Mirant Corporation Q2 2010 Earnings Call Transcript

Mirant Corporation Q2 2010 Earnings Call Transcript
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Mirant Corporation (MIR)

Q2 2010 Earnings Call Transcript

August 6, 2010 9:00 am ET

Executives

Steve Himes – Director, IR

Ed Muller – Chairman, President and CEO

Bill Holden – SVP and CFO

Paul Gillespie – SVP, Tax

John O’Neal – SVP and Chief Commercial Officer

Analysts

Brian Chin – Citigroup

Neel Mitra – Simmons & Company

Lasan Johong – RBC Capital Markets

Ali Agha – SunTrust Robinson Humphrey

Jeff Coviello – Duquesne Capital

Sakeeb Meerzo [ph] – JPMorgan

Brandon Blossman – Tudor, Pickering, Holt & Co.

Brian Russo – Ladenburg Thalmann

Julien Dumoulin-Smith – UBS

Keith Stanley – Deutsche Bank

Terran Miller – Knight

Gregg Orrill – Barclays Capital

Ameet Thakkar – Bank of America/Merrill Lynch

Nitin Dahiya – KLS Diversified

Presentation

Operator

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Previous Statements by MIR
» Mirant Q1 2010 Earnings Call Transcript
» Mirant Corporation Q4 2009 Earnings Call Transcript
» Mirant Corporation Q3 2009 Earnings Call Transcript

Good day everyone and welcome to the Mirant Corporation second quarter 2010 earnings call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Steve Himes, Director of Investor Relations at Mirant. Please go ahead.

Steve Himes

Thank you, Angel, and good morning, everyone. Thank you for joining us today for Mirant’s second quarter 2010 earnings call. If you don’t already have a copy, the press release, financial statements, and second quarter filing with the SEC are available on our Web site at

www.mirant.com

. The slide presentation is also available on our Web site, and a replay of our call will be available approximately two hours after we finish.

Speaking today will be Ed Muller, Mirant’s Chairman and Chief Executive Officer; and Bill Holden, Mirant’s Chief Financial Officer. Also in the room and available to answer questions are John O’Neal, Mirant’s Chief Commercial Officer; Paul Gillespie, our Senior Vice President of Tax; and Gary Garcia, Mirant’s Treasurer.

With regard to the Safe Harbor slides; during the call we will be making forward-looking statements including about the proposed merger with RRI Energy, which are subject to risks and uncertainties. Factors that could cause actual results to differ materially from management’s projections, forecasts, estimates, and expectations, are discussed in the Company’s SEC filings. These filings as well as our materials presented today describe how you may obtain copies of the SEC filed materials related to the proposed merger, as well as information regarding persons who may participate in the merger solicitation. We encourage you to read all of the safe harbors and the materials therein.

Lastly our slide presentation and discussion on this call may include certain non-GAAP financial measures. For such measures reconciliation to the most directly comparable GAAP measure is available on our Web site or at the end of our presentation.

With that I would like to turn the call over to Ed.

Ed Muller

Thanks, Steve, and good morning, everyone. I’ll start on slide number 5 with an update on our announced and planned merger with RRI to create GenOn Energy. First, as you can see on the slide, we and RRI together filed an amended S-4 in response to comments we received from the Securities and Exchange Commission. We did that in early July. We’ve received further comments and we expect with RRI to file a further amended S-4 very shortly.

Second, we have entered into agreements with financial institutions for the financing for GenOn. We are planning to arrange $2.9 billion of financing for GenOn, which will refinance $1.8 billion of funded debt and will replace existing revolving credit facilities at each of Mirant and RRI. The new financing will consist of a revolving credit facility, a term loan, and unsecured notes at GenOn.

In terms of regulatory approvals we have now received the necessary clearance from the New York State Public Service Commission. We have as well as we announced earlier this week received approval from the Federal Energy Regulatory Commission.

We have also received a second request from the Department of Justice in connection with our filing into the Hart-Scott-Rodino Act, and we are proceeding to respond. We continue to expect the merger to close by the end of 2010.

Turning to the next page, slide number 5, financial highlights; you can see our numbers there as we have announced them this morning. Our adjusted EBITDA for the second quarter was $149 million compared to $200 million for the same quarter last year.

As in the past, our hedging strategy provided a positive contribution to our financial results. Our realized value of hedges was lower, because power prices increased in the second quarter and because our power hedges for 2010 were put on at lower power prices than our power hedges for 2009.

Also, our fuel oil management activities in the second quarter of this year contributed a relatively small amount to our results compared to the same period in ‘09 and that is because we had a very favorable settlement of inventory hedges last year in the second quarter. Those decreases were offset somewhat by the higher energy gross margins from our Mid-Atlantic generation that resulted both from higher power prices and lower emissions costs.

For the first six months, all of those factors are applicable. In addition, we had some factors which we described to you during our May call, and those are lower energy gross margin from Northeast generation and lower net gains from sales of emissions and those show why the 2010 first six months of $311 million of adjusted EBITDA is lower than 2009 of $395 million. Bill Holden will walk through these numbers in further detail shortly.

On slide number six, the same operations data that we have been providing showing to you that our safety rate performance continues to be very good as does our commercial availability.

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