Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | May. 03, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | MIR | |
Entity Registrant Name | MIRANT CORP | |
Entity Central Index Key | 0001010775 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 145,457,714 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating revenues (including unrealized gains of $363 million and $255 million, respectively) | $880 | $878 |
Cost of fuel, electricity and other products (including unrealized losses of $11 million and $1 million, respectively) | 207 | 271 |
Gross Margin (excluding depreciation and amortization) | 673 | 607 |
Operating Expenses: | ||
Operations and maintenance | 166 | 162 |
Depreciation and amortization | 51 | 36 |
Gain on sales of assets, net | (2) | (15) |
Total operating expenses, net | 215 | 183 |
Operating Income | 458 | 424 |
Other Expense (Income), net: | ||
Interest expense | 50 | 38 |
Interest income | (2) | |
Other, net | 1 | |
Total other expense, net | 51 | 36 |
Income Before Income Taxes | 407 | 388 |
Provision for income taxes | 8 | |
Net Income | $407 | $380 |
Basic and Diluted EPS: | ||
Basic EPS | 2.81 | 2.62 |
Diluted EPS | 2.79 | 2.62 |
Weighted average shares outstanding | 145 | 145 |
Effect of dilutive securities | 1 | |
Weighted average shares outstanding assuming dilution | 146 | 145 |
1_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating revenues, unrealized gains | $363 | $255 |
Cost of fuel, electricity and other products, unrealized losses | $11 | $1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current Assets: | ||
Cash and cash equivalents | $2,105 | $1,953 |
Funds on deposit | 201 | 181 |
Receivables, net | 367 | 412 |
Derivative contract assets | 2,837 | 1,416 |
Inventories | 247 | 241 |
Prepaid expenses | 133 | 144 |
Total current assets | 5,890 | 4,347 |
Property, Plant and Equipment, net | 3,647 | 3,633 |
Noncurrent Assets: | ||
Intangible assets, net | 169 | 171 |
Derivative contract assets | 1,003 | 599 |
Deferred income taxes | 539 | 376 |
Prepaid rent | 280 | 304 |
Other | 90 | 98 |
Total noncurrent assets | 2,081 | 1,548 |
Total Assets | 11,618 | 9,528 |
Current Liabilities: | ||
Current portion of long-term debt | 26 | 75 |
Accounts payable and accrued liabilities | 816 | 718 |
Derivative contract liabilities | 2,394 | 1,150 |
Deferred income taxes | 539 | 376 |
Other | 7 | 4 |
Total current liabilities | 3,782 | 2,323 |
Noncurrent Liabilities: | ||
Long-term debt, net of current portion | 2,538 | 2,556 |
Derivative contract liabilities | 392 | 163 |
Pension and postretirement obligations | 114 | 113 |
Other | 69 | 58 |
Total noncurrent liabilities | 3,113 | 2,890 |
Commitments and Contingencies | ||
Stockholders' Equity: | ||
Preferred stock, par value $.01 per share, authorized 100,000,000 shares, no shares issued at March 31, 2010 and December 31, 2009 | ||
Common stock, par value $.01 per share, authorized 1.5 billion shares, issued 311,866,593 shares and 311,230,486 shares at March 31, 2010 and December 31, 2009, respectively, and outstanding 145,404,164 shares and 144,946,815 shares at March 31, 2010 and December 31, 2009, respectively | 3 | 3 |
Treasury stock, at cost, 166,462,429 shares and 166,283,671 shares at March 31, 2010 and December 31, 2009, respectively | (5,336) | (5,334) |
Additional paid-in capital | 11,432 | 11,427 |
Accumulated deficit | (1,321) | (1,728) |
Accumulated other comprehensive loss | (55) | (53) |
Total stockholders' equity | 4,723 | 4,315 |
Total Liabilities and Stockholders' Equity | $11,618 | $9,528 |
2_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
Mar. 31, 2010
| Dec. 31, 2009
| |
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, authorized | 1,500,000,000 | 1,500,000,000 |
Common stock, issued | 311,866,593 | 311,230,486 |
Common stock, outstanding | 145,404,164 | 144,946,815 |
Treasury stock, shares | 166,462,429 | 166,283,671 |
3_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (USD $) | ||||||
In Millions | Common Stock
| Treasury Stock
| Additional Paid-In Capital
| Accumulated Deficit
| Accumulated Other Comprehensive Loss
| Total
|
Beginning Balance at Dec. 31, 2009 | $3 | ($5,334) | $11,427 | ($1,728) | ($53) | $4,315 |
Share repurchases | (2) | (2) | ||||
Stock-based compensation | 5 | 5 | ||||
Total stockholders' equity before other comprehensive income | 4,318 | |||||
Net income | 407 | 407 | ||||
Pension and other postretirement benefits | (2) | (2) | ||||
Total other comprehensive income | 405 | |||||
