UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant ¨
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Check the appropriate box:
| ¨ | Preliminary Proxy Statement. |
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| ¨ | Definitive Proxy Statement. |
| x | Definitive Additional Materials. |
| ¨ | Soliciting Material Pursuant to §240.14a-12. |
NRG ENERGY, INC.
(Name of Registrant as Specified in its Charter)
EXELON CORPORATION
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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On July 2, 2009, Exelon Corporation issued the following press release:
| Contact: | Kathleen Cantillon | FOR IMMEDIATE RELEASE | ||
| Exelon Communications | ||||
| 312-394-7417 |
Exelon Increases Offer to Acquire NRG Energy by 12.4 Percent
Company Cites Additional Upside Value Identified Since Initial Offer
Also Shares Details on Financing
CHICAGO (July 2, 2009)—Exelon Corporation (NYSE:EXC) today announced an increase in its offer to acquire all of the outstanding NRG common stock in an all-stock transaction with a fixed exchange ratio of 0.545 of a share of Exelon common stock for each NRG share, a 12.4 percent increase over the initial exchange offer of 0.485. Exelon’s increased offer represents value of over $3 billion to NRG shareholders.
Exelon also filed today with the SEC an investor presentation that will be used as part of the company’s proxy solicitation for the election of nine new, independent directors to the NRG board of directors. In the presentation, Exelon cited approximately $1.5 billion of additional newly identified synergies as the primary reason for the increase. The new offer also reflects the value of NRG’s recent acquisition of the Reliant Energy retail business.
“We listened to NRG investors and balanced their views with the best interests of Exelon shareholders. An exhaustive analysis by our internal team, informed by the best third-party experts, resulted in additional synergies, allowing us to increase our offer to NRG shareholders,” said John Rowe, chairman and chief executive officer of Exelon. “Our track record of the Unicom-PECO merger, cost-cutting initiatives, and fleet optimization proves we can deliver this further value to Exelon and NRG shareholders. This is our best and final offer, and we will use the time leading up to the NRG annual meeting on July 21 to communicate the value of our new offer to NRG shareholders, encouraging them to vote for nine new independent directors who can unlock that value.”
Exelon’s more detailed analysis of NRG’s structure, cost platform and operations assumes that the company would not only absorb NRG but also integrate and transform it. This approach, plant benchmarking, and application of Exelon’s management model to NRG’s assets yielded an estimated present value of $3.6 billion to $4.0 billion in operational synergies from areas including corporate/IT, fossil and nuclear fleet, trading, development, and retail operations. It reflects a 30 percent reduction in NRG’s O&M expense, which is consistent with prior power sector transactions and reflects Exelon’s track record of delivering cost reductions.
In the presentation, Exelon also shared details on its financing plan to maintain its investment grade credit ratings while optimizing long-term shareholder value. Exelon says it is confident, based on discussions with its outside advisors, that the company will be able to meet all financing needs associated with the transaction, including the re-financing of $4.7 billion of NRG’s senior notes and other NRG debt, if necessary, while maintaining investment grade credit ratings.
Exelon says it continues to pursue NRG because of the long-term value that can be created by industry consolidation. Exelon believes that the scope, scale and diversified risk of the combined company will allow it not only to withstand the ever-changing forces of the markets and regulation but also to grow and create more value than each company could on its own.
Exelon says its offer will create immediate value for NRG shareholders and a commensurate value for Exelon shareholders. NRG shareholders will benefit from Exelon’s stronger investment grade balance sheet, low-carbon nuclear fleet, operating excellence, and a $600 million share in the synergies resulting from the combination. Exelon shareholders benefit from NRG’s assets, cash flow, and its own share of the synergies.
“Together, the two companies would become the first national generation company,” said Rowe. “There is no model that can do more for shareholders of both companies than an Exelon-NRG combination.”
Exelon will conduct a conference call with investors to discuss this announcement and presentation at 8 a.m. ET (7 a.m. CT) today. The call-in number in the U.S. and Canada is 800-690-3108, and the international call-in number is 973-935-8753. If requested, the conference ID number is 17092348. Media representatives are invited to participate on a listen-only basis. The call will be web-cast and archived on Exelon’s Web site: www.exeloncorp.com. (Please select the Investor Relations page.) Telephone replays will be available until July 16. The U.S. and Canada call-in number for replays is 800-642-1687, and the international call-in number is 706-645-9291. The conference ID number is 17092348.
Exelon announced on June 17, 2009, that it had filed its definitive proxy materials with the Securities and Exchange Commission to solicit proxies from NRG shareholders at the NRG annual meeting of shareholders scheduled for July 21, 2009. In today’s presentation, Exelon urges all NRG shareholders to use the BLUE proxy card to vote in favor of proposals to expand the NRG Board and elect nine new, independent and experienced directors who will act in shareholders’ best interests to capture the highest shareholder value possible.
Important Information
This press release relates, in part, to the offer (the “Offer”) by Exelon Corporation (“Exelon”) through its direct wholly-owned subsidiary, Exelon Xchange Corporation (“Xchange”), to exchange each issued and outstanding share of common stock (the “NRG shares”) of NRG Energy, Inc. (“NRG”) for 0.545 of a share of Exelon common stock. This press release is for informational purposes only and does not constitute an offer to exchange, or a solicitation of an offer to exchange, NRG shares, nor is it a substitute for the Tender Offer Statement on Schedule TO or the Prospectus/Offer to Exchange included in the Registration Statement on Form S-4 (Reg. No. 333-155278) (including the Letter of Transmittal and related documents and as amended from time to time, the “Exchange Offer Documents”) previously filed by Exelon and Xchange with the Securities and Exchange Commission (the “SEC”). The Offer is made only through the Exchange Offer Documents. Investors and security holders are urged to read these documents and other relevant materials as they become available, because they will contain important information.
Exelon filed a preliminary proxy statement on Schedule 14A with the SEC on April 17, 2009 in connection with its solicitation of proxies (the “Preliminary Exelon Meeting Proxy Statement”) for a meeting of Exelon shareholders (the “Exelon Meeting”) to be called in order to approve the issuance of
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shares of Exelon common stock pursuant to the Offer. Exelon expects to file a definitive proxy statement on Schedule 14A with the SEC in connection with the solicitation of proxies for the Exelon Meeting (the “Definitive Exelon Meeting Proxy Statement”). Investors and security holders are urged to read the Preliminary Exelon Meeting Proxy Statement and the Definitive Exelon Meeting Proxy Statement and other relevant materials as they become available, because they will contain important information.
Investors and security holders can obtain copies of the materials described above (and all other related documents filed with the SEC) at no charge on the SEC’s website: www.sec.gov. Copies can also be obtained at no charge by directing a request for such materials to Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, New York 10022, toll free at 1-877-750-9501. Investors and security holders may also read and copy any reports, statements and other information filed by Exelon, Xchange or NRG with the SEC, at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room.
