SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 19, 2000
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Mirant Corporation
(Exact name of registrant as specified in its charter)
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Delaware 001-16107 58-2056305
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(State or other jurisdiction (Commission File (IRS Employer Identification
of incorporation) Number) No.)
1155 Perimeter Center West Suite 100, Atlanta, Georgia 30338
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (678) 579-5000
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N/A
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(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets.
On December 19, 2000, Mirant Corporation formally Southern Energy, Inc., (the
Company), through its subsidiaries and together with lessors in a leveraged
lease transaction, closed the asset purchase from Potomac Electric Power Company
(PEPCO) of PEPCO's generation assets in Maryland and Virginia. The net purchase
price for these acquisitions was approximately $2.75 billion which includes
working capital and capital expenditures of approximately $100 million and
approximately $1.5 billion provided by a leveraged lease transaction. As part of
the acquisition, the Company also assumed net liabilities, primarily transition
power agreements and obligations under power purchase agreements, of
approximately $2.4 billion.
The acquired assets consist primarily of four generating stations:
o the 1,412 MW coal and oil-fired Morgantown station located in Charles
County, Maryland, approximately 50 miles from Washington, D.C.,
o the 2,423 MW coal, oil and gas-fired Chalk Point station located in
Prince George's County, Maryland, approximately 45 miles from
Washington, D.C., including the assignment of PEPCO's rights and
obligations to the 84 MW Southern Maryland Electric Cooperative, Inc.
combustion turbine located at the Chalk Point station site,
o the 837 MW coal, oil and gas-fired Dickerson station located in upper
Montgomery County, Maryland, approximately 30 miles from
Washington, D.C., and
o the 482 MW coal-fired Potomac River station located in Alexandria,
Virginia, in close proximity to Washington, D.C.
In addition to the electric generating stations described above, the
Company, through subsidiaries, also acquired three separate coal ash storage
areas, a 51.5 mile oil pipeline serving the Chalk Point and Morgantown stations,
and an engineering and maintenance service facility and related assets. The
Company also entered into a lease of the land on which the Potomac River station
is located, power sales agreements with PEPCO under two separate transition
power agreements with terms of up to four years, a local area support agreement
with PEPCO requiring the Potomac River station to operate for purposes of
supporting a local load pocket, a three-year operation and maintenance agreement
for PEPCO's two generating stations located in the District of Columbia (Benning
and Buzzard Point) and the assumption of five of PEPCO's power purchase
agreements totaling 735 MW (Ohio Edison, Panda-Brandywine, Northeast Maryland
Waste Disposal Authority, Prince George's County Detention Center and Gude
Landfill). The Company's rights to acquire the assets were assigned to certain
of the Company's subsidiaries and the Company executed and delivered to PEPCO a
parent guarantee to support the obligations of subsidiaries under the project
agreements. In addition, as part of the acquisition, approximately 950 PEPCO
employees became employees of the Company.
The acquired assets are spread across the PJM Interconnection market, which
encompasses all or a part of Pennsylvania, New Jersey, Maryland, Virginia and
the District of Columbia. The PJM Interconnection market is the largest
centrally-dispatched power pool in the United States. The PJM Interconnection
enables participants to buy and sell energy and ancillary services, schedule
bilateral transactions and reserve transmission service.
The PEPCO assets provide a range of capacity across the PJM Interconnection
dispatch curve. There is approximately 2,700 MW of baseload capacity, 1,400 MW
of cycling capacity, and 1,055 MW of peaking capacity. Likewise, there is a wide
range of fuels consumed at the facilities, and approximately 94% of the total
generating capacity can burn multiple fuels.