Ending Balance at Mar. 31, 2010 | $3 | ($5,336) | $11,432 | ($1,321) | ($55) | $4,723 |
4_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Cash Flows from Operating Activities: | ||
Net income | $407 | $380 |
Adjustments to reconcile net income and changes in other operating assets and liabilities to net cash provided by operating activities: | ||
Depreciation and amortization | 52 | 37 |
Gain on sales of assets, net | (2) | (15) |
Unrealized gains on derivative contracts, net | (352) | (254) |
Stock-based compensation expense | 5 | 5 |
Lower of cost or market inventory adjustments | 8 | 10 |
Funds on deposit | (14) | (3) |
Changes in other operating assets and liabilities | 198 | 111 |
Total adjustments | (105) | (109) |
Net cash provided by operating activities of continuing operations | 302 | 271 |
Net cash provided by operating activities of discontinued operations | 2 | 2 |
Net cash provided by operating activities | 304 | 273 |
Cash Flows from Investing Activities: | ||
Capital expenditures | (85) | (171) |
Proceeds from the sales of assets | 2 | 15 |
Capital contributions | (4) | |
Restricted deposit payments and other | 1 | |
Net cash used in investing activities | (83) | (159) |
Cash Flows from Financing Activities: | ||
Repayment of long-term debt | (67) | (39) |
Share repurchases | (2) | (1) |
Net cash used in financing activities | (69) | (40) |
Net Increase in Cash and Cash Equivalents | 152 | 74 |
Cash and Cash Equivalents, beginning of period | 1,953 | 1,831 |
Cash and Cash Equivalents, end of period | 2,105 | 1,905 |
Supplemental Cash Flow Disclosures: | ||
Cash paid for interest, net of amounts capitalized | 2 | 1 |
Cash paid for claims and professional fees from bankruptcy | $1 |
Description of Business and Acc
Description of Business and Accounting and Reporting Policies | |
3 Months Ended
Mar. 31, 2010 | |
Description of Business and Accounting and Reporting Policies | A. Description of Business and Accounting and Reporting Policies Mirant is a competitive energy company that produces and sells electricity in the United States. The Company owns or leases 10,076 MW of net electric generating capacity in the Mid-Atlantic and Northeast regions and in California. Mirant also operates an integrated asset management and energy marketing organization based in Atlanta, Georgia. Proposed Merger with RRI Energy On April11, 2010, Mirant entered into the Merger Agreement with RRI Energy and RRI Energy Holdings, Inc. (Merger Sub), a direct and wholly-owned subsidiary of RRI Energy. Upon the terms and subject to the conditions set forth in the Merger Agreement, which has been unanimously approved by each of the boards of directors of Mirant and RRI Energy, Merger Sub will merge with and into Mirant, with Mirant continuing as the surviving corporation and a wholly-owned subsidiary of RRI Energy. The merger is intended to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended, so that none of RRI Energy, Merger Sub, Mirant or any of the Mirant stockholders generally will recognize any gain or loss in the transaction, except that Mirant stockholders will recognize gain with respect to cash received in lieu of fractional shares of RRI Energy common stock. Pursuant to the Merger Agreement, upon the closing of the merger, each issued and outstanding share of Mirant common stock, including grants of restricted common stock, will automatically be converted into shares of common stock of RRI Energy based on the Exchange Ratio. Additionally, upon the closing of the merger, RRI Energy will be renamed GenOn Energy. Mirant stock options and other equity awards will generally convert upon completion of the merger into stock options and equity awards with respect to RRI Energy common stock, after giving effect to the Exchange Ratio. As a result of the merger, Mirant stockholders will own approximately 54% of the equity of the combined company and RRI Energy stockholders will own approximately 46%. Completion of the merger is subject to various customary conditions, including, among others, (i)approval by RRI Energy stockholders of the issuance of RRI Energy common stock in the merger, (ii)adoption of the Merger Agreement by Mirant stockholders, (iii)effectiveness of the registration statement for the RRI Energy common stock to be issued in the merger, (iv)approval of the listing on the NYSE of the RRI Energy common stock to be issued in the merger, (v)expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, (vi)receipt of all required regulatory approvals and (vii)consummation by GenOn Energy of debt financings in an amount sufficient to fund the refinancing transactions contemplated by, and on terms consistent with, the Merger Agreement. Among the refinancing transactions noted above, the completion of the merger is conditioned on GenOn Energy consummating certain debt financing transactions, including securing a new revolving credit facility. The new GenOn Energy debt financing and revolving credit facility will be used, in part, to redeem the Mirant North Ame |
