NRG pre-announces preliminary financial results (standalone) of
approximately $530 million in adjusted EBITDA for the second quarter
2012 and $830 million in adju
NRG Energy, Inc. (NYSE: NRG) and GenOn Energy, Inc. (NYSE: GEN) today
announced they have signed a definitive agreement to combine the two
companies in a stock-for-stock tax-free transaction, creating the
largest competitive generator in the United States with a diverse fleet
of approximately 47,000 megawatts (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. "The greater depth and breadth gained through
the combination with GenOn will put NRG in a uniquely strong position to
fulfill the needs of American energy consumers in the 21st
century."
The transaction will enhance annual combined company EBITDA by $200
million by 2014 by realizing cost and operational efficiency synergies.
In addition, the transaction will enable the combined company to reduce
its interest and liquidity costs, and realize other balance sheet
efficiencies, in aggregate, of $100 million per year. As a result, total
recurring FCF benefits generated by this transaction will be
approximately $300 million per year.
"This combination will deliver immediate value to the shareholders of
both companies who will benefit from the combined company's merger
synergies, balance sheet efficiencies, increased scale and additional
geographic diversity," said GenOn Chairman and CEO, Edward R. Muller,
who will join the NRG Board of Directors as Vice Chairman. "NRG and
GenOn are a great fit geographically and operationally and we look
forward to working together to capture efficiencies from the scale
associated with the transaction to deliver enhanced value to our
investors."
Strategic & Financial Benefits
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Diversification and scale
The combined company, which
will retain the name NRG Energy, will become the largest competitive
power generation company in America with approximately 47,000 MW of
fossil fuel, nuclear, solar and wind capacity across the merit order,
situated almost entirely in the three premier competitive energy
markets in the U.S. The combined fleet generates more than 104
terawatt-hours (TWh) of electricity annually.
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Expected Synergies
Transaction benefits will result in at
least $200 million per year in incremental EBITDA and, combined with
$100 million of balance sheet efficiencies, will result in at least
$300 million of additional FCF by 2014, the first full year of
combined operations. The $200 million per year breaks down into $175
million per year in cost synergies, principally resulting from reduced
G&A expenses, and $25 million per year of operational efficiency
synergies under NRG's FORNRG program. In addition, as a result
of interest savings and reduced liquidity and collateral requirements,
the combined company will realize an additional $100 million in
reduced interest expense and collateral benefits. The transaction
costs and total cash "cost to achieve" the synergies and other cash
flow benefits will primarily be incurred during 2013 and are estimated
at approximately $200 million.
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Immediately and substantially accretive
The transaction
will be immediately accretive on an EBITDA basis and substantially
accretive in 2014, the first full year of operation, to both EBITDA
and FCF before growth investments.
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Enables expanded wholesale-retail model
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.
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Dividend
This transaction will reinforce the ability to
pay the 9 cents per share quarterly dividend (36 cents per share on an
annual basis) previously announced by NRG for the benefit of both
companies' shareholders.
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Balance sheet and credit metric enhancing
Balance sheets
efficiencies will permit the combined company to reduce indebtedness
by at least $1 billion and enhancements to corporate EBITDA and funds
from operations (FFO) significantly improve key credit metrics,
including:
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2014 NRG Standalone(1)
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2014 NRG Pro Forma (1)
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Corporate Debt/Corporate EBITDA
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4.6x
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4.1x
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Corporate FFO/Corporate Debt
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13.9%
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16.4%
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(1)
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NRG metrics are based on midpoint of guidance and pro forma
metrics reflects impact of transaction benefits.
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Cleaner energy
The combined company will continue the
work of NRG and GenOn in reducing emissions from their existing
conventional fleets. NRG and GenOn combined have invested over $3
billion since 2000 to reduce emissions. This investment has helped 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.
In addition, the
combined company will continue to grow NRG's industry-leading
portfolio of solar generating facilities, its eVgo electric vehicle
charging network and its other clean energy products and services. In
addition, all previously announced plant retirements and deactivations
will be completed on schedule.
Financial Terms
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%.
Financial Summary
NRG is also announcing preliminary forward pro forma financial guidance
for the combined company for 2013 and 2014. This includes:
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2013
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2014
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Adjusted EBITDA
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$2,535-$2,735 million
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$2,630-$2,830 million
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Free Cash Flow *before investments
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$825-$1,025 million
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$845-$1,045 million
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The above pro forma financial guidance includes updated guidance for
GenOn as follows:
-
2013 adjusted EBITDA guidance raised from $669 million to $687 million
-
2014 adjusted EBITDA guidance provided of $730 million
Additionally, GenOn announced today that it is raising its full year
guidance for 2012 adjusted EBITDA from $446 to $467 million.