Exelon and Xchange will be participants in the solicitation of proxies from Exelon shareholders for the Exelon Meeting or any adjournment or postponement thereof. In addition, certain directors and executive officers of Exelon and Xchange may solicit proxies for the Exelon Meeting. Information about Exelon and Exelon’s directors and executive officers is available in the Preliminary Exelon Meeting Proxy Statement. Information about Xchange and Xchange’s directors and executive officers is available in Schedule II to the Prospectus/Offer to Exchange. Information about any other participants will be included in the Definitive Exelon Meeting Proxy Statement.
Forward Looking Statements
This press release includes forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. The factors that could cause actual results to differ materially from these forward-looking statements include Exelon’s ability to achieve the synergies contemplated by the proposed transaction, Exelon’s ability to promptly and effectively integrate the businesses of NRG and Exelon, and the timing to consummate the proposed transaction and obtain required regulatory approvals as well as those discussed in (1) the Exchange Offer Documents; (2) Exelon’s 2008 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 18; (3) Exelon’s First Quarter 2009 Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors and (b) Part I, Financial Information, ITEM 1. Financial Statements: Note 13; and (4) other factors discussed in Exelon’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this press release. Exelon does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release, except as required by law.
Statements made in connection with the Offer are not subject to the safe harbor protections provided to forward-looking statements under the Private Securities Litigation Reform Act of 1995.
All information in this press release concerning NRG, including its business, operations, and financial results, was obtained from public sources. While Exelon has no knowledge that any such information is inaccurate or incomplete, Exelon has not had the opportunity to verify any of that information.
###
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Exelon Corporation is one of the nation’s largest electric utilities with nearly $19 billion in annual revenues. The company has one of the industry’s largest portfolios of electricity generation capacity, with a nationwide reach and strong positions in the Midwest and Mid-Atlantic. Exelon distributes electricity to approximately 5.4 million customers in northern Illinois and southeastern Pennsylvania and natural gas to 485,000 customers in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC.
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On July 2, 2009, Exelon Corporation issued the following notice:
This morning, Exelon Corporation announced an increase in its offer to acquire all of the outstanding NRG common stock in an all-stock transaction with a fixed exchange ratio of 0.545 Exelon shares for each NRG share, a 12.4 percent increase over the initial exchange offer of 0.485.
Attached is the complete news release and materials for today’s conference call. Conference call details are below.
Exelon Corporation will discuss the proposed NRG Energy transaction in a 45-minute conference call scheduled for Thursday, July 2nd, at 7:00 AM Central Time (8:00 AM Eastern Time). The call-in numbers are:
US & Canada Callers: 800-690-3108
International Callers: 973-935-8753
Conference ID # if requested: 17092348
A conference call replay will be available two hours after the call ends through July 16th, 2009. The numbers to dial for the replay are:
US & Canada Callers: 800-642-1687
International Callers: 706-645-9291
Conference ID #: 17092348
You will also be able to listen to a live audio webcast on the Investor Relations page of Exelon’s website (www.exeloncorp.com). The webcast will be archived and available for replay two hours after the conference call ends.
The call details are also included in the attached document. If you have any problems opening the attachment, please contact Martha Chavez at martha.chavez@exeloncorp.com or call her at 312-394-4069.
Exelon Corporation
10 South Dearborn,
Chicago, IL 60603
5
On July 2, 2009, Exelon Corporation began using the following presentation in discussions with investors:
6
 Exelon’s
Offer Is About Value – Today and Tomorrow Are EXC and NRG Together, or Is NRG Stand Alone, Better Built to Add Value in a Complex and Carbon-Constrained World? Investor Presentation July 2009 |
 Important
Information 2 2 This presentation relates, in part, to the offer (the “Offer”) by Exelon Corporation
(“Exelon”) through its direct wholly-owned subsidiary, Exelon Xchange
Corporation (“Xchange”), to exchange each issued and outstanding share of common stock (the “NRG shares”) of NRG Energy, Inc. (“NRG”) for 0.545 of a share of Exelon common stock.
This presentation is for informational purposes only and does not constitute an offer
to exchange, or a solicitation of an offer to exchange, NRG shares, nor is it a substitute for the Tender Offer Statement on Schedule TO or the Prospectus/Offer to Exchange included in the
Registration Statement on Form S-4 (Reg. No. 333-155278) (including the Letter
of Transmittal and related documents and as amended from time to time, the “Exchange Offer Documents”) previously filed by Exelon and Xchange with the Securities
and Exchange Commission (the “SEC”). The Offer is made only through the
Exchange Offer Documents. Investors and security holders are urged to read these documents and other relevant materials as they become available, because they will contain important
information. Exelon filed a proxy statement on Schedule 14A with the SEC on June 17, 2009 in connection with
the solicitation of proxies (the “NRG Meeting Proxy Statement”) for the 2009
annual meeting of NRG stockholders (the “NRG Meeting”). Exelon will also file a proxy statement on Schedule 14A and other relevant documents with the SEC in connection with
its solicitation of proxies for a meeting of Exelon shareholders (the “Exelon
Meeting”) to be called in order to approve the issuance of shares of Exelon common stock pursuant to the Offer (the “Exelon Meeting Proxy Statement”). Investors and
security holders are urged to read the NRG Meeting Proxy Statement and the Exelon
Meeting Proxy Statement and other relevant materials as they become available, because
they will contain important information. Investors and security holders can obtain copies of the materials described above (and all other
related documents filed with the SEC) at no charge on the SEC’s website:
www.sec.gov. Copies can also be obtained at no charge by directing a request for such materials to Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, New York
10022, toll free at 1-877-750- 9501. Investors and security holders may
also read and copy any reports, statements and other information filed by Exelon, Xchange or NRG with the SEC, at the SEC public reference room at 100 F Street, N.E., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s
website for further information on its public reference room. Exelon, Xchange
and the individuals to be nominated by Exelon for election to NRG’s Board of Directors will be participants in the solicitation of proxies from NRG stockholders for the NRG Meeting or any adjournment or
postponement thereof. Exelon and Xchange will be participants in the solicitation of
proxies from Exelon shareholders for the Exelon Meeting or any adjournment or postponement thereof. In addition, certain directors and executive officers of Exelon and Xchange
may solicit proxies for the Exelon Meeting and the NRG Meeting. Information
about Exelon and Exelon’s directors and executive officers is available in Exelon’s proxy statement, dated March 19, 2009, filed with the SEC in connection with
Exelon’s 2009 annual meeting of shareholders. Information about Xchange and
Xchange’s directors and executive officers is available in Schedule II to the Prospectus/Offer to Exchange. Information about any other participants is included in the
NRG Meeting Proxy Statement or the Exelon Meeting Proxy Statement, as applicable.
