NRG-GenOn Merger Gets Investor Nod - Analyst BlogTuesday, November 13, 2012
New Jersey utility, NRG Energy Inc’s (NRG) proposed acquisition of GenOn Energy Inc. received approval from the shareholders of both companies, the Federal Trade Commission and the Texas regulatory body. However, the acquisition is still awaiting the green signal from the Federal Energy Regulatory Commission and New York Public Service Commission.
The GenOn buyout was announced by NRG Energy in July 2012 for an amount of $1.94 billion. The acquisition is expected to be closed in early 2013 provided all regulatory nods get through. With the GenOn purchase, NRG Energy’s total generating capacity will climb to 47,000 megawatts and enable the company to become one of the key competitive utility providers in the U.S.
GenOn stakeholders’ will receive 0.1216 of an NRG share. NRG Energy’s shareholders will hold 71% of the overall stock while GenOn’s will own 29%.
The Texas acquisition is critical to NRG Energy’s expansion plans and will become a major cornerstone for growth. Besides, the merger of GenOn will help in substantially improving NRG Energy’s upcoming financials as its third-quarter loss of 1 cent per share fell more than 50 cents than the year-ago quarter figure.
NRG Energy will also accrue operational benefits like cost synergies, maximizing efficiencies and enhancing cash flows which would significantly drive up margins and further encourage investment prospects.
However, the New Jersey area has been one of the worst affected by Hurricane Sandy and will impact NRG Energy’s operations in the subsequent quarters. Taking this into account, the company has trimmed its adjusted EBITDA outlook for 2012 to the range of $1,875 million to $1,925 million from its prior expectation of $1,825 million to $2,000 million. The Zacks Consensus Estimates for the fourth quarter and full year 2012 currently stand at 8 cents and 82 cents per share, respectively.
NRG Energy holds a short-term Zacks #3 Rank (Hold rating). NRG Energy competes head-to-head with The AES Corporation (AES). AES reported favorable results in the third-quarter 2012. AES Corporation’s business is spread across the U.S., Bulgaria and Latin America which lends constancy to its operations unlike NRG Energy’s which is primarily confined to the U.S.
Based in Princeton, New Jersey, NRG Energy Inc. is a wholesale power generation company engaged in the ownership, development, construction, and operation of power generation facilities.
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