Exelon to cut 500 jobs, freeze executive salaries

Exelon Corp., the U.S. utility owner that's being rebuffed in its bid to acquire NRG Energy Inc. for $6.2 billion, said it will eliminate about 500 management and corporate support jobs in response to "economic challenges."

The spending cuts will result in savings of about $350 million next year, helping to reduce operations and maintenance spending by about 3.3 percent to $4.35 billion, Chicago-based Exelon said Thursday in a statement. The company said it will record pretax costs of $40 million for the reorganization in the current quarter.

"Eliminating even a single job is painful, but we must reduce the size of our employee team in order to achieve the leaner and more efficient organizational structure required by today's difficult economic and business circumstances," Chief Executive Officer John Rowe said in the statement. "The aggressive steps we are announcing Thursday will enable Exelon to continue to perform at a very high level."

Exelon rose $2.03, or 4.2 percent, to $50.46 in New York Stock Exchange composite trading. Before Thursday the stock had fallen 11 percent since the announcement of the bid for NRG on Oct. 19.

Included in the cuts are 400 corporate support jobs and 100 management positions at the company's ComEd utility in Illinois. Exelon said it also will freeze executive salaries and reduce annual and long-term incentive compensation. Most of the job cuts will occur by Aug. 31.

Management changes included adding responsibility for the power team to the duties of Chief Operating Officer Christopher Crane, Exelon said.

NRG, based in Princeton, New Jersey, has repeatedly rejected as too low Rowe's hostile takeover bid of 0.485 share for each NRG share, aimed at creating the largest U.S. power producer. Exelon is the largest U.S. utility owner by market value.

"Cost cuts raise the expectations for future earnings and should raise the value of Exelon's stock," said Hugh Wynne, an analyst at Sanford C. Bernstein & Co. in New York who rates Exelon shares at "outperform" and owns none. "That should raise the attractiveness of the offer, even if the exchange ratio is not changed."

NRG shareholders will vote on nine nominees for the company's board proposed by Exelon at a meeting on July 21. Exelon directors are scheduled to discuss the matter on June 30.