Financial Instruments
Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Financial Instruments | B. Financial Instruments Derivative Financial Instruments In connection with the business of generating electricity, the Company is exposed to energy commodity price risk associated with the acquisition of fuel and emissions allowances needed to generate electricity, the price of electricity produced and sold and the fair value of fuel inventories. In addition, the open positions in the Companys trading activities, comprised of proprietary trading and fuel oil management activities, expose it to risks associated with changes in energy commodity prices. The Company, through its asset management activities, enters into a variety of exchange-traded and OTC energy and energy-related derivative financial instruments, such as forward contracts, futures contracts, option contracts and financial swap agreements to manage exposure to commodity price risks. These contracts have varying terms and durations, which range from a few days to years, depending on the instrument. The Companys proprietary trading activities also utilize similar derivative financial instruments in markets where the Company has a physical presence to attempt to generate incremental gross margin. The Companys fuel oil management activities use derivative financial instruments to hedge economically the fair value of the Companys physical fuel oil inventories and to optimize the approximately three million barrels of storage capacity that the Company owns or leases. Changes in the fair value and settlements of derivative financial instruments used to hedge electricity economically are reflected in operating revenue, and changes in the fair value and settlements of derivative financial instruments used to hedge fuel economically are reflected in cost of fuel, electricity and other products in the accompanying unaudited condensed consolidated statements of operations. Most of the Companys long-term coal agreements are not required to be recorded at fair value because of the Companys election of normal purchases treatment under the accounting guidance for derivative financial instruments. As such, these contracts are not included in derivative contract assets and liabilities in the accompanying unaudited condensed consolidated balance sheets and are not included in the tables below. Changes in the fair value and settlements of derivative contracts for trading activities, comprised of proprietary trading and fuel oil management, are recorded on a net basis as operating revenue in the accompanying unaudited condensed consolidated statements of operations. As of March31, 2010, the Company does not have any derivative financial instruments for which hedge accounting has been elected and option contracts comprise less than 1% of the Companys net derivative contract assets. The Company also considers risks associated with interest rates, counterparty credit and Mirants own non-performance risk when valuing its derivative financial instruments. The nominal value of the derivative contract assets and liabilities is discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of the Companys transactions being valued. The following table pres |
Long-Term Debt
Long-Term Debt | |
3 Months Ended
Mar. 31, 2010 | |
Long-Term Debt | C. Long-Term Debt Long-term debt was as follows (dollars inmillions): At March31, 2010 At December31, 2009 InterestRate Secured/ Unsecured Long-term debt: Mirant Americas Generation: Senior notes: Due May 2011 $ 535 $ 535 8.30% Unsecured Due October 2021 450 450 8.50% Unsecured Due May 2031 400 400 9.125% Unsecured Unamortized debt premiums (discounts), net (3 ) (3 ) Mirant North America: Senior secured term loan, due 2010 to 2013 307 373 LIBOR+ 1.75%1 Secured Senior notes, due December 2013 850 850 7.375% Unsecured Capital leases, due 2010 to 2015 25 26 7.375%-8.19% Total 2,564 2,631 Less: current portion of long-term debt (26 ) (75 ) Total long-term debt, net of currentportion $ 2,538 $ 2,556 1 The weighted