ATLANTA, Jan. 10, 2003 — The executive management of Mirant on Friday shared part of its strategic plan that it believes will enable the company to manage through the current downturn in the wholesale power industry.
“Mirant intends to remain a leader in the markets it serves and increase value for its many stakeholders,” said Marce Fuller, president and chief executive officer, Mirant. “As such, our strategic plan focuses on two priorities. First, maximize opportunity in well-functioning, regional markets where we have a critical mass of assets, people and customers. Second, continue to enhance our liquidity position.”
Maximizing North American and international market opportunity
Mirant will focus on markets with the following characteristics: sizeable Mirant presence, proper market structure, fair rules for all participants, regulatory and public support, a favorable power supply/demand outlook and sufficient market liquidity.
U.S. regional markets best matching these criteria are the Northeast where Mirant owns 3,100 megawatts, the Mid-Atlantic (over 5,000 megawatts) and the Midwest (1,400 megawatts) — a market that is becoming more closely tied to the Mid-Atlantic. In these areas, Mirant’s presence is substantial and its facilities are located near major metropolitan centers with growing power needs.
Mirant’s perspectives on other North American markets:
* Mirant continues to see opportunity in the Western region (3,000 megawatts) and anticipates adding 650 megawatts in Nevada and Oregon during 2003. While the company also forecasts a growing need for power in Northern California, it plans to restrict capital commitments in the state until a more rational market structure develops.
* Mirant intends to reduce its presence in the Southeast and Texas markets over time.
* Canada remains important to Mirant since it provides natural gas for the company’s Western and Mid-Western asset base; however, the company will scale back its current level of involvement in that market.
Internationally, Mirant has exited, or plans to exit, Germany, the U.K., Italy, Norway, Korea, Australia, China, Guam and Brazil. The company intends to continue operations in the Philippines, where it owns 2,400 megawatts, and the Caribbean (1,100 megawatts). The company’s stable franchises in these locations provide approximately $200 million in net income on a combined annual basis. Additionally, strong regulatory and customer support for Mirant’s participation in these markets provides important stability.
In the fourth quarter 2002, Mirant expects to record an after-tax gain of approximately $75 million from its previously announced sale of Shajiao C in China, before taking into account an after-tax loss of approximately $35 million from the termination of interest rate swaps related to Mirant’s Asia holding company debt. As previously disclosed, Mirant repaid $254 million in debt at its Asia holding company through proceeds from the Shajiao C sale. This action also removed a dividend block from its Philippine businesses.
Mirant reports that on December 30, 2002, it sold its economic interest in CEMIG (Brazil) for a nominal amount. This sale will result in a fourth- quarter write-off of previously disclosed, deferred currency losses of approximately $84 million after tax.
Mirant achieved year-end liquidity of $1.4 billion and notes that nearly all of this amount is in cash. The company is targeting the following measures to enhance its liquidity position:
* Selling Non-Strategic Assets
— Anticipates additional sales of at least $300 million in 2003.
— Announced or sold $2 billion in net proceeds from asset sales in 2002 after repayment of $800 million in debt.
* Reducing Capital Expenditures
— Lowering 2003 capital expenditures to $570 million, which includes approximately $270 million in turbine cancellation costs and approximately $20 million in capitalized interest.
— Capital expenditures were approximately $1.8 billion in 2002 and $1.8 billion in 2001.
* Lowering Collateral
— Targeting a 50 percent reduction in gas volumes by the end of 2003; gas volumes are currently 13 billion cubic feet per day.
— In reaching this target, collateral for trading and marketing should be reduced to $400 million to $500 million by year-end, a reduction of approximately $300 million to $400 million from current levels.
— Removed $700 million in potential ratings triggers during 2002.
* Cutting Operating Costs
— Moving aggressively to eliminate an additional $125 million in annualized operating costs. Combined with a reduction in annualized costs of $150 million in 2002, the company expects to realize a total annualized cost reduction of $275 million by the end of 2003.
— Restructured and reduced the company’s global workforce in 2002, eliminating 800 positions and reducing levels of management.
“It’s obvious that we still face many challenges. But we continue to make excellent progress toward achieving the priorities of our strategic plan,” said Fuller. “I remain convinced that our ongoing efforts will enable Mirant to thrive in the future.”
The company intends to provide a more comprehensive financial outlook in its fourth quarter earnings release in late February.
Analysts’ conference call replay
A recording of the analysts’ conference call is available for replay until Jan. 24, at www.mirant.com.