US Nuclear power giant and utility operator, Exelon Corporation, has raised its $6.2-billion hostile takeover bid for the second-largest power producer in Texas and  rival, NRG Energy, by 12 per cent to $7.45 billion in a bid to sway NRG Energy's shareholders ahead of the company's annual meeting on 21 July.

In the new offer, Exelon cited approximately $1.5 billion of additional newly-identified synergies as the primary reason for raising its offer.  It said that the offer also reflects the value of NRG's recent acquisition of the Reliant Energy retail in Texas.

 In October, Chicago-based Exelon Corporation made an unsolicited offer to acquire rival NRG Energy for $6.2 billion in an all-stock deal, to form the largest power utility in the US. (See: Exelon offers to acquire NRG Energy in $6.2-billion all-stock deal)

A combination of the two energy majors could create the largest power company in the US, ahead of Atlanta-based Southern Co. and Columbus, Ohio-based American Electric Power, with a generation capacity of around 47,000 megawatts - enough to power nearly 45 million homes.

Exelon owns and operates electric utilities in Illinois and Pennsylvania and power plants throughout the US, including the nation's largest fleet of nuclear plants. NRG owns more than 24,000 megawatts of generation.

In November, Princeton, New Jersey-based NRG Energy rejected the hostile takeover offer from Exelon saying that the offer significantly undervalued the company and the offer was "opportunistically timed" since the all-stock bid came after NRG lost half of its market value in two months. (See: NRG Energy rejects $6.2 billion unsolicited bid from Exelon Corp. as undervalued)

 NRG Energy also said one of the reason for the rejection was Exelon lacked secured financing, posing ''real risk of non consummation to NRG's shareholders.''

NRG CEO Crane had made it clear that he was not averse to a takeover at a higher bid. ''It's not the nature of the consideration, it's the amount and NRG intends to continue on the path of fundamental economic value creation that has produced record earnings, record liquidity and record free cash flow generation this year."

After NRG's board rebuffed Exelon, CEO John Rowe moved to bypass the reluctant directors and took the offer directly to NRG shareholders, in the form of a tender offer.
Exelon, with nearly $19 billion in annual revenues, claimed in February this year that 51 per cent of NRG shareholders had tendered more than 125 million shares of NRG's common stock in Exelon's exchange offer. (See: Exelon claims 51 per cent merger approval from NRG shareholders)

 Exelon also indicated that if NRG continues to resist its pursuit, it will conduct a proxy fight and seek to seat its own slate of director nominees on NRG's board when the company holds its shareholder meeting on 21 July.

 Exelon said at that time that it was not buying the shares, but had extended its offer until 26 June. What Exelon really wants is a negotiated transaction, and it is using the tender offer as a less-than-subtle means of mounting pressure on NRG's board.

 ''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 optimisation 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 21 July 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,'' he added.

 The new offer is 0.545 Exelon share for each NRG share, NRG's shares closed yesterday at $26.05, while Exelon's closed at $51.56, which is up from 0.485 of its own share for each NRG share - worth $26.43 a share on 19 February 2008 closing price.

 A Fortune 500 company, NRG Energy owns and operates 48 plants with a generating capacity of approximately 24,000 megawatts of generation capacity - enough to power nearly 20 million homes.

Warren Buffett's Berkshire Hathaway Inc owned 3.24 million shares of NRG as of 30 June, according to SEC filing released in August 2008.

 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.

At the time of its initial offer in November, Standard & Poor's cut Exelon's debt rating to BBB from BBB+. Exelon said it plans to restore this rating, but NRG had said doing this is likely more challenging than Exelon realizes.

Exelon says its offer will create immediate value for NRG shareholders and a commensurate value for Exelon shareholders.

Exelon said that 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 will benefit from NRG's assets, cash flow, and its own share of the synergies.