Power Generation and Leading Retail Franchise Creates a Strong, Reliable and Competitive Business for the Benefit of Texas Customers
– By Linton Levy –
NRG Energy, Inc. (NYSE: NRG) today announced a definitive agreement to acquire Reliant Energy Inc.’s Texas retail business, creating a strong, reliable and competitive business for the benefit of Texas customers. NRG will use cash on hand to fund the $287.5 million acquisition price. NRG also has arranged with Merrill Lynch to provide continuing credit support to the retail business subsequent to closing.
The combination of Reliant’s retail business, the second largest mass market electricity provider in
Texas with approximately 1.8 million customers, and NRG’s generation will create a stronger player
in the competitive Texas market. NRG is one of the nation’s foremost competitive energy providers
with power generating facilities capable of generating more than 24,000 megawatts. NRG entered
the Texas market in early 2006 when it bought nearly 11,000 MW of assets from Texas Genco and
formed NRG Texas which employs 1,100 people in Texas, primarily in the Houston area.
“Reliant has built a premier retail business with a brand that is synonymous with a superior customer
service focus,” said David Crane, NRG’s President and Chief Executive Officer. “We are confident
that our physical assets and commercial and risk management capabilities will provide a strong
foundation, that when combined with Reliant’s consumer business, will give us the ideal business
model to deliver value for our Texas customers, employees and shareholders.”
Supplemental to this acquisition, NRG negotiated a transitional credit sleeve facility with Merrill
Lynch, the current credit provider for Reliant, under which NRG will inject $200 million of cash
into the retail entity. The credit sleeve will provide collateral support at the retail enterprise for up to
18 months while an orderly transition to NRG supplying the retail entity’s power requirements
occurs, with limited ongoing collateral requirements.
“Matching NRG’s generation with Reliant’s retail load reduces the need for third party power
contracts and collateral support for the retail business,” commented Robert Flexon, NRG Chief
Financial Officer. “Merrill Lynch’s credit support allows this transformation to happen in a
structured and rational way.”
Strategic & Financial Benefits
???? Complementary Generation and Retail Portfolios
NRG Texas becomes the primary supplier of power to Reliant, thereby creating a more
stable, reliable and competitive business for the benefit of Texas customers, employees and
stockholders.
???? Credit Synergies
Backing Reliant’s load-serving requirements with NRG’s generation significantly reduces the
need to sell and buy power from the remaining financial institutions and other intermediaries
that trade in the ERCOT market which will result in reduced transaction costs and credit
exposures.
???? Significant Collateral Reduction
This combination, due to NRG’s diverse asset base, provides for an efficient credit structure
as it allows for significant reduction in actual and contingent collateral. The reductions will
be achieved initially through offsetting transactions and over time by minimizing the need to
hedge the retail power supply through third parties and thereby eliminating associated
collateral postings.
???? EBITDA and Cash Flow Accretion
Excluding transaction and other one-time costs, NRG expects the transaction to be
immediately accretive to EBITDA and free cash flows and fully accretive in 2010.
???? Enhanced, Downstream ‘Green’ Capabilities
With Reliant retail, NRG will obtain a platform to build on the entire class of distributed
generation and retail alternative energy technologies that are aimed directly at consumers.
These technologies include smart meters, solar powered rooftop installations, and ultimately,
electric vehicles, among other distributed technologies.
Financial Terms
NRG will acquire Reliant for $287.5 million in cash, and remit acquired net working capital to
Reliant over the six months following the closing date. As of December 31, 2008, the net working
capital was approximately $111 million.
Approvals and Time to Close
NRG expects to close the transaction late in the second quarter of 2009. The transaction is subject
to customary closing conditions and regulatory approvals, including pre-merger notification under
the Hart-Scott-Rodino Act.
Conference Call
NRG Energy will host a conference call on March 2, 2009 at 8:00 a.m. eastern to discuss the
announcement. Participants may access the live, listen-only conference call by dialing 877.407.9205
(toll-free) or 201.689.8054 (international). A slide presentation and live audio webcast will be
available at http://www.nrgenergy.com under the “Investors” section from the menu at the top of
the page. The webcast will be archived on the Company’s website for those who are unable to listen
in real time. Participants should plan to dial in or log on approximately five minutes prior to the
scheduled start time.
NRG Energy, Inc., a Fortune 500 company, owns and operates one of the country’s largest and
most diverse power generation portfolios. NRG’s 48 plants provide approximately 24,000
megawatts of generation capacity—enough to power nearly 20 million homes. In November 2007,
NRG won two of the industry’s highest honors—Platts Industry Leadership and Energy Company
of the Year awards. Headquartered in Princeton, NJ, NRG is a member of the U.S. Climate Action
Partnership (USCAP), a group of business and environmental organizations calling for mandatory
legislation to reduce greenhouse gas emissions. More information is available at
www.nrgenergy.com.