Invitations will soon be landing in the mailboxes of El Paso ( EP) shareholders.

Selim Zilkha, one of El Paso's largest shareholders, is now formally asking others to join his fight against the company's current leadership. In a definitive proxy statement filed Monday, Zilkha laid out plans to replace El Paso's entire board of directors with a new slate including himself, and to name a veteran energy executive as the company's new CEO. Zilkha, who first announced his planned overthrow in mid-February, is now racing for support ahead of El Paso's annual meeting next month.

El Paso filed its own definitive proxy Friday night, asking shareholders to support a board dominated by incumbents. El Paso maintains that sweeping boardroom changes would threaten both the company's turnaround plan and its financial condition.

El Paso blames Zilkha, together with powerful shareholder Oscar Wyatt, for attempting to disrupt its recovery.

"We believe that the Zilkha/Wyatt program offers no clear benefits to our shareholders, entails major risks and has many obvious detriments," the company said in a prepared release Monday. "Although more work remains to be done, we are confident that the company is moving in the right direction."

El Paso says the alternative board has no clear business plan and complains that several of the replacement candidates have been retired from the energy industry for years. At the same time, the company cited recent asset sales and voluntary boardroom changes as evidence of its own progress.

El Paso shares, up 2.8% to $7.66 Monday, have more than doubled from the lows they set when the proxy fight started brewing in February.

Saddles Blazing

Zilkha fired new shots at the company on Monday, attacking both its business plan and its support for expensive "change-of-control" provisions that might frighten shareholders worried about a big hit to the corporate bank account. He criticized El Paso for an alleged lack of direction, saying the company has a "deplorable" tendency to abruptly change its focus and react to serious problems too late. He claims the company redefined its business plan as recently as this month and, overall, has sold off far more core assets than noncore assets in its struggle to recover.

He also criticized financial statements that have confused even professional Wall Street analysts. As evidence, he pointed to a Morgan Stanley analyst who found it impossible to determine El Paso's true debt load. In the end, the analyst simply concluded that El Paso is more than twice as levered as it should be.

Zilkha blamed current leadership for the company's condition, while accusing the company of unfairly blocking shareholders who want real change. He has asked El Paso to voluntarily eliminate golden parachutes totaling $200 million -- which are now automatic under a change of board control -- so that shareholders won't have to fret about hurting the company with their votes.

"Failure to do so could inhibit the stockholders from exercising their right to select a board of their choosing and would impose a large expense on El Paso, at a time when it is desperately short of funds, without any corresponding benefit," Zilkha's proxy filing states.

Building a New Door

If he prevails, Zilkha plans to waste no time showing current CEO Ronald Kuehn to the door. Kuehn is currently serving as the temporary replacement for William Wise, who finally lost his strong board support when Zilkha launched his battle earlier this year. But Zilkha views Kuehn as little better than the man he just replaced -- citing "marked similarities" in their career performances -- and is instead recommending alternative board candidate and former Tenneco CEO Stephen Chesebro as El Paso's next leader. He's also pushing alternative board candidate John Murphy, the former CEO of Dresser Industries, as El Paso's new chairman.

He insists that wholesale change is needed if El Paso even hopes to recover.

"The current board has led a once-proud company to the point that its very viability is being publicly questioned," Zilkha's filing states. "In light of the serious damage done to El Paso, there can ... be no assurance that we will be able to restore confidence in El Paso or turn it around."

In other energy news, Reliant Resources ( RRI) has managed to put one of its big hurdles behind it. The embattled energy company announced Monday that it has reached a settlement that will end an investigation into alleged round-trip energy trades carried out by the company during the Enron-led trading boom. The deal, inked with the Securities and Exchange Commission, prohibits Reliant Resources from engaging in round-trip energy trades but does not require the company to admit any past wrongdoing or pay any fines. Reliant shares jumped 4.7% to $5.58 on the news.

If you liked this article you might like

Lessons Learned From the Hedge Fund Crisis

Lessons Learned From the Hedge Fund Crisis

Why There's Still Hope for Detroit

Why There's Still Hope for Detroit

GM's Biggest Foe Could Be Time

GM's Biggest Foe Could Be Time

Humana's Learning to Change With the Times

Humana's Learning to Change With the Times

Health Insurers See 'Universal' Opportunity

Health Insurers See 'Universal' Opportunity