Board Structure, Management and Headquarters
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.
In addition to David Crane continuing to serve as Director, President
and CEO, Kirk Andrews will remain as Chief Financial Officer and
Mauricio Gutierrez will serve as Chief Operating Officer of the combined
company. Anne Cleary of GenOn will become the Chief Integration Officer
of NRG at closing.
John Ragan and Lee Davis, both currently of NRG, will act as Regional
Presidents of the Gulf Coast and East regions, respectively, and John
Chillemi of GenOn will become Regional President of the West region, at
which time Tom Doyle will focus his efforts as President of NRG Solar.
The combined company will be dual headquartered, with financial and
commercial headquarters in Princeton and operational headquarters in
Houston.
Update to NRG Results
NRG is also pre-announcing preliminary results for its second quarter
2012. For NRG alone, adjusted EBITDA will be approximately $530 million
for the second quarter of 2012 and approximately $830 million in the
first half of 2012. NRG also is reaffirming 2012 guidance of
$1,825-$2,000 million of adjusted EBITDA and $800-$1,000 million of FCF
before growth investment.
Approvals and Time to Close
NRG and GenOn expect to close the merger by the first quarter of 2013.
The transaction is subject to customary closing conditions and
regulatory approvals, including approval by shareholders of both
companies, the Federal Energy Regulatory Commission (FERC), the New York
Public Service Commission and the Public Utility Commission of Texas.
The companies will also submit notice of the merger to the California
Public Utilities Commission and the U.S. Nuclear Regulatory Commission
as well as pre-merger notification to the U.S. Department of Justice and
the Federal Trade Commission under the Hart-Scott-Rodino Act. Due to the
complementary nature of the two generation portfolios, the merger is not
expected to result in any market power issues.
NRG's financial advisors were Credit Suisse and Morgan Stanley and J.P.
Morgan acted as GenOn's financial advisor.
Financial Community Presentation
A live webcast regarding this announcement will be held at 9:00am
Eastern on Monday, July 23 and be hosted by David Crane, NRG President
and CEO and Edward R. Muller, GenOn Chairman and CEO. Investors, media
and others may access this event by logging on to either NRG's website
at http://www.nrgenergy.com
and clicking on "Investors" or GenOn's website, www.genon.com
and clicking on Investor Relations. The webcast will be archived on each
site for those unable to listen in real time.
Press Conference
A telephonic press conference regarding this announcement will be held
at 12:00pm ET/9am PT on Monday, July 23, and will be co-hosted by David
Crane, NRG President and CEO, and Edward R. Muller, GenOn Chairman and
CEO. Members of the media can access this call by dialing 866.314.5232.
The passcode is: 86974439.
About NRG
NRG is at the forefront of changing how people think about and use
energy. A Fortune 500 company, NRG is a pioneer in developing cleaner
and smarter energy choices for our customers: whether as one of the
largest solar power developers in the country, or by building the first
privately funded electric vehicle charging infrastructure or by giving
customers the latest smart energy solutions to better manage their
energy use. Our diverse power generating facilities can support more
than 20 million homes and our retail electricity providers - Reliant,
Green Mountain Energy Company and Energy Plus - serve more than two
million customers. More information is available at www.nrgenergy.com.
About GenOn
GenOn is one of the largest competitive generators of wholesale
electricity in the United States. With power generation facilities
located in key regions of the country and a generation portfolio of
approximately 22,700 megawatts, GenOn is helping meet the nation's
electricity needs. GenOn's portfolio of power generation facilities
includes baseload, intermediate and peaking units using coal, natural
gas and oil to generate electricity. GenOn has experienced leadership,
dedicated team members, financial strength and a solid commitment to
safety, the environment, operational excellence and the communities in
which it operates. GenOn routinely posts all important information on
its web site at www.genon.com.
Forward Looking Statements
In addition to historical information, the information presented in this
communication includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Exchange Act. These statements involve estimates, expectations,
projections, goals, assumptions, known and unknown risks and
uncertainties and can typically be identified by terminology such as
"may," "will," "should," "could," "objective," "projection," "forecast,"
"goal," "guidance," "outlook," "expect," "intend," "seek," "plan,"
"think," "anticipate," "estimate," "predict," "target," "potential" or
"continue" or the negative of these terms or other comparable
terminology. Such forward-looking statements include, but are not
limited to, statements about the anticipated benefits of the proposed
transaction between NRG and GenOn, each party's and the combined
company's future revenues, income, indebtedness, capital structure,
plans, expectations, objectives, projected financial performance and/or
business results and other future events, each party's views of economic
and market conditions, and the expected timing of the completion of the
proposed transaction.
