
elsewhere in this prospectus.
Guaranteed Delivery
Procedures............... If you wish to tender your senior notes, you may,
in certain instances, do so according to the
guaranteed delivery procedures set forth elsewhere
in this prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures."
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Withdrawal Rights.......... You may withdraw senior notes you tender pursuant
to the exchange offer by furnishing a written or
facsimile transmission notice of withdrawal to the
exchange agent containing the information set forth
in "The Exchange Offer -- Withdrawal of Tenders" at
any time before 5:00 p.m. New York City time on
September 30, 1999.
Acceptance of Senior Notes
and Delivery of Exchange
Notes.................... We will accept for exchange any and all senior
notes that are properly tendered in the exchange
offer prior to the expiration date. See "The
Exchange Offer -- Procedures for Tendering." The
conditions described in "The Exchange
Offer -- Conditions of the Exchange Offer" will
apply. The exchange notes issued pursuant to the
exchange offer will be delivered promptly following
the expiration date.
SUMMARY OF TERMS OF EXCHANGE NOTES
Issuer..................... El Paso Energy Corporation
Exchange Notes............. $600,000,000 aggregate principal amount of 6 5/8%
Series B Senior Notes due 2001.
Maturity Date.............. July 15, 2001.
Interest Payment Dates..... January 15 and July 15 of each year, beginning
January 15, 2000.
Optional Redemption........ None.
Sinking Fund............... None.
Ranking.................... The exchange notes rank equally with any other
unsecured indebtedness of El Paso Energy that is
not specifically subordinated to the notes.
Certain Covenants.......... The indenture governing the exchange notes contains
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............ We will not receive any proceeds from the exchange
of the exchange notes for the outstanding senior
notes.
Risk Factors............... You should read the "Risk Factors" section on page
8, as well as the other cautionary statements
throughout this prospectus, to ensure you
understand the risks involved with the exchange of
the exchange notes for the outstanding senior
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 and for the six
months ended June 30, 1998 and 1999 from our financial statements. Our financial
statements for each of the three fiscal years ended December 31, 1998, have been
audited by PricewaterhouseCoopers LLP, independent public accountants. You
should read the following information together with the historical financial
statements of El Paso Energy and related notes contained in our 1998 Annual
Report on Form 10-K and our Quarterly Report on Form 10-Q for the second quarter
of 1999, which are incorporated herein by reference.
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FOR THE SIX
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- ---------------
1996(A) 1997 1998 1998 1999
------- ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND
RATIOS)
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OPERATING RESULTS DATA:
Operating revenues........................................ $3,012 $5,638 $5,782 $2,915 $3,262
Merger-related costs(b)................................... -- -- -- -- 126
Depreciation, depletion and amortization.................. 101 236 269 132 144
Employee separation and asset impairment charge(c)........ 99 -- -- -- --
Operating income.......................................... 170 521 506 254 181
Income before income taxes, minority interest, and
cumulative effect of accounting change.................. 65 340 377 187 133
Income tax expense........................................ 25 129 127 62 45
Minority interest......................................... 2 25 25 12 12
Income before cumulative effect of accounting change...... 38 186 225 113 76
Cumulative effect of accounting change, net of income
tax(d).................................................. -- -- -- -- (13)
Net income................................................ 38 186 225 113 63
Basic earnings per common share
Income before cumulative effect of accounting
change(e)............................................. 0.53 1.64 1.94 0.97 0.65
Cumulative effect of accounting change, net of income
tax................................................... -- -- -- -- (0.11)
------ ------ ------ ------ ------
Net income(e)........................................... 0.53 1.64 1.94 0.97 0.54
Diluted earnings per common share
Income before cumulative effect of accounting
change(e)............................................. 0.52 1.59 1.85 0.92 0.64
Cumulative effect of accounting change, net of income
tax................................................... -- -- -- -- (0.11)
------ ------ ------ ------ ------
Net income(b)(c)(e)..................................... 0.52 1.59 1.85 0.92 0.53
Basic average common shares outstanding(e)................ 72 114 116 116 116
Diluted average common shares outstanding(e).............. 73 117 126 126 119
Ratio of earnings to combined fixed charges and preferred
stock dividend requirements(f).......................... 1.59 2.26 2.01 2.08 1.45
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AS OF
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DECEMBER 31, JUNE 30,
1998 1999
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(IN MILLIONS)
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FINANCIAL POSITION DATA (UNAUDITED)
Total assets.............................................. $10,038 $11,035
Total current liabilities................................. 2,131 1,505
Long-term debt, less current maturities................... 2,552 3,526
Company obligated mandatorily redeemable convertible
preferred securities of El Paso Energy Capital Trust
I....................................................... 325 325
Minority interest......................................... 365 865
Stockholders' equity...................................... 2,108 2,064
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(a) Reflects the acquisitions in June 1996 of Cornerstone Natural Gas, Inc., and
in December 1996 of El Paso Tennessee Pipeline Co.
(b) Includes a charge in the second quarter of 1999 of $126 million pre-tax ($83
million after tax) related to the merger with Sonat. These charges included
$120 million for the accelerated vesting of certain employee benefits and $6
million of various legal, accounting and financial advisory costs. Net
income per share of common stock for the six months ended June 30, 1999,
before giving effect to this charge, would have been $1.23.
(c) Includes 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. Net income per share
of common stock for the year ended December 31, 1996, 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., would have been $1.41 (compared to the reported
$0.52).
(d) We adopted the American Institute of Certified Public Accountant's Statement
of Position 98-5, Reporting on the Cost of Start-Up Activities, effective
January 1, 1999, and recorded a charge of $13 million, net of income taxes,
in the first quarter of 1999.
(e) 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.
(f) The ratio for the six months ended June 30, 1999, would have been 2.14
before giving effect to the merger-related costs, and the ratios for the
year ended December 31, 1994 and 1995, were 2.87 and 2.51, respectively.
6
<PAGE> 13
RISK FACTORS
OPERATIONAL RISKS
EL PASO ENERGY IS A HOLDING COMPANY THAT DEPENDS ON ITS SUBSIDIARIES TO
MEET ITS DEBT SERVICE OBLIGATIONS.
As a holding company, El Paso Energy conducts all of its operations
exclusively through its subsidiaries. El Paso Energy's only significant assets
are the capital stock of its subsidiaries. This means that El Paso Energy is
dependent on dividends or other distributions of funds from its subsidiaries to
meet its 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 its 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 El Paso
Energy's subsidiaries as of March 31, 1999, was approximately $2.6 billion on a
historical basis and approximately $3.7 billion on a pro forma combined basis
giving effect to the merger.
THE RATES WE ARE ABLE TO CHARGE OUR CUSTOMERS MAY BE REDUCED BY
GOVERNMENTAL AUTHORITIES.
