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El Paso Reaches Deal Over California Energy Crisis

But the company may need up to 20 years to fully recover from the sting.

The sun could be setting on

El Paso's


problems out West.

On Thursday, El Paso officially shook hands on a deal to settle charges that it drove up prices during the California energy crisis. But the company took a bit of a blistering in the process.

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Indeed, El Paso may need up to 20 years to fully recover from the sting. To begin the healing, El Paso has to start paying now. First, it needs to crank out 26.4 million new shares -- equal to roughly 4.5% of the current float -- of El Paso stock to pay off Westerners it claims it never wronged. Then it can start throwing them cash from its dwindling bank accounts.

Within 180 days, the company has to cough up $250 million to get rid of smaller payments that were originally scheduled to drag on for years. In the meantime, it must go ahead and scribble out a check for $78.6 million right now. Then it can gear up for annual payments of $45 million for the next two decades. And it can cut power prices for California by $125 million in total.

To settle the deal on its books, El Paso will take a pretax charge of $150 million to $200 million in the upcoming quarter.

When announcing the finalized deal on Thursday, El Paso deemed the settlement worth the price. "Finalizing this settlement is a critical step, and will help resolve the uncertainties that have surrounded El Paso in the market relating to the energy crisis in the Western United States," interim Chief Executive Ronald Kuehn said. "The settlement will allow us to focus our efforts on increasing the core value of El Paso and maximizing shareholder value."

The settlement in fact lifted a lingering cloud from El Paso's stock and allowed it to shine a bit Thursday. Shares of the pipeline giant surged 4.2%, or 33 cents, to $8.24 as news of the deal sank in.