Mirant judge orders changes to plan valuation, Blackstone report

By Caroline Salls

Pittsburgh, July 1 - Mirant Corp.'s bankruptcy judge Dennis Michael Lynn modified the company's business plan and a valuation report by The Blackstone Group to reach what he considers a proper valuation of Mirant's businesses for its plan of reorganization, according to a letter filed Thursday with the U.S. Bankruptcy Court for the Northern District of Texas.

In his letter, Lynn said the use of the business plan for valuation "is more sensible than adoption of cash flow information produced by other parties."

Changes to the business plan will include:

*Actual results as of June 30 will be substituted for projected results;

*Bankruptcy emergence will be assumed for Sept. 30;

*The business plan will include provision for payment for all amounts due to Potomac Electric Power Co. under its agreement with Mirant;

*The business plan will include provisions for taxes, including net operating loss carry-forwards; and

*All commodity and emission data will be updated.

Changes to the calculations of value in the Blackstone report will include:

*Reflecting added capacity payments to be made;

*A valuation calculated based upon results from the 12 months ended March 31 will be included in the range of values;

*Multiples of comparable companies will use June 27 closing stock prices;

*The discount rate applied to cash flows will be based upon a weighted average cost of capital as calculated in the report, but with a 12% to 16.6% cost of equity;

*Valuation of Mirant's Philippine operations will be adjusted to include 50% of 2025 cash flow in 2026, with the reduced cash flow growing at 2% per year thereafter;

*Perpetuity growth rates, other than the Philippines growth rate, will be changed to 3% per year;

*Additional value in the report will be increased $450 million; and

*All valuation method weightings will be equal.

The judge said he will issue a memorandum of opinion on the changes before the confirmation hearing on Mirant's plan of reorganization.

Mirant, an Atlanta-based power company, filed for bankruptcy on July 14, 2003. Its Chapter 11 case number is 03-46590.

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