Alameda Times-Star (Alameda, CA)
Mirant Corp.’s bankruptcy filing was not expected to affect the operations of its three Bay Area power plants, but the company may owe California $150 million to $1 billion in refunds stemming from the 2000-01 energy crisis.
The Atlanta-based energy company filed for bankruptcy late Monday, listing $20.6 billion in assets and $11.4 billion in debt.
Company spokesman Pat Dorinson wouldn’t speculate on what might ultimately happen to the company’s three power plants in Antioch, Pittsburg and San Francisco, though he said they would continue to operate.
“We’re in a new operating environment, that will require a thorough review of our business plan,” Dorinson said. “We don’t know what we’ll conclude during that process.”
Those power plants, which Mirant bought from Pacific Gas & Electric Co. in 1999 for $801 million, produce more than 2,900 megawatts of electricity, enough to power about 2.2 million homes.
Mirant bought them after PG&E was encouraged to sell off much of its generation capacity under California’s electricity deregulation plan.
Mirant had planned to build a 550-megawatt expansion of its Contra Costa power plant in Antioch, a $250 million to $300 million project that would add enough capacity to serve about 400,000 homes. But that project was halted in early 2002 as the company experienced financial problems.
Despite the bankruptcy filing, Mirant is still going to continue to try and get a permit for a proposed expansion of its Potrero power plant in San Francisco, Dorinson said.
Mirant is one of a plethora of energy companies that the state accuses of manipulating energy markets during the 2000-2001 energy crisis. The state is trying to get regulators to order up to $9 billion in refunds from energy companies.
Mirant has said that the company’s actions in the Western markets “constituted legitimate market behavior thatdid not take unfair advantage of any of the rules in place at the time.”
The company’s share of the refunds California is seeking ranges from $150 million to $1 billion, depending on how federal regulators make their calculations, said Erik Saltmarsh, executive director of the California Electricity Oversight Board.
From the state’s point of view, one positive aspect of the bankruptcy filing, Saltmarsh said, is that it stops Mirant’s creditors from collecting on their claims ahead of California.
State officials are still examining how refund money would be paid. One possibility is a discount off Mirant’s future energy charges, Saltmarsh said. The state has looked into seizing Mirant’s power plants, he said, but the company may have borrowed against those assets, complicating the matter.
“It’s too simplistic to assume that Mirant could just hand those [plants] over to the state without affecting other creditors,” he said.
Doug Heller, senior consumer advocate with the Foundation for Taxpayer and Consumer Rights, said Mirant was “complicit in this major heist [and] … has nothing to show for it.”
Mirant’s inability to refinance its debt in time to avoid bankruptcy reflects company-specific issues as much as it highlights the no-nonsense attitude bankers are applying to energy companies in the wake of Enron‘s collapse.
Mirant didn’t get caught up in the same level of financial shenanigans as Enron. However, the company did make significant accounting errors and lenders are still uneasy with the energy trading part of its business.Like anything else in the market, it’s driven by perception, said Anthony Sabino, a St. John’s University business professor who specializes in the oil and gas industry. Having been burned once by Enron, the banks are understandably hesitant about further entanglements with energy industry players.
The Associated Press contributed to this report.