|
 Forward-Looking Statements This presentation includes forward-looking statements. There are a number of risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements made herein. The factors that could cause
actual results to differ materially from these forward-looking statements include
Exelon’s ability to achieve the synergies contemplated by the proposed
transaction, Exelon’s ability to promptly and effectively integrate the businesses of NRG and Exelon, and the timing to consummate the proposed transaction and obtain required
regulatory approvals as well as those discussed in (1) the Exchange Offer Documents;
(2) Exelon’s 2008 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors,
(b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data:
Note 18; (3) Exelon’s first quarter 2009 Quarterly Report on Form 10-Q filed
on April 23, 2009 in (a) Part II, Other Information, ITEM 1A. Risk Factors and (b) Part I, Financial Information, ITEM 1. Financial Statements: Note 13 and (4) other factors
discussed in Exelon’s filings with the SEC. Readers are cautioned not to
place undue reliance on these forward-looking statements, which apply only as of
the date of this communication. Exelon does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this communication, except as required by
law. Statements made in connection with the exchange offer are not subject to the safe
harbor protections provided to forward-looking statements under the Private
Securities Litigation Reform Act of 1995. All information in this presentation concerning NRG, including its business, operations, and
financial results, was obtained from public sources. While Exelon has no
knowledge that any such information is inaccurate or incomplete, Exelon has not had
the opportunity to verify any of that information. 3 3 |
 Scope, scale and
strength to build on Exelon’s proven capacity to… • Execute strategic objectives from a solid financial foundation, with ready access to low-cost capital • Realize significant value creation through operational and financial synergies • Diversify across power markets, fuel types and regulatory jurisdictions • Respond to universally recognized need for industry consolidation • Be a significant voice in industry, policy and regulatory discussions The EXC/NRG combination would be the premier power company in a complex, dynamic industry • Largest U.S. power company (~48,000 MW 1 ) with market cap of ~$40 billion 2 and investment grade balance sheet • Significant presence in five major competitive markets (Illinois, Pennsylvania, Texas, California and the Northeast) rather than two or three • Second lowest carbon emitting intensity in the industry For NRG and Exelon Shareholders, a Combination Means: 4 1. Includes owned and contracted capacity after giving effect to planned divestitures. 2. Exelon and NRG market capitalization as of 6/26/09. |
 5 For NRG Shareholders, Exelon Means Participation in a Company with: • The largest, best run, lowest cost nuclear fleet in the U.S. • A plan to build 1,300-1,500 MW of new nuclear through uprates at a fraction of the cost and risk of NRG’s partial ownership of STP 3&4 • The largest carbon upside in the industry • The opportunity to realize any upside from gas, coal and capacity prices without the higher risk from downside commodity cycles facing stand-alone NRG • A history of financial discipline and shareholder return • Investment grade balance sheet (BBB/A3/BBB+) that enables consistent access to capital at lower cost • Total shareholder return of 124% since 2000, compared with 45% for the UTY and negative 23% for the S&P 500 1. Exelon Generation Senior Unsecured credit ratings. 2. Shareholder return from Exelon inception (10/20/00) through 6/26/09. Total return after
reinvesting all dividends back into the security at the closing price on the day following the relevant ex-dividend date. Includes stock
price appreciation with dividend reinvestment. Excludes taxes and fees.
2 1 |
 An EXC/NRG
Combination Is Compelling… • For NRG shareholders • Higher exchange ratio = 0.545 • Greater growth opportunities than NRG stand-alone, at lower risk and relative cost • ~$3.1 billion transaction value • For Exelon shareholders • $0.6-$2.5 billion transaction value • 2% - 7% accretion to EPS • Improved cash flow • Retained investment grade rating • ~$1.5 billion in additional, bankable synergies ($3.6 to $4.0 billion total) • NRG is more vulnerable to low gas prices, high carbon costs and credit constraints • We can get this deal done - regulatory approvals and financing are on course • Now is the time to move forward quickly: Elect Exelon’s slate of nine independent candidates for the NRG Board 6 |
 The Transaction
Offers Greater Value to Shareholders of Both Companies 7 |
 3 2 1 8 The Value of the Offer to NRG Shareholders Has Increased THEN NOW Exchange Ratio Est. NPV of Synergies 0.485 0.545 (12.4% increase) $1.5 – $3.0 B $3.6 – $4.0 B Exelon’s best and final offer 8 1. Implied ownership as of 2012 assuming the conversion of $1.1 billion of mandatory
convertibles. Immediate ownership percentage upon deal close is 18.6%.
2. Includes estimated transaction costs of $654M (pre-tax). 3. Includes estimated transaction costs of $550M (pre-tax). Transaction Value to NRG $2.3 B $3.1 B Implied Ownership 16.8% 18.2% Vote the BLUE Proxy to decide the outcome of this offer |
 • Exelon’s offer has increased NRG’s stock price and decreased Exelon’s stock price
relative to each company’s peer indices • Assuming that each company’s stand-alone stock price is halfway between the comparable company index and current stock price, the premium offered is still 44% 9 9 Current Stock Price ($50.70) 2 Halfway Between Index and Current ($54.03) Based on Competitive Integrated Index ($57.35) 3 Current Stock Price ($23.80) 2 16% 24% 31% Halfway Between Index and Current ($20.50) 35% 44% 52% Based on IPP Index ($17.21) 4 61% 71% 82% Exelon Stand-Alone Stock Price NRG Stand-Alone Stock Price Indicative Premium 1 The world has changed for IPPs – lower gas prices, a weak economy and likely carbon legislation will translate into lower IPP valuations Best Indicators Suggest Current Exelon Offer Represents an Implied Premium of 44% 1. Premium based on 10/17/08 stock prices (last observable stand-alone stock value) is 54% at
current offer. 2. Closing stock prices as of 6/26/09. 3. EXC implied stock price based on the Competitive Integrateds (AYE, ETR, FPL, PPL, PEG, CEG, EIX,
FE) performance from 10/17/08 to 6/26/09. 4. NRG implied stock price based on the IPP Index (MIR, CPN, DYN, RRI) performance from 10/17/08 to
6/26/09. |
 Based on These
Indicators, Transaction Provides NRG Shareholders Immediate Value of $3.1 Billion
Share of Synergies $0.6B Plus: EXC Upside - Carbon - Uprates - PECO PPA roll- off 1. Based upon implied premium of 44% from previous slide and assumes 277 million NRG
fully-diluted shares outstanding. 2. Share of synergies reflects 18.2% NRG share of synergies (based upon midpoint of $3.6-$4.0B
synergies), less NRG share of $550 million pre-tax total estimated transaction
costs. Implied Transaction Value to NRG Shareholders of $3.1B Implied Premium to NRG Shareholders of $2.5 B 10 Even at June 26 th closing prices, NRG shareholders will realize immediate transaction value of $1.7 billion If Exelon’s offer is withdrawn, NRG shareholders face downside risk in their share price 1 2 |
 Then • Assumed a traditional “integrate” model • Reflected preliminary “top-down” internal estimate without assistance from 3 rd parties • Notable assumptions included: – 40% reduction in NRG’s A&G expense – 10% reduction in NRG’s O&M expense Now • Assumes an “absorb-integrate-transform” model • Reflects “bottom-up” functional estimate with assistance from Booz & Company • Assesses discrete operating areas, updates assumptions and defines desired outcomes • Reflects enhanced view of NRG’s
