NRG Energy warns of Exelon takeover

Defending itself against a hostile takeover attempt by Exelon Corp., NRG Energy Inc. fired back with a lawsuit alleging that Exelon's direct offer to NRG shareholders was a sham and a warning that a successful takeover of NRG could mean higher utility rates for Peco Energy Co. customers.

A study commissioned by NRG, of Princeton, suggested that annual bills for Peco customers could climb as much as $66 million if Exelon buys NRG. Peco, of Philadelphia, is owned by Exelon.

The risk, according to the London Economics International L.L.C. paper being made available today, is that the credit ratings on Exelon and certain of its subsidiaries could be cut because of the heavy debt load required to complete the deal. That would force the Chicago company to pay more to borrow and possibly divert money from its regulated utilities, such as Peco.

Irwin A. "Sonny" Popowsky, Pennsylvania's official consumer advocate in proceedings before the Public Utility Commission, would not comment on the merits of the London Economics analysis, but he said the study focused on matters of concern.

"We really want to protect Pennsylvania regulated consumers from any additional risk from merging or acquiring another entity," he said.

A spokesman for Exelon said the study "appears to be yet another off-base allegation by NRG in a desperate attempt to thwart Exelon's acquisition effort in the face of demonstrable support by NRG shareholders."

Exelon offered in October to buy NRG for $6.2 billion in stock. NRG's board rejected the bid, so Exelon took it directly to NRG shareholders even though a hostile merger would trigger the costly refinancing of $8.6 billion in NRG debt, NRG said.

NRG argued in the lawsuit, filed Tuesday in federal court in New York, that Exelon's exchange offer to NRG shareholders was a ploy to force NRG to negotiate a deal. The suit demanded that Exelon make "corrective disclosures" about its real intentions.