Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — Proxy Contest (February 2009)
37 slides from Nrg Energy's proxy contest presentation, Feb 10, 2009
Slide 1: Schedule 14A Proxy Statement Information
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: Slide 2
Slide 3: Exelon began using the following slides with investors
On February 10, 2009, Exelon began using the following slides in discussions with investors:
Slide 4: Exelon + NRG: Committed, Moving Forward
Exelon + NRG: Committed, Moving Forward Investor Meetings February 2009
Slide 5: Important Information
Important Information This presentation relates 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, Inc. (“NRG”)
Slide 6: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements. These forward-looking statements include, for example, statements regarding benefits of the proposed merger, integration plans and expected synergies. There are a number of risks and uncertainties that could cause actu
Slide 7: Agenda for Today's Discussion
Agenda for Today’s Discussion • Full and Fair Offer • Capturing the Value of Growth Opportunities • Committed To Execution 4
Slide 8: 1. Full and Fair Offer
1. Full and Fair Offer Exelwn.
Slide 9: Full and Fair Offer
Full and Fair Offer th • On November 12 , Exelon launched an exchange offer for all of the outstanding shares of NRG common stock • Filed Form S-4 with the SEC • Fixed exchange ratio of 0.485 Exelon share for each NRG common share th • Represents a 37% premium to the October 17 NRG closing price 6
Slide 10: Value Created for NRG Shareholders
Value Created for NRG Shareholders Assuming that NRG’s stock price maintained its historic relationship to movement in the IPP index (1), NRG stock would have declined ~16% since October 17, 2008 in the absence of the Exelon offer (2); with those assumptions, NRG’s implied stock price would have bee
Slide 11: 2. Capturing the Value of Growth Opportunities
2. Capturing the Value of Growth Opportunities
Slide 12: Exelon Offers Lower Risk Growth Opportunities
Exelon Offers Lower Risk Growth Opportunities 1 We believe I/B/E/S ’09-’11 EBITDA 5.5% 3.2% Exelon’s near- I/B/E/S ’09-’11 EPS 1 15.6% 7.4% term growth drivers are more predictable and have dramatically • Nuclear uprates • STP nuclear expansion less capital at risk • PA POLR roll-off with sub-invest
Slide 13: Exelon is Better Positioned to Capture the Value of Growth Opportunities
Exelon is Better Positioned to Capture the Value of Growth Opportunities We believe the market will likely discount NRG’s standalone growth prospects given: Lack of VS. Balance • NRG’s development Balance Sheet Sheet model requires external solutions that as a Flexibility Strength standalone company
Slide 14: 3. Committed to Execution
3. Committed to Execution Exelwn.
Slide 15: Committed to Execution
Committed to Execution Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 10/19: Announce Offer 11/12: 2/25: Exchange Exchange Offer Offer Expires Filed Proxy Solicitation NRG and Exelon Shareholder Meetings Make Filings and Work to Secure Regulatory Approvals (FERC, NRC, DOJ/FTC, PUCT, NYPSC, PAPUC, CPUC, ICC
Slide 16: Strong Initial Exchange Offer Results
Strong Initial Exchange Offer Results th • As of January 6 , 45.6% of NRG shares had We remain been tendered into the exchange offer committed to and are moving forward with • Many NRG shareholders have informed Exelon they want to the transaction see meaningful discussions sooner rather than later
Slide 17: Moving Forward with Proxy Solicitation
Moving Forward with Proxy Solicitation • Pursuing, and soliciting proxies for, two shareholder actions at NRG annual meeting • Proposed an expansion of the NRG board from 12 to 19 directors • Nominated nine well-qualified, independent candidates who we believe will act in the best interests of NRG a
Slide 18: Making Progress on Regulatory Approvals
Making Progress on Regulatory Approvals • Initial filings have been made with the following (1): • FERC (Docket #EC09-32-000) • Hart-Scott-Rodino (DOJ/FTC) • Request for additional information was issued by the DOJ on th January 16 , extending HSR waiting period • NRC • State regulatory commissions,
Slide 19: Financing Is Not an Obstacle
Financing Is Not an Obstacle • Believe we can obtain committed financing for the entire ~$8 billion of NRG debt, if needed, at the appropriate time • Decision to defer commitments allows us to take advantage of improving credit markets • Exelon’s relationships with many of NRG’s banks should facilit
Slide 20: Compelling Value for NRG Shareholders
Compelling Value for NRG Shareholders • Full and generous price – upfront premium of 37% • Tax-free opportunity to participate in the future growth of the largest and most diversified US power company, with a substantially improved credit profile and access to liquidity • Requisite scope, scale and
Slide 21: Appendix
rae Exelon. 18
Slide 22: Exelon Unlocks NRG Value
Exelon Unlocks NRG Value Price per Kilowatt Comparison for Texas Baseload Generation Even with premium, purchase 3,000 price is 66% of conservative long-term DCF value 3,000+ Less than 45% of Price 2,000 replacement value 2,050 ($/kilowatt) 1,000 1,350 975 0 Without With Conservative Replacement Pre
Slide 23: Combination Expected to Create Substantial Synergies
