Having already put an additional $550 million behind its energy marketing business, Mirant is now working on a deal with investment bankers to further bolster its reserves, Mirant CEO Marce Fuller told analysts the company hopes to hammer out some type of deal by this summer with a commercial or investment bank to help bolster its energy marketing and risk management business. She said the type of deal wouldn’t be known for 30-60 days. Last month, Mirant officials had mentioned the possibility of some type of joint venture with a bank or large insurance firm to support its marketing operation and free up collateral for other actions to help restore its credit rating to investment grade.

Mirant was forced to put an additional $400 million behind its marketing operation after Moody’s Investors Service downgraded the company’s credit rating to junk status in December (see Power Market Today, Dec. 21). Fuller said during an energy conference in New York sponsored by Morgan Stanley Dean Witter & Co. that Mirant has set aside an additional $150 million as further support to the business.

“You have to keep in mind that we always have at our discretion the ability to start taking that capital back out of that business,” said Fuller. “We can always make the decision to reduce the size of our overall book in terms of risk management and marketing.”

She also said Mirant is actively negotiating with Moody’s to try to get its credit rating restored, but doesn’t expect any action in the near term. “I don’t see how they can downgrade you in December and very quickly bring you back up,” she said. “But I think we deserve to be upgraded.

“You could get downright depressed about this sector,” Fuller told analysts. “I don’t think that’s the right thing to do. I think we have to continue to remind ourselves that wherever there is uncertainty and challenge in the marketplace there also is opportunity. I believe that Mirant is a strong good company and we will thrive in this market environment as we go forward.”

While Mirant didn’t expect the Moody’s downgrade in December, it has managed to come up with a number of things to strengthen its balance sheet and improve its credit ratings. Last fall, Mirant had $20 billion in capital expenditures planned for the next five years. Today it has only $5 billion planned and it still expects to have 20,000 MW of generation in place in the United States at the end of five years, compared to the 35,000 MW planned last fall and the 14,000 MW it has in place currently.

It is 75% complete in a $1.6 billion asset sale program. Fuller said Mirant has $1.5 billion in liquidity and expects to end the year with $1.1 billion after another $350 million in asset sales. The company has spent about $400 million in construction costs so far this year, mainly to bring an additional 2,200 MW online for this summer.

“At this point in time I think we are ahead of the game relative to some others in the business,” said Fuller.

Mirant, Calpine, Williams and other energy marketers have faced increasing pressure and scrutiny from Washington and Wall Street since the December bankruptcy of Enron Corp. But Fuller believes this is not a time for a dramatic shift in approach to the business; it’s time for a “back to basics” strategy. Assets are still critical for success, she said. Diversity and scale continue to be very important.

Mirant shares rose 4.3% to $10.35 in early trading Tuesday after outpacing the rest of the energy group with an 11% jump Monday. Mirant’s stock hit its 52-week low of $7.50 in mid-February. Its high of $47.20 was last May.

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