With natural gas-fired and renewable generation assets as an attraction, Princeton, NJ-based NRG Energy Inc. said Friday it has entered a $2.5 billion "planned sponsor agreement" with Edison Mission Energy (EME) and some of its subsidiaries to eventually acquire the Chapter 11-mired independent power generation company. NRG said it hopes to close the acquisition in the first quarter next year.
The transaction is subject to approval of the U.S. Bankruptcy Court for Northern District of Illinois, and a hearing is expected to be held by Friday (Oct. 25), NRG said. EME then will file a motion to seek approval of its Chapter 11 reorganization plan and a related disclosure statement.
Eventually, various federal regulatory approvals also will be needed from the Federal Energy Regulatory Commission, Federal Trade Commission and Department of Justice, along with the Texas Public Utilities Commission.
NRG said the purchase price of $2.635 billion is also characterized as $1.572 billion, net of $1.063 billion retained cash at EME. NRG will use 12.7 million of its common shares to make the purchase, and it will assume EME debt of about $1.545 billion.
If completed, the deal will add nearly 8,000 MW to NRG's already substantial portfolio of independent electric generation plants. Most of NRG's existing plants are in the East, Southeast, Texas and the West.
EME plants are concentrated in the Midwest and more than half of their total megawatts are coal-fired generation, most of which is not expected to operate long term without substantial emissions-control investments. They also include 3,300 MW (1,600 MW of gas-fired) of either gas or renewable power facilities. As part of Friday's announcement, NRG said it has committed to fund up to $350 million in capital expenditures for plant modifications at EME's Powerton and Joliet coal-fired plants in Illinois.
NRG CEO David Crane said that nearly 100% of the EME assets he is bidding to acquire are "complementary" to NRG's current portfolio, personnel and businesses.
At EME, President Pedro Pizarro called NRG a "leader" in the independent power sector and said the acquisition should help the former Edison International (EI) merchant power subsidiary emerge from Chapter 11 bankruptcy.
At the end of last year, EME's former parent, EI, said the nonutility subsidiary it had created several decades ago was now "deconsolidated" from the parent company of Southern California Edison Co. as of the Chapter 11 filing date. "EI has reached an agreement with EME and a majority of its noteholders that would transition EI's ownership to EME's creditors upon approval of a plan of reorganization by the bankruptcy court," Edison International said in its only website reference to EME.