SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 3, 2003
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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 5. Other
Recent Developments
Credit Rating Downgrades
On June 3, 2003, Standard & Poor's Ratings Services ("S&P") lowered its
rating on our senior unsecured debt from B to CCC. S&P ratings of Mirant remain
on CreditWatch, but the implications were revised to developing from negative.
S&P also lowered its rating on the following of our subsidiaries or subsidiary
issues: Mirant Americas Energy Marketing, L.P., Mirant Americas Generation, LLC,
Mirant Mid-Atlantic, LLC and Mirant Trust I.
On June 4, 2003, Fitch Ratings ("Fitch") lowered its rating on our senior
unsecured debt from B+ to B-. Fitch ratings of Mirant remain at Rating Watch
Negative. Fitch also lowered its rating on the following of our subsidiaries or
subsidiary issues: Mirant Americas Generation, LLC, Mirant Mid-Atlantic, LLC and
Mirant Trust I.
On June 5, 2003, Moody's Investor Service ("Moody's") lowered its rating on
our senior unsecured debt from Caa2 to Ca. Moody's ratings of Mirant continue to
have a negative outlook. Moody's also lowered its rating on the following of our
subsidiaries or subsidiary issues: Mirant Americas Energy Marketing, L.P.,
Mirant Americas Generation, LLC, Mirant Mid-Atlantic, LLC and Mirant Trust I.
Panda-Brandywine Power Purchase Agreement
In connection with Mirant's acquisition of the Mirant Mid-Atlantic assets
from PEPCO in 2000, PEPCO granted Mirant certain rights to purchase from PEPCO
all power it received under a power purchase agreement (the "PPA") between it
and Panda-Brandywine L.P. ("Panda"). The Panda PPA is a long term power purchase
agreement that expires in 2021. Mirant and PEPCO entered into a contractual
arrangement (the "Back-to-Back Agreement") with respect to the Panda PPA under
which (1) PEPCO agreed to resell to Mirant all "capacity, energy, ancillary
services and other benefits" to which it is entitled from Panda under the Panda
PPA; (2) Mirant agreed to pay PEPCO each month all amounts due from PEPCO to
Panda for the immediately preceding month associated with such capacity, energy,
ancillary services and other benefits; and (3) PEPCO irrevocably and
unconditionally appointed Mirant to deal directly with Panda with respect to all
matters arising under the Panda PPA. Mirant also entered into an agreement with
PEPCO that provided that if the Back-to-Back Agreement between Mirant and PEPCO
with respect to the power received under the Panda PPA was voided by a binding
court order prior to March 19, 2005, the price paid by Mirant for its December
2000 acquisition of PEPCO assets would be adjusted to compensate PEPCO for the
termination of that arrangement but to hold Mirant economically indifferent.
Panda initiated legal proceedings in 2000 asserting that the Back-to-Back
Agreement violated provisions in the PPA prohibiting PEPCO from assigning the
PPA or delegating its duties under the PPA to a third party without Panda's
prior written consent. On June 10, 2003, the Maryland Court of Appeals, its
highest court, ruled that the assignment of certain rights and delegation of
certain duties by PEPCO to Mirant did violate the non-assignment provision of
the Panda PPA and was unenforceable. The court, however, did not rule that the
sale of power from PEPCO to the Company pursuant to the Back-to-Back Agreement
was void and left open the issues whether the provisions found to violate the
Panda PPA could be severed and the rest of the Back-to-Back Agreement enforced
and whether Panda's refusal to consent to the assignment of the Panda PPA by
PEPCO to Mirant was unreasonable and violated the Panda PPA. If a final
determination is made by March 2005 that the Back-to-Back Agreement entered into
by PEPCO and Mirant Corporation related to the Panda PPA violated the terms of
the Panda PPA and was void and that determination triggers an adjustment to the
purchase price paid by Mirant to PEPCO, such adjustment may have a material
adverse effect on the Company's liquidity but would not be expected to have a
material adverse effect on its financial position or results of operations.