The pipeline businesses of El Paso Energy and Sonat are regulated by the
FERC and various state and local regulatory agencies. In particular, the FERC
limits the rates we are permitted to charge our customers for interstate
transportation and, in some cases, sales of natural gas. If the rates we are
permitted to charge our customers for use of our regulated pipelines are
lowered, the profitability of our pipeline businesses may be reduced. Under the
terms of a settlement approved by the FERC, Sonat's subsidiary, Southern Natural
Gas Company, 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 OUR FAVORABLE CONTRACTS FOR NATURAL GAS TRANSMISSION WILL EXPIRE
WITHIN THE NEXT FEW YEARS.
Substantially all of the revenues of El Paso Energy's subsidiary, Tennessee
Gas Pipeline Company, are generated under long-term natural gas transmission
contracts. Contracts representing approximately 70% of the subsidiary's firm
transportation capacity will expire by November 2000. Although the subsidiary is
actively pursuing the renegotiation, extension and/or replacement of these
contracts, we cannot give any assurance that it will be able to extend or
replace all or most of these contracts or that the terms of any renegotiated
contracts will be as favorable to the subsidiary as the existing contracts.
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 they expect to negotiate to extend these contracts, there
can be no assurance that they 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 we merge
7
<PAGE> 14
with Sonat and Sonat is unable to renew these contracts or if they are renewed
on less favorable terms, we may suffer a material reduction in our revenues and
earnings.
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 their 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. 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 BE SURE THE INTEGRATION OF EL PASO ENERGY'S AND SONAT'S MARKETING
ACTIVITIES WILL BE SUCCESSFUL.
El Paso Energy's and Sonat's marketing activities involve complicated
transactions and valuation approaches that require daily monitoring using
sophisticated financial systems to manage market risks effectively. Some of
these financial systems and other activities used by the
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<PAGE> 15
two operations are different and will have to be successfully integrated.
Successful integration will involve risks, including:
- the selection and integration of financial systems and personnel;
- the possibility that information contained in the systems may be lost
during the transition;
- volatility in the market place which may occur during the transition of
systems and procedures that may result in a loss of control for a period
of time;
If we cannot successfully manage the integration, we may experience a
material adverse effect on our business, financial condition or results of
operations.
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.
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 Sonat's 50% interest in the Florida pipeline is held
through a joint venture operated by a subsidiary of Enron Corp., 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.
TRANSACTION RISKS
THE COMPANIES COULD BE REQUIRED TO EFFECT SIGNIFICANT DIVESTITURES OR
COMPLY WITH OTHER REGULATORY REQUIREMENTS.
We cannot complete the merger until the waiting period under the HSR Act
has expired or terminated. We are obligated to use our "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.
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<PAGE> 16
In addition, although we are not obligated to take actions that would
reasonably be likely to have a materially adverse affect on the combined company
or on El Paso Energy's 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 are also required to obtain the approval of the FERC in connection with
the merger. 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
significantly delay completion of the merger.
Other risks, uncertainties and factors which may adversely affect El Paso
Energy 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 El Paso Energy's 1998
Annual Report on Form 10-K.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the historical capitalization of El Paso
Energy at June 30, 1999, and such capitalization (i) as adjusted to reflect the
private placement on July 12, 1999, of $600 million of the senior notes and $100
million of floating rate senior notes due 2001, and El Paso Energy's application
of the proceeds it received from both placements and (ii) as further adjusted to
give effect to the merger of El Paso Energy and Sonat (accounted for as a
pooling of interests) and to our formation of Chaparral Investors, L.L.C. This
table should be read in conjunction with the consolidated financial statements
of El Paso Energy and related notes thereto contained in its 1998 Annual Report
on Form 10-K and its Quarterly Report on Form 10-Q for the second quarter of
1999 and with the unaudited pro forma condensed combined financial information
contained in its Current Report on Form 8-K dated August 24, 1999, each of which
is incorporated herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------------------------
(IN MILLIONS)
(UNAUDITED)
AS ADJUSTED
FOR THE AS FURTHER
HISTORICAL(A) OFFERING(B) ADJUSTED(C)
------------- -------------- -----------
<S> <C> <C> <C>
Short-term debt:
Short-term debt(c)................................ $ 410 $ -- $ 974
Current maturities of long-term debt.............. 62 62 167
------ ------ -------
Total short-term debt.......................... 472 62 1,141
------ ------ -------
Long-term debt, less current maturities:............ 3,116 3,816 4,910
------ ------ -------
Company-obligated mandatorily redeemable convertible
preferred securities of El Paso Energy Capital
Trust I........................................... 325 325 325
------ ------ -------
Minority interest................................... 865 865 874
------ ------ -------
Stockholders' equity:
Common stock, par value $3.00 per share;
275,000,000 shares authorized; 126,577,846
shares issued(d)............................... 380 380 710
Additional paid-in capital........................ 1,501 1,501 1,298
Retained earnings................................. 474 474 1,411
Other............................................. (291) (291) (299)
------ ------ -------
Total stockholders' equity................ 2,064 2,064 3,120
------ ------ -------
Total capitalization...................... $6,842 $7,132 $10,370
====== ====== =======
</TABLE>
- ------------------------------------------------------
(a) Before the reclassification of $410 million from short-term to long-term
debt as reflected in the Quarterly Report on Form 10-Q for the second
quarter of 1999.
(b) Adjusted to reflect the application of the proceeds from the private
placement on July 12, 1999 of $600 million of senior notes and $100
million of floating rate senior notes due 2001. The exchange of the
senior notes will not have an impact on El Paso Energy's capitalization.
(c) Gives effect to (i) the merger of El Paso Energy and Sonat (accounted for
as a pooling of interests) as if it occurred on June 30, 1999, (ii) the
formation of Chaparral Investors, L.L.C. and (iii) the application of the
proceeds from the private placement on July 12, 1999 of $600 million of
senior notes and $100 million of floating rate senior notes due 2001.
(d) In June 1999, El Paso Energy's stockholders authorized an increase of an
additional 475,000,000 shares. If the merger is effected, El Paso Energy
would issue an additional 110,069,157 shares. The number of shares issued
excludes 8,324,641 shares (13,734,476 shares after giving effect to the
merger) of El Paso Energy common stock issuable upon the exercise of
outstanding stock options.
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<PAGE> 18
USE OF PROCEEDS
El Paso Energy will not receive any cash proceeds from the issuance of the
exchange notes. El Paso Energy will exchange existing senior notes for exchange
notes in like principal amount as contemplated in this prospectus. The terms of
the exchange notes are identical in all material respects to the existing senior
notes except that the exchange notes will be issued in a transaction registered
under the Securities Act and will not bear legends restricting transfer thereof.
