Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Mirant Corporation (MIR) -- Ignore unavailable to you. Want to Upgrade?

To: Oeconomicus who wrote (191)	2/19/2002 3:57:01 PM
From: Softechie	Respond to of 903

Exelon Still Seeking Utility Acquisition, Co-CEO Says By JON KAMP Of DOW JONES NEWSWIRES CHICAGO -- Exelon Corp. (EXC) is looking to acquire a smaller integrated utility with retail customers, transmission and generation assets, co-Chief Executive John Rowe said Tuesday. "We've made it very clear that continued growth by acquisition is part of our strategy," Rowe said in an interview. "Our ideal range would be something a third to half our size." Exelon's market capitalization is $16 billion. The company would like to announce an acquisition this year, an Exelon spokeswoman said. When Exelon was created in late 2000 by the merger of Chicago's Unicom Corp. and Philadelphia's PECO Energy Co., Rowe and co-CEO Corbin McNeill said they hoped to announce another deal by the end of 2001. No utility deal emerged last year that met Exelon's needs, so the company focused instead on adding generation assets, Rowe said. Most notably, the company said in December it would buy two natural gas-fired power plants producing a total 2,334 megawatts of capacity from Dallas-based TXU Corp. (TXU) in a deal valued at $443 million. Exelon remains interested in acquiring more generation, particularly by buying up an integrated utility, Rowe said. Exelon wants a target that would bring "geographic diversity," but Rowe declined to specify a region. In a recent report, Crain's Chicago Business quoted Rowe and McNeill as saying Exelon was targeting the eastern half of the U.S. Updated February 19, 2002 2:43 p.m. EST

To: Oeconomicus who wrote (191)	2/20/2002 7:51:33 AM
From: Asymmetric	Read Replies (1) \| Respond to of 903

Access to Capital is An Issue. Lack of access to capital, and with bonds rated at junk status, Mirant has had to pony up more collateral in trades it undertakes in the energy markets and so this has served to lessen flexibility by tying up capital and has driven up costs. The incidental cost inflicted on all parties is that this condition also serves to widen spreads and so anyone looking to come into the energy market with power for sale or looking to buy is penalized there as well. Lack of access to (reasonably priced) capital, as you pointed out has forced Mirant to cancel many projects, to back out of deals (for ex in Puerto Rico) and further to put or investigate putting substantial assets up for sale. I could go on, but I think you meant that by dramatically cutting capital expenditures in future years, Mirant has ensured that it's survival as a corporate entity is no longer an issue over the near and intermediate term. After today, I'm not so sure that can be said about AES, and perhaps about Calpine either. Almost amazing that in the short span of several months, almost every company in this sector has gone from focusing on growth and future earnings, to one of focusing on sheer survival and whether cash flows are sufficient to service their debt. I also think that one has to be on guard that asset valuations may actually end up being dramatically lower as each company begins flinging power plants, natural gas pipelines, etc into the market. Anyone with cash to buy knows it's a buyers market and that time is on their side, not on the sellers. With so many assets coming onto the market all within a short period of time, and deals having to get done thru forced sales in order to bring debt levels down and credit ratings up, prices cannot help but fall. Europeans will drive a very hard bargain because they will already feel they are paying a premium thru a disadvantaged Euro-Dollar exchange rate. The deferral of new plant additons also will not help, as the plants that are already completed or near completion will add 5% to total US generating capacity. With electricity growth of 2-3% per year, this addition is sufficient to supply near-term growth needs probably for the next two years. After that the lack of plant build will definitely begin to hurt consumers. So the premium you seek lies in future a year or two out, too far to help those presently seeking to sell. Obviously areas regionally deficient, as in New York and norhtern California are exceptions. As far as Moody's signalling the coast is clear again for these companies, and raising their bond ratings, that, I think, is several months away at best. I hope I am wrong on this score, but Moody's has clearly expressed their distrust of the merchant energy business model. In an article in the Wall St Journal (I believe) at an analyst confab, the analyst for Moody's who covers Mirant, among others, was a dissenting voice and stated he was not convinced deregulation of electricity markets was a "success". This bias can further be seen by Moody's stating that income based on trading operations income is uneven and and volatile, hence unreliable and companies which have large trading operations need to have balance sheets showing no more than 50% debt-to- equity to hedge against market volatility. That all said, Mirant is cheap at this price, and they own a lot of very valuable assets. Thankfully they are not as leveraged as AES and Calpine. I suspect the selling we are seeing at this price ($9) are mutual funds and institutions that have to get out of or are throwing in the towel on this sector. Anyway, though I may not sound like it, I am very long this stock, and may get longer yet should it fall further. Gotta know and be prepared for what can go wrong, especially in a dicey market like this. Good luck. Peter.