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Gold/Mining/Energy : Mirant Corporation (MIR)
MIR 25.20+2.2%Jan 6 3:59 PM EST
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To: Braincramp who wrote (253)2/23/2002 10:22:04 PM
From: Oeconomicus  Read Replies (1) of 903
 
The reality is that if your assets are worth 50% less in todays market than they where a year ago, what your book value stated at that time will not amount to one plugged nickel.

Why would you think book value of fixed assets meant a thing?

So, if current market conditions require that Mirant has to sell assets, at a loss, we will see how long they stay as a going concern.

Why would you think MIR would need to sell assets at a loss?

As the collateral evaporates because of the downturn in the market they will be forced into a corner by the banks.

Why would you think that the "market value" (liquidation value, presumably) of MIR's fixed assets could in any way enable banks to force MIR into a corner?

The next thing that you need to realize is that as assets are being sold off at discount prices, the companies buying these assets will be able to generate power at far less of a cost.

Depreciation and interest, the costs directly affected by the cost of assets, are a relatively small part of the operating costs of an IPP. For MIR in Q4, these costs came to 3.4% of revenues. Why would you think that even fire sale prices would enable a new owner to have a significant competitive advantage?

One does not need a "Masters in Business" to figure this stuff out. Perhaps if you weren't suffering from brain cramps, you could too.
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