Edison Mission Energy inks $2.64 billion deal to sell assets to NRG

By Caroline Salls

Pittsburgh, Oct. 18 - Edison Mission Energy entered into a plan sponsor agreement under which NRG Energy, Inc. will acquire substantially all of Edison Mission's assets, including its equity interests in some subsidiaries, for a total purchase price of $2,635,000,000, according to an NRG news release.

In addition to Edison Mission and NRG, the parties to the agreement include Edison Mission's unsecured creditors committee, some of its unsecured noteholders and the parties to a Powerton and Joliet sale leaseback transaction.

The purchase price will be $1,572,000,000 net of $1,063,000,000 of retained cash.

In addition, NRG said the total purchase price, which is subject to post-closing adjustments, will consist of 12.7 million shares of NRG common stock, which is valued at $350 million based on the volume-weighted average trading price of the stock on the 20 trading days before Oct. 18, with the balance to be paid in cash on hand.

In connection with the transaction, NRG said it will also assume $1,545,000,000 of non-recourse debt, of which $273 million is associated with assets designated as non-core assets.

NRG said the acquisition and purchase agreement transactions will be completed as part of Edison Mission's Chapter 11 plan. Each of Edison Mission's major stakeholders has agreed to support the NRG-sponsored plan, the release said.

The assets to be acquired include Edison Mission's generation portfolio and Edison Mission Marketing and Trading, a proprietary trading and asset management platform.

"Edison Mission Energy is a great fit with NRG, as virtually 100% of their assets, their particular expertises and the balance of their technologies deployed complement NRG's own assets, personnel and businesses," NRG president and chief executive officer David Crane said in the release.

Edison Mission president Pedro Pizarro said in the release, "We are pleased to have reached this agreement with NRG, which maximizes the value of our company for all of our stakeholders and paves the road for our emergence from Chapter 11.

"We will continue to operate our fleet of coal, gas and wind energy facilities as we move through this transition."

With the transaction, NRG and its affiliates will become the third-largest U.S.-based renewable energy generator.

Powerton/Joliet lease

In connection with the transaction, NRG said it has agreed to financial conditions with the Powerton and Joliet lessor stakeholders subject to which an NRG subsidiary will assume the leveraged lease and NRG will guarantee the remaining payments under each lease.

NRG said it has committed to fund up to $350 million in capital expenditures for plant modifications at Powerton and Joliet to ensure Mercury and Air Toxics Standards compliance. All monetary defaults under each lease will be cured at closing.

Agreement conditions

According to the release, Edison Mission expects the hearing on the plan sponsor agreement to be held on Oct. 25 and expects to seek approval of the plan in the first quarter of 2014.

NRG expects to close the transaction in the first quarter of 2014.

In addition to court approval, the transaction is subject to the effectiveness of the registration statement for the 12.7 million shares of NRG stock, approval for the listing of the NRG common stock on the New York Stock Exchange and receipt of regulatory approval by the Federal Energy Regulatory Commission, the Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Act, as well as the Public Utility Commission of Texas. Edison Mission will also submit notice of the acquisition to the California Public Utilities Commission.

Edison Mission may continue to solicit alternative transaction proposals from third parties through Dec. 6.

Under specified circumstances, including if Edison Mission enters into or seeks approval of alternative transactions, NRG will be entitled to receive a cash fee of $65 million and expense reimbursement to the extent the plan sponsor agreement and asset purchase agreement are terminated.

Edison Mission, a Santa Ana, Calif.-based owner, operator and leaser of a portfolio of electric generating facilities, filed for bankruptcy on Dec. 17, 2012 in the U.S. Bankruptcy Court for the Northern District of Illinois. Its Chapter 11 case number is 12-49219.

NRG is a wholesale power generation company with headquarters in Princeton, N.J., and Houston.

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