On sale: The Jamaica Public Service Company's headquarters on Knutsford Boulevard, New Kingston. - RICARDO MAKYN/STAFF PHOTOGRAPHER
SAYING THAT the sale of its international assets will reduce the company's future cash flow as well as its portfolio diversification, the rating agency Standard & Poor's announced this week that it has placed Mirant Corporation and its subsidiaries on credit watch, which could have negative implications for the firm's 'B+' corporate credit rating.
The subsidiaries subject to the Standard & Poor's report are Mirant North American LLC (MNA), Mirant Americas Generating LLC (MAG), and Mirant Mid-Atlantic LLC (MIRMA).
Mirant is the parent firm of Jamaica Public Service (JPS), the light and power company, one of the foreign holdings that Mirant on Monday announced that it has put up for sale as part of a scheme that includes the buy-back of up to 43 million of Mirant's ordinary shares, for which Mirant plans to spend up to US$1.2 billion.
JPS apart, the assets the Atlanta-based Mirant have placed on the blocks are operations in the Phillipines plus its 55 per cent stake in Grand Bahama Power Company, 39 per cent of Power Generation Company of Trinidad and Tobago and 25 per cent of Curacao Utilities Company.
Mirant said that its Phillipines interests contributed US$370 million in adjusted EBITDA last year, while the contribution from its Caribbean operations was US$156 million.
Mirant had said that it would finance the share-buy back from cash on hand and cash freed for a near-term recapitalisation of its Phillipines business, from which it expects to raise US$700 million.
"The use of cash to buy back the company's common stock will reduce Mirant's liquidity position to levels below those established, when the company emerged from bankruptcy in late 2005," Stand & Poor's warned.
Added the rating agency:"The sale of the international assets will reduce future cash flow and more importantly, reduces the company's portfolio diversification. The share repurchases and divestitures are both negative for credit quality and could lead to a downgrade of company ratings. Mirant's management stated on their analyst call that as the company generates cash, they plan to return it to their shareholders, and that at present, there is no intention to repay any debt at MNA, MAG or MIRMA."
With the sales, Mirant will largely focus on power generation in the US, having exited the distribution end of the operation. But under the agreement in which it acquired 80 per cent of JPS it will require the greenlight from the Jamaican government, which still holds 20 per cent of the company, in determining a buyer.
It was not clear whether Mirant, having bundled the Caribbean businesses into a unit called Mirant Caribbean Holdings, will attempt to sell the operations singly or together and what posture Jamaica was likely to take.
"They can't do anything without speaking to the government," Robert Pickersill, who is in charge of the government in the absence or Prime Minister Portia Simpson Miller, told Parliament on Tuesday,
Pickersgill said the finance minister minister, Omar Davies, has already told Mirant officials that they needed to come to Jamaica quickly to talk about the plan to sell JPS. "We are not holding any blade," Pickersgill said. "In fact, we are holding the handle."
