Mirant eyes direct asset sale negotiations in lieu of auction
Monday, September 11, 2006
By MYRNA M. VELASCO
Atlanta-based Mirant Corporation is hanging back on previously-laid plan to issue this week a shortlist of four prospective buyers of its Philippine interests, as it was indicated that none of the submitted bids met the $ 2.8-billion targetted proceeds it committed to shareholders.
Instead of drawing up a shortlist, the company was reported to have been seriously weighing options to pursue direct negotiations with any of the four investor-groups that submitted the ‘relatively acceptable’ bids so it could still gain leeway to drive up its sale value.
"The plan as of Friday is not to issue a shortlist but there could still be list of bidders that the company would want to negotiate with," a source privy to Mirant Atlant’s management decision has divulged to media.
He noted that the US firm "cannot go back to its shareholders with lower targetted proceeds than what was previously committed," so they are compelled to re-evaluate strategies on how they can shore up the takings.
What the company wants to avoid from the continuation of the process, according to the source, would be for the shortlisted bidders to immediately move to physical due diligence process; and the result of this might even be a lower price offer for the acquisition of the Philippine equity shares.
It was gathered that the highest bids submitted were at $ 2.6 billion to $ 2.68 billion and the average for the considered five highest bids hover around $ 2.5 billion, with leveraging on the $ 700 million term-loan secured last August using the Sual and Pagbilao plants as collaterals. After due diligence, Mirant fears that this might dip further to about $ 2.4 billion or even lower.
There have been reports though that in an analyst call, Mirant management has been floating that it got some bids which are as high as $ 3.0 billion; but when counter-checked with the parties that submitted tenders, they noted that such was "a bloated figure"; and this has been viewed as the US firm’s strategy so it could have a bidding power for higher purchase offer. In fact, it was noted that its sale advisor Credit Suisse has been looking at a lower ceiling of $ 2.1 billion and a floor price of $ 1.9 billion.
Credit Suisse was also reported making calls last Friday to those that made bid submissions, informing them that the only one in the shortlist was One Energy (joint venture of China Light & Power and Mitsubishi Corporation); albeit, this was reckoned by industry watchers as a form of strategy so the interested buyers would move for consolidation and this would make them more capable to put in higher bids.
At close of evaluation process, Mirant was also pondering on dropping Avenue Capital from its list of prospective buyers despite the fact that it submitted one of the highest bids, hinging on argument that it does not have operation and maintenance (O&M) partner. Its option, if ever, would be to re-align synergies with those having entrenched technical expertise to operate power assets.
The source added that the US firm has planned of asking the interested parties to either consolidate so they can post a higher tender; or the party with the highest offer will be asked to stick to its original price bid even after due diligence. Formal correspondence on Mirant’s final decision will be sent to prospective buyers soon.
The others reported to have submitted relatively acceptable bids are the Marubeni-Tokyo ElectricFirst Gen group; Korea Electric Power Corporation with Chubu Electric and Mitsui with UK’s International Power.
With such dilemma confronting the company’s sale, apprehensions are getting higher that the process might encounter delays given that there are also serious issues that needed to be settled first on the ground.
The prospective investors have raised serious concern on the employees’ bid for severance packages and the consent issue that shall be settled with the Philippine government. The employees have sounded off plans of as far as seeking Malacanang’s help or elevating their case to the courts.
Reaching this point, Mirant Philippines will be facing new round of Congressional investigation this week, providing a venue for state-owned National Power Corporation (NPC) to flesh out its legal right to oppose a sale process that would sidestep its consent to the process.
NPC is a counter-party in the energy conversion agreements for the 1,200megawatt Sual power facility and the 1,200-MW Ilijan gas plant; and in the contract for the sale of electricity in the 735-MW Pagbilao plant. (MMV)
posted by philpower @ 8:35 AM,