average interest rate for the periods ended March31, 2010 and December31, 2009, was 1.98% and 2.13%, respectively. Mirant Americas Generation Senior Notes The senior notes are senior unsecured obligations of Mirant Americas Generation having no recourse to any subsidiary or affiliate of Mirant Americas Generation. Mirant North America Senior Secured Credit Facilities Mirant North America, a wholly-owned subsidiary of Mirant Americas Generation, entered into senior secured credit facilities in January2006, which are comprised of a senior secured term loan due January 2013 and a senior secured revolving credit facility due January 2012. The senior secured term loan had an initial principal balance of $700 million, which has amortized to $307 million as of March31, 2010. At the closing, $200million drawn under the senior secured term loan was deposited into a cash collateral account to support the issuance of up to $200million of letters of credit. During 2008, Mirant North America transferred to the senior secured revolving credit facility approximately $78 million of letters of credit previously supported by the cash collateral account and withdrew approximately $78 million from the cash collateral account, thereby reducing the cash collateral account to approximately $122 million. At March31, 2010, the cash collateral balance was approximately $124 million as a result of interest earned on the invested cash balances. At March31, 2010, there were approximately $120million of letters of credit outstanding under the senior secured revolving credit facility and $123 million of letters of credit outstanding under the senior secured term loan cash collateral account. At March31, 2010, $635 million was available under the senior secured revolving credit facility and less than $1 million was available under the senior secured term loan for cash draws or for the issuance of letters of credit. Although the senior secured revolving credit facility has lender commitments of $800 million, availability thereunder reflects a $45 million effective reduct |
Guarantees and Letters of Credi
Guarantees and Letters of Credit | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees and Letters of Credit | D. Guarantees and Letters of Credit Mirant generally conducts its business through various operating subsidiaries which enter into contracts as a routine part of their business activities. In certain instances, the contractual obligations of such subsidiaries are guaranteed by, or otherwise supported by, Mirant or another of its subsidiaries, including by letters of credit issued under the credit facilities of Mirant North America. In addition, Mirant and its subsidiaries enter into various contracts that include indemnification and guarantee provisions. Examples of these contracts include financing and lease arrangements, purchase and sale agreements, commodity purchase and sale agreements, construction agreements and agreements with vendors. Although the primary obligation of Mirant or a subsidiary under such contracts is to pay money or render performance, such contracts may include obligations to indemnify the counterparty for damages arising from the breach thereof and, in certain instances, other existing or potential liabilities. In many cases, the Companys maximum potential liability cannot be estimated because some of the underlying agreements contain no limits on potential liability. Upon issuance or modification of a guarantee, the Company determines if the obligation is subject to initial recognition and measurement of a liability and/or disclosure of the nature and terms of the guarantee. Generally, guarantees of the performance of a third party are subject to the recognition and measurement, as well as the disclosure provisions of the accounting guidance related to guarantees. Such guarantees must initially be recorded at fair value, as determined in accordance with the accounting guidance. The Company did not have any guarantees at March31, 2010, that met the recognition requirements of the accounting guidance. For the three months ended March31, 2010, Mirant had net increases to its guarantees of approximately $48 million, which included net increases of approximately $44 million to its letters of credit, approximately $3 million to other guarantees and approximately $1 million to its surety bonds. This Note should be read in conjunction with the complete description under Note 7, Commitments and Contingencies Guarantees, to the Companys financial statements in its 2009 Annual Report on Form 10-K. |
