Mirant

(MIR)

plunged in premarket trading after the energy company disclosed plans to cut its capital spending, lowered its 2002 guidance and said it will sell 40 million common shares.

On Wednesday, Mirant had its credit rating lowered to junk status by Moody's, which cited "moderating cash flows" due to its $5 billion debt burden.

The company will remove $1.5 billion from its 2002 capital budget, saying it will spend only $2.6 billion, primarily on 5,700 megawatts of U.S. generating capacity. The company also plans to raise $1.6 billion from the sale of assets, including $900 million by divesting its Bewag unit.

Mirant left 2001 guidance at $1.95 a share before charges but said it now expects to earn $2 to $2.10 a share next year. Analysts polled by First Call had been expecting earnings of $2.55 a share.

The Moody's action, which came after the rating agency previewed the debt-reduction program, will require Mirant to post millions of dollars of new cash collateral with its energy trading partners.

On Instinet, Mirant was down $2.57, or 16%, to $13.50.