NRG to Exelon: Drop effort to board

NRG Energy Inc. urged Exelon Corp. to withdraw its proposal to expand NRG's board in an attempt to win approval of a $5.3 billion takeover aimed at creating the largest U.S. power producer.

Exelon's effort to gain a presence on the board risks triggering lending terms mandating repayment of $8 billion of corporate debt, Princeton, New Jersey-based NRG said today in a statement. Accelerated debt repayment "would have serious negative consequences," the company said.

Exelon in a March 17 filing proposed expanding the NRG board to 19 members with the aim of winning election of nine candidates at this year's annual meeting. Exelon said its presence on the board would pressure NRG management to negotiate a sale of the company, which the current board opposes.

As of Feb. 25, more than 51 percent of NRG shares were tendered to Exelon's offer of 0.485 a share for each share of NRG.

With one vacancy on the board currently, Chicago-based Exelon would have as many as 50 percent of the seats, triggering the debt repayment provision, NRG said. NRG would have a one- vote majority if it fills the vacancy and all of Exelon's candidates are elected.

"Even an outcome which causes current NRG directors to hold a one-vote majority poses a threat to NRG shareholders," NRG said. "The debt-acceleration provision could also be triggered by future events, such as the departure of even one current board member."

Exelon Responds

Exelon, in an e-mailed statement today, said "NRG has clearly misread its own indentures." An NRG board with nine NRG incumbent directors and the nine independent nominees proposed by Exelon wouldn't create a change of control under the NRG indentures or credit agreement, according to Exelon.

"We have no intention to allow the election of the nominees proposed by Exelon to result in a change of control," Exelon said in the statement. "It is unfortunate that NRG once again prefers to look for opportunities to mislead its shareholders and deny them the chance to vote for the independent nominees proposed by Exelon."

The company has said it wants to acquire NRG through negotiation to avoid provisions that would require refinancing of the debt.

Exelon rose $1.29, or 2.9 percent, to $45.89 in New York Stock Exchange composite trading. That brought the value of its offer for NRG to $22.26 a share. NRG rose 24 cents, or 1.4 percent, to $17.37.

Regulatory Approvals

NRG has said the Exelon offer "undervalues" the company and is "highly conditional." It challenged Exelon's projection that it can obtain all state and required federal regulatory approvals by year-end.

NRG is the second-largest power producer in Texas and also owns plants in California and the U.S. Northeast. The acquisition would make Exelon the biggest U.S. power producer, ahead of Atlanta-based Southern Co. and Columbus, Ohio-based American Electric Power Co.

Exelon currently is the largest U.S. producer of nuclear power with 17 reactors and owns utilities in Illinois and Pennsylvania. NRG operates and owns 44 percent of the South Texas Project, a nuclear plant southwest of Houston.