Mirant

[Joe Stocks]

Status Report on Valuation Hearing

After 26 days of the valuation hearing, the evidence is finally closed (although none of the big New York firms have yet figured out which exhibits are in or out of evidence).

Closing arguments will begin at noon on Monday, June 27, 2005, in Fort Worth, with two hours per side. I encourage all interested shareholders to attend.

From my perspective as a participating trial lawyer representing shareholders, the evidence has “gone in” very well. The experts representing the Debtor and Creditors set forth their basic presentations and their rebuttal of the equity experts. The cross examination identified approximately 16 items or issues that were overlooked, mistakes in methodology, or represented newer available information, each of which should cause the valuation to rise. The equity experts then expounded each of these 16 items on both direct and cross examination, such that each of these issues has been fully and openly explored.

The Court has appeared carefully attentive, and has asked interesting questions. Therefore, while no one can predict how the Court may rule, we have presented a very strong case in favor of a much higher valuation than suggested by the Debtor and the Creditors.

For example, there clearly appears to have been a substantial rise in the pricing of natural gas, which will tend to set a higher price for power, such that Mirant will earn much higher gross margins on its coal plants. The Debtor and Creditors urge the use of outdated forecasts showing much lower natural gas pricing, which is an obvious issue that has simply undercut their credibility with the Court. The use of newer forecasts would result in at least $100-$150 million in additional bottom line cash, which should add approximately $1B to the value.

Similarly, thanks to Terry Z (aka Finenergy) we were able to demonstrate that the actual tax rate, including IRC Section 199, the Philippines tax holiday, and the state NOL, will be much lower than the 40% used in the Discounted Cash Flow projections. Mirant’s actual tax rate in 2000 was only 29%! Our efforts brought out all of this information, which results in approximately 18% more cash flow, translating into an 18% higher DCF valuation. The Court will certainly consider some of this information.

We have also successfully interjected the Till v. SCS Credit case, and have cross examined all of the experts to confirm that their “Equity Cost of Capital” is both much higher than and directly contrary to that permitted under Till.

Moreover, we have also proved that the Debtor, even under its own plan projections, has enough future free cash flow, when added to its current excess cash balances, to pay the $6 Billion of Class 4 debt on a current interest basis at the 6.5% contract rate. By 2009, the Debtor could begin to amortize and pay down this debt principal. The 16 disputed factors will merely add to the available cash flow. Therefore, this is a debtor which can, eventually, pay its creditors in full and a term-out should be explored, or at least considered for valuation purposes.

We will argue that any debtor who can afford to keep interest current, and then retire its debts, must have positive equity value. While conversion of that debt to equity may represent a safer plan of reorganization, it should not be permitted to eliminate equity, because that clearly over-pays the creditors. In this regard, we have developed record evidence confirming that the Creditors essentially want a 10% premium to their contract rate of return in order to be converted from Debt to Equity.

Please send me any suggestions or comments for closing argument. I very much appreciate all of the support and encouragement I have received from everyone. Please keep us all in your prayers for Monday.

Best regards to all the Longs.

[e-mail]

L. Matt Wilson