The existing senior notes surrendered in exchange for exchange notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange notes will not result in a change in the indebtedness of El Paso
Energy.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the senior notes on July 12, 1999 to the initial purchasers,
pursuant to a purchase agreement dated July 7, 1999, a copy of which is filed as
an exhibit to the registration statement of which this prospectus is a part. As
a condition to the purchase of the senior notes by the initial purchasers, we
entered into a registration rights agreement with the initial purchasers, which
requires, among other things, that promptly following the issuance and sale of
the senior notes, we file with the SEC the registration statement with respect
to the exchange notes, use our reasonable best commercial efforts to cause the
registration statement to become effective under the Securities Act and, upon
the effectiveness of the registration statement, offer to the holders of the
senior notes the opportunity to exchange their senior notes for a like principal
amount of exchange notes, which will be issued without a restrictive legend and
may be reoffered and resold by the holder without restrictions or limitations
under the Securities Act. A copy of the registration rights agreement has been
filed as an exhibit to the registration statement of which this prospectus is a
part. The term "holder" with respect to the exchange offer means any person in
whose name senior notes are registered on our books or any person whose name
appears on a security position listing provided by The Depository Trust Company
("DTC"), acting as depositary, as an owner of senior notes.
Based on existing interpretations of the Securities Act by the staff of the
SEC set forth in several no-action letters to third parties, and subject to the
immediately following sentence, we believe that the exchange notes issued
pursuant to the exchange offer may be offered for resale, resold and otherwise
transferred by the holders thereof (other than holders who are broker-dealers or
a person that is an "affiliate" (within the meaning of Rule 405 of the
Securities Act) of El Paso Energy) without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of notes who is an affiliate of El Paso Energy or who intends to
participate in the exchange offer for the purpose of distributing the exchange
notes, or any broker-dealer who purchased the notes from El Paso Energy to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act (1) will not be able to rely on the interpretations by the staff
of the SEC set forth in the above-mentioned no-action letters; (2) will not be
able to tender its notes in the exchange offer; and (3) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the notes unless such sale or transfer
is made pursuant to an exemption from such requirements. We do not intend to
seek our own no-action letter, and there is no assurance that the staff of the
SEC would make a similar determination with respect
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<PAGE> 19
to the exchange notes as it has in such no-action letters to third parties. See
"Plan of Distribution."
Following the consummation of the exchange offer, holders of senior notes
not tendered will not have any further registration rights except in certain
limited circumstances requiring the filing of a shelf registration statement,
and the senior notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the senior notes could be
adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept all senior notes properly
tendered and not withdrawn prior to 5:00 p.m., New York City time on the
expiration date. After authentication of the exchange notes by the trustee or an
authenticating agent, we will issue $1,000 principal amount of exchange notes in
exchange for each $1,000 principal amount of outstanding senior notes accepted
in the exchange offer. Holders may tender some or all of their senior notes
pursuant to the exchange offer in denominations of $1,000 and integral multiples
thereof.
Each holder of senior notes (other than certain specified holders) who
wishes to exchange senior notes for exchange notes in the exchange offer will be
required to represent that (1) it is not an affiliate of El Paso Energy, (2) any
exchange notes to be received by it were acquired in the ordinary course of its
business and (3) it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the exchange notes.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The staff of the SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the exchange notes (other than a resale of an unsold allotment
from the original sale of the notes) with the prospectus contained in the
exchange offer registration statement. We will be required to allow
participating broker-dealers to use the prospectus contained in the exchange
offer registration statement (subject to certain "black out" periods) following
the exchange offer, in connection with the resale of exchange notes received in
exchange for notes acquired by such participating broker-dealers for their own
account as a result of market-making or other trading activities. See "Plan of
Distribution."
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the senior notes except that (1) the exchange
notes will be issued in a transaction registered under the Securities Act, (2)
the exchange notes will not be subject to transfer restrictions and (3) certain
provisions relating to an increase in the stated interest rate on the senior
notes provided for in certain circumstances will be eliminated. The exchange
notes will evidence the same debt as the senior notes. The exchange notes will
be issued under and entitled to the benefits of the indenture.
As of the date of this prospectus, $600,000,000 aggregate principal amount
of the senior notes is outstanding. In connection with the issuance of the
senior notes, we arranged for the senior notes, which were initially purchased
by qualified institutional buyers as defined pursuant to Rule 144A under the
Securities Act, to be issued and transferable in book-entry form through
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<PAGE> 20
the facilities of DTC, acting as depositary. The exchange notes will also be
issuable and transferable in book-entry form through DTC.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business on
August 30, 1999. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Exchange Act, and the rules and regulations of
the SEC thereunder, including Rule 14e-1, to the extent applicable. The exchange
offer is not conditioned upon any minimum aggregate principal amount of senior
notes being tendered, and holders of the senior notes do not have any appraisal
or dissenters' rights under the General Corporation Law of the State of Delaware
or under the indenture in connection with the exchange offer. We will be deemed
to have accepted validly tendered senior notes when, as and if we have given
oral (promptly confirmed in writing) or written notice thereof to the exchange
agent. See "-- Exchange Agent." The exchange agent will act as agent for the
tendering holders for the purpose of receiving exchange notes from El Paso
Energy and delivering exchange notes to such holders.
If any tendered senior notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted senior notes will be returned, at our cost,
to the tendering holder thereof as promptly as practicable after the expiration
date.
Holders who tender senior notes in the exchange offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of senior
notes pursuant to the exchange offer. We will pay all charges and expenses,
other than certain applicable taxes, in connection with the exchange offer. See
"-- Solicitation of Tenders; Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF EL PASO ENERGY NOR EL PASO ENERGY MAKES
ANY RECOMMENDATION TO HOLDERS OF SENIOR NOTES AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF THEIR SENIOR NOTES PURSUANT TO THE EXCHANGE
OFFER. MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION.
HOLDERS OF SENIOR NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT
TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF SENIOR NOTES TO TENDER
AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH
THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on
September 30, 1999, unless extended by us (the "expiration date"). We expressly
reserve the right to extend the exchange offer on a daily basis or for such
period or periods as we may determine in our sole discretion from time to time
by giving oral, promptly confirmed in writing, or written notice to the exchange
agent and by making a public announcement by press release to the Dow Jones News
Service prior to 9:00 a.m., New York City time, on the first business day
following the previously scheduled expiration date. During any extension of the
exchange offer, all senior notes previously tendered, not validly withdrawn and
not accepted for exchange will remain subject to the exchange offer and may be
accepted for exchange by us.
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<PAGE> 21
To the extent we are legally permitted to do so, we expressly reserve the
absolute right, in our sole discretion, to:
- waive any condition to the exchange offer and
- amend any of the terms of the exchange offer.
Any waiver or amendment to the exchange offer will apply to all senior
notes tendered, regardless of when or in what order the senior notes were
tendered. If we make a material change in the terms of the exchange offer or if
we waive a material condition of the exchange offer, we will disseminate
additional exchange offer materials, and we will extend the exchange offer to
the extent required by law.
We expressly reserve the right, in our sole discretion, to terminate the
exchange offer if any of the conditions set forth under "-- Conditions of the
Exchange Offer" cease to exist. Any such termination will be followed promptly
by a public announcement. In the event we terminate the exchange offer, we will
give immediate notice to the exchange agent, and all senior notes previously
tendered and not accepted for payment will be returned promptly to the tendering
holders.