operating profile (plant benchmarking) • Recognizes impact of Reliant Retail business to NRG (A&G) 11 Upon Detailed Investigation, Exelon Has Identified Greater Synergies Exelon will realize these synergies, just as we have in the past 1. Based on analysis of publicly available information. 2. Primarily reflects severance, systems integration, retention and relocation costs. Est. Annual Cost Savings: $180 - $300 M % of Combined Expenses: ~3%-5% Costs to Achieve : $100 M NPV of Est. Synergies: $1,500 - $3,000 M Est. Annual Cost Savings: $410 - $475 M % of Combined Expenses: ~6%-7% Costs to Achieve : $200 M NPV of Est. Synergies: $3,600 - $4,000 M 1 1 2 2 |
 Synergies
reflect a 30% reduction in NRG’s O&M expense, which is consistent with prior power sector transactions and reflects Exelon’s track record and commitment to delivering
strong results – additional synergies possible 12 Category Amount ($M) Commentary Key Sources of Synergies Corporate / IT $225 - $245 • Includes enhanced corporate synergies from initial case based on detailed assessment and prior transaction experience, minimizing duplicative corporate support Fossil $75 - $85 • Based on ~350 employee reduction from Exelon/NRG fleet optimization due to implementation of Exelon’s management model Trading $65 - $75 • Absorption of NRG trade book into existing Exelon Power Team operations • EXC Power Team is an experienced, multi-state power marketer, enabling smooth integration and significant labor synergies Development $20 - $30 • Significant reduction in redundant staffing, without sacrificing continuing growth and development opportunities Nuclear $10 - $20 • Integration of STP 1 & 2 into the largest nuclear fleet in the industry (not assumed until 2011, contingent upon agreement with co-owners) Retail $15 - $20 • Reflects assumed NRG synergies (since Reliant acquisition was not incorporated into our initial analysis) Total $410 - $475 |
 13 243 170 117 Cost Savings Estimate ($M) $ 100 117% Actual Post Merger Integration Savings ($M) % Realized of Estimate 106% $ 160 $ 180 135% • Targeted headcount reduction of ~1,200; actual ~1,600 • Disciplined integration planning process • Effective use of pre-close period for integration planning purposes to accelerate synergy capture • Reduction in overall staffing levels through centralization/leverage of scale • Elimination of duplicate corporate and administrative positions • Common company-wide management processes Year 2001 2002 2003 $67 $210 $200 2004 $410 2003 $230 $163 Cumulative Cost Savings Estimate ($M) Actual Results (Pre Tax - $M) (O&M + Capital = Total) % Realized of Estimate 100% 129% $163 + $67 = $230 $339 + $188 = $527 O&M Capital Exelon has the experience and management commitment to deliver on its synergy targets Exelon Has a Proven Track Record of Delivering Targeted Synergies • Improved capacity factor from 77% in 2004 to 96% in 2006 • Reduced average refueling days from 80 in 2004 to 26 in 2006 50 60 70 80 90 100 1998 2000 2002 2004 2006 2008 PECO Unicom PSEG Exelon AmerGen PSEG with NOSC |
 14 The Value Of The Offer To Exelon Shareholders Is Substantial THEN NOW 14 Operating EPS Accretion to EXC 2% – 10% 5 2% – 7% 5 1. Assumes total asset sale proceeds of ~$1.0B. 2. Assumes total asset sale proceeds of $1.6 B and a $1.1B mandatory convertible offering. 3. Includes estimated transaction costs of $654M (pre-tax). 4. Includes estimated transaction costs of $550M (pre-tax). 5. Does not include effects of purchase accounting. Transaction Value to EXC $1.0 – $3.0 B $0.6 – $2.5 B 4 Est. NPV of Synergies $1.5 – $3.0 B $3.6 – $4.0 B 3 1 2 |
 Transaction
Will Create Significant Value under Multiple Scenarios Value ($B) Gas Prices Federal RES Carbon Year:Price Post-Recession Growth 15 $1.2 $0.6 Merchant Allocation? 2014:$25 $7.00 No Low Yes 2020:$29 $6.80 No Stagflation Yes 2014:$25 $6.90 Yes Low Yes 2014:$17 $6.00 No Low No $1.1 $2.5 The transaction offers positive value creation of $0.6-$2.5B 2012:$25 $7.90 No Moderate Yes $1.1 1 2 3 4 5 6 1. Includes the cost of issuing $1.1 B of mandatory convertibles at a price below Exelon’s
long-term value; therefore long-term value estimates are reduced by $0.1
B to $0.5 B (depending on the scenario). 2. Gas price is long-term price in 2008 $/MMBtu. 3. Carbon Year is year in which national cap and trade starts, Carbon Price is in 2014 $/tonne
assuming 7% annual escalation. In $7.90 gas case, 2012 and 2013 carbon
prices assumed to be $13/tonne and $14/tonne, respectively. 4.
Merchant Allocation assumes 50% of emissions to merchant coal generators
phasing out by 2030. 5. Federal Renewable Energy Standard (RES) assumes 20% standard. 6. Low post-recession growth assumes load growth consistent with current forwards followed by ~1%
annual load growth, Moderate post-recession growth assumes load growth
consistent with current forwards followed by ~1.5% annual load growth,
Stagflation assumes three years of 7% inflation and five years of no load growth. |
 16 Transaction Is Accretive for Exelon Shareholders Operating Earnings New Offer (Now) Original Offer (Then) Exelon remains fully committed to delivering value to its own shareholders 10% 2% 5% 2010 2011 2012 4% 2% 7% 7% 2010 2011 2012 2013 1 1. Does not include effects of purchase accounting, which may be dilutive to GAAP earnings following
transaction closing, depending on market conditions and other factors.
2. Exelon Investor Presentation 10/29/08, page 5. Based on I/B/E/S estimates as of
10/21/08. Assumes total asset sale proceeds of ~$1.0 B. 3.
Based on internal Exelon estimates. Assumes total asset sale proceeds of $1.6 B
and a $1.1 B mandatory convertible offering. |
 • NRG Shareholders – 12.4% increase in exchange ratio from 0.485 to 0.545 increases transaction value to $3.1 billion – Share in greater total synergies from combined company – Greater long-term value creation from Exelon • Exelon Shareholders – Strategic platform for continued growth – Long-term value creation of $0.6 – $2.5 billion on a discounted cash flow basis, including a share of synergies – Accretive transaction beginning in Year 1 • NRG Bondholders – Credit strength from Exelon’s investment grade balance sheet and prudent risk management • Exelon Bondholders – Continued commitment to investment grade ratings, as evidenced by plans to issue equity and realize asset sale proceeds The Transaction Would Create Value For All Stakeholders 17 1. Does not include effects of purchase accounting. |
 Exelon Offers
Greater Growth at Lower Risk 18 |
 1 2 Exelon Is Built to Last and Consistently Creates Value Operational Prowess 19 Solid Balance Sheet Consistent Dividends $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 2003 2004 2005 2006 2007 2008 Exelon Industry Nuclear Annual Avg. Production Cost ($/MWh) $1.26 $1.60 $1.60 $1.76 $2.03 $0 $0.50 $1.00 $1.50 $2.00 2004 2005 2006 2007 2008 2009E $2.50 $2.10 • Investment Grade Rating (BBB/A3/BBB+) • Broad Access To The Deepest Capital Markets: - $4.3 trillion High Grade Bond market - $1.2 trillion Commercial Paper market • Lower Cost of Capital: - Offers $250 M in aggregate interest savings over the next five years relative to non-investment grade debt pricing • Financial and Operational Flexibility: - Ability to negotiate hedging transactions with better margining terms or avoid incremental credit charges 1. Exelon Generation Senior Unsecured credit ratings. 2. Based on internal analysis. Changes in market conditions could impact results.