As part of the acquisition, the Company entered into two separate transition
power agreements with PEPCO to provide energy, capacity and ancillary services
to PEPCO's default retail customers. One of the transition power agreements is
for service to PEPCO's default customers in Maryland and has a term through June
30, 2004. The other transition power agreement is for service to PEPCO's default
customers in the District of Columbia and expires December 18, 2004. Under both
transition power agreements, the Company is obligated to provide capacity and
ancillary services for the entire term. The Company is also obligated under both
contracts to provide 100% of the energy requirements for the first contract year
and 75% of the energy requirements for the second contract year. Beginning in
the second contract year, PEPCO has the option of purchasing additional energy
requirements in 25% increments up to the level purchased in the prior contract
year. PEPCO's current peak demand requirements for the existing retail customers
are approximately 5,300 MW. With a total generation portfolio of 5,889 MW,
including the power purchase agreements, these transition power agreements
provide a significant portion of the Company's revenues for the first two to
four years and thereby mitigate the market price volatility risk. The pricing
for these services in each of the agreements is below current market prices.
Under the asset purchase and sale agreement, the Company assumed the
obligations and benefits of five power purchase agreements with a total capacity
of 735 MW. Three of the power purchase agreements (Ohio Edison, Panda-Brandywine
and Northeast Maryland Waste Disposal Authority) represent 730 MW.
In connection with the acquisition, the Company entered into credit
agreements with a syndicate of banks led by Credit Suisse First Boston, New York
Branch, as arranger, and seven other banks that provided the following:
o two facilities to Mirant Americas Generation, Inc., the Company's wholly-owned
subsidiary, totaling $1.02 billion with recourse to SE North America
Generating
o one facility of $650 million to the Company with recourse to the Company
In addition, the Company entered into leveraged lease transactions that provided
$1.5 billion of the purchase price at closing. Equity funding by third party
owner lessors provided approximately $299 million. The issuance and sale of
three series of certificates pursuant to a 144A offering raised the remaining
$1.22 billion of lease debt. Under the leveraged lease financing arrangements,
the owner lessors acquired the Dickerson and Morgantown baseload facilities and
leased these facilities to a subsidiary of the Company under long term lease
agreements. The leases will be treated as operating leases for book purposes
whereby one of the Company's subsidiaries will record periodic lease rental
expenses.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of the businesses acquired. N/A
(b) Pro forma financial information.
The following unaudited pro forma condensed consolidated balance sheet and
consolidated statements of income are presented to give effect to the
acquisition by Mirant, through its subsidiaries and together with lessors in a
leveraged lease transaction, of PEPCO's generation assets in Maryland and
Virginia.
The unaudited pro forma condensed consolidated balance sheet as of September 30,
2000 included herein assumes that the acquisition of PEPCO's generation assets
in Maryland and Virginia was consummated on September 30, 2000. The unaudited
pro forma consolidated statements of income for the nine months ended September
30, 2000 and the year ended December 31, 1999 give effect to the acquisition of
PEPCO's generation assets as if the transaction had been consummated on January
1, 1999. PEPCO's operating results included in the pro forma statements of
income for the nine months ended September 30, 2000 and the year ended December
31, 1999 are for the periods January 1, 2000 through September 30, 2000 and
January 1, 1999 through December 31, 1999, respectively. The unaudited pro forma
condensed consolidated balance sheet and consolidated statements of income are
based upon preliminary fair value allocations related to the purchase of PEPCO's
generation assets. Historically, PEPCO did not operate its generating assets
collectively as a stand alone business and did not operate the Maryland or
Virginia plants as separate reporting entities; therefore, the purchased assets
do not have historical financial statements. Rather, as is often the case with
fully integrated U.S. electric utilities, PEPCO accounted for all of its revenue
and a significant portion of its expenses on a bundled basis (that is, including
all of the functions of a vertically integrated electric utility). Accordingly,
PEPCO management has created carve-out income statements (which include
substantial allocations, many of which were subjective and material) of the
purchased generating assets. While significant expense allocations have been
made utilizing methods traditionally acceptable in carve-out financial
statements, the revenue allocation methodology applied was subjective as it is
not possible to specifically identify and distribute PEPCO's bundled revenues
among its generation, transmission, distribution and customer support
operations.