In the event that the exchange offer is withdrawn or otherwise not
completed, exchange notes will not be given to holders of senior notes who have
validly tendered their senior notes.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from the date of issuance of the
senior notes that are tendered in exchange for the exchange notes (or the most
recent date on which interest was paid or duly provided for on the senior notes
surrendered in exchange for the exchange notes). Accordingly, holders of senior
notes that are accepted for exchange will not receive interest that is accrued
but unpaid on such senior notes at the time of tender. Interest on the exchange
notes will be payable semi-annually on each January 15 and July 15, commencing
on January 15, 2000.
PROCEDURES FOR TENDERING
Only a holder may tender its senior notes in the exchange offer. To tender
in the exchange offer, unless such tender is being effected pursuant to the
procedures for book-entry transfer described below, a holder must complete, sign
and date the letter of transmittal or a facsimile thereof, have the signatures
thereof guaranteed if required by the letter of transmittal, and mail or
otherwise deliver such letter of transmittal or such facsimile, together with
the senior notes (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the exchange agent, prior to 5:00 p.m. New York City time, on the expiration
date.
Any financial institution that is a participant in the depositary's
book-entry transfer facility system may make book-entry delivery of the senior
notes by causing DTC to confirm the transfer such senior notes into the exchange
agent's account in accordance with the DTC procedure for such transfer (a "book
entry confirmation"). Although delivery of senior notes may be effected through
book-entry transfer into the exchange agent's account at the depositary, the
letter of transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the exchange agent at its address set forth herein under
"-- Exchange Agent" prior to 5:00 p.m., New York City time, on
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<PAGE> 22
the expiration date, unless an agent's message is transmitted by that time in
lieu thereof. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "agent's message" means a message, transmitted by DTC to and
received by the exchange agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the tendering
depositary participant, which acknowledgment states that such participant has
received and agrees to be bound by the letter of transmittal and that we may
enforce the letter of transmittal against such participant.
The tender by a holder will constitute an agreement between such holder, El
Paso Energy and the exchange agent in accordance with the terms and subject to
the conditions set forth herein and in the letter of transmittal.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO EL PASO ENERGY
THAT, AMONG OTHER THINGS, (1) THE EXCHANGE NOTES RECEIVED PURSUANT TO THE
EXCHANGE OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE
PERSON RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER),
(2) NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION OF SUCH
EXCHANGE NOTES, (3) NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS AN
"AFFILIATE, " AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT, OF EL PASO
ENERGY, (4) THE HOLDER IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION OF THE EXCHANGE NOTES, AND (5) IF THE TENDERING HOLDER IS A BROKER
OR DEALER (AS DEFINED IN THE EXCHANGE ACT) ( A) IT ACQUIRED THE SENIOR NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES AND (B) IT HAS NOT ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH
EL PASO ENERGY, OR ANY "AFFILIATE" OF EL PASO ENERGY (WITHIN THE MEANING OF RULE
405 UNDER THE SECURITIES ACT) TO DISTRIBUTE THE EXCHANGE NOTES TO BE RECEIVED IN
THE EXCHANGE OFFER. In the case of a broker-dealer that receives exchange notes
for its own account in exchange for senior notes which were acquired by it as a
result of market-making or other trading activities, the letter of transmittal
will also include an acknowledgment that the broker-dealer will deliver a copy
of this prospectus in connection with the resale by it of exchange notes
received pursuant to the exchange offer. See "Plan of Distribution."
THE METHOD OF DELIVERY OF SENIOR NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR SENIOR NOTES SHOULD BE SENT TO EL PASO ENERGY.
HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR HOLDERS IN EACH CASE
AS SET FORTH HEREIN AND IN THE LETTER OF TRANSMITTAL.
Any beneficial owner whose senior notes are registered in the name of such
owner's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial owner wishes
to tender on his own behalf, such beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his senior notes, either make
appropriate arrangements to register ownership of the senior notes in such
owner's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
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<PAGE> 23
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act unless the senior notes tendered pursuant thereto
are tendered (1) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" of the
letter of transmittal or (2) for the account of an eligible institution. If the
letter of transmittal is signed by a person other than the registered holder
listed therein, such senior notes must be endorsed or accompanied by appropriate
bond powers which authorize such person to tender the senior notes on behalf of
the registered holder, in either case signed as the name of the registered
holder
or holders appears on the senior notes. If the letter of transmittal or any
senior notes or bond powers are signed or endorsed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with such letter of transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered senior notes will be
determined by us in our sole discretion, which determination will be final and
binding. We reserve the absolute right to reject any and all senior notes not
properly tendered or any senior notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the absolute right to waive
any irregularities or conditions of tender as to particular senior notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of senior notes must be cured within such time as we determine. Although we
intend to notify holders of defects or irregularities with respect to tenders of
senior notes, neither El Paso Energy, the exchange agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of senior notes nor shall any of them incur any liability for
failure to give such notification. Tenders of senior notes will not be deemed to
have been made until such irregularities have been cured or waived. Any senior
notes received by the exchange agent that we determine are not properly tendered
or the tender of which is otherwise rejected by us and as to which the defects
or irregularities have not been cured or waived by us will be returned by the
exchange agent to the tendering holder unless otherwise provided in the letter
of transmittal, as soon as practicable following the expiration date.
In addition, we reserve the right in our sole discretion to (a) purchase or
make offers for any senior notes that remain outstanding subsequent to the
expiration date, or, as set forth under "-- Expiration Date; Extensions;
Termination; Amendments," to terminate the exchange offer and (b) to the extent
permitted by applicable law, purchase senior notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers may differ from the terms of the exchange offer.
CONDITIONS OF THE EXCHANGE OFFER
The exchange offer is subject only to the following conditions:
- the compliance of the exchange offer with securities laws;
- the tender of the existing notes;
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- the representation by the holders of the senior notes that the exchange
notes they will receive are being acquired by them in the ordinary course
of their business and that at the time the exchange offer is completed
the holder had no plan to participate in the distribution of the exchange
notes; and
- no judicial or administration proceeding shall have been threatened that
would limit us from proceeding with the exchange offer.
The conditions to the exchange offer are for our sole benefit and may be
asserted by us in our sole discretion or may be waived by us, in whole or in
part, in our sole discretion, whether or not any other condition of the exchange
offer also is waived. We have not made a decision as to what circumstances would
lead us to waive any condition, and any waiver would depend on circumstances
prevailing at the time of that waiver. Any determination by us concerning the
events described in this section shall be final and binding upon all persons.
