[0] S&P Lowers Edelnor Ratings to 'CC'; Still on Watch.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Aug. 6, 2001--Standard & Poor's today lowered its senior unsecured debt and corporate credit ratings on Empresa Electrica del Norte Grande S.A. (Edelnor) to double-'C' from triple-'C'. The ratings remain on CreditWatch with negative implications.

Edelnor generates and transmits electricity in the northern interconnected system (SING), Chile's second largest electrical grid. Mirant Corp. (triple-'B'-minus/Stable/'A-3'), owns 82% of Edelnor. The downgrade follows Mirant's announcement that it does not intend to make additional cash infusions into Edelnor unless it can be reassured that it will be repaid in the near term. Since Mirant also stated that it is difficult at the present time to envision how it would receive such assurances of repayment in the absence of an advanced sales agreement for Edelnor, Standard & Poor's concludes that Mirant will withdraw a sizeable amount of support for Edelnor. Mirant's action significantly increases uncertainty over Edelnor's ability to make its upcoming debt service payment in September 2001.

The rating reflects:

-- Worse-than-anticipated operating performance in 2000, resulting in coverage
ratios below expectations;

-- The anticipated loss of significant contract revenue from the Emel
subsidiary, which expires at the end of 2001;

-- Uncertainty about Edelnor's ability to keep and attain new sales contracts
or sell into the spot market; and

-- The entry of gas and gas-fired plants, which has created overcapacity in the
SING grid.

Edelnor has only been able to meet its financial obligations since the end of the first quarter of 2001 with the aid of a US$6 million fund set aside for Edelnor, and made available by its Chilean parent, Mirant Chile S.A. The purpose of this fund was to help Edelnor work through minor cash flow difficulties due to timing. Mirant is not expected to continue to provide this support, though Mirant has instructed Edelnor that it will defer repayment of more than US$2 million owed to Mirant for services previously provided in order to assist with Edelnor's liquidity situation.

Nevertheless, without revenues from the Emel contracts after 2001, which account for roughly one-half of contracted capacity; expected narrowing margins on sales of coal-powered energy; and barring any additional aid from its parent, it is extremely unlikely Edelnor will meet its scheduled interest payments in March 2002. This assumes Edelnor wins definitive approval from the national environmental regulator (CORAMA) to use pet coke, a more efficient fuel, in its coal plants, which might enable the coal plants to be dispatched more often. Even if Edelnor wins definitive approval, which may take place in the third quarter of 2001, it will not have a material impact on Edelnor's ability to meet its financial obligations in March 2002. Funds gathered from Edelnor's sale of noncore assets are also not expected to be sufficient to help meet its March 2002 debt service payments.

A further hindrance to Edelnor's cash flow difficulties in 2001 is the elimination of a US$30 million cash influx Edelnor was to receive from a debt issuance to have taken place in 2000 at its gas pipeline subsidiary, NorAndino. This financing did not take place. The elimination of this expected cash influx is pivotal to Edelnor's current cash flow crunch, and makes Edelnor even more vulnerable, especially in 2002 after the loss of the Emel contracts.

The loss of the Emel contracts coincides with the entry of lower marginal cost, gas-fired facilities, which have doubled installed capacity in the SING. Because most large customers have already procured firm supply, there is little opportunity for Edelnor to replace these customers in the SING. ---CreditWire