El Paso Corp. will pay Mirant Corp. $87.5 million as part of a settlement agreement approved this week by the Texas bankruptcy court overseeing Mirant’s Chapter 11 case. Mirant’s bankruptcy led to a default on a master netting agreement between the two companies, which had hundreds of open trading positions.

El Paso originally believed it had a net loss on the trading positions of about $37 million, while Mirant believed it was owed $107 million. The two companies reached a settlement earlier this month in which both parties made “significant movements and concessions,” Mirant told the court. Mirant already has drawn about $36 million of the total from letter of credit facilities posted by El Paso.

Atlanta-based Mirant filed for Chapter 11 protection in July. The filing, which came as Mirant was due to pay back a $1.13 billion bank loan and conclude a major bond exchange offer, included Mirant Corp., Mirant Americas Generation LLC and substantially all of the companies’ wholly-owned subsidiaries in the United States. Mirant produces and sells electricity in North America, the Caribbean, and the Philippines. It owns or controls more than 22,000 MW of electric generation globally.

Mirant reported minimal financial improvements in the third quarter, including a $33 million net loss, or 8 cents/share, compared $41 million, 10 cents/share, in 3Q2002. While the company posted higher revenues of $1.6 billion, compared to $1.4 billion, its cost of fuel, electricity and other products also was higher at $1 billion, compared to $726 million for the third quarter of 2002, reflecting significantly higher prices paid for natural gas and oil. As a result, its gross margin was $607 million compared to $644 million in 3Q2002. As of Dec. 5, Mirant had $1.734 billion in total cash and cash equivalents, $496 million of which is restricted.

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