Friday, electric utility company Mirant Corp. (MIR ), reported a plunge in profit for the third quarter, in the the absence of hefty hedging gains from last year. However, on an adjusted basis, net income rose from last year and came in well ahead of Street estimates. The company also lowered its forecast for 2009 adjusted earnings before interest, taxes, depreciation and amortization, but raised its outlook for fiscal year 2010.
The Atlanta, Georgia-based company's net income from continuing operations for the third quarter plummeted to $55 million or $0.38 per share from $1.61 billion or $8.69 per share in the year ago quarter.
The results for the recent third quarter include unrealized losses, principally on hedges of $174 million or $1.19 per share, compared to unrealized gains on hedges of $1.395 billion or $7.54 per share in the prior year quarter.
Adjusted income from continuing operations for the quarter, however, increased to $238 million or $1.63 per share from $216 million or $1.17 per share in the same quarter last year.
On average, eight analysts polled by Thomson Reuters expected the company to earn $1.16 per share. Analysts' estimates typically exclude one-time charges and gains.
In the sequentially preceding second quarter, Mirant reported a net income of $163 million or $1.12 per share, compared with a net loss of $783 million or $3.90 per share in the year earlier quarter.
Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization, or EBITDA, from continuing operations for the latest third quarter was $311 million, compared to $278 million a year earlier. The increase in adjusted EBITDA was due to higher realized value of hedges and higher realized results from proprietary trading activities, partially offset by lower energy gross margins from generation.
Mirant's net cash provided by operating activities of continuing operations for the quarter dropped to $290 million from $632 million in the same period last year, primarily as a result of significant cash collateral returned in the previous year quarter.
As at September 30, 2009, Mirant had cash and cash equivalents of $2.029 billion, of which $574 million was restricted at Mirant North America and its subsidiaries and not available for distribution to Mirant. The company anticipates Mirant North America would distribute nearly $116 million to its parent, Mirant Americas Generation, in November 2009. As at September 30, 2009, Mirant had total outstanding debt of $2.633 billion.
Edward Muller, chairman and chief executive officer, Mirant said, "In these challenging economic times during which prices for commodities, including electricity, have remained at relatively low levels, our strategy of hedging has mitigated the impact on Mirant in 2009 and somewhat in 2010."
Slumping electricity demand and sliding natural gas prices hurt independent power producers, who rely on wholesale electricity prices for their earnings. Utility is one of areas that the Obama Administration wants to strengthen, with the creation of a Smart Grid, making use of smart meters and load-controllers. President Barack Obama had announced a $3.4 billion federal investment, most of which would go to utilities to install meters, transformers and other equipment that can control the flow of electricity and reduce power use and homeowner bills.
For the nine-month period, net income from continuing operations declined to $598 million from $621 million in the same period last year. On a per share basis, earnings increased to $4.12 per share from $2.86 per share last year on lower share count.
Adjusted income from continuing operations for the nine months rose to $484 million or $3.34 per share from $440 million or $2.03 per share in the same period last year.
Adjusted EBITDA for the period increased to $706 million from $632 million in the year ago period.
On August 13, Mirant agreed to permanently shutter the company's Potrero power plant in San Francisco by the end of 2010. The company will also pay at least $1 million to the City to help address pediatric asthma in nearby communities and to initiate other mitigations in neighborhoods adjacent to the fossil-fueled facility. Mirant will pay another $100 thousand to the San Francisco City Attorney's Office for legal fees and costs.
Looking ahead, Mirant reduced its 2009 adjusted EBITDA guidance from $873 million to $860 million and increased its 2010 adjusted EBITDA guidance from $570 million to $617 million.
Amongst others in the sector, San Jose, California-based independent wholesale power generation company Calpine Corp. (CPN), on October 30, reported a rise in profit for the third quarter, notwithstanding a drop in revenues, helped by a decline in fuel and purchased energy expense and lower loss from unconsolidated investments in power plants. The company's net income for the third quarter increased to $238 million or $0.49 per share from $136 million or $0.28 per share in the previous year, while operating revenues declined to $1.85 billion from $3.19 billion in the previous year quarter.
MIR is currently trading at $14.63, down $0.08 or 0.54%, on a volume of 0.42 million shares on the NYSE. In the past 52 weeks, the stock trended in a broad range of $9.11 - $20.28, with a three-month average volume of 1.59 million shares.
For comments and feedback: editorial@rttnews.com