They are apparently not going to roll over.  

As you are well aware, we filed an arbitration against EPME under the swap agreement and El Paso Corp. under the guaranty. Our hope was that once the El Paso legal department got involved this would come to an amicable resolution. Not so fast.  While EPME recognizes that it is contractually obligated to arbitrate under the swap agreement, El Paso Corp. is claiming that it is not subject to arbitration and has filed a lawsuit asking a court to declare that El Paso Corp. is not subject to arbitration. 

We had a call with El Paso's lawyers early this morning to discuss where we are and where we are going. We told El Paso's lawyers that we will agree to drop El Paso Corp. from the arbitration if they agree to drop their lawsuit. (I have talked to Duran and Deffner about this and they have made it clear that our overriding objective is to monetize the swap agreement.  To do so, we need an arbitration panel's ruling on the confidentiality provision in the swap agreement.  The guaranty issue is, in their view, of secondary concern at this time). During the call, EPME asked for 10 days to name their party arbitrator.  We agreed. By the way, we have already appointed our party arbitrator.  El Paso's lawyers are going to check with their client today to confirm that the lawsuit will be dropped.

On the arbitration front, once EPME names its party arbitrator, the two party arbitrators will get together and select a neutral arbitrator.  We should expect that process to take about 30 days.  Then the entire arbitration panel will get together and set an arbitration schedule.

I will keep you updated.

Andy


 -----Original Message-----
From: 	Kitchen, Louise  
Sent:	Monday, July 16, 2001 8:45 AM
To:	Edison, Andrew
Subject:	What's happening with El Paso Arbitration?