Vegas-area power plant owner enters bankruptcy

Tuesday, July 15, 2003 | 10:58 a.m.

SUN STAFF AND WIRE REPORTS

ATLANTA -- Energy supplier Mirant Corp. succumbed to bankruptcy after struggling for more than a year with heavy debt and weak revenue, aggravated by questions about the company's accounting and behavior in California's energy market.

Mirant filed its Chapter 11 petition late Monday, the day before a $1.1 billion payment was due.

The filing is the latest milestone of financial turmoil for the company, which joined its rivals in furiously selling assets, trimming the size of trading contracts and refinancing debt since the 2001 demise of Enron Corp.

That debacle -- coupled with a long slump in energy prices -- left investors nervous about the huge debt loads independent energy merchants were carrying on their books and prompted credit downgrades for most firms, including Mirant.

In March, Mirant opened its $325 million, 533-megawatt Apex Generating Station, a natural gas-fired power plant located at the Apex Industrial Park about 20 miles north of Las Vegas.

Much of the output of that plant has been committed to Nevada Power Co. through long-term contracts.

Mirant also has permitting in place to add a 550-megawatt second phase to the Apex plant but has not announced plans to begin construction of that project.

In its petition, Atlanta-based Mirant listed $20.6 billion in assets, $11.4 billion in debt and $1.17 billion in cash.

The filing, along with one in Canada relating to several subsidiaries there, was filed in U.S. Bankruptcy Court in Fort Worth, Texas. Spokesman James Peters said the company has some assets in Texas, but he was unclear why the case was filed there.

Mirant Corp., Mirant Americas Generation, LLC, and nearly all the companies' wholly owned subsidiaries in the United States are included in the Chapter 11 filings. Excluded from the filings are the company's operations in the Philippines and the Caribbean.

Mirant said the court allowed it to honor obligations under existing and future trading and marketing contracts that support its asset base. The protection applies only to parties that do not terminate trading and marketing contracts because of Mirant's filing.

Mirant has not yet formulated a reorganization plan, so it is unclear how creditor and stockholder claims would be treated.

Peters said the company also has filed a motion requesting that the court allow it to keep paying its 7,000 employees.

The bankruptcy filing came after Mirant was unable to reach a last-minute out-of-court debt restructuring plan with its creditors.

Chief Executive Marce Fuller said Mirant's inability to strike an agreement with creditors unsettled investors.

"This, in turn, put a strain on our liquidity and threatened the feasibility of our business plan. Add to this, uncertainty about the timing of the recovery in power prices and a slow economic recovery in the U.S., and it became clear that a comprehensive financial reorganization was the best approach for our stakeholders," she said in a statement.

Contributing to Mirant's problems were $2.4 billion in losses last year, an audit that found $188 million in income overstatements, and allegations that it and other suppliers manipulated prices that led to California's energy crisis three years ago. Mirant has denied the allegations.