Merger of NRG Energy, GenOn Serves as "Foundation" for Retail Expansion

The combination of NRG Energy, Inc. and GenOn Energy, Inc. will serve as a "foundation" for further retail market expansion, NRG President and CEO David Crane said today.

NRG Energy, Inc. and GenOn Energy, Inc. announced they have signed a definitive agreement to combine the two companies in a stock-for-stock tax-free transaction, which the companies said would create the largest competitive generator in the United States with a fleet of approximately 47,000 MW with asset concentrations in the East, Gulf Coast and West and a combined enterprise value of $18 billion.

"This combination ushers in a new era of scale, scope, and market and fuel diversification in the competitive power industry," said NRG President and CEO David Crane, who will continue his present positions with the combined company.

In particular, the combination provides NRG with a much larger portfolio of physical generation in the Northeast and Mid-Atlantic, in which it has been expanding its retail book through both organic expansion of the Reliant and Green Mountain Energy brands, and the previous Energy Plus acquisition.

"An expanded core generation fleet will enable the combined company to duplicate in multiple core markets (principally in the East) NRG's successful integrated wholesale-retail business model in ERCOT -- the best business model across the price cycle, in an industry that is subject to commodity price volatility," the companies said.

Crane said backing retail supply obligations with physical generation assets is the "best way" to operate a retail business.

The NRG-GenOn combined fleet generates more than 104 terawatt-hours (TWh) of electricity annually. The combined fleet will include 23 GW in the East, including a large concentration in Pennsylvania and Maryland, 16 GW in the Gulf Coast, and 8 GW in the West.

"Due to the complementary nature of the two generation portfolios, the merger is not expected to result in any market power issues," the companies said.

NRG and GenOn expect to close the merger by the first quarter of 2013.

GenOn shareholders will receive 0.1216 of a share of NRG common stock in exchange for each GenOn share of common stock. Based on NRG's and GenOn's closing share prices on July 20, the transaction represents a 20.6% premium to GenOn's shareholders.

Following completion of the transaction, NRG shareholders will own 71% of the combined company and GenOn shareholders will own 29%.

After closing, the Board of Directors will have 16 members with 12 members from the NRG Board and four joining from the GenOn Board. Howard Cosgrove will remain Chairman of the NRG Board and GenOn Chairman and CEO Edward R. Muller will join the NRG Board as Vice Chairman.