By the OGJ Online Staff
HOUSTON, Jan. 30, 2002 — To strengthen the balance sheet, Mirant Corp. said Wednesday it will sell its European marketing and risk management activities, close its Berlin office, and lay off 100 of its 150 European employees.
“We have a focused, new business plan grounded in current market realities,” said CEO Marce Fuller. “Despite our hard work in the European market, capital constraints do not make it possible for us to create the portfolio of assets required to justify our presence in risk management.”
The Atlanta-based energy company said it will continue to develop greenfield power projects in Europe specifically in Italy and Norway. Mirant also said it will retain its 49% stake in Western Power Distribution, which distributes electricity to 1.4 million customers in southwest England and to 1 million customers in South Wales.
The company’s stock has been sliding since December losing almost 60% of its value as of December 7 when the share price was about $25. Tuesday the shares closed at $10. The stock was down to $9.56 Wednesday morning over worries about the balance sheet and liquidity.
The energy marketing and trading industry has been under increased scrutiny since problems with accounting for off balance sheet debt were discovered at Enron Corp., contributing to its filing for Chapter 11 protection on Dec. 2, 2001. The credit ratings agencies are requiring companies to boost balance sheets to compensate for perceived increased risk from energy trading activities.
Moody’s Investors Service downgraded Mirant’s credit rating to junk bond status Dec. 20 contributing to the pressure on Mirant’s stock price. After the market closed Tuesday, Mirant “affirmed” its liquidity position.
The company said that it was experiencing “normal” volumes in its marketing and risk management operations in North America and had $750 million in cash and credit lines after posting additional collateral required in the risk management business. Mirant said it will receive $900 million in after-tax proceeds from the sale of its German utility unit, Bewag, in mid-February.