Atlanta Firm Will Pay Pepco, Ending Long Fight

Mirant Corp., an Atlanta energy company, has agreed to pay Pepco $520 million in cash and stock to settle legal disputes over a power contract.

The agreement, which still has to win court approval, saves Pepco from a potentially protracted legal battle with Mirant over a six-year-old agreement. Mirant emerged from bankruptcy protection in January.

"This settlement resolves the current legal disputes in a fair and reasonable way and frees both companies to move forward without the distractions of pending litigation," Dennis Wraase, Pepco Holdings Inc. chairman, president and chief executive, said in a written statement.

Pepco is a subsidiary of District-based Pepco Holdings Inc., which serves about 1.8 million customers in Delaware, the District, Maryland, New Jersey and Virginia.

The legal battle dates back to 2000, when Pepco was looking to get out of the energy generation business and sold four power plants to Mirant, then part of Southern Co., for $2.75 billion.

As part of the deal, Mirant agreed take over Pepco's payments to another energy producer, Panda Energy International Inc., a Dallas-based company that owns a power plant in Maryland. That agreement was due to last until 2021.

In 2001, Southern spun off Mirant into a separate company. Two years later, Mirant filed for bankruptcy in Texas and sought an end to its payments to Pepco, arguing its bankruptcy proceeding allowed it to renegotiate contracts made before it filed for Chapter 11.

Under the settlement, Mirant's payment of $520 million in cash and stock will go into a fund that Pepco will use to buy power from Panda Brandywine.

"It is good to have this matter behind us," Mirant chairman and chief executive Edward R. Muller said in a written statement. "We look forward to resuming normal business relations with our valued customer, Pepco."