Pension and Other Postretiremen
Pension and Other Postretirement Benefit Plans | |
3 Months Ended
Mar. 31, 2010 | |
Pension and Other Postretirement Benefit Plans | E. Pension and Other Postretirement Benefit Plans Mirant has various defined benefit and defined contribution pension plans, and other postretirement benefit plans. For a further discussion of these plans see Note 6, Employee Benefit Plans in the Companys 2009 Annual Report on Form 10-K. Net Periodic Benefit Cost (Credit) The components of the net periodic benefit cost (credit) are shown below (in millions): PensionPlans OtherPostretirement Benefit Plans ThreeMonthsEnded March 31, Three MonthsEnded March31, 2010 2009 2010 2009 Service cost $ 2 $ 2 $ $ 1 Interest cost 4 4 1 1 Expected return of plan assets (5 ) (6 ) Net amortization1 1 (2 ) (2 ) Net periodic benefit cost (credit) $ 1 $ 1 $ (1 ) $ 1 Net amortization amount includes prior service costs and actuarial gains or losses. |
Stock-based Compensation
Stock-based Compensation | |
3 Months Ended
Mar. 31, 2010 | |
Stock-based Compensation | F. Stock-based Compensation On March11, 2010, the Company granted stock options and issued restricted stock units to executives and certain other employees under the Mirant Corporation 2005 Omnibus Incentive Compensation Plan. The stock options have a ten-year term and the stock options and restricted stock units vest in three equal installments on each of the first, second and third anniversaries of the grant date. The stock options have an exercise price of $13.19, the Companys closing stock price on the day of the grant, and a grant date fair value of $5.64. The restricted stock units have a grant date fair value of $13.19, the Companys closing stock price on the day of the grant. During both the three months ended March31, 2010 and 2009, the Company recognized approximately $4 million of compensation expense related to stock options and restricted stock units. These amounts are included in operations and maintenance expense in the unaudited condensed consolidated statements of operations. Stock-based compensation activity for the three months ended March31, 2010, is as follows: Stock OptionsService-based Number ofOptions Weighted Average Exercise Price Aggregate Intrinsic Value (in thousands) Outstanding at January1, 2010 4,040,576 $ 24.05 $ 5,818 Granted 951,224 $ 13.19 Exercised or converted (40,416 ) $ 10.40 Forfeited (10,279 ) $ 15.39 Expired (3,298 ) $ 31.28 Outstanding at March31, 2010 4,937,807 $ 22.08 $ 529 Exercisable or convertible at March31, 2010 3,071,584 $ 26.75 $ 192 Cash proceeds from exercise of options for the three months ended March31, 2010 $ 420,326 Restricted Stock UnitsService-based Number ofUnits/ Shares Weighted Average GrantDate Fair Value Outstanding at January 1, 2010 1,587,324 $ 14.95 Granted 990,200 $ 13.19 Vested (595,693 ) $ 18.07 Forfeited (8,582 ) $ 13.21 Outstanding at March 31, 2010 1,973,249 $ 13.13 Change of Control If consummated, the proposed merger with RRI Energy will constitute a change of control as defined under the Mirant Corporation 2005 Omnibus Incentive Compensation Plan. As a result, all outstanding stock options and restricted stock units will become fully vested. The outstanding stock options will be converted into options to purchase RRI Energy common stock and restricted stock units will be converted into shares of RRI Energy based on the Exchange Ratio and the terms of the Merger Agreement. Upon the closing of the merger, RRI Energy will be renamed GenOn Energy. In addition, any unrecognized compensation expense associated with previously unvested stock options and restricted stock units will be immediately recognized as compensation expense. As of March31, 2010, there was approximately $36 million of total unrecognized compensation cost, excluding estimated forfeitures, related to non-vested stock-based awards. |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share | G. Earnings Per Share Mirant calculates basic EPS by dividing income available to stockholders by the weighted average number of common shares outstanding. Diluted EPS gives effect to dilutive potential common shares, including unvested restricted stock units, stock options and warrants. The following table shows the computation of basic and diluted EPS for the three months ended March31, 2010 and 2009 (in millions except per share data): Three Months Ended March31, 2010 2009 Net income $ 407 $ 380 Basic and diluted: Weighted average shares