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Exelon Files at FERC for its Hostile NRG Deal

December 22, 2008
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Exelon Corp. has asked FERC to approve its proposed and unwelcome deal to acquire NRG Energy Inc. The company also filed notification with the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC).

"Our regulatory filings represent an important step in realizing the value of an Exelon-NRG combination, and we will continue to work diligently toward achieving all regulatory approvals and expeditiously consummating the transaction,” said Exelon COO Christopher M. Crane.

Exelon has said a combined Exelon-NRG would need to divest some generating capacity in Texas and PJM East to mitigate market power. In its Federal Energy Regulatory Commission filing Exelon proposed to divest its three facilities in Texas -- Mountain Creek, Handley and LaPorte -- totaling approximately 2,400 MW, and to transfer to a third party its power purchase agreements in Texas worth about 1,200 MW. The combined company would also divest approximately 1,000 MW in the PJM East market, specifically the Indian River, Vienna and Dover plants currently owned by NRG.

"Exelon's attempt to secure regulatory approvals is premature because there is no transaction to approve," NRG said. "Exelon's filings are an unnecessary distraction for regulators at this time given the uncertainty of completing the transaction. Processing the filings would result in an inefficient use of government resources."

The DOJ or FTC will review the proposed takeover to determine if it impedes competition in the relevant energy markets. "Given the size and complexity of the deal, Exelon should not receive early termination of its requested pre-merger review," NRG said. "For FERC to approve this transaction, the agency must conclude that the transaction is in the public interest and that it will not increase market concentration, adversely impact competition, or raise rates. The transaction is also subject to a number of other regulatory approvals and filings, including: the Nuclear Regulatory Commission and the state public utility commissions of California, Illinois, New York, Pennsylvania and Texas."

NRG said the Exelon offer still significantly undervalues the company and is not in the best interest of its shareholders. The NRG board voted unanimously on Nov. 24 to reject the offer.

On Oct.19 Exelon sent a letter to NRG's board and management in which it proposed to acquire all outstanding shares of NRG common stock at a fixed exchange ratio of 0.485 Exelon shares for each NRG share, which represented a 37% premium to NRG's closing price on Oct. 17. Following rejection of the proposal by NRG, Exelon brought its offer directly to NRG shareholders on Nov. 12 in an exchange offer that is set to expire at 5 p.m. EST on Jan. 6 (see NGI, Nov. 17).

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