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Thursday, October 18, 2012

NRG and GenOn Merge to the Top

News & Events - News NRG and GenOn Merge to the Top Posted: 8.28.2012 By now you’ve probably heard about the highly publicized merger of NRG Energy, Inc. and GenOn Energy, Inc. In a $1.7 billion deal, announced on July 22 by NRG, the combined company will keep the NRG name for a new conglomerate that will have the capacity to generate 47,000 megawatts of electric power. Why is it such a big deal? In short, it’s a move that completely transforms the competitive power game in one fell swoop. After the merger takes place in January 2013, NRG will be the largest Independent Power Producer in the country, strategically positioned nationwide for rapid growth and the continued development of sustainable, affordable Smart Energy Solutions. The combined company will: Generate enough energy to power 40 million American homes Have asset concentrations in the East, Gulf Coast and West Have a combined enterprise value of $18 billion (compare that with the largest MLM in the business, Avon, which has a public value of $9 billion – only half that amount) David Crane, NRG President and CEO, explains it like this: “This combination ushers in a new era of scale, scope, and market and fuel diversification in the competitive power industry.” Mr. Crane, who will continue to lead the merged organization in his current role, added that backing retail supply obligations with physical generation assets is the "best way" to operate a retail business. The companies’ spokespeople elaborated by saying, “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.” NRG and GenOn have invested over $3 billion since 2000 on environmental improvements, leading to significant emissions reductions. The combined company will continue NRG’s commitment to delivering the sustainable energy technologies of tomorrow. An enhanced core generation business will allow it to further invest in and grow its clean energy businesses. The bottom line: the 900 pound gorilla we had in NRG just hit adolescence and became King Kong. It’s something to write home about.