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Mirant plans to raise more than $1 billion to fund acquisitions

By the OGJ Online Staff

HOUSTON, Oct. 29, 2001 — Energy marketer Mirant Corp. reported third quarter profits nearly doubled with help from its trading and marketing unit, and said it could exceed analysts earnings estimates for 2002.

Mirant remains optimistic it can achieve 20% earnings growth in 2002 and 2003, said CEO Marce Fuller.

Company officials Monday also reassured analysts Enron Corp.’s problems haven’t affected liquidity in the market. As the top gas and power market maker, questions about Enron’s financial strength continue to be raised by analysts during earnings conference calls. In its dealings with the Enron, CEO Marce Fuller said Mirant is staying “within our credit controls” and risk positions.

She said the 2002-2003 outlook is dependent on being able to access the capital market at reasonable rates. If capital isn’t available to build new power plants, Fuller warned, net shortages could occur in parts of the US. She said the company can profit under either condition.

Mirant said it plans to tap capital markets “shortly” with the goal of raising about $1-$1.5 billion to help finance acquisitions. The money would be raised through a combination of debt and equity-linked securities, said chief financial officer Ray Hill. But, he added, market conditions make a common equity issue less likely than debt. Fuller said the company is working closely with credit rating agencies to avoid any possible degradation of the company’s investment grade credit rating.

For 2002, the company maintained it earnings guidance of $2.55-$2.65/share, compared with the current First Call consensus projection of $2.58/share. More than 60% of Mirant’s North American portfolio is hedged in 2002 and 2,200 Mw of new capacity will be brought on line during the year.

Mirant can continue to achieve “good healthy double digit growth” without acquisitions next year, Fuller said, but to achieve its goal of 20% growth in 2003 will require some acquisitions. Moreover, she said, volatile market conditions have not caused the company to change its 2002-2003 power generation development plans.

In the year ahead, Mirant said it anticipates it will continue to receive one third of its earnings from operations outside North America. It said it will continue to benefit from long-term contracts in Asia and franchise businesses in the UK, Germany, and the Caribbean.

The company reported third quarter earnings from operations of $234 million, or 67¢/share, up from $119 million, or 35¢/share, in the same quarter a year ago. Operating revenues for the quarter rose to $8.19 billion from $4.20 billion in the prior-year quarter.

Analysts forecast earnings of 60-71/¢share, with a consensus estimate of 65¢/share, according to tracking firm Thomson Financial/First Call. Mirant was spun off earlier this year from Southern Co. to divide the unregulated businesses and regulated businesses. The goal was to create two companies, one for investors seeking growth and the other for investors seeking the stability of traditional utilities.