Mirant has included these financial statements prepared by PEPCO's management in
the Company's unaudited pro forma consolidated statements of income for the nine
months ended September 30, 2000 and the year ended December 31, 1999. As part of
these pro forma financial statements, Mirant has provided detailed disclosure of
the direct and allocated expenses associated to the generating assets acquired,
as well as allocated revenues and detailed disclosure of the nature of the
allocation methods used. Due to this, the stand alone statements of income for
the PEPCO generation assets cannot be opined on by independent accountants as
being prepared under accounting principles generally accepted in the U.S. and
can not be audited under generally accepted auditing standards in the U.S.
The purchase price allocations are subject to revision after more detailed
analyses, appraisals and evaluations are completed. The pro forma information is
presented for illustrative purposes only and is not indicative of the operating
results that would have occurred if the PEPCO acquisition had been consummated
at the beginning of the period specified, nor is it indicative of future
operating results. The unaudited pro forma financial statements and notes
thereto included herein should be read in conjunction with the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (filed on
November 14, 2000) which, is incorporated herein by reference. Reference is also
made to the section entitled "Report of Independent Accountants and Financial
Statements of "Southern Energy, Inc and Subsidiaries" (pages F-16 to F-65) in
the prospectus filed on Form S-1 (Registration No. 333-35390), by Southern
Energy, Inc., with the SEC on September 27, 2000.
Mirant Corporation
Unaudited Pro Forma Consolidated Statement of Income (A)
For the Nine Months Ended September 30, 2000
(in millions)
Carve-out
Historical PEPCO Mirant
Mirant Generating Pro Forma Corporation
Corporation Assets Adjustments Pro Forma
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Operating Revenues $5,473 $1,015 (B) $6,488
Operating Expenses:
Cost of fuel, electricity and other products 3,965 625 (C) 4,590
Maintenance 104 78 (D) 182
Depreciation and amortization 244 48 (E) 16 (F) 308
Selling, general, and administrative 438 14 (G) 452
Other 194 71 (I) 132 (H) 397
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Total operating expenses 4,945 836 5,929
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Operating Income 528 179 559
Other Income (Expense):
Interest income 123 - 123
Interest expense (462) (49) (J) (24) (K) (535)
Net gain on sales of assets 18 - 18
Equity in income of affiliates 132 - 132
Other, net 49 (3) (M) 46
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Total other income (expense) (140) (52) (216)
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Income From Continuing Operations Before
Income Taxes and Minority Interest 388 127 343
Provision (benefit) for income taxes 56 52 (N) (60) (O) 48
Minority Interest 60 - 60
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Income From Continuing Operations $272 $75 $235
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See Notes to Unaudited Pro Forma Financial Statements
Mirant Corporation
Unaudited Pro Forma Consolidated Statement of Income (A)
For the Year Ended December 31, 2000
(in millions)
Carve-out
Historical PEPCO Mirant
Mirant Generating Pro Forma Corporation
Corporation Assets Adjustments Pro Forma
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Operating Revenues $2,268 $1,217 (B) $3,485
Operating Expenses:
Cost of fuel, electricity and other products 937 738 (C) 1,675
Maintenance 116 106 (D) 222
Depreciation and amortization 270 62 (E) 25 (F) 357
Selling, general, and administrative 253 26 (G) 279
Write-down of Assets 60 - 60
Other 188 86 (I) 210 (H) 484
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Total operating expenses 1,824 1,018 3,077
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Operating Income 444 199 408
Other Income (Expense):
Interest income 172 - 172
Interest expense (502) (60) (J) (27) (K) (589)
Net gain on sales of assets 313 - 313
Equity in income of affiliates 111 1 (1) (L) 111
Receivables recovery 64 - 64
Other, net 72 (2) (M) 70
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Total other income (expense) 230 (61) 141
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Income From Continuing Operations Before
Income Taxes and Minority Interest 674 138 549
Provision (benefit) for income taxes 129 54 (N) (92) (O) 91
Minority Interest 183 - 183
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Income From Continuing Operations $362 $84 $275
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See Notes to Unaudited Pro Forma Financial Statements
Mirant Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2000
(in millions)
(P) Mirant
Mirant Pro Forma Corporation
Corporation Adjustments Pro Forma
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ASSETS
Total Current Assets $4,212 $458 $4,670
Property, Plant and Equipment, net 5,969 1,413 7,382
Noncurrent Assets:
Notes and other receivables, less provision for
uncollectibles of $30 1,814 - 1,814
Goodwill, net of accumulated amortization of $202 2,256 1,306 3,562
Other noncurrent assets 3,464 716 4,180
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Total noncurrent assets 7,534 2,022 9,556
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Total assets $17,715 $3,893 $21,608
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Short-term debt $3,521 - $3,521
Accounts payable 1,978 - 1,978
Other current liabilities 1,723 2,183 3,906
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Total current liabilities 7,222 2,183 9,405
Noncurrent Liabilities:
Notes payable 4,102 - 4,102
Other noncurrent liabilities 2,789 1,710 4,499
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Total noncurrent liabilities 6,891 1,710 8,601
Minority Interest in Subsidiary Companies 675 - 675
Stockholder's Equity
Additional paid in capital 2,687 - 2,687
Other shareholder's equity 131 - 131
Retained earnings 109 - 109
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Total stockholders' equity 2,927 - 2,927
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Total liabilities and stockholder's equity $17,715 $3,893 $21,608
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See Notes to Unaudited Pro Forma Financial Statements
Notes to Unaudited Pro Forma Financial Statements.
