Exelon Corporation · NASDAQ:EXC
Exelon — NRG Energy — Merger or Acquisition (November 2008)
25 slides from Exelon's merger presentation, Nov 10, 2008
Slide 1: Filed by Exelon Corporation - Rule 425 Safe Harbor Statement
Filed by Exelon Corporation (Commission File No. 1-16169) Pursuant to Rule 425 under the Securities Act of 1933 Subject Company: NRG Energy, Inc. (Commission File No. 1-15891) Safe Harbor Statement This filing does not constitute an offer to sell or the solicitation of an offer to buy any securities
Slide 2: Forward-looking statements and conference notice
transaction and obtain required regulatory approvals as well as those discussed in (1) Exelon’s 2007 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Sup
Slide 3: Exelon Corporation - Edison Electric Institute Financial Conference
Exelon Corporation Christopher Crane President and Chief Operating Officer Edison Electric Institute Financial Conference November 10-12, 2008
Slide 4: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, for example, statements regarding benefits of the proposed merger, integration plans and expected syn
Slide 5: Important Additional Information
Important Additional Information This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This presentation relates to a transaction with NRG proposed by Exelon, which may become the subject of a registra
Slide 6: Exelon Key Messages
Exelon Key Messages • Consistent with Exelon Protect and Grow Strategy Compelling Offer • Earnings and cash accretion for NRG • Clear value creation • Meets NRG’s “Five Imperatives” • 2009 operating guidance of $4.00 - $4.30/share Exelon Financial • Managing costs and driving productivity Outlook •
Slide 7: A Compelling Opportunity for Value Creation
A Compelling Opportunity for Value Creation • Exelon offered to acquire all outstanding common shares of NRG in an all stock transaction – Fixed exchange ratio of 0.485 Exelon share for each NRG common share – Offer represents a 37% premium to October 17th closing price for NRG • Combined Entity Cre
Slide 8: Transaction Is Accretive
Transaction Is Accretive Based on analyst consensus estimates for both companies, the deal will be accretive in the first full year following closing Exelon 3 NRG 3 Pro forma 5 $6.16 $6.43 $5.86 $6.01 $4.42 $4.83 $3.70 Operating Earnings • Synergies $2.91 per share 11 $2.83 • Increased interest expe
Slide 9: Combination Creates Substantial Synergies
Combination Creates Substantial Synergies ($ in Millions) Exelon Operations & Maintenance: $4,289 1 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 Expenses: 3
Slide 10: 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, possibly more 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 Costs $1,300 $1,10
Slide 11: 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 3,000+ long-term DCF value Less than 45% of 2,000 replacement value 2,050 1,000 1,350 975 0 Without With Conservative Replacement Premium Premium DCF Es
Slide 12: World Class Nuclear & Fossil Operations
World Class Nuclear & Fossil Operations NRG High performing nuclear plant • Top quartile capacity factor – 94.9% • Large, well-maintained, relatively young units Fossil fleet • Half of >500 MW coal units are top quartile capacity factor • 90% of coal fleet lower-cost PRB and lignite Exelon Premier U
Slide 13: 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 ~150,000 GWh 1 5.00 Powder River Basin 6% Northern Appalachian Coal 4.00 Central Appalachian 3.00 2.00 93% 1.00 0.00 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2
Slide 14: Largest Fleet, 2nd Lowest Carbon Intensity
Largest Fleet, 2nd Lowest Carbon Intensity CO2 Emissions of Largest US Electricity Generators Top Generators by CO2 Intensity Bubble size represents carbon intensity, expressed in terms of 10 AEP 0.83 metric tons of CO2 per MWh 150 generated NRG 0.80 AEP Southern 9 Southern 0.74 8 Duke 0.66 Duke 7 F
Slide 15: Financing Plan Considerations
Financing Plan Considerations • Negotiated acquisition of NRG would require refinancing of only ~$4B of NRG debt and other credit facilities – Under a negotiated deal with NRG, $4.7B of NRG bonds could remain in place with no change in terms, but with substantially improved credit metrics for those
Slide 16: Premier Balance Sheet and Credit Metrics
Premier Balance Sheet and Credit Metrics Committed to returning Exelon Generation’s senior unsecured debt to strong investment grade within the next 3 years Targeting stronger credit metrics for the combined entity -- 25 - 30% FFO/debt 1 Pay down debt plan will include: NRG balance sheet cash, asset
Slide 17: Principal Regulatory Approvals and Expected Divestitures
Principal Regulatory Approvals and Expected Divestitures • Principal regulatory approvals: – Texas, New York, Pennsylvania, California state regulatory commissions – Hart-Scott-Rodino (DOJ/FTC) – FERC – NRC – Notice filing in Illinois • Limited market power issues – not expected to challenge transac
Slide 18: 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 provides NRG stakeholders with significant value and upside and a share of the largest un
Slide 19: Exelon Key Messages
Exelon Key Messages • Consistent with Exelon Protect and Grow Strategy Compelling Offer • Earnings and cash accretion for NRG • Clear value creation • Meets NRG’s “Five Imperatives” • 2009 operating guidance of $4.00 - $4.30/share Exelon Financial • Managing costs and driving productivity Outlook •
Slide 20: Appendix: Additional Information regarding Offer for NRG
Appendix Additional Information regarding Offer for NRG 18
Slide 21: Combination Will Result in Scope, Scale and Financial Strength
Combination Will Result in Scope, Scale and Financial Strength Combined company will have requisite scope, Pro Forma Quick Stats scale and financial strength to succeed in an ($ in millions) increasingly volatile energy market Combined assets (1) $68,900 LTM EBITDA (2) $9,400 $70 Market cap (as of 1
Slide 22: Combination Enables Access to Attractive New Markets
Combination Enables Access to Attractive New Markets Geographically complementary asset base Predominantly located in competitive Attractive new markets for Exelon (NY, NE, markets CA): declining reserve margins, supportive ERCOT portfolio will position Exelon to offer regulatory structures an array
Slide 23: Nuclear Growth Opportunities
Nuclear Growth Opportunities • Texas offers nuclear growth platform • Potential for stretch power uprate (5-7%) on South Texas Project units 1 and 2 • Construction & Operating License and Loan Guarantee applications filed for both STP 3 and 4 and Victoria County • Exelon has the financial strength a
Slide 24: Exelon 2020 and NRG
Exelon 2020 and NRG Options to Evaluate: Reduce or offset our • Expand internal energy efficiency, SF6, footprint by greening vehicle, and supply chain initiatives to NRG our operations portfolio • Offset a portion of NRG’s GHG emissions Help our customers Apply Elements of and the communities • Exp
Slide 25: NRG is Best Investment Available
NRG is Best Investment Available Earnings Yield EBITDA / EV Yield Free Cash Flow 16.0% 25.0% 20.0% Yield 20.1 20.1 15.0% 14.2 20.0% 12.3 11.8 11.9 12.0% 11.4 11.2 11.6 10.7 16.7 17.1 10.2 10.6 16.1 10.0% 15.4 15.0% 14.4 13.7 5.2 7.9 8.1 4.3 8.0% 5.0% 10.0% 0% 4.0% (3.1) 5.0% (5.0%) (6.2) 0% 0.0% (10