Environmental Information Requests
Along with several other electric generators which own facilities in New
York, in October 1999, Mirant New York received an information request from the
State of New York concerning the air permitting and air emission control
implications under the EPA's new source review regulations promulgated under the
Clean Air Act ("NSR") of various repairs and maintenance activities at its
Lovett facility. Mirant New York responded fully to this request and provided
all of the information requested by the State. The State of New York issued
notices of violation to some of the utilities being investigated. The State
issued a notice of violation to the previous owner of the Lovett facility,
Orange and Rockland Utilities, alleging violations associated with the operation
of the Lovett facility prior to the acquisition of the plant by Mirant New York.
On June 11, 2003, Mirant New York and the State of New York entered into,
and filed for approval with the United States District Court for the Southern
District of New York, a consent decree that releases Mirant New York from all
potential liability for matters addressed in the notice of violation previously
issued by the state to Orange and Rockland Utilities and for any other potential
violation of NSR or related New York air laws prior to and through the date of
entry of the consent decree by the court. The consent decree is subject to
review and final approval by the court. Under the decree, Mirant New York
commits to install on Lovett's two coal-fired units by 2007 to 2008 emission
control technology consisting of selective catalytic reduction technology to
reduce NOx emissions, alkaline in-duct injection technology to reduce SO2
emissions, and a baghouse. The cost of the emission controls prescribed by the
consent decree could approach $100 million over the approximately five year
period covered by the consent decree. Such costs would generally be capitalized
and depreciated as a component of property, plant and equipment. The consent
decree allows Mirant New York to shut down a unit rather than install the
prescribed emission controls on the unit. For one of the units, Mirant New York
also has the option to convert the unit to operate exclusively as a gas-fired
boiler and limit the hours of operation rather than install the prescribed
emission controls. Mirant New York also agreed, beginning 2009, to retire
annually 1,954 tons of SO2 emission allowances allocated to the Lovett facility
under the Clean Air Act Acid Rain Program, which allowances will no longer be
needed by Mirant New York for compliance as a result of the SO2 emission
reductions caused by the other actions required by the consent decree. Mirant
New York did not admit to any liability, and the consent decree does not impose
any penalty on Mirant New York for alleged past violations. Under the sales
agreement with Orange and Rockland Utilities for the Lovett facility, Orange and
Rockland Utilities is responsible for fines and penalties arising from any
violation associated with historical operations prior to the sale of the Lovett
facility to Mirant New York.
ERISA Litigation
On June 3, 2003, a second purported class action lawsuit alleging
violations of ERISA was filed in the United States District Court for the
Northern District of Georgia entitled Greg Waller, Sr. v. Mirant Corporation, et
al. The Waller suit names as defendants Mirant Corporation, certain of its
current and former officers and directors, and Southern Company. The Waller suit
is substantially similar to the previously filed Brown suit with respect to the
claims asserted, the factual allegations made, and the relief sought. Additional
"copy cat" lawsuits may be filed.
Mirant Americas Generation Credit Facilities Notice of Default
On June 6, 2003, Mirant Americas Generation, LLC ("MAG") received notice
(the "Notice") from Lehman Brothers Commercial Paper, Inc. as Agent under its
Facility B Credit Agreement (the "Facility B Credit Agreement") and its Facility
C Credit Agreement (the "Facility C Credit Agreement" and together with the
Facility B Credit Agreement, the "MAG Credit Facilites"), each dated as of
August 31, 1999, that it believes that MAG is in default under the MAG Credit
Facilities. The Notice states that the default occurred as a result of MAG's
failure to deliver its financial statements for the quarter ended March 31,
2003, and related officer certificates, within the time specified in each of the
MAG Credit Facilities. Under each of the MAG Credit Facilities, MAG has 30 days
to remedy any default arising from non-delivery of its financial statements and
related officer certificates, after which time the Agent may seek to (i)
terminate the obligation of each lender to make further advances thereunder
and/or (ii) accelerate MAG's repayment obligations under the MAG Credit
Facilities. MAG anticipates that it will be able to provide the required
financial statements and officer certificates prior to the expiration of the
30-day cure period. In the event, however, that MAG is unable to provide such
financial statements and the related officer certificates within the 30-day cure
period and the lenders under the MAG Credit Facilities accelerate the amounts
thereunder, we do not anticipate that MAG would be able to make such repayments
and MAG would need to seek bankruptcy protection.
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: June 20, 2003 MIRANT CORPORATION
By /s/ Dan Streek
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Dan Streek
Vice President and Controller
(Principal Accounting Officer)