Slide 1: Schedule 14A Definitive Additional Materials
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A (RULE 14a-101) SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant ¨ Filed by a Party other than the Registrant x Check the appropriate b
Slide 2: Exelon presentation used with RiskMetrics and PROXY Governance
On July 2, 2009, Exelon Corporation used the following presentation in meetings with RiskMetrics Group and PROXY Governance, Inc.:
Slide 3: Exelon's Offer Is About Value Today and Tomorrow
Exelon’s Offer Is About Value Today – and Tomorrow Are EXC and NRG Together, or Is NRG Stand Alone, Better Built Add to Value in a Complex and Carbon-Constrained World? RiskMetricsGroup PROXY Governance, Inc. July 2, 2009
Slide 4: Important Information
Important Information This presentation relates, in part, to the offer (the “Offer”) by Exelon Corporation (“Exelon”) through its direct wholly-owned subsidiary, Exelon Xchange Corporation (“Xchange”), to exchange each issued and outstanding share of common stock (the “NRG shares”) of NRG Energy, In
Slide 5: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. The factors that could cause actual results to differ materially from
Slide 6: Background
Background • On October 19, 2008 Exelon announced its proposal to acquire NRG and create the largest, most diverse generation company in the U.S. – 100% stock consideration, fixed exchange ratio of 0.485 shares of EXC 1 for everyshareof NRGrepresentingan initial premium of 37% • The EXC/NRG combinat
Slide 7: For NRG Shareholders, a Combination Means
For NRG Shareholders, a Combination Means: Scope, scale and strength to build on Exelon’s proven capacity to… • Execute strategic objectives from a solid financial foundation, with ready access to low-cost capital • Realize significant value creation through operational and financial synergies • Div
Slide 8: Discussion Points
Discussion Points: 1. Exelon: Sustainable Advantage 2. Exelon-NRG: A Clear Strategic Fit 3. Value for NRG Shareholders 4. Achievable Plan to Execute Deal 5. Action Sought 6
Slide 9: Multi-Regional Diverse Company
Multi-Regional Diverse Company Electricity Customers: 3.8M Electricity Customers: 1.6M Total Capacity Gas Customers: 0.5M Owned: 24,809 MW Contracted: 6,483 MW Total: 31,292 MW New England Capacity Owned: 182 MW Midwest Capacity Owned: 11,388 MW Contracted: 3,230 MW Mid-Atlantic Capacity Total: 14,6
Slide 10: Exelon's Sustainable Advantage
Exelon’s Sustainable Advantage 1 Largestmarketcapitalization in thesectorat $33B andan investment grade balance sheet • Investmentgradebalancesheetthat enablesconsistentaccessto capital at lower cost Experienced management team with track record of creating and returning shareholder value • Exelonfo
Slide 11: Exelon Is Built to Last and Consistently Creates Value
Exelon Is Built to Last and Consistently Creates Value 100% Operational Prowess $20.00 Nuclear Annual Avg. Production Cost ($/MWh) 95% $18.00 90% 85% $16.00 80% $14.00 75% Range 5-Year Average $12.00 Exelon Industry 70% 65% $10.00 2003 2004 2005 2006 2007 2008 Operator (# of Reactors) Solid Balance
Slide 12: Exelon's Long-Term Value Drivers Generate Post-Transaction Value
Exelon’s Long-Term Value Drivers Generate Post- Transaction Value for All Shareholders Carbon - $1.1billion1 andgrowingannualupsideto ExelonEBITDAfrom Waxman-Markeylegislation - 1,300 MW -1,500 MW in Exelon nuclear uprates by 2017 increases the value of the existing fleet Nuclear Uprates - $2,200-2,
Slide 13: Exelon's Nuclear Uprate Plan Delivers More MWs Than NRG New Build
Exelon’s Nuclear Uprate Plan Delivers More MWs Than NRG New BuildWith - Less Risk At Half The Cost • Incremental 1,300 1–,500 MWsof Exelon uprates over 2009-2017 exceeds NRG’s expected ownership of STP 3&4 • Exelon has substantial experience managing 1,100 of MWs uprateprojects over the past 10 year
Slide 14: Discussion Points
Discussion Points: 1. Exelon: Sustainable Advantage 2. Exelon-NRG: A Clear Strategic Fit 3. Value for NRG Shareholders 4. Achievable Plan to Execute Deal 5. Action Sought 12
Slide 15: Combination Will Result in Scope, Scale and Financial Strength
