Mirant writes off Chilean subsidiary

By the OGJ Online Staff

HOUSTON, Aug. 3, 2001à‚–Mirant Corp. reduced its investment in a Chilean power generation company essentially to zero with a second quarter after tax charge of $57 million.

The Atlanta-based Mirant, that owns 82% of the company, said it didn’t intend to make any more cash infusions into the financially troubled Empresa Electric del Norte Grande S.A. (EDELNOR) unless there is a sales agreement for EDELNOR.

The Chilean company’s operating income fell to a negative Ch$(1.5) billion through the second quarter compared with Ch$3.6 billion for the same period of 2000. Revenue decreased for the same period 13.7% to Ch$27.8 billion compared with Ch$32.2 billion Income was negatively affected by the loss of a large contract for the output for a generation unit and increased gas transportation costs for a new 250 megawatt power plant. The gas-fired power plant was limited by the pipeline to just 180 Mw of output resulting in an availability factor of 96% but a capacity factor of only 54.9%. The capacity factor is a ratio of the amount of power generated as a percentage of the capacity rating of the unit.

To address the liquidity crunch, EDELNOR said it completed a sale of an office building in Antofagasta in June for US$1.7 million. The company has also requested authority from Chilean regulators to remove certain diesel generators from service that occupy property along the shoreline in Antofagasta. Once the equipment is removed, the company plans to sell that property. But due to the complexity of land transactions in Chile, proceeds from the sale won’t be realized until the first quarter of next year at the earliest.

EDELNOR said it “believes in the near term to be able to manage the timing of receipts and disbursements to enable it to meet its financial obligations when due. No assurance can be given that it will be able to do so.”

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