65% 70% 75% 80% 85% 90% 95% 100% Operator (# of Reactors) Range 5-Year Average |
 Exelon’s
Long-Term Value Drivers Generate Post- Transaction Value for All
Shareholders Carbon Nuclear Uprates PA Procurement Cost Reductions Long-term fundamentals create value beyond what is currently reflected in Exelon’s stock price - $1.1 billion and growing annual upside to Exelon EBITDA from Waxman-Markey legislation - 1,300 MW - 1,500 MW in Exelon nuclear uprates by 2017 increases the value of the existing fleet - $2,200-2,500/kW overnight cost for uprates vs. $4,000-4,500/kW for new build and additional ~$110/kW in annual savings from lower incremental operating costs from uprates - $100-102/MWh result in June PECO power procurement suggests robust pricing and higher margins at Exelon Generation in 2011 and beyond - $350 million in announced O&M reductions for 2010, more than half of which is sustainable 20 1. Assumes $15/tonne carbon pricing. 2. Reflects retail price including line losses and gross receipts tax. 2 1 |
 Carbon
Legislation Is Coming – Who Can Better Navigate a Carbon-Constrained World? • Waxman-Markey legislation provides allocations to merchant coal units only if they actually run
in any given year – with this allocation mechanism, merchant coal plants will
dispatch more than is economically efficient and fewer merchant coal plants will
retire • If merchant coal allocations are granted in a manner that does not change dispatch and retirement
incentives, Exelon’s EBITDA would increase by about $1.5 billion and NRG’s
EBITDA would increase by about $150M in Year 1 • While Exelon has supported merchant coal allocations as part of an overall industry compromise, if
no allocations are granted, Exelon’s EBITDA would increase by $1.5 billion and
NRG’s EBITDA will decrease by $150M in Year 1 Note: Dollar values reflect
illustrative results based on potential outcomes of climate legislation and should not be interpreted as a forecast for future periods. $1,100 Exelon NRG ($M) Year 1 EBITDA Impact of $15/tonne Carbon With Waxman-Markey Merchant Coal Allocations There is no case where carbon legislation is better for NRG than for Exelon 21 $0 On June 26 , the U.S. House passed the Waxman-Markey Bill by a vote of 219-212 Assuming carbon priced at $15 per tonne, Exelon EBITDA in the first year alone could grow by ~$1.1 billion th |
 22 • Incremental 1,300 – 1,500 MWs of Exelon uprates over 2009-2017 exceeds NRG’s expected ownership of STP 3&4 • Exelon has substantial experience managing 1,100 MWs of uprate projects over the past 10 years • Less Risk: less risk of cost overruns and delays; uprates can also be phased in based on market conditions which adds value • Lower Cost: Uprates do not materially increase the O&M of existing plants, saving ~$110/kW in annual costs vs. a
new nuclear plant Exelon’s Nuclear Uprate Plan Delivers More MWs Than NRG New Build - With Less Risk At Half The Cost 1,170 MW (44% Equity Ownership) Average Overnight Cost Estimate of U.S. New Build: $4,000-4,500/kW Year Uprates Become Operational 0 200 400 600 800 1000 1200 1400 1600 1999- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009- 2017 MWs 1,100 MWs 1,300 – 1,500 MW Average Overnight Cost Estimate: $2,200 - 2,500/kW Exelon’s Uprate Plan NRG’s New Nuclear Plan at Max Equity Position¹ 1. Exelon expects that NRG’s planned equity selldown would further reduce NRG's net equity interest to approximately 35%, or 936 MW, and possibly even less “We are impressed with Exelon's optimistic plans to add up to 1,500 MW from nuclear
uprates over the next eight years…The returns on these investments should be very attractive, as the company does not
anticipate a higher run- rate of O&M expenses (i.e., O&M/MWh should decrease).” - Angie Storozynski, Macquarie Securities, June 12, 2009 |
 3 NRG’s “prediction” Pennsylvania Procurement Provides Strong Evidence of the Value of Exelon’s Mid-Atlantic Fleet “Well, they recently – another neighboring utility, First Energy, announced their auction results as they transitioned to open market, and in fact that they realized was $61.50 per megawatt hour, which obviously is a far cry from $107.50. $61.50 obviously is better than $60, but it’s hardly worth waiting three years for, nor is it worth foregoing NRG’s own considerable growth prospects” – David Crane, Deutsche Bank Conference, May 27, 2009 What Actually Happened • Exelon Generation wins commitments in PECO and Allegheny auctions for more than 7 million MWhs at attractive pricing “There had been some suggestions (notably from NRG) that the recent FE price might presage downside risk in the PECO auction - but such fears were clearly not borne out…and highlights the different market dynamics such as positive basis to PECO's Philadelphia location.” - Jonathan Arnold, Bank Of America Merrill Lynch, June 17, 2009 23 Current ExGen Contract 2011 PECO Price $100-102/MWh Current ExGen Contract 2011+ $60/MWh ? 1 1. NRG Deutsche Bank Securities Energy & Utilities Conference Presentation - 5/27/09.