Combination Will Result in Scope, Scale and Financial Strength Pro Forma Quick Stats ($s in millions) Enterprise Value Combined assets 1 $73,000 2 Market Cap LTM EBITDA $10,000 $60 $58 BILLION Market cap (as of 6/26/2009) $40,000 Enterprise value 3 $58,000 $50 4 Generating capacity ~48,000 MWs $40 $
Slide 16: Combination Will Operate in Most Attractive Markets
Combination Will Operate in Most Attractive Markets • Geographically complementary generation asset base • Predominantly located in competitive markets • Strong presence in PJM (Mid-Atlantic and Midwest) and ERCOT 1 By RTO Combined PJM 22,830 ERCOT 13,232 MISO 1,065 ISO NE 2,202 NYISO 3,960 CAL ISO
Slide 17: Combined Entity Will Continue to Benefit from Low Cost Fuel Sources
Combined Entity Will Continue to Benefit from Low Cost Fuel Sources Historical <1% <1% Forward Coal Prices Exelon 6.00 1 Central Appalachian ~150,000 GWh 5.00 6% 4.00 Coal $/mmbtu Northern Appalachian 3.00 2.00 2 PowderRiverBasin 93% 1.00 0.00 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008
Slide 18: Largest Fleet, Lowest Carbon Intensity
nd Largest Fleet, 2 Lowest Carbon Intensity CO2 Emissions of 15 Largest U.S. Electricity Generators Top 15 Generators by CO2 Intensity 1 Exelon 0.06 Bubble size represents carbon intensity, 2 Entergy 0.27 AEP expressed in terms of metric tons of CO2 Exelon + NRG 0.31 per MWh generated 150 3 FPL Grou
Slide 19: Carbon Legislation Gaining Momentum and Will Benefit Combined Company
Carbon Legislation is Gaining Momentum and Will Benefit the Combined Company Year 1 EBITDA Impact of $15/tonne Carbon With Waxman-Markey Merchant Coal Allocations $1,100 There is no case th where carbon OnJune26 , the U.S. legislation is ($M) House passed the better for NRG Waxman-Markey Bill than f
Slide 20: Discussion Points
Discussion Points: 1. Exelon: Sustainable Advantage 2. Exelon-NRG: A Clear Strategic Fit 3. Value for NRG Shareholders 4. Achievable Plan to Execute Deal 5. Action Sought 18
Slide 21: Offer Represents Significant Value to NRG Shareholders
Offer Represents Significant Value to NRG Shareholders • Our original offer provided a 37% premium to NRG's stock price on 10/17/08 • When comparedto all $1B+stockdealssince12/2003, that wasalmost doublethe 1-day average of 19% • NRG has responded with obstruction • Refusing to negotiate with Exelon
Slide 22: The Value of the Offer to NRG Shareholders Has Increased
The Value of the Offer to NRG Shareholders Has Increased THEN NOW Exchange Ratio 0.485 0.545 (12.4% increase) 1 Implied Ownership 16.8% 18.2% 3 Transaction Value to NRG $2.3 B2 $3.1 B Est. NPV of Synergies $1.5 –$3.0 B $3.6 –$4.0 B 1. Implied ownership as of 2012 assuming the conversion of $1.1 bill
Slide 23: Best Indicators Suggest Implied Premium of 44%
Best Indicators Suggest Current Exelon Offer Represents an Implied Premium of 44% • Exelon’s offer has increased NRG’s stock price and decreased Exelon’s stock price relative to each company’s peer indices The world has • Assuming that each company’s stand-alone stock price is halfway between the ch
Slide 24: Transaction Provides NRG Shareholders Immediate Value of $3.1 Billion
Based on These Indicators, Transaction Provides NRG Shareholders Immediate Value of $3.1 Billion Plus: EXC Upside - Carbon - Uprates th Even at June 26 - PECO PPA roll- closing prices, NRG off shareholders will realize immediate Share of transaction value of Synergies $1.7 billion $0.6B2 Implied If
Slide 25: Upon Detailed Investigation, Exelon Has Identified Greater Synergies
Upon Detailed Investigation, Exelon Has Identified Greater Synergies • Assumed a traditional “integrate” model Est. Annual Cost Savings: • Reflected preliminary “top-down” internal estimate $180- $300M 1 without assistance fromrd3 parties % of Combined Expenses: Then • Notable assumptions included:
Slide 26: Key Sources of Synergies
Key Sources of Synergies Category Amount ($M) Commentary • Includesenhancedcorporatesynergiesfrom initialcasebasedon detailed Corporate / IT $225 -$245 assessment and prior transaction experience, minimizing duplicative corporate support • Based on ~350 employee reduction from Exelon/NRG fleet optim
