NRG Energy, Inc. (NYSE:NRG) recently announced a $1.7 billion stock purchase of GenOn Energy, Inc. (NYSE:GEN), making NRG the largest U.S. Independent electricity generator. In the deal, GenOn shareholders will receive 0.1216 share of NRG common stock for every one of their GenOn shares. This represents a 21% premium over GenOn's previous closing price. The combined companies will operate under the NRG name and bring together an enterprise value of $18 billion. The deal is scheduled to close by the first quarter of 2013.
With this deal, NRG will surpass Calpine Corporation (NYSE:CPN) as the largest U.S. power company by generation capacity. Currently Calpine produces more power each year than any other independent power producer. In 2011, the company generated more than 94 million megawatt hours of electricity. The company also boasts the youngest and cleanest plants in the country, emitting fewer greenhouse gases per megawatt hour than any other power producer in the U.S. Though NRG will soon be surpassing Calpine as the largest producer in the U.S., Calpine will still maintain its proud standing as the cleanest power producer in the U.S.
GenOn is currently headquartered in Houston, Texas, and according to the terms of the deal, NRG will use this location as its headquarters for operations. GenOn by itself has a generating capacity of 22,670 megawatts and operates 46 generating stations. Its fleet uses a mix of coal, natural gas, and oil to generate electricity. GenOn attempts to mitigate risk through diversity by region and fuel type. Still, this company has been struggling recently with lower electricity prices and the difficult barriers to growth. This deal will aid in both of those areas.
NRG on its own currently has a generating capacity of more than 25,000 megawatts, which means it is capable of supporting more than 20 million homes. NRG claims to support clean energy resources and technologies. As a result, it has won many awards for its initiatives targeted toward clean air and natural resources protection. NRG has made investments in solar, wind, and nuclear power in addition to electric vehicle infrastructure. This deal will allow NRG to continue its clean energy initiatives while boosting its business.
Combined, NRG and GenOn will have a generating capacity of over 47,000 megawatts. The market value of the new company will give NRG enough market share to withstand the decreasing power prices. By riding out this slump, NRG will be positioned to capitalize effectively on the rebound. Also, following this announcement, NRG has also stated that it will pay its first ever quarterly dividend in August of this year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.