Exelon Corporation · NASDAQ:EXC
Exelon — NRG Energy — Merger or Acquisition (October 2008)
38 slides from Exelon's merger presentation, Oct 29, 2008
Slide 1: Filed by Exelon Corporation - 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 press release
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: Press release: Exelon-NRG combination benefits
• The combined company brings together NRG’s high-quality fossil fleet with Exelon’s world-class nuclear fleet, which will have requisite scope, scale and financial strength to succeed in an increasingly volatile energy market. • The combined company will continue to rely on low-cost and less volati
Slide 4: Safe Harbor Statement
Safe Harbor Statement This press release 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 press release relates to a transaction with NRG proposed by Exelon, which may become the subject of a registration state
Slide 5: Presentation
Presentation:
Slide 6: Exelon + NRG: A Compelling Opportunity for Value Creation
Exelon + NRG: A Compelling Opportunity for Value Creation Investor Meetings
Slide 7: 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 8: Combined Entity Creates Value By
Combined Entity Creates Value By: • Providing earnings and cash accretion • Creating an exceptional growth platform • Operating in the most attractive markets • Utilizing a premier balance sheet • Allowing Exelon to unlock NRG’s value • Giving NRG’s shareholders the opportunity to participate in fut
Slide 9: 1. Earnings and Cash Accretion
1. Earnings and Cash Accretion
Slide 10: 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 NRG Pro forma 4 $6.80 $6.25 $6.46 $6.37 $4.53 $4.96 Operating $4.23 •Synergies Earnings $3.03 $3.02 •Increased interest expense per share 1 9.
Slide 11: Combination Creates Substantial Synergies
Combination Creates Substantial Synergies ($ in Millions) Exelon Operations & Maintenance: $4,2891 1 NRG Maintenance & Other Opex: $950 General & Admin Expenses: $309 Other COGS: $454 Pro Forma Combined Non-fuel Expenses: $6,002 Estimated Annual Cost Savings:$180 -$3002 % of Combined Expenses: 3%-5%
Slide 12: Clear Value under Multiple Scenarios
Clear Value under Multiple Scenarios Long-term Value To Exelon Shareholders We look at fundamental value creation under a wide range of future commodity price scenarios and our analysis suggests $1-3 billion, possibly more. Value Gas Prices $6.50 $7.30 $7.10 $7.30 $8.60 New Build Costs $1,300 $1,100
Slide 13: NRG is Best Investment Available
NRG is Best Investment Available 16.0% Earnings Yield 25.0% EBITDA / EV Yield 20.0% Free Cash Flow Yield 15.0 20.1 20.3 15.0% 14.1 12.0 12.1 20.0% 12.0% 11.5 11.5 11.1 11.4 10.9 17.2 17.2 10.3 16.2 10.0% 14.8 15.1 15.0% 13.9 8.3 8.0 8.0% 5.0% 4.4 4.7 10.0% 0% 4.0% 5.0% (4.0) (5.0%) (5.8) 0% 0.0% (10
Slide 14: 2. Exceptional Growth Platform
2. Exceptional Growth Platform
Slide 15: Combination Will Result in Scope, Scale and Financial Strength
Combination Will Result in Scope, Scale and Financial Strength Combined company will have requisite scope, scale and Pro Forma Quick Stats ($s in millions) financial strength to succeed in an 1 increasingly volatile energy market Combined assets $73,500 $70 LTM EBITDA 2 $8,000 Market cap 3 $40,500 $
Slide 16: World Class Nuclear & Fossil Operations
World Class Nuclear & Fossil Operations NRG High performing nuclear plant • Top quartilecapacityfactor – 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 17: 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 • Continue momentum established with STP 3 and 4 new build project • Continue work on Victoria County nuclear project • Exelon has the financial streng
Slide 18: 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% Exelon 6.00 1 Powder River Basin ~150,000 GWh 5.00 Northern Appalachian 4.00 Central Appalachian $/mmbtu 3.00 2.00 1.00 0.00 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008
Slide 19: Largest Fleet, Lowest Carbon Intensity
nd LargestFleet,2 LowestCarbonIntensity CO2 Emissions of Largest US Electricity Generators Bubble size represents carbon Top Generators by CO2 Intensity intensity, expressed in terms of metric 150 tons of CO2 per MWh generated 10 AEP 0.83 AEP 2006 CO2 Emissions Southern NRG 0.80 from Electricity 9 S
Slide 20: Exelon 2020 and NRG
Exelon 2020 and NRG Options to Evaluate: • Expand internal energy efficiency, SF6, Reduce or offset our 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 Exelo
Slide 21: 3. Presence in Most Attractive Markets
3. Presence in Most Attractive Markets
Slide 22: Combination Enables Access to Attractive New Markets
Combination Enables Access to Attractive New Markets • Geographically complementary asset base • Predominantly located in competitive markets • Attractive new markets for Exelon (NY, NE, CA): declining reserve margins, supportive regulatory structures • ERCOT portfolio will position Exelon to offer
Slide 23: 4. Balance Sheet and Credit Metrics
4. Balance Sheet and Credit Metrics
Slide 24: 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% 1 FFO/debt • Pay down debt plan will include: NRG balance sheet cash, as
