ExelonÂ’s unsolicited, all-stock bid comes after Princeton, New Jersey-based NRG lost half of its market value in two months. The offer, valued at 37 percent more than NRGÂ’s Oct. 17 closing price, would create the biggest U.S. power producer.
Buying NRG, the second-biggest power producer in Texas, would expand Chicago-based ExelonÂ’s sales outside its Illinois and Pennsylvania operating bases, including a nuclear plant stake southwest of Houston. NRG, Exelon and other power producers have proposed 24 new reactors to help add needed generation capacity without increasing greenhouse-gas emissions.
"Exelon couldnÂ’t build the plants for the same price it would buy NRG for," said Nathan Judge, an analyst at Atlantic Equities in London who rates Exelon shares "underweight" and owns none. "It also gives them access to a bigger balance sheet to fund things like new nuclear plants."
Exelon, already the largest U.S. producer of nuclear power, benefits from a cost advantage because according to an estimate by Natixis Bleichroeder Inc., reactors generate electricity for about 70 percent less than the most efficient gas-fueled plants.
Two new reactors of the size NRG has proposed may cost $21.6 billion, according to the Federal Energy Regulatory Commission.