NRG and GenOn to Merge in $1.7 B Deal

Princeton, N.J.-based NRG Energy and Houston, Texas-based GenOn on Monday signed a definitive agreement to combine the two companies in a $1.7 billion stock-for-stock tax-free transaction. The merger will create "the largest competitive generator" in the U.S. with a fleet of about 47 GW and assets in the East, Gulf Coast, and West, and a combined enterprise value of $18 billion, the companies said.

The merger would give NRG a "greater depth and breadth" to fulfill the nation’s energy needs, NRG President and CEO David Crane said in a statement. "This combination ushers in a new era of scale, scope, and market and fuel diversification in the competitive power industry."

GenOn Chair and CEO Edward Muller, who will join the NRG Board of Directors as vice chairman, said the companies are a "great fit geographically and operationally."

The combined company will retain the name NRG Energy. NRG said it expects yearly transaction benefits before interest, taxes, depreciation, and amortization (EBITDA) of at least $300 million by 2014, which would be the first full year of combined operations.

Another aspect of the merger: working collaboratively to reduce emissions from their existing conventional fleets. Together, the companies have invested more than $3 billion since 2000 to reduce emissions, helping "NRG reduce SO2 emissions by 56% and NOx emissions by 64% below 2000 levels and GenOn reduce SO2 emissions by 90% and NOx emissions by 78% below 1990 levels."

GenOn, a company formed in December 2010 through the merger of Mirant Corp. and RRI in February announced it would deactivate 3,140 MW of generating capacity in PJM’s operational region between June 2012 and May 2015, citing insufficient “forecasted returns on investments necessary to comply with environmental regulations.” All previously announced plant retirements and deactivations are expected to be completed on schedule as a result of the NRG-GenOn merger.

Sources: POWERnews, NRG, GenOn

—Sonal Patel, Senior Writer (@POWERmagazine)