aero,
I see a lot of red flags all over the place with MIR.
75% of Net worth is goodwill.
Other assets of 8.5 Billion????? (this is where non cash earning go)
Leverage to tangible net worth 732%
Working capital a negative 1.5 Billion.
Cash flow is GONE!!!
9 mos last year
Earnings were $292MM and Cash flow was $468MM (looks reasonable)
9 mos this year
Earnings $538MM, and Cash flow of only $303MM
From the 10Q:
Revenues earned from Enron Corporation through energy marketing and risk management operations approximated 19% of Mirant's total revenues for both the three and nine months ended September 30, 2001 as compared to 10% and 8% for the same periods in 2000. Mirant's credit exposure to this counterparty is significant less than revenues due to the offset of purchases and other netting activities. As of September 30, 2001, only one counterparty, the
California Department of Water Resources, represented more than 10% of Mirant's total credit exposure. The Company's total credit exposure is computed as total accounts and notes receivable, adjusted for risk management and derivative hedging activities, netting where appropriate.
(you can't net in bankruptcy, you owe them.....they don't owe you and they will collect)
Derivative gains and losses arising from cash flow hedges that are included in OCI are reclassified into earnings in the same period as the settlement of the underlying transaction. During the three months ended September 30,
2001, $229 million of pre-tax derivative gains was reclassified to operating income and $8 million of pre-tax derivative losses was reclassified to interest
expense.
(this is more than they earned!!!!!!!!!!!!!!!!!!!!!)
If Mirant is unsuccessful in its appeal of the ALJ's decision, it will be required to refund certain amounts of the revenue requirement paid by the CAISO for the period from June 1, 1999 until the final disposition of the appeal.
The amount of this refund as of September 30, 2001 would have been approximately $198 million; however, there would have been no effect on net income for the periods under review as adequate reserves have been recorded. This amount does not include interest that may be payable in the event of a refund. If Mirant is unsuccessful in its appeal, Mirant plans to pursue other options available
under the reliability-must-run agreements to mitigate the impact of the ALJ's decision upon its future operations. The outcome of this appeal is uncertain, and Mirant
cannot provide assurance that it will be successful.
(this is 25% of the tangible net worth!!!!!!!!!!!!!!!)
CAISO Claim before the FERC: The CAISO asserted in a March 22, 2001 filing at the FERC that sellers in the California wholesale electricity market have, as a
group, charged amounts in the period from May 2000 through February 2001 that exceeded just and reasonable charges by an amount in excess of $6 billion. The CAISO also asserted that during that period generators in California bid prices into the CAISO real time markets that exceeded just and reasonable amounts by approximately $505 million in the aggregate, of which a single generator (subsequently identified in a news report as Mirant Corporation) was alleged by the CAISO to have overcharged by
approximately $97 million. These claims are being addressed in the FERC California Refund proceeding scheduled for December 2001 and February 2002.
(hard to figure the CA exposure.............it's a mess)
As of September 30, 2001, the total amount owed to Mirant by the CAISO and the PX was $373 million. The total amount of provisions made during 2000 and 2001 in relation to uncertainties in the California power market was $295 million pre-tax. (looks like this is the balance of the tangible net worth)
Mirant has entered into agreements to purchase 49 turbines to support ongoing and planned construction efforts. Mirant also has options to purchase an
additional 32 turbines. Minimum termination amounts under all purchase contracts were $8 million at September 30, 2001. At September 30, 2001, total amounts to
be paid under the agreements if all turbines are purchased as planned are estimated to be $680 million. At September 30, 2001, other construction-related commitments totaled $923 million.
(better than CPN..........where the money coming from????????????/)
The Company has entered into long-term service agreements for the maintenance and repair by third parties of many of its combustion-turbine or combined-cycle generating plants. These agreements may be terminated in the event a planned construction project is cancelled. At September 30, 2001, the total estimated commitment for completed and in-process construction
projects was $496 million, and the total estimated commitment if all turbines are purchased as planned is approximately $2,240 million. In April 2001, the Company entered into a long-term power purchase
agreement with Perryville, which expires in December 2022, under which it will receive all the generation output of the Perryville facility for a monthly
reservation charge. The total estimated minimum commitment under this agreement over the life of the agreement is approximately $924 million.
(how much of the income from this was booked?????????????/)
On October 2, 2001, the CPUC and SCE announced a settlement of SCE's filed rate doctrine lawsuit, which is pending in federal district court in Los Angeles. The terms of the proposed settlement provide that SCE will fully repay what the settlement agreement Calls "Procurement Related Liabilities" by the end
of 2003. Although the proposed settlement agreement purports to provide for the payment of all Procurement Related Liabilities, which includes $920 million
owed to the PX and the CAISO (a portion of which is owed to Mirant), there is no specific information about when any particular creditor or class of creditors
can expect repayment. Further, SCE has agreed to work with the CPUC and the California Attorney General in pursuing litigation against energy sellers and to
meet and confer with the CPUC as to all significant strategic and tactical decisions in existing or future litigation, including administrative proceedings. Effective March 1, 2002, CPUC approval is required of any settlement of existing or future litigation, and, if the CPUC rejects a proposed settlement, SCE is required to continue with such litigation.
The impact of the proposed settlement agreement on Mirant remains uncertain, but could include delayed payment, extended litigation, or discriminatory treatment in the repayment process. Mirant is currently analyzing
the proposed settlement agreement and its analysis may indicate that other available remedies are preferable to this settlement proposal. Such remedies may include participation in an effort to file an involuntary bankruptcy petition against SCE. On October 5, 2001, the U.S. District Court for the Central District of California approved the proposed settlement agreement. The
District Court's judgement was temporarily stayed on October 30, 2001 by the 9th Circuit Court of Appeals for a 14-day period while a motion is addressed by the District
Court.
(what a mess)
Be careful with MIR and CPN, there are good reasons why they are selling so cheep.
Jim |
