Casting off the contracts that once catapulted it to the top of the gas marketer rankings, Mirant Corp. on Thursday said it will sell a significant portion of its Canadian gas aggregator, transportation and storage agreements to food processing giant Cargill Ltd. Terms of the deal were not disclosed, but financially struggling Mirant said it would reduce its collateral obligations by about $200 million.

Cargill, a privately held company, has been major gas consumer, using the fuel to produce and process numerous agricultural and food products. But spokeswoman Lori Johnson said supply wasn’t behind the company’s purchase decision. She said Cargill has been an active marketer since 1993 and intends to grow that portion of its business.

“This is a significant expansion for us in terms of the role that we play in the market,” said Johnson. “Obviously the entire sector is under an enormous amount of pressure right now, and with the exodus of players from the market, we see a need there for new marketers and folks like us who can expand and grow.”

Cargill is purchasing contracts representing 380 MMcf/d of natural gas transportation assets and 1.3 Bcf of natural gas storage, as well as Mirant’s “netback pool,” the portion of the natural gas marketing contracts that market the aggregate supply of natural gas from over 500 Canadian natural gas producers associated with the former TransCanada PipeLines’ pool business (see Daily GPI, Oct. 12, 2001). Also, Cargill will assume the management services agreements to operate the aggregator businesses of Pan-Alberta Gas Ltd., Northwest Pacific Energy Marketing Inc. and CanWest Gas Supply, Inc.

“We haven’t focused on anything in particular yet, but we think there are some other opportunities in the energy sector,” said Johnson. “We’re looking at this as the beginning of an expansion of our energy trading. We have a number of customers and we hope to expand that customer base. We really see this as an opportunity to provide some risk management services and marketing services that we’ve developed over 138 years of working the commodity markets to help producers and consumers.”

David Gabriel, president of Cargill Power & Gas Markets, said the acquisition will allow Cargill to provide a broader range of producer and end-use customer solutions. Cargill will center its North American natural gas trading operations to service producers and customers in Calgary and plans to employ a significant portion of Mirant’s Calgary based employees. Cargill is one of Canada’s largest agricultural merchandisers and processors and already employs 5,000 across the country. The transaction is expected to close later this year pending regulatory approvals.

Mirant said the deal is one of several that should allow it to exit the majority of its Canadian natural gas storage, transportation, portfolios of trading transactions and aggregator services contracts and reduce its collateral obligations by over $200 million.

“This transaction will allow Mirant to reduce its collateral obligations and strengthen our corporate balance sheet,” said Rick Pershing, Mirant’s executive vice president. He said Mirant intends to maintain a much smaller presence in the Canadian natural gas industry. Mirant will retain a Calgary office and 30 of its 100 employees.

Mirant is struggling to fund operations, pay down debt, and manage collateral requirements. Although its shares have risen above $3 recently on news that it has received temporary waivers from its banks related to its debt, the company said on Wednesday that it is very concerned about its ability to refinance $8.9 billion in debt. In a proxy filing with the SEC, Mirant said it can give no assurances that the waiver will be extended beyond May 29. If it is not, or the company cannot find additional financing, it may be forced into bankruptcy.

On Wednesday, Mirant also reported a $2.4 billion loss for 2002 on a sharp revenue decline and hefty restructuring charges. The company also said that it found nearly $190 million in income overstatements since 2000 due to accounting errors and errors in its gas inventory. It has replaced its chief financial officer. The company is still preparing revised quarterly earnings for 2001 and 2002, and plans to issue first quarter earnings for 2003 soon.

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