2. NRG estimate of energy and capacity excluding transmission. 3. Estimated retail price (i.e., inclusive of gross receipts tax and adjustment for T&D losses
but not Network Transmission Service) converted from ExGen’s winning offers
using Residential Retail Generation Rate Conversion Model at PECO Procurement website (http://www.pecoprocurement.com/index.cfm?s=supplierInformation&p=rates). 2 |
 NRG Faces
Significant Risks and Overvalues its Stand-Alone Business Prospects 24 |
 NRG Touts
Numerous “Growth” Opportunities, But A Closer Look Reveals Minimal Value New Nuclear (NINA) • NRG significantly underestimates both costs and risks • Any value estimate is speculative at this point Reliant • Purchase appears accretive, but NRG’s EBITDA projections are extremely aggressive and suggested EBITDA multiple is unrealistic • Net value of ~ $1/share Padoma Wind • 150 MW net ownership (0.7% of NRG existing capacity) of new wind in Texas scheduled to come on-line by the end of 2009 • Potential net value in the $0.00-0.10/share range eSolar • 184 MW net ownership (0.8% of NRG existing capacity) of new solar in Southwest scheduled to come on-line in 2011/2012 • Potential net value in the $0.00-0.25/share range GenConn Energy • 200 MW net ownership (0.9% of NRG existing capacity) of new peaking in Connecticut scheduled to come on-line in 2010/2011 • Estimated net value of ~$0.10/share 1. Upper end of range is based on optimistic net value estimate assuming a 10% profit margin on
capital invested. NRG’s only real growth opportunity is the gas and heat rate upside
in its existing 23,000 MW domestic fleet – Exelon has similar upside plus enormous carbon upside as well 25 |
 26 /kW) Historical projected and actual costs of nuclear construction ($/kW) 1974/75 $1,156 $4,410 1976/77 $1,493 $4,008 $560 $1,170 1966/67 % Over Original Estimate +381% +269% +209% • No success with planned equity selldown • Insufficient DOE loan guarantee funds to support all identified projects • Even with DOE loan guarantee of $4.6B and $3B in loan guarantees from Japan (which we see as aggressive), there is a financing gap of $2.5B - $5B that NRG has not secured • No disclosed details on risk mitigation plan for Toshiba’s first U.S. nuclear construction project • No signed PPAs because current market fundamentals do not support pricing needed to cover construction costs Significant Risks Make It Impossible To Ascribe Value At This Early Stage Nuclear new build estimates— Overnight $/kW FPL $3,170-$4,630/kW Progress (Levy County) $4,345/kW Brattle Group $4,038/kW Exelon (Victoria County) $4,148/kW U.S. Consensus $4,000-4,500/kW NRG $3,200/kW vs. Sources: NEI Whitepaper “The Cost of New Generating Capacity in Perspective” February 2009, Brattle Group IRP for Connecticut - January 2008 , NRG 6/4/09 Presentation at Macquarie Global Infrastructure Conference 1. Amounts shown in 2008$, assuming 2% inflation over 2007$ for FPL and Progress. Exelon estimate includes initial fuel load cost. 2. NRG Investor Presentation, June 17, 2009 Overnight Cost Growth (1966-1977) Est: +167% Actual: +243% NRG Underestimates the Risks of Being a First Mover STP 3&4 Is Subject To Project Execution And Cost Escalation Risks That NRG Shareholders Cannot Ignore • U.S. Supply chain and labor force must be re-established • Japanese modular construction practices have not been applied in the U.S. • NRG has not announced completion of construction contract • U.S. labor productivity vs. Japanese is unknown • Construction proximity to an operating nuclear plant poses significant risk to construction execution, schedule, and cost • Owner’s costs and site development risks are material, despite the brownfield site 2 1 |
 27 NRG Is Overvaluing Reliant Retail’s Financial Impact Valuation Considerations Even when assuming a $250 million run rate EBITDA for Reliant Retail, the financial impact to NRG is less than $1.00 per share • Exelon fully supports the retail business model, and the Reliant acquisition appears value-accretive • However, the suggestion that over $1 billion in equity value (or ~$4.50 per share) has been created is an overstatement • Valuation of 4-6x EBITDA is not achievable – NRG paid 1.9x to 2.6x EBITDA in an auction – Public markets have not imputed attractive multiples to retail businesses in the past • No allocation of debt in NRG’s valuation either in the form of collateral or increased working capital • NRG seems to ignore the higher level of risk for retail; implies higher cost of capital Potential Price Per Share Impact ($ M) • $250 million run rate EBITDA appears aggressive – Gross margins ($670 M) assume steady mass market and Commercial & Industrial margins which have been volatile – Aggressive pricing from large competitors (e.g., Centrica, FPL, CEG) will
likely compress margins – Requires strong execution across key disciplines (e.g., risk management, customer service) Earnings Considerations Low High NRG Management (as of 3/2/09): 1 Purchase Price $388 $388 (a) Original EBITDA Estimate $200 $150 (b) Implied EV / EBITDA 1.9x 2.6x Revised NRG Estimates (as of 5/27/09): 2 (c) Revised Run-rate EBITDA $250 $250 (d) Change / Implied Synergies (c - a) $50 $100 (e) NRG Purchase Multiple Range (line b) 1.9x - 2.6x 1.9x - 2.6x Implied Value Created (d * e) $95 $130 $190 $260 Est. Price Per Share Impact 3 $0.34 $0.47 $0.69 $0.94 1. NRG Investor presentation - March 2, 2009. 2. NRG Investor presentation - May 27, 2009. 3. Assumes 277 million NRG fully-diluted shares outstanding. |
 28 0 100 200 300 400 500 600 700 $800 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Exelon Estimate – Incremental CapEx (High Case) Exelon Estimate – Incremental CapEx (Low Case) NRG Form 10-K Disclosure $1.3-$2.3 billion of incremental environmental compliance costs could limit NRG’s ability to fund its future “growth” – particularly in light of its leveraged balance sheet and non-investment grade ratings Total NRG Estimate $1.15B Incremental Cap Ex $1.3 – $2.3B Total $2.45 – $3.45B 28 • Under the new administration, we anticipate there will be more stringent environmental rules and
regulations, including NOX and SO2 and particulate reductions under a revised Clean Air Interstate Rule (CAIR), an aggressive EPA/DOJ New Source Review enforcement initiative • These regulations may result in significant compliance costs for NRG’s coal-fired generation assets • These regulations will have minimal impact on Exelon’s compliance costs given our nuclear
portfolio 1. In its 3/31/09 Form 10-Q, NRG states that it has prepared an environmental capital expenditure
plan for numerous pending regulations but does not disclose the amount of the planned
expenditures. 2. Forecasted amounts shown above are included in transaction analysis. Environmental Capital Expenditures Could Severely Limit NRG’s Future Growth 2 1 |
 looking
closer: • NRG claims that its hedge program insulates it from the current commodity down-cycle… • NRG has sold about 2/3 of its baseload energy forward for 2011, but at much lower prices than for 2009 sales • As NRG’s above-market hedges roll off, we estimate that NRG’s baseload energy revenues could decline by ~$700 million based on current market prices between 2009 and 2011 At Current Forward Prices, ~$700 Million in NRG Revenue Deterioration From 2009-2011 1. Based on 2/28/09 market conditions, per Exelon Hedging Disclosures (April 2009). 2. Percentages sold and average prices in blue as disclosed in NRG’s 2008 Form 10-K.
