Exelon also urgesNRG shareholders to use the BLUE proxy card to vote in favor of proposals
- By Abby Gessner -
Exelon Corporation, in a letter to shareholders of NRG Energy, Inc.has provided more detail on the true value of Exelons offer to acquire NRG. Exelon emphasized that its offer is worth more to NRG shareholders today than when it was first announced last October.
Ina letter, Exelon also urgesNRG shareholders to use the BLUE proxy card to vote in favor of proposals to expand the NRG Board and elect nine new, independent and experienced directors. The fulltext of theletter follows:
* * * *
Dear NRG Energy, Inc. Shareholder:
Exelon Corporation has made an offer to acquire NRG Energy through an exchange of each share of NRG common stock you own for 0.485 of a share of Exelon common stock, which we believe would create significant value for you now and in the future. NRGs board and management have resisted Exelons proposal from the outset, refusing to entertain the only serious offer they have received despite their review of market alternatives.
What makes the current NRG boards conduct all the more surprising is that on top of its refusal to allow due diligence, it has spent a significant amount of shareholder money to file frivolous litigation and challenge our effort at every step since last October, as if the NRG board found our ongoing pursuit of value creation for NRG shareholders a distraction to be avoided regardless of the cost to you. It is not surprising that a judge just ruled against NRG in its lawsuit in federal court, determining that NRGs case had no merit. In addition, despite repeated efforts by NRG to thwart or delay consideration of the proposed combination by regulatory authorities, FERC approved the combination on May 21, 2009.
Given what we believe is this obvious pattern of entrenchment and intransigence on the part of the NRG board and management, Exelon is left with little choice but to ask you, the NRG owners, to change the make-up of the NRG board of directors so you have an opportunity to take advantage of the substantial value that can be created through a combination of NRG and Exelon. We will not be deterred by NRGs stubborn desire that we simply go away.
An Exelon-NRG combination provides a strategic platform for continued growth and offers extraordinary value-creation benefits to the shareholders of both companies. Our offer was valuable to NRG shareholders in October when we first made our proposal public, and it continues to offer the same and even greater value today. In the coming days and weeks, you will be hearing much more from Exelon on the value of our offer to acquire NRG.
Exelon is asking you to elect nine new, independent directors to an expanded NRG board of 19 directors. By changing the dynamic in the NRG boardroom, it is our intent not to change the control of the current board, but only to seat new directors who will bring a fresh perspective to the situation and put the best interests of NRG shareholders and the shareholders expressed interest in a transaction first and foremost. In our view, the present NRG board, in supporting managements unbending position, is not acting in your best interests. Change is needed inside the NRG boardroom, and you can make change happen by casting your votes to expand the NRG board and elect all nine independent candidates proposed by Exelon. We urge you to vote today using the BLUE proxy cardby telephone, by Internet or by signing, dating and returning the BLUE proxy card in the postage-paid envelope provided.
SETTING THE RECORD STRAIGHT
Since we publicly disclosed our proposal, you have been subjected to what we believe is an unfortunate amount of misinformation and distortion coming from NRG. Of late, in particular, NRGs management has sought to disparage the true value of Exelons offer.
The fact is that Exelons offer is worth more today than it was in October 2008. Investors are already well aware of the extent to which the value of Exelons offer has supported the trading price of NRGs stock for more than eight months. Beyond that, its important to focus on a few of the key value drivers that Exelon will bring to the combined company in the future.
EXELONS VALUE PROPOSITION: STRONGER TODAY, STRONGER TOMORROW
1. Strength and Scale. Exelons position in the competitive power sector with the largest nuclear fleet in the country and the third largest in the world cannot be replicated. Exelon has the largest market cap in the industry and maintains an investment grade credit rating. This represents a sustainable competitive advantage, with scale, scope and financial flexibility becoming increasingly important for competitive generators. Given the highly volatile market environment and unprecedented political/regulatory challenges, smaller, sub-investment grade companies like NRG with concentrated risks will face growing challenges over the long-term. The combined Exelon-NRG will have scale unparalleled in the industry, with considerable regional, fuel and regulatory diversity, and with the financial strength and flexibility required to endure commodity fluctuations, political risks and capital market constraints.
