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Atlanta energy wholesaler Mirant Corp. dropped out of the bidding on a New York energy contract worth $1 billion - a deal that would have boosted Wall Street's confidence in the company - because Mirant executives didn't want to tie up tens of millions of dollars needed to bid on the contract.
For the past three quarters, executives with Mirant (NYSE: MIR) have been working on a restructuring plan that calls for selling billions of dollars in assets and cutting spending to help reduce the company's $9.7 billion total debt load and improve liquidity.
The restructuring plan, and Mirant's effort to free up its cash flow, played a significant role in the company's decision to kill its bid on a $1 billion contract by ConEdison Inc. to supply 500 megawatts of power to a half-million homes in New York.
"There was some requirement there for upfront collateral money to be placed in an escrow account in case of default by the potential bidder ... [and] we chose not to bid on that project," said Mirant spokesperson Lou Friscoe.
The ConEdison deal would have required Mirant to deposit tens of millions of dollars into an escrow account to safeguard against the current volatility and financial instability of the energy industry, Friscoe said. He declined to specify exactly how much money ConEdison wanted Mirant to commit. Con Edison is expected to announce the winner of the bid soon.
"To secure a long-term contract is seen by the financial markets as a very good thing, so that would've been helpful," Friscoe said. "We considered it and did an assessment and everything ... [but] that is a pretty hefty sum of money."
Struggling with debt
Mirant and many of its peers in the beleaguered energy market are struggling to reduce...