2010-2011 average prices in green are based on Exelon internal analysis. Average price represents weighted average of TX, NY and
PJM baseload energy sales using market conditions as of 5/29/09. Between 2009 and 2011, Exelon Generation’s estimated gross margin grows by ~$500 million 1 , largely due to the PECO PPA roll-off 29 0 1 2 3 4 2009 2010 2011 $B NRG Baseload Energy Revenues 2 5% Sold in Short- Term Market 95% Sold Forward at an Average Price of $61/MWh 21% Remaining Sales at an Average Price ~$46/MWh Assuming 5/29/09 Market 79% Sold Forward at an Average Price of $58/MWh $700 Million Decline 33% Remaining Sales at an Average Price ~$53/MWh Assuming 5/29/09 Market 67% Sold Forward at an Average Price of $52/MWh |
 Regulatory
Approval and Financing Plan Are On Course 30 |
 31 Jurisdiction Status FERC Acquisition approved on May 21, 2009 Hart-Scott-Rodino Statutory waiting period expired April 30, 2009 NRC Application under review without further information requests Texas Commission ruled application is sufficient - hearing to be held on October 15, 2009 New York To be decided without evidentiary hearing Pennsylvania Hearings scheduled for July 15-17, 2009 California CPUC accepted application; will be decided without evidentiary hearing Regulatory Approvals Are Advancing As Expected Completed In Process 1. As of June 26, 2009. Note: It is also worth noting that NRG’s lawsuit against Exelon in U.S. District Court,
Southern District of New York, was dismissed on June 22, 2009 and will not be an
obstacle to closing. 1 |
 32 32 Exelon Has a Financing Plan That Is Executable, Provides Investment Grade Metrics and Creates Long-Term Value “I think Exelon has the capability to refinance and close the exchange offer” - Jonathan Baliff, NRG Executive Vice President, Strategy 4 • We have modeled varying combinations of debt refinancing, asset divestitures, equity or equity-linked issuance and accelerated debt paydown to maintain our investment grade credit ratings – with a view to long-term shareholder value • Our optimal financing plan includes: - Divesting assets of ~$1.6 billion - Issuing ~$1.1 billion of mandatory convertible equity or common equity - Deploying cash on hand of ~$1.7 billion - Financing $4.2 billion in the debt capital markets • The plan is executable and provides investment
grade metrics • We have incorporated a “cost” of issuing equity or equity-linked securities into our model as we believe EXC’s long-term value is greater than its current stock price • The strategic benefits, long-term value and synergies created by the combination are more valuable than the “cost” of an equity or equity-linked issuance: – Combined company will benefit from low-cost, baseload generation positions in PJM and ERCOT which will provide diversification and a platform for future growth – Long-term DCF value remains positive at $0.6 - $2.5 billion, inclusive of cost to issue a mandatory convert of $0.1 – 0.5 billion – Earnings and cash flow accretive in first full year of operations 3 2 1 1. Based on relative economics of the two securities and market conditions. 2. Estimated excess cash balance at NRG reflects Exelon internal projections as of FYE 2009.
3. Either at or about the time of the transaction or thereafter. 4. Former investment banker at Credit Suisse testifying under oath in Federal Court on June 1,
2009. NRG Energy. Inc. v. Exelon Corp., et al., No. 09 Civ. 2448 (S.D.N.Y.).
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 We Have A Plan
To Meet Our Financing Needs – The Plan is Flexible and Executable • Exelon has many options to address its financing needs • Capital markets • Bank financing • TopCo structure • Asset sales / Equity issuance • Bond waivers • Excess NRG cash • Capital markets remain strong • Over $200 billion in bank commitments (over $1 billion) in the last twelve months • Over $88 billion in investment grade bond issues (over $1 billion) year to date • $130 billion in U.S. equity issuances year to date, of which over $19 billion is convertible equity • We can finance the transaction at an ~8% interest rate given current market conditions 33 Summary Financing Needs ($ M) Principal Bank Debt (Includes TLB and Synthetic LOCs) $3,114 Senior Notes due '14, '16, and '17 (in aggregate) 4,700 8.500% Senior Notes due 2019 700 3.625% Preferred Stock 250 Other 3 908 Potential Financing Needs $9,672 Preliminary Financing Plan Estimated Excess NRG Cash and Equivalents (as of FYE '09) $1,700 Equity / Mandatory Convert Issuance 1,100 Asset Sales 1,600 Assumption of 2019 Bonds 700 Assumption of Select Non-Recourse Obligations 5 379 Debt Capital Markets Financing 6 4,193 Total Sources $9,672 7 7 7 1 2 4 Note: Estimated balances based on internal estimates, reported data in NRG’s Form
10-Q as of 3/31/09 and 10-K dated 12/31/08. 1. Synthetic LOCs require drawn bridge loan. 2. Credit Suisse has the option to keep the security outstanding and make fair value
adjustments. 3. Includes estimated fees, net of taxes and other non-recourse obligations. 5. Excludes CS Notes and preferred interest. 6. Either at or about the time of the transaction or thereafter. 7. UBS market data . 4. Assumes divestiture of various assets including Big Cajun and other Louisiana Plants.
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 •
Elect each of the four independent candidates nominated to run in opposition to the incumbent directors up for re-election • Expand the size of the NRG board to 19 directors • Elect each of the five independent candidates to serve on the expanded board NRG Shareholders can secure the best transaction possible by taking the following actions:
This approach will allow NRG shareholders to share in the significant value to be generated from creating the largest, most diversified power company in the U.S. 34 This will not result in Exelon’s slate constituting a majority of the NRG Board • NRG’s Board has been entrenched in its steadfast opposition to a transaction with Exelon by: - Supporting an entrenched CEO and Senior Management who have sought to obstruct Exelon’s attempts to obtain regulatory approvals for the transaction - Consistently ignoring the spoken will of a majority of NRG’s shareholders and refusing to negotiate with Exelon or allow due diligence • We are committed to this transaction but will continue our efforts only as long as we have shareholder support. The election of only four new directors would raise a significant question about the level of that support Voting For Only Four Directors Will Reduce the Likelihood of a Value-Enhancing
Transaction It’s Time to Act to Capture This Value – Vote the BLUE Proxy Card to Make the Offer Successful |
 35 This Transaction Is Unique • Substantial synergies - fairly shared • Compelling value • Catalyst for consolidation The time is now…the parties are NRG and Exelon… the price is fair |
 Appendix
36 |
 Q2 2009
Q3 2009 Q4 2009 Receive Regulatory Approvals 10/19: Announce Offer Annual NRG and Exelon Special Shareholder Meetings 11/12: Exchange Offer Filed Make Filings and Work to Secure Regulatory Approvals (NRC, DOJ/FTC, PUCT, NYPSC, PAPUC, CPUC) Shareholder Proposal and Proxy Solicitation 8/21: Exchange Offer Expires 2/25: Over 51% of NRG Shares Tendered Regulatory approvals are manageable and we expect the transaction to close in 2009 5/21: FERC Approval Expected Transaction Close Exelon is Committed to the Combination Q4 2008 Q1 2009 37 Discussing regulatory concerns of an NRG/Exelon tie-up, Crane said he did not expect the bidder to have any regulatory problems.– David Crane Interview with Peter Semler of Mergermarket, March 10, 2009 |
 We Also
Identified Numerous Sources Of Additional Upside To Our Synergy Estimates We may even realize additional synergies post-transaction that are not reflected in our current estimates Comments • Aggressive approach to sourcing, standardization and service contracting could increase savings opportunity Supply Chain • Further rationalization of the acquired and legacy businesses combined business model, avoidance of incremental staff-up and elimination of non-value added spend Retail • Extension of the Exelon nuclear management model and capture of economies of scale at STP Nuclear • Opportunity for regional consolidation, resource sharing and contracting strategy rationalization Fossil • Expanded insight into NRG IT environment will likely yield opportunities in architecture and platforms, application conversion and plant-level systems IT 38 |
