Mirant reaches agreement with California utilities, public agencies

New York, Jan. 14 - Mirant said it reached a settlement agreement with California electric utilities and public agencies, including the state's attorney general, to resolve various claims against Mirant and its subsidiaries related to California's energy crisis in 2000 and 2001.

Mirant's subsidiary, Mirant Americas Energy Marketing LP, will assign $283 million of unpaid receivables ($320 million before adjustments directed by Federal Energy Regulatory Commission) to the California parties, which consist of PG&E, Southern California Edison Co., San Diego Gas & Electric Co., the California attorney general, the California Public Utilities Commission, the California Department of Water Resources and the California Electricity Oversight Board.

These unpaid receivables are to be divided among the California parties and any other market participants that choose to opt into the settlement.

In addition to the transferred receivables, the California parties will receive an allowed, unsecured claim of $175 million against Mirant Americas Energy Marketing. The Department of Water Resources will receive an additional allowed, unsecured claim against Mirant Americas Energy Marketing of $2.25 million.

When Mirant emerges from Chapter 11, those claims will be compensated on the same basis as other pre-petition claims against Mirant Americas Energy Marketing.

The settlement also resolves all of PG&E's claims against Mirant relating to refunds potentially owed for sales by Mirant under reliability-must-run agreements. PG&E will receive allowed, unsecured claims against Mirant that will result in a distribution of proceeds of $63 million under Mirant's plan of reorganization.

In addition, either Mirant's subsidiaries will transfer ownership of the partially completed 530-megawatt gas-fired Contra Costa Unit 8 power plant and associated turbines to PG&E or PG&E will receive an additional amount of as much as $85 million. Mirant and PG&E also agreed to enter into long-term power purchase agreements that will allow PG&E to dispatch and receive the output of certain electric generating units owned by Mirant's subsidiaries in Northern California.

The California will release Mirant and its California subsidiaries from liability for claims related to transactions in the western energy markets from Jan. 1, 1998 to July 14, 2003.

Mirant will also be released from all claims, including claims filed at the FERC seeking refunds related to a 19-month power supply contract between Mirant Americas Energy Marketing and the Department of Water Resources that expired in December 2002.

In addition, the California parties receiving the Mirant Americas Energy Marketing receivables will assume Mirant Americas Energy Marketing's obligation to pay refunds determined by the FERC to be owed by Mirant Americas Energy Marketing to other parties for transactions in the California Independent System Operator and the California Power Exchange markets during the period Oct. 2, 2000 to June 20, 2001.

The settlement does not cover ratepayer class action suits against Mirant, or claims by the California Independent System Operator, the California Power Exchange or other market participants that are not parties to the settlement for periods outside the refund period.

However, Mirant said it expects that the FERC's approval of the settlement will cause the California Independent System Operator and the California Power Exchange to modify their books to reflect the terms of the settlement, which should significantly reduce their claims in Mirant's bankruptcy proceedings.

Furthermore, in December, the bankruptcy court orally ruled that it would deny class status with respect to the claims filed in the bankruptcy proceedings by the plaintiffs in the ratepayer suits, which would substantially reduce the potential exposure of Mirant and its subsidiaries to those claims by limiting the claims to the damages, if any, incurred by the individual plaintiffs.

Mirant, an Atlanta energy company, said the settlement was approved on Jan. 13 by the California Public Utilities Commission but must still be approved by FERC and the bankruptcy courts overseeing the Chapter 11 proceedings of Mirant and Pacific Gas & Electric Co.

Mirant said it expects to file its plan of reorganization with the U.S. Bankruptcy Court for the Northern District of Texas later this month and has set a timetable to emerge from Chapter 11 in mid-2005.

Mirant filed for bankruptcy on July 14, 2003. Its Chapter 11 case number is 03-46590.

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