Assets may be sold, the domestic and global power plant expansions may be curtailed, but one thing is certain: Mirant has no intention of exiting the risk marketing and trading arena.

CEO Marce Fuller acknowledged during an analyst conference call on Friday morning that the company has an uphill battle as it works to overcome credit ratings downgrades, lawsuits, investigations and liquidity. However, she affirmed that Mirant will remain in the energy merchant business.

“I’ve always said that Mirant is an integrated business…and our aim is to optimize our assets,” she said when asked about the company’s future direction and whether it would exit from the wholesale market as many of its peers have.

“We’re going to stay in the trading business,” she said. “In the future, we continue to believe very, very strongly that you have to have those capabilities. We may be reducing the scale of it, but we still feel it’s important and it’s an integral part of our business plan. We’ve said we need it as a way to manage the…risk of pricing fuel and power, and yes, we do see opportunities to make additional margin on our assets.”

In recent months, several formerly strong energy merchants have been attempting to sell their trading books, but Fuller said that possibility was unlikely at Mirant. “Everything we have is worth more to somebody else, and obviously, we’d give it serious consideration,” she said, when asked if there might be a price at which the company would sell off its marketing arm.

She added there would be a “caveat” if Mirant did not have a risk management function in house. “If we were going to do something along those lines, it would have to be where we could continue to have some relationship to risk manage our assets. Again, that is something we see as a very, very important function. If we don’t do it, we’d have to have someone do it for us.” Fuller added that keeping the trading functions within the company is “more economic for us. We do believe that.”

It will be “late February” before Mirant will be able to provide a comprehensive breakdown of its fourth quarter earnings, but Fuller and the company’s executive team provided a restrained outlook for the coming year, and offered details of the company’s liquidity and ongoing asset sales.

Mirant, which released its third quarter earnings in December, also disclosed that multiple accounting errors had been made in previous earnings statements, which Fuller said are being reaudited (see NGI, Jan. 6). Without the complete reaudit, she said 2003 guidance will not be provided until fourth quarter and year-end earnings are released next month. However, Fuller added, “inevitably, it will be another challenging year for this sector in 2003.”

Fuller said that from a company perspective, Mirant needs “critical mass in critical regions,” as well as the ability to help shape the “rules” as they evolve in the markets it serves. “We also want a platform for future expansion,” which would be keyed toward the mid- and upstream markets. Mirant had escalated its global reach until the end of 2001, but with the fallout from Enron and the resulting problems within the sector, it has been restructuring, selling off most of its international assets to concentrate on North America.

“Mirant intends to remain a leader in the markets it serves and increase value for its many stakeholders,” said Fuller. “As such, our strategic plan focuses on two priorities. First, maximize opportunity in well-functioning, regional markets where we have a critical mass of assets, people and customers. Second, continue to enhance our liquidity position.” The Atlanta-based company plans to focus on markets with specific characteristics: “sizeable” company presence, “proper” market structure, “fair rules for all participants”, regulatory and public support, a favorable power supply/demand outlook and sufficient market liquidity.

In the United States, Fuller said that the regional markets “best” matching the company’s criteria are the Northeast where Mirant owns 3,100 MW, the Mid-Atlantic (5,000-plus MW) and the Midwest (1,400 MW), is also becoming “more closely” tied to the Mid-Atlantic. Regarding the North American markets, Fuller said the company’s strategy going forward would include the following:

Asset sales also will continue, Fuller said, with “at least” $300 million more of non-strategic sales this year. In 2002, Mirant sold or announced the sale of $2 billion in net asset sales after repaying $800 million in debt. Year-end liquidity stood at $1.4 billion, with “nearly” all of it in cash. To further enhance its liquidity, Mirant also plans to do the following this year:

“It’s obvious that we still face many challenges. But we continue to make excellent progress toward achieving the priorities of our strategic plan,” said Fuller. “I remain convinced that our ongoing efforts will enable Mirant to thrive in the future.” In closing out the conference call, Fuller said she wanted to talk about the “topic of integrity,” which she said was a “Mirant mind set.” She reiterated her belief that Mirant would “tell the whole truth, that we’re candid,” which she sees as “key to long-term success.”

In 2002, said Fuller, the merchant sector “saw unprecedented scrutiny,” but noted that “after numerous inquiries and investigations, we have confirmed our basic honesty and the integrity of our employees.” So far, none of the investigations into inflated trading volumes have included Mirant, she said, “something that differentiates our company.”

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