(A) The pro forma consolidated statements of income for the periods presented
reflect the historical results of operations for Mirant and PEPCO's
carved-out Maryland and Virginia generation assets acquired with
adjustments related to the preliminary allocation of fair values for assets
acquired and liabilities assumed.
(B) PEPCO non-fuel base rate revenue was allocated to the generation assets so
that the earned rate of return among all of PEPCO's business segments
(generation, transmission and distribution) was the same. Fuel revenue and
other revenue was directly allocated to the generating assets to the extent
they related to the assets.
(C) Fuel and interchange costs were assigned directly to the generating assets
to the extent they related directly to the assets. Capacity purchase costs
were assigned 100% to the generating assets.
(D) Maintenance costs were assigned directly to the generating assets to the
extent they related directly to the assets.
(E) Depreciation and amortization expenses were assigned directly to the
generating assets to the extent they related directly to the assets.
(F) To adjust depreciation expense and record goodwill and other intangibles
amortization based on the preliminary estimated fair value of the net
assets acquired. The acquired assets have a weighted average useful life of
approximately 32 years. Goodwill and capacity addition rights are being
amortized over 40 years, marketing and trading rights are being amortized
over 40 years, and installed capacity credits are being amortized over 20
years.
(G) Operations costs were assigned directly to the generating assets to the
extent they related directly to the assets.
(H) To record lease expense resulting from Mirant's operating leases for the
Dickerson and Morgantown baseload facilities.
(I) Other operations maintenance costs that were corporate in nature were
allocated to the generating assets based on the ratio of net generation
property and plant to total PEPCO net property and plant.
(J) Net interest expense was allocated to the generating assets based on the
ratio of net generation property and plant to total PEPCO net property and
plant.
(K) To adjust interest expense on existing PEPCO debt that Mirant did not
assume as part of the acquisition resulting in a reduction in interest for
the nine months ended September 30, 2000 and twelve months ended December
31, 1999 of $49 million and $60 million, respectively.
To record interest expense for the nine months ended September 30, 2000 and
twelve months ended December 31, 1999 of $73 million and $87 million,
respectively, assuming that the PEPCO generation assets were acquired with
short-term borrowings at the Company's effective average borrowing rate of
7.2 percent and 6.4 percent, respectively.
(L) To eliminate equity in income of PEPCO affiliates.
(M) Other taxes were assigned directly to the generating assets to the extent
they related to the assets.
(N) Income taxes were allocated on the ratio of generating assets pro forma
taxable income to total PEPCO taxable income.
(O) To reflect the estimated tax effect of the pro forma adjustments.
(P) To reflect balances related to the acquired PEPCO generating assets,
excluding the assets subject to the leveraged lease transaction, at
closing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: February 28, 2001 SOUTHERN ENERGY, INC.
By /s/ James A. Ward
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James A. Ward
Senior Vice President, Finance
And Accounting
(Principal Accounting Officer)