Slide 27: Exelon Has a Proven Track Record of Delivering Targeted Synergies
Exelon Has a Proven Track Record of Delivering Targeted Synergies Cost Savings Actual Post Merger % Realized of Year Estimate ($M) Integration Savings ($M) Estimate • Targeted headcount reduction of ~1,200; actual ~1,600 2001 $ 100 117 117% • Disciplined integration planning process 2002 $ 160 170 1
Slide 28: NRG Touts Numerous Growth Opportunities, But Minimal Value
NRG Touts Numerous “Growth” Opportunities, But A Closer Look Reveals Minimal Value New Nuclear • NRG significantly underestimates both costs and risks (NINA) • Any value estimate is speculative at this point Reliant • Purchase appears accretive, but NRG’s EBITDA projections are extremely aggressive
Slide 29: Discussion Points
Discussion Points: 1. Exelon: Sustainable Advantage 2. Exelon-NRG: A Clear Strategic Fit 3. Value for NRG Shareholders 4. Achievable Plan to Execute Deal 5. Action Sought 27
Slide 30: Exelon Has an Executable Financing Plan
Exelon Has a Financing Plan That Is Executable, Provides Investment Grade Metrics and Creates Long-Term Value • We have modeled varying combinations of debt refinancing, asset divestitures, equity or equity-linked issuance and accelerated debt paydown to maintain our “I think Exelon has the investme
Slide 31: We Have A Plan To Meet Our Financing Needs
We Have A Plan To Meet Our Financing Needs – The Plan is Flexible and Executable • Exelon has many options to Summary Financing Needs ($ M) Principal address its financing needs 1 Bank Debt (Includes TLB and Synthetic LOCs) $3,114 • Capital markets Senior Notes due '14, '16, and '17 (in aggregate) 4
Slide 32: Exelon is Committed to the Combination
Exelon is Committed to the Combination Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 10/19: Announce Offer 2/25: Over 8/21: Discussing regulatory 51% of NRG concerns of an Exchange NRG/Exelon tie-up, 11/12: Shares Offer Expires Exchange Tendered Crane said he did not Offer Filed expect the bidder to Share
Slide 33: Regulatory Approvals Are Advancing As Expected
Regulatory Approvals Are Advancing As Expected Jurisdiction Status1 FERC Acquisition approved on May 21, 2009 Hart-Scott-Rodino Statutory waiting period expired April 30, 2009 Application under review without further information NRC requests Commissionruled applicationis sufficient - hearingto Texas
Slide 34: Discussion Points
Discussion Points: 1. Exelon: Sustainable Advantage 2. Exelon-NRG: A Clear Strategic Fit 3. Value for NRG Shareholders 4. Achievable Plan to Execute Deal 5. Action Sought 32
Slide 35: It's Time to Capture This Value
It’s Time to Capture This Value NRG Shareholders can secure the best transaction possible by taking the following actions: This will notresult • Electeachof the fourindependentcandidatesnominatedto run in in Exelon’s slate opposition to the incumbent directors up for re-election constituting a • Exp
Slide 36: Exelon's Slate of Experienced Independent Nominees
Exelon’s Slate of Experienced Independent Nominees Nominees have extensive business and management experience and experience serving on boards of public companies. Slate comprised of a broad range of financial, legal and industry expertise Four independent, highly qualified candidates to replace dir
Slide 37: This Transaction Is Unique
This Transaction Is Unique • Substantialsynergies- fairly shared • Compelling value • Catalyst for consolidation The time is now…the parties are NRG and Exelon… the price is fair 35
Slide 38: Appendix
Appendix 36
Slide 39: NRG Will Benefit from Exelon's Carbon Upside
NRG Will Benefit from Exelon’s Carbon Upside Assumptions: “Among the principal • $10/tonne carbon beneficiaries of the Waxman bill, therefore, • 50% of requirement in free allowances from will be utilities with a government large proportion of • 80% recovery through unregulated nuclear power prices
Slide 40: Exelon's Balance Sheet Can Weather Volatile Commodity Markets
