ATLANTA, Dec. 30, 2002 — Mirant recently reported a net loss of $1 million, or less than one cent per diluted share for the quarter.
The company’s third quarter adjusted earnings were $149 million, or 33 cents per diluted share. These adjusted earnings exclude the following:
— $204 million in pre-tax write-downs related to cancelled projects in Norway and Korea, and the loss on the sale of Mirant’s gas production company;
— $10 million of pre-tax write-downs on minority-owned affiliates;
— $8 million of pre-tax, operational restructuring costs incurred during the quarter, primarily due to employee reductions; and,
— $10 million of deferred income tax expense associated with the announced sale of Mirant’s interest in Shajiao C in China.
The net after-tax impact of these charges was $150 million, or 33 cents per diluted share.
Mirant reported a year-to-date net loss of $227 million. Adjusting for significant operational restructuring and asset-sale related charges taken during the nine-month period, year-to-date adjusted earnings were $412 million or 98 cents per diluted share.
Mirant reported $330 million in net cash from operating activities during the third quarter for a total of $683 million through the nine-months ended Sept. 30.
Mirant has adopted the provisions of the Financial Accounting Standards Board’s Emerging Issues Task Force Issue 02-03 with respect to netting revenues and expenses on energy trading contracts. The reclassification, required upon adoption, reduced both revenues and the cost of fuel, electricity and other products by approximately $7 billion for the third quarter, and by approximately $17 billion through the nine-months ended Sept. 30. The adoption of the new accounting provisions did not change Mirant’s gross margin or results from operations.
Quarterly Review of Operations by Business Segment
— reported net income of $123 million, and adjusted earnings of $191 million;
— earned gross margins of $578 million from assets; and,
— earned gross margins of $77 million from energy marketing and risk management activities.
— reported a net loss of $72 million, and adjusted earnings of $13 million; and,
— ceased international greenfield power plant development projects in Italy, Norway and Korea.
“We had a solid quarter despite poor market conditions and made excellent progress in further strengthening Mirant,” said Marce Fuller, president and chief executive officer, Mirant. “We brought more than 1,100 megawatts of generation on-line, moved aggressively to preserve liquidity, reduced trading and marketing activity, and eliminated rating triggers during the quarter. Since then, we negotiated a bilateral agreement with the Philippine government that affirmed our existing power contracts, and we resolved insurance requirements associated with our Philippines businesses. These actions continue to position us well for the future.”
Mirant ended the third quarter with liquidity of $1.9 billion. The company’s current liquidity is $1.3 billion and it projects ending the year at approximately $1.4 billion. The year-end liquidity estimate reflects the following approximate figures for the fourth quarter:
— $400 million in capital expenditures, including $200 million related to turbine cancellations;
— $250 million in collateral, resulting from the recent credit downgrades;
— $50 million for debt repayment; and,
— $200 million in expected proceeds from asset sales.
The company’s collateral posted to support trading and marketing activity is approximately $850 million, reflecting recent rating agency downgrades that were offset to some extent by collateral reductions accomplished during the third and fourth quarters. Mirant expects to continue reducing its collateral position during 2003 by further scaling back its gas marketing activities.
Mirant anticipates using the proceeds from the sale of its Shajiao C interest in China (expected to close by year-end) to eliminate a $254 million loan at its Asia holding company. This action would remove a previously disclosed dividend block from Mirant’s Philippine businesses.
Guidance: Lowered for 2002
Mirant is lowering its guidance for 2002 as a result of ongoing adverse market conditions in North America (which include significantly reduced market liquidity), a reduction in its gas business to decrease collateral requirements, and a higher effective-tax rate on the earnings of its Asia businesses.
The company now expects full-year adjusted earnings of $1.00 to $1.05 per diluted share. This guidance implies fourth quarter adjusted earnings per share of five to ten cents, and takes into account the dilutive effects of the company’s convertible offering in July 2002. Adjusted earnings for the fourth quarter do not reflect charges related to asset sales or restructuring activity that will be finalized by the time the company reports its full-year results.
Form 10-Q Filings
Mirant will file its third quarter Form 10-Q and quarterly filings for its subsidiaries, Mirant Americas Generation, LLC and Mirant Mid-Atlantic, LLC, after 6:00 p.m. EST, Dec. 20, 2002. These filings will be available at www.mirant.com .
The subsidiary filings consist of second and third quarter Forms 10-Q, and amended, first-quarter Forms10-Q/A. Mirant notes that these filings represent the conclusion of the quarterly reviews conducted by its independent auditors for the first, second and third quarters of 2002.