outstandingbasic 145 145 Shares from assumed vesting of restricted stock units 1 Weighted average shares outstandingdiluted 146 145 Basic and Diluted EPS Basic EPS $ 2.81 $ 2.62 Diluted EPS $ 2.79 $ 2.62 For the three months ended March31, 2010 and 2009, the weighted average number of securities that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been antidilutive were as follows: ThreeMonths Ended March31, 2010 2009 (sharesinmillions) Series A Warrants 27 27 Series B Warrants 7 7 Restricted stock units 1 Stock options 4 4 Total number of antidilutive shares 38 39 Change of ControlSeries A Warrants and Series B Warrants If the proposed merger with RRI Energy is consummated, the holders of the Series A Warrants and Series B Warrants will have the right to acquire and receive, upon the exercise of such warrants, the number of shares of RRI Energy common stock that would have been issued or paid to the holders of the Series A Warrants and Series B Warrants if such holders were to have exercised the Series A Warrants and Series B Warrants immediately prior to the closing of the merger. Upon the closing of the merger, RRI Energy will be renamed GenOn Energy. The obligations in respect of the outstanding Series A Warrants and Series B Warrants, which expire on January3, 2011, will be assumed by GenOn Energy upon consummation of the proposed merger. |
Stockholders' Equity
Stockholders' Equity | |
3 Months Ended
Mar. 31, 2010 | |
Stockholders' Equity | H. Stockholders Equity Stockholder Rights Plan On March26, 2009, Mirant announced the adoption of a stockholder rights plan (the Stockholder Rights Plan) to help protect the Companys use of its federal NOLs from certain restrictions contained in 382 of the Internal Revenue Code of 1986, as amended. In general, an ownership change would occur if certain shifts in ownership of the Companys stock exceed 50 percentage points measured over a specified period of time. Given 382s broad definition, an ownership change could be the unintended consequence of otherwise normal market trading in the Companys stock that is outside the Companys control. The Stockholder Rights Plan was adopted to reduce the likelihood of such an unintended ownership change occurring. However, there can be no assurance that the Stockholder Rights Plan will prevent such an ownership change. Under the Stockholder Rights Plan, when a person or group has obtained beneficial ownership of 4.9% or more of the Companys common stock, or an existing holder with greater than 4.9% ownership acquires more shares representing at least an additional 0.2% of the Companys common stock, there would be a triggering event causing potential significant dilution in the economic interest and voting power of such person or group. Such triggering event would also occur if an existing holder with greater than 4.9% ownership but less than 5.0% ownership acquires more shares that would result in such stockholder obtaining beneficial ownership of 5.0% or more of the Companys common stock. The Board of Directors has the discretion to exempt an acquisition of common stock from the provisions of the Stockholder Rights Plan if it determines the acquisition will not jeopardize tax benefits or is otherwise in the Companys best interests. On February26, 2010, Mirant announced that the Board of Directors had extended the Stockholder Rights Plan and that the Company would submit the Stockholder Rights Plan to a stockholder vote at its 2010 Annual Meeting of Stockholders on May6, 2010. On April28, 2010, the Company entered into a further amendment to the Stockholders Rights Plan (the Second Amendment) with Mellon Investor Services LLC, as Rights Agent (the Rights Agent). The Second Amendment reduces the maximum term of the Stockholders Rights Plan from ten years to three years. Under the terms of the Stockholder Rights Plan (prior to the Second Amendment), the rights (as defined in the Stockholder Rights Plan) would have expired on the earliest of (i)February25, 2020 (the Fixed Date), (ii)the time at which the rights are redeemed, (iii)the time at which the rights are exchanged, (iv)the repeal of 382 or any successor statute, or any other change, if the Board of Directors determines that the Stockholder Rights Plan is no longer necessary for the preservation of tax benefits, (v)the beginning of a taxable year of the Company for which the Board of Directors determines that no tax benefits may be carried forward and no built-in losses may be recognized, (vi)February25, 2011 if stockholder approval has not been obtained, or (vii)a determination by the Board of Directors, prior to the time any person or g |