2. Carbon Advantage. Climate change legislation is now more likely than ever, and will significantly increase Exelons long-term earnings and value proposition while reducing the long-term value of NRGs coal-powered generation fleet. While the specific provisions of legislation that may ultimately be approved are subject to further debate, Exelons large nuclear fleet positions it for significant upside from virtually any form of carbon legislation. At the same time, NRG will face long-term downside risk as a stand-alone entity dominated by coal plants.
3. Increased Nuclear Capacity. Exelon intends to bring on-line between 1,300 and 1,500 MW of nuclear uprates between now and 2017 representing the equivalent of a new nuclear unit at roughly half the cost to build, and with no incremental annual operating expense other than the cost of fuel. Nuclear uprates provide a substantially higher return at lower financial risk than new build, and do not present the substantial risk of new-build cost overruns and regulatory delays, including those that NRG faces with its proposed new nuclear build at South Texas. The uprate projects are expected to be financed through Exelons balance sheet capacity. By comparison, NRGs likely share of the output of its proposed nuclear project will be less than the amount of these uprates, while the financial risks of that project are substantially greater than Exelons uprates. While Exelon has successfully brought 1,100 MW of uprates on line over the past ten years and has plans to do even more, NRG is taking substantial risk to finance and build a $10 billion nuclear plant as a sub-investment grade company something NRG has never done before and will not be able to do without financial assistance well in excess of the limited DOE loan guarantee resources that may be available to NRG for its project.
4. Cost Discipline. Exelon has demonstrated a commitment to shareholder value through successful cost-cutting programs, including a recently announced efficiency program. OM cost savings of $350 million are in the plan for 2010, half of which will be sustainable, representing a 3.5% decrease in OM from 2009 to 2010. Exelon has a history of successfully creating shareholder value through disciplined spending, including $250 million of OM cost savings following the Unicom-PECO merger in 2000 and another $350 million in OM cost savings driven by the Exelon Way in 2003-2004.
5. Market Diversification. Recent procurement events by Allegheny Power and PECO Energy in Pennsylvania, in which Exelon Generation won commitments for over 7 million megawatt hours of generation supply beginning in 2011, provide evidence of strong pricing for Exelons MidAtlantic fleet. The retail prices clearly underscore the long-term value inherent in Exelons well-positioned assets and the importance of strong regional market diversification.
We believe a combination of Exelon and NRG represents compelling and substantial value for all NRG stockholders. We also believe that the quickest and clearest path for NRG stockholders to realize the benefits of a transaction with Exelon or any other strategic transaction is to elect directors to the NRG board who are open to considering the merits of a combined Exelon-NRG and will compel management to at least enter into serious discussions on a transaction that demonstrates such clear value to you.
VOTE THE BLUE PROXY CARD TODAY
At the end of the day, you, as stockholders, are the owners of NRG and you will ultimately determine the future of your investment, but we do not think you will have that opportunity without a change in the NRG board. We are confident that you want a board of directors that will give Exelons offer full and fair consideration. We are equally confident that the nine independent nominees on the BLUE proxy card, upon election to the NRG board, will give full consideration to all strategic alternatives available to NRG and will not neglect, as we believe the current NRG board has, the opportunity to enter into a transaction that promises to create superior value for you.
Your vote is extremely important. To elect directors who are committed to looking out for your best interests, including exploring a potential combination of Exelon and NRG, please vote the BLUE proxy card TODAY by telephone, by Internet, or by signing, dating and returning the enclosed BLUE proxy card in the postage-paid envelope provided.
Thank you for your consideration.

Similar posts: exelon jobs