BOOK-ENTRY TRANSFER
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the senior
notes at the DTC for the purpose of facilitating the exchange offer, and subject
to the establishment thereof, any financial institution that is a participant in
the book-entry transfer facility's system may make book-entry delivery of senior
notes by causing such book-entry transfer facility to transfer such senior notes
into the exchange agent's account with respect to the senior notes in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of senior notes may be effected through book-entry transfer into the
exchange agent's account at the book-entry transfer facility, an appropriate
letter of transmittal properly completed and duly executed with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, unless an agent's message is
transmitted by that time in lieu thereof, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures. Delivery of documents to the book-entry transfer facility
does not constitute delivery to the exchange agent. See "Description of the
Notes -- Book Entry; Delivery and Form."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their senior notes and (1) whose senior notes
are not immediately available, or (2) who cannot deliver their senior notes, the
letter of transmittal or any other required documents to the exchange agent
prior to the expiration date, or if such holder cannot complete the procedure
for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives from
such eligible institution a properly completed and duly executed notice of
guaranteed delivery (by facsimile transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such holder's senior notes and the principal amount of such
senior notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the expiration date, the
letter of transmittal (or facsimile thereof), together with the
certificate(s) representing the senior notes to be tendered in proper form
for transfer (or confirmation of a book-entry transfer into the
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exchange agent's account at DTC of senior notes delivered electronically)
and any other documents required by the letter of transmittal will be
deposited by the eligible institution with the exchange agent; and
(c) such properly completed and executed letter of transmittal (or
facsimile thereof) or an agent's message in lieu thereof, together with the
certificate(s) representing all tendered senior notes in proper form for
transfer (or confirmation of a book-entry transfer into the exchange
agent's account at DTC of senior notes delivered electronically) and all
other documents required by the letter of transmittal are received by the
exchange agent within five business days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their senior notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of senior notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of senior notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must (1) specify the name of
the person having deposited the senior notes to be withdrawn (the "depositor"),
(2) identify the senior notes to be withdrawn (including the certificate number
or numbers and principal amount of such senior notes or, in the case of senior
notes transferred by book-entry transfer, the name and number of the account at
the depositary to be credited), (3) be signed by the depositor in the same
manner as the original signature on the letter of transmittal by which such
senior notes were tendered (including any required signature guarantee) or be
accompanied by documents of transfer sufficient to permit the trustee with
respect to the senior notes to register the transfer of such senior notes into
the name of the depositor withdrawing the tender and (4) specify the name in
which any such senior notes are to be registered, if different from that of the
depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by us, whose
determination shall be final and binding on all parties. Any senior notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer, and no exchange notes will be issued with respect thereto unless
the senior notes so withdrawn are validly retendered. Any senior notes that have
been tendered but are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
senior notes may be retendered by following one of the procedures described
above under "-- Procedures for Tendering" at any time prior to the expiration
date.
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EXCHANGE AGENT
The Chase Manhattan Bank, the trustee under the indenture, has been
appointed as exchange agent for the exchange offer. In such capacity, the
exchange agent has no fiduciary duties and will be acting solely on the basis of
our directions. Requests for assistance and requests for additional copies of
this prospectus or of the letter of transmittal should be directed to the
exchange agent addressed as follows:
By Mail, Hand Delivery or
Overnight Courier:....... The Chase Manhattan Bank
55 Water Street, Second Floor
Room 234 -- North Building
New York, New York 10041
Facsimile Transmission:.... (212) 638-7380 or (212) 638-7381
Confirm by Telephone:...... Carlos Esteves (212) 638-0828
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by us. The principal solicitation pursuant to the exchange offer is being
made by mail. Additional solicitations may be made by our officers and regular
employees in person, by telegraph, telephone or telecopier.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We, however, will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket costs and expenses in connection
therewith and will indemnify the exchange agent for all losses and claims
incurred by it as a result of the exchange offer. We may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this prospectus,
letters of transmittal and related documents to the beneficial owners of the
senior notes and in handling or forwarding tenders for exchange.
We will pay the expenses to be incurred in connection with the exchange
offer, including fees and expenses of the exchange agent and trustee and
accounting and legal fees and printing costs.
We will pay all transfer taxes, if any, applicable to the exchange of
senior notes pursuant to the exchange offer. If, however, certificates
representing exchange notes or senior notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the senior
notes tendered, or if tendered senior notes are registered in the name of any
person other than the person signing the letter of transmittal, or if a transfer
tax is imposed for any reason other than the exchange of senior notes pursuant
to the exchange offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
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therefrom is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed by us directly to such tendering holder.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
senior notes, as reflected in our accounting records on the date of the
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes upon the consummation of the exchange offer. We will amortize the
expenses of the exchange offer over the term of the exchange notes.
FEDERAL INCOME TAX CONSEQUENCES
The following general discussion is a summary of the material United States
federal income tax consequences of the ownership and disposition of notes and
applies to you if you are a United States holder, you acquired existing notes at
original issue for cash and you exchange those existing notes for exchange notes
in the exchange offer. This discussion only applies to you if you purchased
existing notes in the private placement for an amount equal to the "issue price"
of the notes and hold the exchange notes as a "capital asset," generally, for
investment, under Section 1221 of the Internal Revenue Code. This summary,
however, does not consider state, local or foreign tax laws. In addition, it
does not include all of the rules which may affect the United States federal tax
treatment of your investment in the exchange notes. For example, special rules
not discussed here may apply to you if you are, including without limitation:
- a broker-dealer, a dealer in securities or a financial institution;
- an insurance company;
- a tax-exempt organization;
- holding the exchange notes through partnerships or other pass-through
entities; or
- holding the exchange notes as part of a hedge, straddle or other risk
reduction or constructive sale transaction.
This discussion is based on current provisions of the Internal Revenue
Code, existing and proposed regulations and current administrative rulings and
court decisions, all of which are subject to change. Later changes in these
authorities may cause the tax consequences to vary substantially from the
consequences described below. Accordingly, you should consult, and should depend
on, your own tax advisor in analyzing the federal, state, local and foreign tax
consequences to you of the ownership and disposition of exchange notes.
UNITED STATES HOLDER
You are a United States holder if you hold notes and you are:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in the United States or
under the laws of the United States or of any political subdivision;
- an estate the income of which is subject to United States federal income
tax regardless of its source; or
- a trust, if (1) a United States court can exercise primary supervision
over the administration of the trust and one or more United States
persons can control all
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substantial decisions of the trust, or (2) the trust was in existence on
August 20, 1996 and has properly elected to continue to be treated as a
United States person.
TAXATION OF INTEREST
Interest on the exchange notes generally will be taxable to you as ordinary
interest income at the time payments are accrued or received in accordance with
your regular method of accounting for federal income tax purposes.
RECEIPT OF EXCHANGE NOTES
Because the economic terms of the exchange notes and the existing notes are
identical, your exchange of existing notes for exchange notes under the exchange
offer will not constitute a taxable exchange of the existing notes. As a result:
- you will not recognize taxable gain or loss when you receive exchange
notes in exchange for existing notes;
- your holding period in the exchange notes will include your holding
period in the existing notes; and
- your basis in the exchange notes will equal your basis in the existing
notes.