Segment Reporting
Segment Reporting | |
3 Months Ended
Mar. 31, 2010 | |
Segment Reporting | I. Segment Reporting The Company has four operating segments: Mid-Atlantic, Northeast, California and Other Operations. The Mid-Atlantic segment consists of four generating facilities located in Maryland and Virginia with total net generating capacity of 5,194 MW. The Northeast segment consists of three generating facilities located in Massachusetts and one generating facility located in New York with total net generating capacity of 2,535 MW. The California segment consists of three generating facilities located in or near the City of San Francisco, with total net generating capacity of 2,347 MW. The California segment also includes business development efforts for new generation, including Mirant Marsh Landing. Other Operations includes proprietary trading and fuel oil management activities, unallocated corporate overhead, interest expense on debt at Mirant Americas Generation and Mirant North America and interest income on the Companys invested cash balances. In the following tables, eliminations are primarily related to intercompany sales of emissions allowances and interest on intercompany notes receivable and notes payable. Operating Segments Mid- Atlantic Northeast California Other Operations Eliminations Total (inmillions) Three Months Ended March31, 2010: Operating revenues1 $ 739 $ 72 $ 38 $ 31 $ $ 880 Cost of fuel, electricity and otherproducts2 155 44 8 207 Gross margin 584 28 30 31 673 Operating Expenses: Operations and maintenance 113 24 20 9 166 Depreciation and amortization 33 6 8 4 51 Gain on sales of assets, net (2 ) (2 ) Total operating expenses, net 144 30 28 13 215 Operating income (loss) 440 (2 ) 2 18 458 Total other expense, net 1 50 51 Net income (loss) $ 439 $ (2 ) $ 2 $ (32 ) $ $ 407 Total assets at March31, 2010 $ 6,445 $ 650 $ 130 $ 7,415 $ (3,022 ) $ 11,618 1 Includes unrealized gains of $338 million, $15 million and $10 million for Mid-Atlantic, Northeast and Other Operations, respectively. 2 Includes unrealized losses of $19 million for Northeast and unrealized gains of $8 million for Mid-Atlantic. Mid- Atlantic Northeast California Other Operations Eliminations Total (inmillions) Three Months Ended March31, 2009: Operating revenues1 $ 672 $ 152 $ 35 $ 22 |
Litigation and Other Contingenc
Litigation and Other Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Litigation and Other Contingencies | J. Litigation and Other Contingencies The Company is involved in a number of significant legal proceedings. In certain cases, plaintiffs seek to recover large and sometimes unspecified damages, and some matters may be unresolved for several years. The Company cannot currently determine the outcome of the proceedings described below or the ultimate amount of potential losses and therefore has not made any provision for such matters unless specifically noted below. Pursuant to guidance related to accounting for contingencies, management provides for estimated losses to the extent information becomes available indicating that losses are probable and that the amounts are reasonably estimable. Additional losses could have a material adverse effect on the Companys results of operations, financial position or cash flows. Shareholder Litigation Mirant and its directors have been named as defendants in four putative shareholder class actions filed in the Superior Court of Fulton County, Georgia,in connection with the merger of Mirant and RRI Energy: Rosenbloom v. Cason, et al., No.2010CV184223, filed April13, 2010; The Vladmir Gusinsky Living Trust v. Muller, et al., No, 2010CV184331, filed April15, 2010; Ng v. Muller, et al., No.2010CV184449, filed April16, 2010; and Bayne v. Muller, et al., No.2010CV184648, filed April21, 2010. The complaints seek to enjoin the merger, alleging that Mirants directors breached their fiduciary duties by failing to maximize the value to be received by Mirant shareholders, by agreeing to certain deal protection measures, and by improperly considering certain directors personal interests in the transaction, such as future employment by the post-merger entity, in determining whether to enter into the Merger Agreement. Three of the complaints assert a claim of aiding and abetting breach of fiduciary duty against Mirant and RRI Energy; the fourth, Bayne, asserts this claim against RRI Energy alone. In addition