Forward-looking statements are not a guarantee of future performance and
actual events or results may differ materially from any forward-looking
statement as result of various risks and uncertainties, including, but
not limited to, those relating to: the ability to satisfy the conditions
to the proposed transaction between NRG and GenOn, the ability to
successfully complete the proposed transaction (including any financing
arrangements in connection therewith) in accordance with its terms and
in accordance with expected schedule, the ability to obtain stockholder,
antitrust, regulatory or other approvals for the proposed transaction,
or an inability to obtain them on the terms proposed or on the
anticipated schedule, diversion of management attention on
transaction-related issues, impact of the transaction on relationships
with customers, suppliers and employees, the ability to finance the
combined business post-closing and the terms on which such financing may
be available, the financial performance of the combined company
following completion of the proposed transaction, the ability to
successfully integrate the businesses of NRG and GenOn, the ability to
realize anticipated benefits of the proposed transaction (including
expected cost savings and other synergies) or the risk that anticipated
benefits may take longer to realize than expected, legislative,
regulatory and/or market developments, the outcome of pending or
threatened lawsuits, regulatory or tax proceedings or investigations,
the effects of competition or regulatory intervention, financial and
economic market conditions, access to capital, the timing and extent of
changes in law and regulation (including environmental), commodity
prices, prevailing demand and market prices for electricity, capacity,
fuel and emissions allowances, weather conditions, operational
constraints or outages, fuel supply or transmission issues, hedging
ineffectiveness.
Additional information concerning other risk factors is contained in
NRG's and GenOn's most recently filed Annual Reports on Form 10-K,
subsequent Quarterly Reports on Form 10-Q, recent Current Reports on
Form 8-K, and other SEC filings.
Many of these risks, uncertainties and assumptions are beyond NRG's or
GenOn's ability to control or predict. Because of these risks,
uncertainties and assumptions, you should not place undue reliance on
these forward-looking statements. Furthermore, forward-looking
statements speak only as of the date they are made, and neither NRG nor
GenOn undertakes any obligation to update publicly or revise any
forward-looking statements to reflect events or circumstances that may
arise after the date of this communication. All subsequent written and
oral forward-looking statements concerning NRG, GenOn, the proposed
transaction, the combined company or other matters and attributable to
NRG or GenOn or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements above.
Additional Information and Where To Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any
vote or approval, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such jurisdiction. The proposed business combination transaction between
NRG and GenOn will be submitted to the respective stockholders of NRG
and GenOn for their consideration. NRG will file with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-4 that
will include a joint proxy statement of NRG and GenOn that also
constitutes a prospectus of NRG. NRG and GenOn will mail the joint proxy
statement/prospectus to their respective stockholders. NRG and GenOn
also plan to file other documents with the SEC regarding the proposed
transaction. This communication is not a substitute for any prospectus,
proxy statement or any other document which NRG or GenOn may file with
the SEC in connection with the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF GENON AND NRG ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT WILL BE FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and stockholders will be able to obtain free
copies of the joint proxy statement/prospectus and other documents
containing important information about NRG and GenOn, once such
documents are filed with the SEC, through the website maintained by the
SEC at www.sec.gov.
NRG and GenOn make available free of charge at www.nrgenergy.com
and www.genon.com,
respectively (in the "Investor Relations" section), copies of materials
they file with, or furnish to, the SEC.
Participants in The Merger Solicitation
NRG, GenOn, and certain of their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies
from the stockholders of GenOn and NRG in connection with the proposed
transaction. Information about the directors and executive officers of
NRG is set forth in its proxy statement for its 2012 annual meeting of
stockholders, which was filed with the SEC on March 12, 2012.
Information about the directors and executive officers of GenOn is set
forth in its proxy statement for its 2012 annual meeting of
stockholders, which was filed with the SEC on March 30, 2012. These
documents can be obtained free of charge from the sources indicated
above. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests,
by security holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with the
SEC when they become available.
Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50349413&lang=en
NRG
Media:
Lori Neuman, 609-524-4525
Dave
Knox (TX), 713-537-2130
or
Investors:
Chad
Plotkin, 609-524-4526
Stefan Kimball, 609-524-4527
or
GenOn
Media:
Laurie
Fickman, 832-357-7720
or
Investors:
Dennis Barber,
832-357-3042
Monica Schafer, 832-357-7278
© Business Wire 2012
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