Combination Expected to Create Substantial Synergies ($ in Millions) 1 Exelon Operations & Maintenance: $4,289 1 NRG Maintenance & Other Opex: $950 General & Admin Expenses: $309 Other COGS: $454 Pro Forma Combined Non-fuel Expenses: $6,002 2 Estimated Annual Cost Savings: $180 - $300 % of Combined
Slide 24: NRG Shareholders Capture Value
NRG Shareholders Capture Value Creates compelling value for NRG shareholders today and allows them to share in growth of Exelon stock. $12.8 billion $12.8 billion = $46.50 per NRG share > NRG’s 52-week high $5.1 Value Creation $0.4 $7.7 billion to NRG Value to NRG Shareholders $2.0 Shareholders $2.4
Slide 25: Percent Contribution of Free Cash Flow
Percent Contribution of Free Cash Flow • NRG states they contribute 30% of the free cash flow while getting 17% ownership of the pro-forma 1 company based on offer • NRG’s position is only a single year (2008) calculation • Ignores PECO PPA roll-off in 2011 and Exelon carbon uplift • Factoring in th
Slide 26: Combination Will Result in Scope, Scale and Financial Strength
Combination Will Result in Scope, Scale and Financial Strength Combined company expected to have requisite scope, scale and Pro Forma Quick Stats ($s in millions) financial strength to succeed in an increasingly volatile energy market Combined assets 1 $68,900 2 $70 LTM EBITDA $9,400 Market cap (as
Slide 27: Credit Ratings Are a Valuation Differentiator
Credit Ratings Are a Valuation Differentiator Investment grade 1-year ForwardEV/EBITDA credit ratings 14.0 provide access to Investment Grade Non-Investment Grade capital markets for 12.0 growth capital and minimize collateral 10.0 requirements which maximizes 8.0 liquidity and 6.0 contributes to su
Slide 28: Stable, Predictable Cash Flow Is Awarded Premium Valuation
Stable, Predictable Cash Flow Is Awarded Premium Valuation Exelon’s strong, Enterprise Value / LTM EBITDA diversified cash 12.0 flow streams have 10.0 provided for a more stable 8.0 7.5x valuation during Average EV / LTM EBITDA for last: 6.0 Current 1 month 6 months 1 year periods of NRG 4.6 5.8 8.2
Slide 29: World Class Nuclear & Fossil Operations
World Class Nuclear & Fossil Operations Combined Company: • Largest U.S. power company in terms of generating capacity: ~51,000 MW fleet (18,000 MW nuclear) • Best-in-class nuclear and fossil operations • Second lowest carbon emitting intensity in the industry • Geographic and fuel diversification w
Slide 30: EXC: World-Class Nuclear Fleet Operator
EXC: World-Class Nuclear Fleet Operator Average Capacity Factor Range of Fleet 2-Yr Avg Capacity Factor (2003-2007) 100% 100 EXC 93.5% 95 95% 90 85 90% 80 75 85% 70 Range 5-Year Average 80% 65 Exelon Industry Operator (# of Reactors) Sustained production excellence Sources: Platt’s, Nuclear News, Nu
Slide 31: EXC: Lowest Cost Nuclear Fleet Operator
EXC: Lowest Cost Nuclear Fleet Operator 2006-2007 Average Production Cost for Major Nuclear Operators (1) Average st nd rd th 1 Quartile 2 Quartile 3 Quartile 4 Quartile Among major nuclear plant fleet operators, Exelon is consistently the lowest-cost producer of electricity in the nation 1. Source:
Slide 32: Operating in Most Attractive Markets
Operating in Most Attractive Markets • Geographically complementary generation asset base • Predominantly located in competitive markets • Strong presence in PJM (Mid-Atlantic and Midwest) and ERCOT By RTO Combined¹ PJM 22,812 ERCOT 13,027 MISO 1,065 ISO NE 2,174 NYISO 3,960 CAL ISO 2,085 Contracted
Slide 33: Combined Entity Will Continue to Benefit from Low Cost, Low Volatility Fuel Sources
Combined Entity Will Continue to Benefit from Low Cost, Low Volatility Fuel Sources 2009 Historical Forward Coal Prices <1% <1% 6.00 Exelon 1 Powder River Basin ~150,000 GWh 5.00 Northern Appalachian 6% 4.00 Central Appalachian Coal $/mmbtu 3.00 2.00 93% 1.00 0.00 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1
Slide 34: Largest Fleet, 2nd Lowest Carbon Intensity
nd Largest Fleet, 2 Lowest Carbon Intensity CO2 Emissions of Largest US Electricity Generators Bubble size represents carbon Top Generators by CO2 Intensity intensity, expressed in terms of 150 metric tons of CO2 per MWh generated 10 AEP 0.83 AEP 2006 CO2 Emissions Southern NRG 0.80 from Electricity
Slide 35: Exelon 2020 and NRG
Exelon 2020 and NRG Options to Evaluate: • Expand internal energy efficiency, SF6, Reduce or offset our vehicle, and supply chain initiatives to footprint by greening NRG portfolio our operations • Offset a portion of NRG’s GHG emissions Help our customers Adapt Elements of and the communities Exelo
Slide 36: Clear Value under Multiple Scenarios
Clear Value under Multiple Scenarios We look at fundamental value creation under a wide range of future commodity price scenarios and our analysis suggests $1-3 billion of value, possibly more. Value Gas Prices $6.50 $7.30 $7.10 $7.30 $8.60 Coal Prices $11.00 $20.00 $20.00 $20.00 $11.00 New Build Co
Slide 37: Exelon More Than Meets the Five Imperatives Outlined by NRG
Exelon More Than Meets the “Five Imperatives” Outlined by NRG on May 28, 2008 Exelon Combination More NRG’s Stated Imperatives than Meets These Imperatives 1. MUST accumulate generation at competitive cost Deal expected to provide NRG stakeholders with significant value and upside and a share of the