Exelon’s Balance Sheet Can Weather Volatile Commodity Markets Financial • Lower margin and collateral needs and • Ability to bid competitively on PPAs and long-term deals since counterparties prefer Business investment grade companies • Reduced working capital requirements, no prepayments on long-te
Slide 41: Risks Inherent In A Non-investment Grade Balance Sheet
Risks Inherent In A Non-investment Grade Balance Sheet Though currently re-opened, the non-investment grade market has closed on several occasions in recent memory, while the high-grade market has been consistently accessible regardless of economic cycles 20% $35,000 19% 18% 30,000 17% 16% 25,000 15
Slide 42: Pennsylvania Procurement Value of Exelon's Mid-Atlantic Fleet
Pennsylvania Procurement Provides Strong Evidence of the Value of Exelon’s Mid-Atlantic Fleet • Exelon Generation’s full requirements power purchase agreement with PECO Energy expires on December 31, 2010 • Recent PJM prices for full requirements products: Procurement Delivery Period $/MWh Date PSE&
Slide 43: RPM Capacity Auctions in PJM
RPM Capacity Auctions in PJM • The RTO clearing price for 2012/2013 was $16.46 MW-day. The clearing price for MAAC and Eastern MAAC resources was $133.37 MW-day and $139.73 MW-day respectively. - Exelon offered 12,200 MWsof capacity in the RTO region; 1,500 MWs in the MAAC region; and 9,600 MWsof ca
Slide 44: Federal RES Will Reduce Prices More in ERCOT
Federal RES Will Reduce Prices More in ERCOT than in Midwest or Mid-Atlantic Mid-Atlantic Wind: Limited Wind Resources, So Will Purchase RECsFrom Other Areas Upper Midwest Wind: Dependent on Not-Yet-Approved Multi-State Transmission Buildoutand Price Depression Will be Spread Over A Broad Area ERCOT
Slide 45: STP 3&4 Execution and Cost Escalation Risks
STP 3&4 Is Subject To Project Execution And Cost Escalation Risks That NRG Shareholders Cannot Ignore Historical projected and actual costs of NRG Underestimates the Risks of Being a First Mover nuclear construction ($/kW) • U.S. Supply chain and labor force must be re-established Overnight Cost Gro
Slide 46: Scale and Complexity of Nuclear New Build
Scale and Complexity of Nuclear New Build Introduces a Unique Set of Challenges for NRG 1 Totalnuclearnew buildequityfinancingasa percentageof marketcapitalization 40% 35% 31% 28% 30% 25% 25% 22% NRG 20% 19% 16% EXC/NRG 15% 12% 10% 5% 3% 3% 4% 4% 5% 2% 2% 0% 2 $ 4,142 / kW $ 5,178 / kW $ 6,213 / kW
Slide 47: NRG Is Overvaluing Reliant Retail's Financial Impact
NRG Is Overvaluing Reliant Retail’s Financial Impact • Exelon fully supports the retail business model, and the Reliant acquisition appears value-accretive • However,the suggestionthat over $1 billion in equity value(or ~$4.50per share)hasbeen createdis an overstatement Valuation Considerations Pote
Slide 48: Environmental Capital Expenditures Could Limit NRG's Growth
Environmental Capital Expenditures Could Severely Limit NRG’s Future Growth • Under the new administration, we anticipate there will be more stringent environmental rules and regulations,includingNOXandSO2andparticulatereductionsundera revisedCleanAir InterstateRule (CAIR), an aggressive EPA/DOJ New
Slide 49: ~$700 Million in NRG Revenue Deterioration 2009-2011
At Current Forward Prices, ~$700 Million in NRG Revenue Deterioration From 2009-2011 • NRG claimsthat its hedge program insulates it from the current commodity down-cycle…lookingcloser: • NRG has sold about 2/3 of its baseload energy forward for 2011, but at much lower prices than for 2009 sales • A
Slide 50: Premium Paid Analysis
Premium Paid Analysis All stock transactions with equity values greater than $1.0 billion, announced since 12/5/2003, U.S. targets (excluding withdrawn deals and spin-offs) Date Date Equity Value Premium Prior to Announcement (%) Announced Effective Target Acquiror ($mm) 1 Day 1 Week 4 Weeks 04/01/0
Slide 51: Premium Paid Analysis
Premium Paid Analysis All stock transactions with equity values greater than $1.0 billion, announced since 12/5/2003, U.S. targets (excluding withdrawn deals and spin-offs) Date Date Equity Value Premium Prior to Announcement (%) Announced Effective Target Acquiror ($mm) 1 Day 1 Week 4 Weeks 05/04/0