NRG-GenOn merger to create new leader in power capacity

• 11 years ago (2012-07-23)
• Junior Isles

North America 998

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NRG Energy Inc. (NRG) is to purchase $1.7 billion of GenOn Energy Inc. (GEN) stock, initiating a merger that will create the US’ largest independent electricity generator and, hopefully, a more resilient firm with the market strength to withstand sliding power prices.

The combined companies will operate under the NRG Energy name and have an enterprise value of $18 billion, according to a statement from the companies.

Once the merger completes in first quarter 2013 NRG will surpass Calpine Corp. as the largest independent power company by generation capacity in the US.

Their newly combined operations will drive efficiency and lower costs for their roughly 47 000 MW of generation capacity, leaving them better positioned to benefit from an expected rebound in prices, according to chief executive officers of NRG and GenOn.

“In this industry, if you have the lowest cost structure, you are going to have success over time,” NRG CEO David Crane said. Crane is to remain president and CEO of the combined company, with GenOn CEO Edward Muller joining NRG’s board as vice chairman.

NRG holders will own 71 per cent of the new company, with GenOn holding the remaining 29 per cent.

The transaction must still be approved by shareholders of both companies, the Federal Energy Regulatory Commission (FERC), the New York Public Service Commission and the Public Utility Commission of Texas.

Houston based GenOn has lost almost a third of its market value this year, closing at $1.82 on July 20, due to cheap natural gas driving down electricity prices.

The GenOn purchase adds coal plants in the Mid-Atlantic to NRG’s power portfolio, with NRG intending to expand its wholesale retail business in the Eastern US.

“The greater depth and breadth gained through the combination with GenOn will put NRG in a uniquely strong position to fullfil the needs of American energy consumers in the 21st century,” Crane said.