to an order enjoining the transaction, the complaints variously seek, among other things: additional disclosures regarding the proposed transaction; an accounting to plaintiffs or imposition of a constructive trust in favor of plaintiffs for all damages allegedly caused by defendants and for all profits and any special benefits obtained as a result of defendants purported breaches of fiduciary duties; rescission of the transaction, if consummated, or an award to plaintiff of recessionary damages; and attorneys fees and expenses. Mirant and its directors view the complaints to be without merit and intend to defend against them vigorously. Scrubber Contract Issues Mirant Mid-Atlantic is working through various issues with Stone Webster, Inc. (Stone Webster), the EPC contractor for the scrubber projects at the Chalk Point, Dickerson and Morgantown generating facilities to determine the final amount owed to Stone Webster. Stone Webster is estimating that the cost incurred under the EPC contract at completion will exceed the amount currently budgeted. If the costs actually incurred for the EPC work were to equal the amount projected by Stone Webster, the costs incurred by Mirant Mid-Atlantic and Mirant Chal |
Settlements and Other Charges
Settlements and Other Charges | |
3 Months Ended
Mar. 31, 2010 | |
Settlements and Other Charges | K. Settlements and Other Charges Potomac River Settlement In July 2008, the City of Alexandria, Virginia (in which the Potomac River generating facility is located) and Mirant Potomac River entered into an agreement containing certain terms that were included in a proposed comprehensive state operating permit for the Potomac River generating facility issued by the Virginia DEQ that month. Under that agreement, Mirant Potomac River committed to spend $34 million over several years to reduce particulate emissions. The $34 million was placed in escrow and included in funds on deposit and other noncurrent assets in the accompanying unaudited condensed consolidated balance sheets. At March31, 2010, the balance in the escrow account was approximately $33 million and is included in the Companys estimated capital expenditures. On July30, 2008, the Virginia State Air Pollution Control Board approved the comprehensive permit with terms consistent with the agreement between Mirant Potomac and the City of Alexandria, and the Virginia DEQ issued the permit on July31, 2008. Prior to the issuance of the comprehensive state operating permit in July 2008, the Potomac River generating facility operated under a state operating permit issued June1, 2007, that significantly restricted the facilitys operations by imposing stringent limits on its SO2 emissions and constraining unit operations so that no more than three of the facilitys five units could operate at one time. In compliance with the comprehensive permit, in 2008 Mirant Potomac River merged the stacks for units 3, 4 and 5 into one stack at the Potomac River generating facility and, in January 2009, Mirant Potomac River merged the stacks for units 1 and 2 into one stack. With the completion of the stack mergers, the permit issued in July 2008 does not constrain operations of the Potomac River generating facility below historical operations and allows operation of all five units at one time. In January 2010, the Virginia DEQ informed Mirant Potomac River that in light of the decision of the Virginia Court of Appeals vacating Virginias rules restricting trading in CAIR allowances, the Virginia DEQ has determined that issuing a state operating permit to limit NOx emissions during the Ozone Season is warranted. Mirant Potrero Settlement Agreement with City of San Francisco Mirant Potrero and the City and County of San Francisco, California entered into a Settlement Agreement (the Potrero Settlement) dated August13, 2009. The Potrero Settlement became effective in November 2009 upon its approval by the Citys Board of Supervisors and Mayor. The Potrero Settlement addressed certain disputes that had arisen between the City of San Francisco and Mirant Potrero related to the Potrero generating facility. Among other things, the Potrero Settlement obligates Mirant Potrero to close permanently each of the remaining units of the Potrero generating facility at the end of the year in which the CAISO determines that such unit is no longer needed to maintain the reliable operation of the transmission system. The agreement also bars Mirant Potrero from building any additional generating facilities on the si |