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Written by: Staff

MANILA, March 27 (Reuters) U.S. power producer Mirant, which recently emerged from bankruptcy protection, plans to raise around $1.2 billion in a refinancing deal for its core Philippine assets, a source close to the matter said on Monday.

''It would be almost like a loan to generate some cash,'' the source told Reuters. ''It's at a very preliminary stage ... They are in the process of beginning negotiations (with prospective investors).'' A spokesman for Mirant, the largest foreign investor and the biggest private power provider in the Philippines, declined to comment.

The source said the $1.2 billion represents around half of the estimated value of the two assets, a 1,200 megawatt plant in Sual, northern Philippines, and a 735 megawatt plant in Pagbilao in the east of the country.

Reuters reported in February that Mirant, which owns or leases more than 18,000 megawatts of electric generating capacity globally, had hired investment bank Credit Suisse to explore options for its Philippine assets.

The management of Atlanta-based Mirant told analysts and investors in a presentation earlier this month that it intended to recapitalise a couple of major plants in the southeast Asian country.

The management declined to answer questions at the conference on whether they planned to sell out of the Philippines, a move long desired by some of the region's power investors because of the country's political uncertainty.

Last month, President Gloria Macapagal Arroyo declared a week-long state of emergency, ending on Mar. 3, after saying security officials had foiled a plot by renegade soldiers, communist rebels and some political opponents to oust her.

Many of Mirant's U.S. counterparts such as El Paso and Edison Mission Energy have sold off their foreign assets since the 2001 collapse of U.S. energy giant Enron.

NO SELL-OFF, FOR NOW Industry sources monitoring Mirant's overseas activities say the U.S. company is opting for refinancing over an immediate sale of its Philippine portfolio because the size of its exposure means that it might not be able to get the price it wants.

With interests in eight power plants, Mirant accounts for one-fifth of installed capacity in a country that is desperately short of electricity.

A sale of the entire portfolio at a valuation lower than that of Mirant Corp.'s shares would be dilutive for shareholders, industry sources said.

By some estimates, Mirant's Philippine operations account for nearly half of its overall EBITDA (earnings before interest, taxes, depreciation and amortisation) of $779 million in 2005.

Mirant's plants in the Philippines hold long-term power purchase agreements -- which underpin their future revenue stream.

The source close to the refinancing plan said parties to the deal would get a fixed income stream in return for the financing. The source declined to say over what period the income would be paid.


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