 Exelon’s
Track Record of Operational Synergies - Nuclear Operating Service Contract for
PSEG In addition to a proven track record on financial synergies, Exelon has also proven
its ability to create operational synergies through our Management Model Salem/Hope Creek Exelon Nuclear Operating Service Contract – Operation of PSEG Salem and Hope Creek Units Exelon Fleet 39 Average Refueling Outage Duration (Days) 0 20 40 60 80 2004 2005 2006 2-Year Production Cost ($/MWh) $5.00 $10.00 $15.00 $20.00 $25.00 2004 2005 2006 # Employees Per Unit 0 200 400 600 800 2004 2005 2006 Capacity Factor 50% 60% 70% 80% 90% 100% 2004 2005 2006 |
 40 1. Wholesale level pricing (excludes adjustments for taxes and transmission and distribution losses);
includes cost of Network Transmission Service (NTS). 2. Retail level pricing but excluding NTS. Retail price includes cost of Gross Receipts Tax and
adjustment for transmission and distribution (T&D) losses. Retail prices
based on distribution company press releases. 3. Estimated retail price (i.e., inclusive of Gross Receipts Tax and adjustment for T&D losses
but not NTS) converted from ExGen’s winning offers using Residential Retail
Generation Rate Conversion Model at PECO Procurement website (http://www.pecoprocurement.com/index.cfm?s=supplierInformation&p=rates). • Exelon Generation’s full requirements power purchase agreement with PECO Energy expires on December 31, 2010 • Recent PJM prices for full requirements products: Procurement Date Delivery Period $/MWh PSE&G (NJ BGS) February 2009 June 1, 2009 - May 31, 2012 $103.72 Residential and Small C&I PPL April 2009 January 1, 2010 - December 31, 2010 $86.74 Residential $87.59 Small C&I Allegheny June 2009 Residential: 17-month and 29-month contracts, both beginning January 1, 2011 Non-residential: 17-month contracts beginning January 1, 2011 $71.64 Residential $75.40 Non-residential PECO June 2009 17-month and 29-month contracts beginning January 1, 2011 $100-102 Residential (approximate) Pennsylvania Procurement Provides Strong Evidence of the Value of Exelon’s Mid-Atlantic Fleet 1 2 2 2 2 3 |
 41 RPM Capacity Auctions in PJM The results of the recent RPM capacity auction are not anticipated to reflect a new “norm” due to an anticipated market response to low clearing prices and rule changes for demand response bidding • The RTO clearing price for 2012/2013 was $16.46 MW-day. The clearing price for MAAC and Eastern MAAC resources was $133.37 MW-day and $139.73 MW-day respectively. - Exelon offered 12,200 MWs of capacity in the RTO region; 1,500 MWs in the MAAC region; and 9,600 MWs of capacity in Eastern MAAC region • A market response to the low clearing prices in the RTO region is anticipated - Modified resource bidding behavior - Retirement of costly and less efficient generation - Cancellation of new generation projects - Less Cleared Demand Response (DR) • The RPM capacity auction prices for 2012/2013 are the result of increased generation supply and demand response resources, decreased load PJM wide, and locational reliability requirements • The 2012/2013 capacity auction was the first time in which Interruptible Load Resources (ILR) were required to offer into RPM as a capacity resource - The PJM tariff was interpreted to require existing ILR Resources to bid at $0 • On June 8, 2009, PJM and its stakeholders began considering changes that would eliminate offer caps on DR - Tariff changes could result in future auctions that better reflect the true market value of capacity (i.e. the value to end use customers who sell firm power rights)
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 Scale and
Complexity of Nuclear New Build Introduces a Unique Set of Challenges for NRG
42 New nuclear build is a high risk proposition for NRG and represents a substantial portion of the company’s market cap • Even with financing support by the U.S. and Japanese governments, NRG is placing a significant portion of the company’s market cap at risk • Exelon’s size and investment grade balance sheet significantly lessens the impact of this mega-project on the company’s operating and financial risk profile Total nuclear new build equity financing as a percentage of market capitalization NRG EXC/NRG - +25% +50% +75% +100% +125% +150% $8.9 billion $11.2 billion $13.4 billion $15.7 billion $17.9 billion $20.1 billion $22.4 billion 12% 16% 19% 22% 25% 28% 31% 2% 2% 3% 3% 4% 4% 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% $ 4,142 / kW $ 5,178 / kW $ 6,213 / kW $ 7,249 / kW $ 8,284 / kW $ 9,320 / kW $ 10,355 / kW 2 1. New build equity financing percentages are presented for various levels of total nominal project
costs per kW, assuming 80% debt funding and market capitalization as of 6/26/09. The
equity financing percentages reflect NINA ownership of STP units 3 and 4 at 40%, and
NRG ownership of NINA at 88%. 2. Estimate of the total nominal project cost per kW based on the midpoint of the NRG price range for
the nominal EPC and owners’ cost from NRG’s 6/4/09 presentation at Macquarie
Global Infrastructure Conference, plus estimated interest during construction, initial
fuel load costs, guaranteed loan fees and debt service reserve. |
 ERCOT Wind:
18 GW of Transmission Approved, Can Sell RECs Nationally Under Federal RES, and Price Depression Will Be Absorbed By Texas Alone Upper Midwest Wind: Dependent on Not-Yet-Approved Multi-State Transmission Buildout and Price Depression Will be Spread Over A Broad Area Mid-Atlantic Wind: Limited Wind Resources, So Will Purchase RECs From Other Areas 43 Federal RES will result in incremental wind build in Texas to support REC purchases in other markets – depressing power prices in ERCOT 43 Federal RES Will Reduce Prices More in ERCOT than in Midwest or Mid-Atlantic |
 Exelon has the
liquidity, market access and financial flexibility to manage risk and pursue sizeable
growth initiatives when appropriate Exelon’s Balance Sheet Can Weather Volatile Commodity Markets • Lower interest rates and lower cost of capital • Lower cost of equity capital • Ability to source capital from multiple markets (e.g. commercial paper) reduces risk of liquidity crunch • Investment grade market more likely to be accessible during challenging business cycles • Banks in this environment more willing to lend to large, diversified, highly-rated companies – Over 20 banks committed to Exelon’s facilities providing over $7B in aggregate commitments Broad Access to Capital 44 Lower Cost of Capital • Lower margin and collateral needs • Ability to bid competitively on PPAs and long-term deals since counterparties prefer investment grade companies • Reduced working capital requirements, no prepayments on long-term contracts Financial and Business Flexibility |
 Risks Inherent
In A Non-investment Grade Balance Sheet Though currently re-opened, the non-investment grade market has closed on several occasions
in recent memory, while the high-grade market has been consistently accessible
regardless of economic cycles Erratic access to such a critical source of funding would
have significant liquidity implications for non-investment grade issuers like
NRG 45 High Yield Market High Grade Market 4% 5% 6% 7% 8% 9% 10% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 $160,000 Source: SDC, J.P. Morgan JULI Yield (%) Monthly new issuance volume ($mm) 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 5,000 10,000 15,000 20,000 25,000 30,000 $35,000 JPMorgan Global HY Index Yield to Worst Monthly new issuance volume ($mm) |
 The Transaction
Offers Both Companies Geographically Diverse EBITDA Contribution Midwest 55% Mid-Atlantic 45% Mid- Atlantic 5% Other 30% ERCOT 65% Exelon NRG Pro Forma 1 46 Midwest 45% ERCOT 15% Other 5% Mid-Atlantic 35% 1. Represents 2010 EBITDA contribution by region before divestitures.
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