SALE OR OTHER TAXABLE DISPOSITION OF EXCHANGE NOTES
You must recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of an exchange note. The amount of your
gain or loss equals the difference between the amount you receive for the
exchange note in cash or other property, valued at fair market value, minus the
amount attributable to accrued qualified stated interest on the exchange note,
minus your adjusted tax basis in the exchange note. Your initial tax basis in an
exchange note equals the price you paid for the existing note which you
exchanged for the exchange note increased by any amounts previously includable
in income as original issue discount and reduced by any payments other than
payments of qualified stated interest made on the notes.
Your gain or loss will generally be a long-term capital gain or loss if
your holding period in the exchange note is more than one year. Otherwise, it
will be a short-term capital gain or loss. Payments attributable to accrued
qualified stated interest which you have not yet included in income will be
taxed as ordinary interest income.
BACKUP WITHHOLDING
You may be subject to a 31% backup withholding tax on payments of interest,
principal and premium on, and any proceeds upon the sale or disposition of, an
exchange note. Some holders, including, among others, corporations and some
tax-exempt organizations, are generally not subject to backup withholding. In
addition, the 31% backup withholding tax will not apply to you if you provide
your taxpayer identification number in the prescribed manner unless:
- the IRS notifies us or our agent that the taxpayer identification number
you provided is incorrect;
- you fail to report interest and dividend payments that you receive on
your tax return and the IRS notifies us or our agent that withholding is
required; or
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- you fail to certify under penalties of perjury that you are not subject
to backup withholding.
You should consult your tax advisor as to your qualification for exemption
from backup withholding and the procedure for obtaining an exemption. If the 31%
backup withholding tax does apply to you, you may use the amounts withheld as a
refund or credit against your federal income tax liability as long as you
provide necessary information to the IRS.
OTHER
Participation in the exchange offer is voluntary. Holders of the senior
notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered senior notes pursuant to the terms of, this exchange offer, we
will have fulfilled a covenant contained in the terms of the registration rights
agreement. Holders of the senior notes who do not tender their certificates in
the exchange offer will continue to hold such certificates and will be entitled
to all the rights, and subject to the limitations applicable thereto, under the
indenture governing the notes, except for any such rights under the registration
rights agreement that by their term terminate or cease to have further effect as
a result of the making of this exchange offer. All untendered senior notes will
continue to be subject to the restrictions on transfer set forth in the
indenture. To the extent that senior notes are tendered and accepted in the
exchange offer, the trading market for untendered senior notes could be
adversely affected.
We may in the future seek to acquire untendered senior notes in the open
market or through privately negotiated transactions, through subsequent exchange
offers or otherwise. We intend to make any such acquisitions of senior notes in
accordance with the applicable requirements of the Exchange Act, and the rules
and regulations of the SEC thereunder, including Rule 14e-1, to the extent
applicable. We have no present plan to acquire any senior notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any senior notes that may be but are not tendered pursuant to the
exchange offer.
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DESCRIPTION OF THE NOTES
The exchange notes will be issued, and the senior notes were issued, under
an indenture (the "indenture") between El Paso Energy and The Chase Manhattan
Bank, as trustee, dated as of May 10, 1999, copies of which may be obtained from
the trustee at its corporate trust office in New York, New York. The terms of
the notes include those stated in the indenture and made a part thereof by
reference to the Trust Indenture Act in effect on the date of the indenture.
This summary of certain terms of the notes and the indenture does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
the 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 indenture.
GENERAL
The notes are unsecured and rank senior in right of payment to all
subordinated debt of El Paso Energy. The notes are limited to an aggregate
principal amount of $600,000,000. The indenture does not limit the incurrence or
issuance of other secured or unsecured debt of El Paso Energy, whether under the
indenture or any existing or other indenture that we may enter into in the
future or otherwise.
The senior notes were originally represented by a single, global senior
note in registered form. The global note was registered in the name of Cede &
Co. Cede & Co. was the nominee for the depositary. The depositary was The
Depositary Trust Company. When the senior notes are exchanged for the exchange
notes, they will initially be represented by a single, global exchange note in
registered form. The global exchange note will be registered in the name of The
Depositary Trust Company.
The notes are not subject to any sinking fund provision. The entire
principal amount of the notes will mature, and become due and payable, together
with any accrued and unpaid interest thereon, on July 15, 2001.
INTEREST
The notes will bear interest at the annual rate of 6 5/8% per annum,
payable semi-annually in arrears on January 15 and July 15 of each year,
commencing on January 15, 2000 (each, an "interest payment date"), to the person
in whose name each 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
notes is not a business day, then payment of the interest payable on such date
will be made on 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.
Although the notes are not redeemable, we may purchase notes in the open
market, by tender or otherwise.
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CONSOLIDATION, MERGER OR SALE
The indenture generally permits a consolidation or merger between us and
another corporation. It also permits the sale by us of all or substantially all
of our property and assets. If this occurs, the remaining or acquiring
corporation will assume all of our responsibilities and liabilities under the
indentures, including the payment of all amounts due on the notes and
performance of the covenants in the indenture. However, we will only consolidate
or merge with or into any other corporation or sell all or substantially all of
our assets according to the terms and conditions of the indenture. The remaining
or acquiring corporation will be substituted for us in the indenture with the
same effect as if it had been an original party to the indenture. Thereafter,
the successor corporation may exercise our rights and powers under the
indenture, in our name or in its own name. Any act or proceeding required or
permitted to be done by our board or any of our officers may be done by the
board or officers of the successor corporation. If we sell all or substantially
all of our assets, we will be released from all our liabilities and obligations
under the indenture and under the senior notes.
MODIFICATION OF INDENTURE
Under the indenture, our rights and obligations and the rights of the
holders of notes may be modified with the consent of the holders of a majority
in aggregate principal amount of the outstanding notes affected by the
modification. No modification of the principal or interest payment terms, and no
modification reducing the percentage required for modifications, is effective
against any holder without its consent.
EVENTS OF DEFAULT
"Event of default" when used in the indenture will mean any of the
following:
- failure to pay the principal of or any premium on any note when due;
- failure to pay interest on any note for 30 days;
- failure to perform any other covenant in the indenture that continues for
60 days after being given written notice;
- certain events in bankruptcy, insolvency or reorganization of El Paso
Energy; or
- any other event of default included in the indenture.
An event of default for the notes does not necessarily constitute an event
of default for any other series of debt securities issued under the indenture.
The trustee may withhold notice to the holders of the notes of any default,
except in the payment of principal or interest, if it considers such withholding
of notice to be in the best interests of the holders.
If an event of default for the notes occurs and continues, the trustee or
the holders of at least 25% in aggregate principal amount of the notes of the
series may declare the entire principal of the notes to be due and payable
immediately. If this happens, subject to certain conditions, the holders of a
majority of the aggregate principal amount of the notes can void the
declaration.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under the indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnification, the holders of a
majority in principal amount of the notes may direct the time, method and place
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of conducting any proceeding or any remedy available to the trustee, or
exercising any power conferred upon the trustee, for the notes.