Slide 25: 5. Exelon Offer For NRG
5. Exelon Offer For NRG Exelon.
Slide 26: Compelling Offer For NRG
Compelling Offer For NRG • 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 • All stock offer provides NRG sharehold
Slide 27: 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. MUSTaccumulate generation at competitive cost Deal provides NRG stakeholders with significant value and upside and a share of the largest unre
Slide 28: Exelon Unlocks NRG Value
Exelon Unlocks NRG Value Price per Kilowatt Comparison for Texas Baseload Generation Even with premium, purchase price is 66% of conservative 3,000 long-term DCF value 3,000+ Less than 45% of Price 2,000 replacement value 2,050 ($/kilowatt) 1,350 1,000 975 0 Without With Conservative Replacement Pre
Slide 29: Financing Plan Considerations
Financing Plan Considerations • Contemplating structure such that the required refinancing is only ~$4B • A negotiated deal with NRG can be structured such that $4.7B of NRG bonds remain in place with no change in terms, but with substantially improved credit metrics for those bondholders • Exelon h
Slide 30: 6. Manageable Regulatory Hurdles
6. Manageable Regulatory Hurdles
Slide 31: Modest Divestitures Expected
Modest Divestitures Expected • Limited market power issues not– expected to challenge transaction closing • Divestitures anticipated only in PJM and ERCOT • ~3,000 MWs of high heat rate gas and 1 baseloadcoalplantsin liquid markets 1. Plants subject to divestiture are de minimus contributors to reve
Slide 32: Principal Regulatory Approvals
Principal Regulatory Approvals • Texas, New York, Pennsylvania, California state regulatory commissions • Hart-Scott-Rodino (DOJ/FTC) • FERC • NRC • Notice filing in Illinois 27
Slide 33: Combined Entity Creates Value By
Combined Entity Creates Value By: • Providing earnings and cash accretion • Creating an exceptional growth platform • Operating in the most attractive markets • Utilizing a premier balance sheet • Allowing Exelon to unlock NRG’s value • Giving NRG’s shareholders the opportunity to participate in fut
Slide 34: Appendix
re Exelon. 29
Slide 35: Exelon Nuclear Fleet Overview
Exelon Nuclear Fleet Overview Net Annual Spent Fuel Storage/ Mean Rating License Expiration / Date to lose full core Plant, Location Units Type Vendor MW 20081 Status Ownership discharge capacity Braidwood, IL 2 PWR W 1194, 1166 2026, 2027 100% 2013 Byron, IL 2 PWR W 1183, 1153 2024, 2026 100% 2011
Slide 36: NRG Fleet Overview
NRG Fleet Overview Net Annual Mean 1 Plant, Location Type Power Market Rating MW 2008 Ownership Cedar Bayou, TX Gas ERCOT 1,500 100% Greens Bayou, TX Gas ERCOT 760 100% Limestone, TX Coal ERCOT 1,690 100% San Jacinto, TX Gas ERCOT 160 100% SR Berton, TX Gas ERCOT 840 100% 44% NRG, 40% CPS Energy/Cit
Slide 37: NRG Fleet Overview
NRG Fleet Overview Net Annual Mean 1 Plant, Location Type Power Market Rating MW 2008 Ownership Connecticut Remote Turbines, CT Jet Fuel/ Gas ISO-NE 145 100% Devon, CT Gas/Oil/ Jet Fuel ISO-NE 140 100% Dunkirk, NY Coal NYISO 530 100% Huntley, NY Coal NYISO 380 100% Indian River, DE Coal/Oil PJM 740
Slide 38: NRG Fleet Overview
NRG Fleet Overview Net Annual Mean 2 1 Plant,Location Type Power Market Rating MW 2008 Ownership Bayou Cove, LA Gas SERC-Entergy 300 100% Big Cajun I Gas SERC-Entergy 430 100% Big Cajun II Coal SERC-Entergy 1,495 85.8% Sterlington, LA Gas SERC-Entergy 185 100% Rockford I, IL Gas PJM 300 100% Rockfor