Nrg Energy (NYSE:NRG)
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1 Year : From May 2012 to May 2013
(Updated to add details and background.)
By Cassandra Sweet
NRG Energy Inc. (NRG) and GenOn Energy Inc. (GEN) said Sunday they plan to merge in an all-stock deal valued at about $1.7 billion that would create the largest U.S. competitive power company.
The combined company would be the largest merchant power generator in the U.S., worth $18 billion, and with about 47,000 megawatts of power plants, in regions near the East and West Coasts and the Gulf Coast, the companies said.
Under the deal, GenOn shareholders will receive 0.1216 of a share of NRG common stock in exchange for each GenOn share of common stock. The deal has been valued at roughly $1.7 billion, representing a 20.6% premium to GenOn shares, based on their closing price Friday of $1.82.
NRG shares closed Friday at $18.05.
After the deal closes, NRG shareholders will own 71% of the combined company and GenOn shareholders will own 29%.
NRG President and Chief Executive David Crane will maintain his current positions at the combined company.
"This combination ushers in a new era of scale, scope, and market and fuel diversification in the competitive power industry," Mr. Crane said in a statement.
The companies' merger plans come as U.S. power-plant operators have struggled against some of the lowest wholesale power prices in a decade, as a natural-gas production boom has kept gas prices at record lows. Companies such as NRG and GenOn that primarily sell into the wholesale power markets are much more exposed to the ups and downs of commodity prices than companies such as Duke Energy Corp. (DUK) and Southern Co. (SO), that operate utilities in states where regulators oversee their operations and set rates and investment returns.
By combining their operations, NRG and GenOn expect to boost earnings before interest, taxes and other costs by $200 million by 2014, because of lower interest and other savings they expect to see from operating their fleets as one company. The companies said they expect an additional $100 million in savings that will boost cash flow.
Write to Cassandra Sweet at cassandra.sweet@dowjones.com
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