COVENANTS
Under the indenture, we will:
- pay the principal of, and interest and any premium on, the notes when
due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year reviewing
our obligations under the indenture; and
- deposit sufficient funds with any paying agent on or before the due date
for any principal, interest or premium.
The indenture provides that we will not, nor will we permit any restricted
subsidiary to, create, assume, incur or suffer to exist any lien upon any
principal property, whether owned or leased on the date of the indenture or
thereafter acquired, to secure any debt of El Paso Energy or any other person
(other than the debt securities issued under the indenture), without causing all
of the debt securities outstanding under the indenture to be secured equally and
ratably with, or prior to, the new debt so long the new debt is so secured. This
restriction does not, however, prohibit us from creating the following:
(i) any lien upon any property or assets of El Paso Energy or any
restricted subsidiary in existence on the date of the indenture or created
pursuant to an "after-acquired property" clause or similar term in
existence on the date of the indenture or any mortgage, pledge agreement,
security agreement or other similar instrument in existence on the date of
the 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;
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(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;
(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 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 debt securities
issued under the 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 (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.
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The indenture also provides that we will not, nor will we 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 of El Paso Energy or any such
restricted subsidiary, or (B) investment in another principal property.
Notwithstanding the foregoing, under the indenture we may, and may permit
any restricted subsidiary to, effect any sale-leaseback transaction that is not
excepted by clauses (i) through (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
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 DEFINITIONS
The following are definitions of some terms used in the above covenant
descriptions:
"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
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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 United States 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 (i) 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 the United States
or Canada, and (ii) any processing or manufacturing plant owned or leased by El
Paso Energy or any subsidiary that is located within the United States or
Canada, except, in the case of either clause (i) or (ii), 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.
DEFEASANCE
We will be discharged from our obligations on the notes at any time if we
deposit with the trustee sufficient cash or government securities to pay the
principal, interest, any premium and any other sums due to the stated maturity
date or a redemption date of the notes. If this happens, the holders of the
notes will not be entitled to the benefits of the indenture except for
registration of transfer and exchange of senior notes and replacement of lost,
stolen or mutilated notes.
The indenture also provides that El Paso Energy and any other obligor, if
any, will be discharged from any and all obligations in respect of the notes
(excluding, however, certain obligations, such as the obligation to register the
transfer or exchange of such outstanding senior
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notes, to replace stolen, lost, mutilated or destroyed certificates, to pay
principal and interest on the original stated due dates or specified redemption
date, and to maintain paying agencies) on the 91st day following the deposit
referred to in the first bullet point below, subject to the following
conditions:
- 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 notes, on the stated maturity of such payments in
accordance with the terms of the indenture and the outstanding senior
notes or on any redemption date established pursuant to the third bullet
point below;
- 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
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 notes 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;
- if the notes are to be redeemed prior to stated maturity, notice of such
redemption shall have been duly given pursuant to the indenture or
provision therefor satisfactory to the senior debt trustee shall have
been made;
- 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
- El Paso Energy's delivery to the trustee of an officer's certificate and
an opinion of counsel, each stating that the conditions precedent under
the indenture have been complied with.
Under the indenture, we also may discharge our 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 indenture, in respect of
the notes on the 91st day following the deposit referred to in the first bullet
point in the immediately preceding paragraph, subject to satisfaction of the
conditions described in the first, third, fourth and fifth bullet points in the
immediately preceding paragraph with respect to the notes and the delivery of an
opinion of counsel confirming that the holders of the notes 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.
GOVERNING LAW
The indenture and the notes will be governed by and construed in accordance
with the laws of the State of New York.
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NOTICES
Notices to holders of notes will be given by mail to the addresses of such
holders as they appear in the security register.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to us, we will make all
payments of principal of, premium, if any, and interest and liquidated damages,
if any, on the notes in accordance with those instructions. All other payments
on these notes will be made at the office or agency of the paying agent and
registrar within the City and State of New York unless we elect to make interest
payments by check mailed to the holders at their address set forth in the
security register.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders of the notes,
and we may act as paying agent or registrar.
TRANSFER AND EXCHANGE
Subject to the restrictions set forth in "Notice to Investors," a holder
may transfer or exchange notes in accordance with the indenture. The registrar
and the trustee may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and we may require a holder to pay any taxes
and fees required by law or permitted by the indenture. Also, we are not
required to transfer or exchange any note between a record date and the next
succeeding interest payment date.
The registered holder of a note will be treated as the owner of it for all
purposes.
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 indenture or the notes by reason of his,
her or its status as such.
BOOK-ENTRY; DELIVERY AND FORM
The notes will initially be represented by one or more permanent global
notes in definitive, fully registered book-entry form (the "global securities")
which will be registered in the name of a nominee of DTC or its nominee and
deposited on behalf of purchasers of the notes represented thereby with a
custodian for DTC for credit to the respective accounts of the purchasers (or to
such other accounts as they may direct) at DTC.
The global securities. We expect that pursuant to procedures established
by DTC (a) upon deposit of the global securities, DTC or its custodian will
credit on its internal system portions of the global securities which will
contain the corresponding respective amount of the global securities to the
respective accounts of persons who have accounts with such depositary and (b)
ownership of the notes will be shown on, and the transfer of ownership thereof
will be affected only through, records maintained by DTC or its nominee (with
respect to interests of participants (as defined below) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the
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initial purchasers and ownership of beneficial interests in the global
securities will be limited to persons who have accounts with DTC (the
"participants") or persons who hold interests through participants. Noteholders
may hold their interests in a global security directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC or its nominee is the registered owner or holder of any of
the notes, DTC or such nominee will be considered the sole owner or holder of
such notes represented by such global securities for all purposes under the
indenture and under the notes represented thereby. No beneficial owner of an
interest in the global securities will be able to transfer such interest except
in accordance with the applicable procedures of DTC in addition to those
provided for under the indenture.
Payments of the principal, premium, interest and other amounts on the notes
represented by the global securities will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of El Paso Energy, the
trustee or any paying agent under the indenture will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
We expect that DTC or its nominee, upon receipt of any payment of the
principal, premium, interest or other amounts on the notes represented by the
global securities, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the global securities
as shown on the records of DTC or its nominee. El Paso Energy also expects that
payments by participants to owners of beneficial interests in the global
securities held through such participants will be governed by standing
instructions and customary practice as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payment will be the responsibility of such participants.
