NRG says no … again.

To no one’s surprise, NRG Energy has formally said no to Exelon’s offer to buy them out. NRG already rejected the unofficial offer on Nov. 9 and is now rejecting the same offer the Chicago-based power giant is bringing to individual shareholders of NRG, Texas’ No. 2 power company.

nukes3mile It’s all about the nukes: Well, and some other power plants too, but they’re a big reason Exelon is pushing its hostile takeover attempt of NRG Energy. Exelon, owner of The Three Mile Island nuclear power plant, is the largerst nuclear power generator in the U.S. (AP Photo/Chris Gardner)

NRG’s voluminous filing explaining the board’s rejection (and why shareholders should do the same) has many interesting details, including some from the early discussions of a deal.
According to the filing NRG’s President and CEO David Crane said he wouldn’t even meet with Exelon’s Chairman and CEO John Rowe unless ” …Exelon was able to pay a price for NRG that reflected the underlying fundamental value of NRG.” In other words, don’t make a lame offer. Apparently Rowe even mentioned a specific price range to Crane on the phone, which Crane thought was in the ballpark, so he agreed to meet.
According to the SEC filing “Mr. Rowe went on to make it clear to Mr. David Crane that Exelon’s interest was in the power generation assets of NRG, particularly in Texas and New York, and that Exelon perceived NRG’s headquarters, and all members of management and the costs associated with it, as the principal cost synergy of the transaction.” In other word, Crane would be out of work.
Turns out at the meeting on Sept. 30 in New York, Exelon wouldn’t offer any specifics and just wanted to start due diligence so they could have some sort of agreement ready for the 43rd Edison Electric Institute Financial Conference in early November. Crane said no and Exelon made its offer on Oct. 19 via letter and press release.
Crane later refused to take a November 3 call form Christopher Crane, Exelon’s Chief Operating Officer, ” … based on the view that any communication between the parties under the circumstances should be between the Chief Executive Officers of the two companies.” Ouch. In addition, several NRG directors were contacted by Exelon directors and members of Exelon’s senior management, according to the filing.
Exelon has already filed suit against NRG in Delaware Chancery Court over the rebuffed advances.
Also this week Exelon has said it is reconsidering the design it will run with for its planned nuclear power plant in Victoria. Originally the company was going with the General Electric-Hitachi Economic Simplified Boiling Water Reactor (ESBWR), a design that has not yet been built, even though its design is generally less complicated than others.
But Exelon spokesman Craig Nesbit told Reuters ” … the Victoria project came out in the bottom of two tiers in an initial ranking by the U.S. Department of Energy which is prioritizing 19 requests for federal loan guarantees for 14 nuclear projects, many more than the $18.5 billion program can support.”

“We believe the Victoria project fell into the lower tier largely because of the uncertainty of the ESBWR design,” Nesbit said.

NRG isn’t saying where its application to expand the South Texas Project nuclear plant ranked under the DOE review. But it was the first application submitted under the new regime the Nuclear Regulator Commission started for plants in recent years, and the chosen design has already been built overseas.
An interesting thought that the change-in-reactor-design brings up: might Exelon be looking to buy not just NRG’s Texas power plants but the agreement the company signed with Toshiba this year? Under that deal NRG created Nuclear Innovation North America which will market, site, develop, finance and build not just the two expansion units at STP but two more units with Toshiba.

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