Exelon committed to regaining investment-grade rating if proposed NRG acquisition is OK'd

By Jennifer Lanning Drey

Portland, Ore., Oct. 20 - Exelon Corp. believes it would be able to regain its investment-grade credit rating at its current level within three years of closing on its proposed $6.2 billion acquisition of NRG Energy Inc. if the transaction is approved, John Rowe, Exelon's chief executive officer, said during a Monday conference call.

"We remain committed to investment-grade ratings, but in the near-term we do recognize that our current ratings may be affected," Rowe said.

Exelon expects that the combined company would remain at an investment-grade level but may initially be lowered after the closing of the transaction, he said.

Exelon announced its proposal on Monday to acquire NRG Energy in an all-stock transaction with a fixed exchange ratio with a value of $26.43 for each NRG common share.

Exelon has also been working with four major banks to secure financing commitments to refinance about $8 billion of NRG's debt that is putable or would need to be refinanced under change-of-control provisions. The company expects to have commitments in place within the next few days.

If the transaction is completed, debt reduction would be the combined company's highest priority after funding its basic investment requirements, Rowe said.

"You can assume that after our basic investment requirements, our next priority will be debt reduction, and you can assume we will be on a path to restore the credit rating to our current rating in about three years," he said.

The closing of the transaction is dependent on the company receiving board, shareholder and regulatory approvals, and Exelon did not provide a timeline for expected closing during the call.

Potential acquisition benefits

Exelon's preliminary estimates indicate the transaction would be accretive to earnings in the first calendar year of operation and over time provide additional value of between $1 billion and $3 billion for Exelon shareholders.

Additionally, Rowe said Exelon believes the transaction would increase its levered free cash flows by 20% on an annual basis within its five-year planning horizon.

If completed, the transaction would create the nation's largest power company in terms of assets, market capitalization, enterprise value and generation capacity, Rowe said.

"There is simply no doubt that scale is important in turbulent times, and it's important as the cost of growth continues to rise," he said.

Exelon is a Chicago-based electric company.

NRG is a Princeton, N.J.-based power company.

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