Transfers between participants in DTC will be affected in accordance with DTC
rules and will be settled in immediately available funds.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the global securities are credited and only in respect of the
aggregate principal amount of as to which such participant or participants has
or have given such direction.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the global securities among participants of
DTC, DTC is under no obligation to perform such procedures, and such procedures
may be discontinued at any time. None of
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El Paso Energy, the trustee or the paying agent will have any responsibility for
the performance by DTC or its direct or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Certificated securities. Interests in the global securities will be
exchanged for physical delivery of certificates (the "certificated securities")
only if (i) DTC is at any time unwilling or unable to continue as depositary for
the global securities, or DTC ceases to be a "clearing agency" registered under
the Exchange Act, and a successor depositary is not appointed by El Paso Energy
within 90 days or (ii) an event of default under the indenture has occurred and
is continuing with respect to the notes. Upon the occurrence of either of the
events described in the preceding sentence, we will cause the appropriate
certificated securities to be delivered.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We and the initial purchasers entered into a registration rights agreement
on the closing date of the private placement of the senior notes. In the
registration rights agreement, we agreed to file this exchange offer
registration statement with the SEC within 90 days after the closing date, and
use our best efforts to have it declared effective at the earliest possible
time. We also agreed to use our best commercial efforts to cause this exchange
offer registration statement to be effective continuously, to keep the exchange
offer open for a period of not less than 20 business days and cause the exchange
offer to be consummated no later than the 30th business day after it is declared
effective by the SEC. Pursuant to the exchange offer, certain holders of senior
notes which constitute transfer restricted securities may exchange their
transfer restricted securities for a new series of registered notes containing
terms substantially identical in all material respects to the senior notes. To
participate in the exchange offer, each holder must represent that it is not an
affiliate of El Paso Energy, that it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the exchange notes, and that it is acquiring
the exchange notes in the exchange offer in its ordinary course of business.
If (i) the exchange offer is not permitted by applicable law or SEC policy
or (ii) any holder of senior notes which are transfer restricted securities
notifies El Paso Energy prior to the 20th business day following the
consummation of the exchange offer that (a) it is prohibited by law or SEC
policy from participating in the exchange offer, (b) it may not resell the
exchange notes acquired by it in the exchange offer to the public without
delivering a prospectus, and this prospectus is not appropriate or available for
such resales by it, or (c) it is a broker-dealer and holds senior notes acquired
directly from El Paso Energy or any of El Paso Energy's affiliates, El Paso
Energy will file with the SEC a shelf registration statement to register for
public resale the transfer restricted securities held by any such holder who
provides El Paso Energy with certain information for inclusion in the shelf
registration statement.
For the purposes of the registration rights agreement, "transfer restricted
securities" means each senior note until the earliest of the date of which (i)
such senior note is exchanged in the exchange offer for a like principal amount
of exchange notes and entitled to be resold to the public by the holder thereof
without complying with the prospectus delivery requirements of the Securities
Act, (ii) such senior note has been disposed of in accordance with the shelf
registration statement or (iii) such senior note is distributed to the public
pursuant to Rule 144 under the Securities Act, and each exchange note until the
date on which such exchange note is disposed of by a broker-dealer pursuant to
the "Plan of Distribution" contemplated by this exchange offer registration
statement (including delivery of this prospectus).
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The registration rights agreement provides that (1) if we fail to file an
exchange offer registration statement with the SEC on or prior to the 90th day
after the closing date of the offering of the senior notes, (2) if the exchange
offer registration statement is not declared effective by the SEC on or prior to
the 180th day after the closing date, (3) if the exchange offer is not
consummated on or before the 30th business day after the exchange offer
registration statement is declared effective, (4) if obligated to file the shelf
registration statement and we fail to file the shelf registration statement with
the SEC on or prior to the 60th day after such filing obligation arises, (5) if
obligated to file a shelf registration statement and the shelf registration
statement is not declared effective on or prior to the 120th day after the
obligation to file a shelf registration statement arises, or (6) subject to
certain conditions, if the exchange offer registration statement or the shelf
registration statement, as the case may be, is declared effective but thereafter
ceases to be effective or useable in connection with resales of the transfer
restricted securities, for such time of non-effectiveness or non-usability
(each, a "registration default"), we agree to pay to each holder of transfer
restricted securities affected thereby liquidated damages ("liquidated damages")
at a rate per annum equal to 0.25% of the original principal amount of transfer
restricted securities held by such holder for the first 90 day period
immediately following the occurrence of such registration default, or portion of
such 90 day period, that the registration default continues. The rate of the
liquidated damages shall increase by an additional 0.25% per annum of the
original principal amount of transfer restricted securities with respect to each
subsequent 90 day period until all registration defaults have been cured, up to
a maximum rate of liquidated damages of 0.75% per annum of the principal amount
of transfer restricted securities. We will not be required to pay liquidated
damages for more than one registration default at any given time. Upon curing
all registration defaults, liquidated damages will cease to accrue.
We will pay all accrued liquidated damages to holders entitled thereto by
wire transfer to the accounts specified by them or by mailing checks to their
registered address if no such accounts have been specified.
Holders of the senior notes who wish to exchange senior notes for exchange
notes will be required to make certain representations to El Paso Energy (as
described in the registration rights agreement) in order to participate in the
exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their senior notes included in
the shelf registration statement.
We will be entitled to close the registered exchange offer 20 business days
after the commencement thereof; provided that we have accepted all senior notes
validly tendered in accordance with the terms of the exchange offer and no
brokers/dealers continue to hold any senior notes.
This summary of certain provisions of the registration rights agreement is
not complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the registration rights agreement, a copy of which is
filed as an exhibit to the registration statement of which this prospectus is a
part.
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PLAN OF DISTRIBUTION
Any broker-dealer who holds senior notes that were acquired for the account
of such broker-dealer as a result of market-making activities or other trading
activities (other than senior notes acquired directly from El Paso Energy or its
affiliates) may exchange such senior notes pursuant to the exchange offer. Each
broker-dealer that receives exchange notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for existing senior notes
where such existing senior notes were acquired as a result of market-making
activities or other trading activities.
El Paso Energy will not receive any proceeds from any sale of exchange
notes by broker-dealers. Exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commission or concessions received by any
such person may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter," within the meaning of the Securities Act.
There has been no public market for the senior notes or the exchange notes
prior to the exchange offer. We do not intend to apply for listing of the
exchange notes on any securities exchange or for quotation through The Nasdaq
Stock Market. We cannot assure you that an active market for the exchange notes
will develop. To the extent that a market for the exchange notes does develop,
future trading prices of the exchange notes will depend on many factors,
including, among other things, prevailing interest rates, and the market for
similar securities as well as our results of operations and financial condition.
We have agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the notes), other than
commissions or concessions of any broker-dealers, and will indemnify the holders
of the notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the notes and certain United States federal income taxation
matters will be passed upon for El Paso Energy by Andrews & Kurth L.L.P.,
Houston, Texas.
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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 audited by 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 forth 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.
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AUGUST 30, 1999
EL PASO ENERGY CORPORATION
OFFER TO EXCHANGE
$600,000,000
6 5/8% SENIOR NOTES DUE 2001
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PROSPECTUS
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WE HAVE NOT AUTHORIZED ANY DEALER, SALES PERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALES MADE HEREUNDER AFTER THE DATE OF THIS 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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