UPDATE: Exelon won't up its NRG bid

Illinois-based power plant giant Exelon won’t sweeten its offer for NRG Energy, the second-largest power producer in Texas, according to this Reuters story:

stp_refueling_2008 The glow of money: Exelon is interested in NRG in part for its stake in the South Texas Project nuclear plant near Bay City. The plant is the best performing nuke plant in the U.S. for several years running. Here’s the reactor cooling pool on Unit 2 during reactor refueling in October. (Julio Cortez / Chronicle)

“We think the offer is very sweet as it is,” President and Chief Operating Officer Christopher Crane told the EEI Financial Conference in Phoenix. “The offer is the offer.”

Exelon first made the offer for NRG in late October, an unsolicited bid worth about $6 billion. Many, including NRG officials, saw it as an effort to take advantage of the beating NRG’s stock price took in the past six months.
Despite the overall market decline, independent power producers have seen their stocks fall even more steeply in part because hedge fund and institutional investors have been selling off their holdings in the firms and concerns the capital-intensive businesses would be particularly hard hit by the credit crunch.
On Sunday NRG formally declined the offer in a lengthy letter. NRG CEO David Crane also indicated in the letter there was concern Exelon had not lined up financing for such a deal yet, which seems like a bad idea given the current market, and that the deal would require refinancing existing NRG debt, also an ill advised move.
Some think that won’t be the end of the story, however, including Deutsche Bank analyst John Kiani, who wrote in a research note:

“We continue to agree that NRG is worth substantially more than [Exelon’s) offer (our target is $41), but also believe [Exelon’s] large cap currency offers similar financial and commodity upside.”
“EXC may respond aggressively, considering its 11/3/08 letter stated
that the company may take its proposal to NRG shareholders.”

Kiani notes that Exelon may have a way of joining the two companies that wouldn’t require refinancing the existing NRG debt, a move that might appeal to shareholders if they’re approached directly.
AP reports Exelon isn’t throwing in the towel, either.

Crane said after the meeting that the Exelon has heard from NRG shareholders who support the deal and that NRG’s board should take that into account.
“In this process, if we hear back from NRG shareholders that they are not interested, then we go away, but that’s not the feedback we’re receiving,” Crane told reporters.

What about buying up some of the other independent power producers who have been hit hard this year?

Crane said Exelon had evaluated other independent power producers as part of its growth strategy, and believed NRG was the best fit in terms of avoiding regulatory problems.
“This one is the most compelling,” he told a room crowded with investors and analysts following the takeover battle.
“If you look at Mirant, Dynegy or Reliant they’re all problematic from a portfolio standpoint with market power, and the divestitures with something like that wouldn’t be supportive,” Crane said.
Asked later about Calpine Corp which NRG itself tried to buy earlier this year, Crane said Exelon had evaluated what was a “very strong fleet of assets” but found it would be too dilutive to its shareholders.

+++++++++++++++++
UPDATE
Here comes the proxy fight!
Exelon said it is moving forward with plans to go directly to shareholders with its offer and plans to put forward its on slate of directors for NRG’s board.
NRG is telling shareholders to reject the proposal.

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