NRG Energy, Inc. and GenOn Energy, Inc. announced a deal to combine the two companies in an estimated $1.7 billion stock swap. The transaction would create the largest electricity generator that operates on the competitive market.
The combination would edge out Calpine for the top spot. Calpine operates the Hay Road plant near Wilmington and has a regional office in the city. NRG operates the coal-fired Indian River plant in Sussex County. Calpine converted the Hay Road plant to natural gas.
Cited as the reason for the merger were efficiency gains that would come from running the combined companies. NRG and GenOn are dealing with falling electric power rates and sluggish demand for electricity that has resulted from economic conditions and energy conservation efforts.
Coal-fired plants are also facing stiffer competition as natural gas prices remain low as supplies increase from Marcellus shale in Pennsylvania. Another factor is the cost of coal-fired plants complying with stiffer environmental standards. NRG has made major investments at Indian River under an environmental agreement with the state.
Both NRG and GenOn are diversifying with solar, wind and natural gas-fired plants.
The combined company will retain the name NRG Energy. Headquarters operations will be in Princeton, N.J. And Houston.
Non-executive chairman of NRG is Howard Cosgrove, former CEO of Conectiv and Delmarva Power. Delmarva formerly owned the Hay Road and Indian River plants.