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

To: Asymmetric who wrote (239)	2/22/2002 2:37:46 PM
From: Oeconomicus	Respond to of 903

I'm not sure exactly what your question is. Comparison to what?

To: Asymmetric who wrote (239)	2/22/2002 3:09:40 PM
From: Asymmetric	Read Replies (1) \| Respond to of 903

Some Big Picture Thoughts. All the IPPs have been put in the penalty box here. With Mirant at $7.70, it's selling at a PE UNDER 5, and close to, but a little over 50% book. Let's put ourselves into the shoes of utility executives and see how that would play out via Mirant. Utilities are historically slow growth companies. If you are not growing, then you are dying. If you are not growing, and your competitors are, their earnings go up, their share prices go up, and this increase in size and financial power strengthens them to expand at the expense of, or even take over weaker competitors. You, the one not growing, eventually do not survive. So growth is not an option, it is a necessity driven by market realities. The HISTORIC undervaluation of IPPs driven by a crisis of confidence in the sector, brought on by Enron, has brought a once in a lifetime opportunity for almost every electric utility that exists out there, a once in a lifetime opportunity to ENSURE their own growth for the next 5 to 10 years out, by swallowing either entire companies, or by rounding out their energy portfolios by picking up power plants here and there. Growth is a BIG problem for stodgy old utilites. There generally isn't very much of it, and what there is is very hard to come by. That's why you saw companies like AES expand into South America, and TXU into England - they were trying to grow, trying to diversify by going overseas. Sometimes they try to grow by getting into unrelated businesses. These generally haven't worked out too well on the whole, as I'm sure Williams can testify with their foray into the telecomm business. So what does Mirant present to these stodgy old utilities, including it's own parent, Southern Co? A golden opportunity of almost historic proportions. An opportunity to grow in a business they understand, and an opportunity to grow right in their own backyards: right here in the good ole USA....and to do so on the cheap, and to cement that growth for the next 5 to 10 years forward, if not more. Companies like Mirant and Calpine know they have been hit by a "Perfect Storm" environment. Low spark spread prices, with no end in sight, due to a lot of capcacity/ generation coming on line, capital markets being totally closed off to them, (Moody's closed off the bond markets, and low stock prices have closed off raising further equity), accounting questions on everything from mark-to-market to off balance sheet partnerships, and political backlash from both Enron and California.... For utilities, they know the issues confronting the IPPs are pretty much non-existent for them, and only temporary for the IPPs. If you can cement your growth for the next 5-10 years out, who cares if spark spread prices remain low for another 6-12 months? Your planning, if properly done, looks out over a much longer time horizon. Access to debt/equity markets? Not a problem if you are Duke, etc. The other stuff on accounting and politcal: important now, but 2 years from now? 5 years from now? If you are going to buy out Mirant it seems to me you would want to do it before any of several events occur which would serve to drive up the price: You would want to do it before any Moody's upgrade. You would want to do it before summer hits, and the possibility that the increase in demand for electricity would raise spark spread prices... because that would raise cashflow and raise the value of power plants therefore making Mirant that much tougher to bring down. You would want to do it before the accounting/ political furor blows over because those are factors which help you leverage a lower buy out price. Obviously, if you are Mirant, you would be on the reverse of all the above, so as to be able to negotiate/dictate as favorable a price as possible. Unfortunately, in my opinion, Mirant no longers has control over it's own future. The action by Moody's tells us that. My call here, is I look for a buyout sooner rather than later. Anyone else with thoughts out there? Good luck to all. Peter. PS (and yes, I bought more today)