LOS ANGELES, Oct 18 (Reuters) - Power company NRG Energy Inc said on Friday it would pay $2.64 billion to acquire theassets of bankrupt unregulated power producer Edison MissionEnergy, adding nearly 8,000 megawatts of coal, gas and windgeneration to its business.
NRG's stock closed up 4.8 percent at $29.30 following theannouncement. It reached $30.17 earlier in the session, itshighest level since 2008.
The purchase price includes 12.7 million shares of NRGcommon stock, valued at $350 million, with the rest to be paidin cash. Princeton, New Jersey-based NRG will also assume $1.55billion of EME's non-recourse debt.
EME's assets include four coal-fired plants in Illinois,about 10 gas-fired plants in California and more than 30 windprojects in 11 states. It also has a trading and assetmanagement platform.
The assets are located outside NRG's core territories ofTexas and the Eastern United States, said Morningstar analystTravis Miller, adding that coal-fired plants in the Midwest,which make up more than half of the generation capacity NRG willbe acquiring, are challenged due to the region's low powerprices and competition from cheap natural gas.
"These aren't great assets, but they didn't pay much forthem," Miller said.
But the deal will nearly quadruple NRG's wind generationcapacity, the company said, making it the nation's third largestU.S.-based producer of renewable energy. Most of the windcapacity and a 500 MW gas-fired plant could be "dropped down" toNRG's NRG Yield Inc subsidiary, which was formed tooperate and acquire power assets under long-term contracts. NRGYield debuted on the public markets this year.
"Edison Mission Energy is a great fit with NRG, as virtually100 percent of their assets, their particular expertises and thebalance of their technologies deployed complement NRG`s ownassets, personnel and businesses," NRG Chief Executive DavidCrane said in a statement.
NRG expects to close the deal, which is subject to approvalby the U.S Bankruptcy Court for the Northern District ofIllinois, in the first quarter of 2014.
EME, a unit of Edison International based in SantaAna, California, filed for Chapter 11 bankruptcy protection inDecember, citing heavy debts, weak power prices and high fuelcosts.
The company is one of many in the energy space to suffer asa result of the 2007-2009 recession, which cut power demand, andthe glut of cheaper natural gas, which caused wholesale powerprices to fall.
Dynegy went bankrupt in July 2012, emerging fromChapter 11 later that year after handing almost all of itsequity to unsecured creditors. Patriot Coal declaredbankruptcy in 2012 under the weight of pension obligations itsshrinking workforce could no longer support. And Texas powergiant Energy Future Holdings is in negotiations with creditorsto try to restructure $40 billion in debt, and may declarebankruptcy by the end of the month.
- Utility Industry
- Edison Mission Energy
- NRG Energy