Mirant and RRI to merge

Two US power companies, Mirant and RRI Energy, have agreed to a merger that will create one of the largest independent power producers in the US.  The two companies will combine to form GenOn Energy, a power producer with 24,700 megawatts of electric generating capacity and a market value of about $3.1 billion. GenOn will be the second largest power producer in terms of US generating capacity after Chicago, Illinois-based Exelon. The deal is expected to close before the end of this year, at which point Mirant stockholders will own approximately 54 percent of GenOn equity and RRI stockholders will own approximately 46 percent. RRI owns and leases a total of 14,581 megawatts of generation assets in Southern California, the Midwest, the Mid-Atlantic and the Southeast. Mirant owns and leases a total of 10,076 megawatts of generation assets in Northern California, the Mid-Atlantic and the Northeast. Both companies generate electricity utilizing coal, natural gas and oil. There has been talk for some time about a merger between Atlanta, Georgia-based Mirant and Houston, Texas-based RRI. The companies believe they can save $150 million in costs each year from 2012 through merging. Edward Muller, chairman and CEO of Mirant, will lead GenOn until his forthcoming retirement in 2013, after which Mark Jacobs, president and CEO of RRI who will initially serve as president and COO of GenOn, will assume MullerÔÇÖs role. Commenting on the deal, Muller said: "Bringing together RRI Energy and Mirant is a true merger of equals, combining two companies with complementary strengths, a shared strategic vision and a commitment to value creation. ÔÇ£This compelling combination will create tremendous value for stockholders of both companies as our business benefits from cost savings, greater scale, and enhanced financial strength and flexibility." Jacobs added: "We are committed to delivering the cost savings benefits and successfully integrating Mirant and RRI Energy. We will bring together the best operating practices from both organizations, building on our excellent track records." Analysts say that the power industry in the US is ripe for consolidation, given that there are more than 250 mid-size and large utilities and distribution companies across the country. However, financial constraints and regulators have obstructed a number of previous merger attempts by utilities. In 2006, FPL, which owns Florida's largest utility, withdrew from an $11.4 billion takeover of Constellation Energy following disagreements with regulators. Mirant also withdrew that year from an $8 billion hostile takeover of rival NRG, after NRG refused to engage in negotiations and Mirant's shareholders expressed concerns over the proposed deal. In 2009, Exelon also abandoned a hostile bid for NRG, after failing to win the confidence of NRG's investors.