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El Paso


plunged again Tuesday as the energy company's investor confidence crisis deepened.

A day after the stock

lost a third of its value following an unfavorable regulatory decision, El Paso shed an additional 25% to hit an unprecedented $5.60. The latest slide came after ratings agencies Moody's and Standard & Poor's placed El Paso's treasured investment-grade credit under review for possible downgrade. Several equity analysts also withdrew their bullish recommendations for El Paso's stock, citing penalties that could be imposed on El Paso by the Federal Energy Regulatory Commission.

FERC Chief Justice Curtis Wagner ruled Monday that El Paso had manipulated energy markets in California and should be fined as a result. California estimates that El Paso's alleged wrongdoing cost the state more than $3 billion during the energy crisis of 2000-01.

El Paso has attacked Wagner's decision as flawed, expressing confidence that it will be reversed when the full commission considers it next year.

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But the company remains at risk of a credit downgrade in the meantime. Moody's cited the FERC ruling as just one of many El Paso issues currently under review. The agency, in fact, expressed more concern about the company's dwindling cash flow.

"Moody's review is prompted by the concern that EP's cash flows are not likely to recover from the low levels experienced in the first half of this year," the agency announced Tuesday.

The following research houses also lowered their recommendations on El Paso's stock: CIBC World Markets, J.P. Morgan, Goldman Sachs and A.G. Edwards. The firms no longer expect El Paso to outperform the market.

Prudential Securities maintained a similar hold rating. But the firm blasted FERC's latest ruling as unreasonable.

The firm said Wagner "threw caution and safety to the wind in what appeared to be a politically motivated recommendation," analyst Carol Coale wrote Tuesday. "Although

the recommendation lacks consistency, motivation and logic, the media and short sellers are having a 'hay day' on the news."

Responding to investor concerns, Coale lowered her price target for El Paso's stock from $17 to $14 -- nearly three times what the stock is currently fetching. The same stock traded for $54 less than a year ago.