El Paso

(EP)

is still racing to redecorate itsboardroom on its own.

With the clock ticking toward a

shareholdershowdown, El Paso on Monday rolled out a proposedboard of directors with deeper energy experience thanhas been seen on past boards. Gone are grocery executive ByronAllumbaugh, Stanford academic James Gibbons and oustedCEO William Wise, who touted a long energy career thatnevertheless

ended with the taint of El Paso'sdecline. And in their places are respected energyveterans such as former Texaco President James Dunlap, who was introduced as a candidate Monday, as well as Transocean ChairmanMichael Talbert, former Conoco CFO Robert Goldman andConsol Energy Chairman John Whitmire.

Together with eight leftovers from El Paso'sheyday, the newcomers are battling to defeat

dissidentshareholders who have assembled a proposed board witheven deeper energy experience. Selim Zilkha, El Paso'slargest individual shareholder, is seeking to replaceEl Paso's current board with eight energyprofessionals -- including himself -- and a retiredfederal judge. The alternative board, while smaller,would boast twice as many energy professionals as thecompany's proposed board.

Making the Case

El Paso, whose stock price has eroded by 85% inthe past year, insisted Monday that its own slate ofdirectors offers the right combination of strengthsneeded to unlock the company's real power.

"El Paso has undertaken a process designed toassure continuity while effecting measured change inthe composition of our board of directors," saidRonald Kuehn, who stepped in to fill Wise's shoes aschairman and CEO last month. "The combined expertiseof El Paso's nominees in the energy industry, finance,academia and the law, and the mix of new directors anddirectors with detailed knowledge of our company, willcreate a board that is particularly well-equipped tohelp us achieve our long-term goals."

John Olson, an analyst at Sanders Morris Harris,was a bit more restrained in his praise of anincumbent board that now includes another energyveteran.

"I would say that is another step in the rightdirection," said Olson, who rates El Paso a hold andowns the stock himself. "It brings to four -- out of 12board members -- the number of people with energybackgrounds."

Lifted by Monday's news, as well as a surge in theoverall market, El Paso jumped 4.7% to $6.44 in middaytrading. But industry critic Karl Miller, a former ElPaso executive who now leads an energy-relatedacquisition firm, saw only "cosmetic" changes in theboard's overall makeup. And even Olson, a longtimefan of the company, acknowledged that the incumbent boardfaces a tough battle ahead.

Olson said the current board has laid out a"reasonable" recovery plan for the company. But heexpects the dissidents, who have yet to unveil theirexact strategy, to more stringently address crucialconcerns such as asset sales, cost-cutting and debtreduction.

Casing the Joint

In the meantime, El Paso is scrambling for maximumprogress -- and preparation time -- ahead of the proxyfight. The company, which routinely hosts itsshareholder meetings in May, announced Monday thatthis year's meeting will be in June -- the latest timeallowed under current bylaws. And it has yet toidentify a specific date for that gathering.

At last year's meeting, held in Dallas instead ofEl Paso's home base of Houston, the company weathereda scathing evaluation by powerful shareholder OscarWyatt. Wyatt warned that El Paso's merchant energybusiness was engaging in

Enron

-like games that couldjeopardize the entire company. Though the companydisputed Wyatt's claims, it has since seen its stockprice and credit ratings erode over direct concernsabout a merchant energy business that it now plants todismantle.

Wyatt has gone on to back the proxy fight led byZilkha, who claims El Paso's board has "failed thestockholders miserably."

Pressured by the upcoming proxy fight, El Paso'sleadership has scrambled to strengthen the company asmuch as possible ahead of this summer's meeting. Sincethe beginning of the year, the company has managed to

resolve its longstanding dispute with California andpass the halfway mark in its $3.4 billion asset saleprogram. And though it

fell well short of earningsexpectations for 2002 -- losing money instead ofreporting a slight profit -- it has neverthelessreassured investors by bolstering its liquidity.

But pressing questions remain, including oneparticularly big one.

"Whose future is this going to be?" Olson asked."The incumbents' or the opposition slate's?

"It's going to be an interesting next 60 to 90days."