Exelon makes move to fill nearly half of NRG board; NRG questions nominees' independence

By Susanna Moon

Chicago, Jan. 30 - Exelon Corp. said it proposed a slate of nine independent nominees for election to the board of directors of NRG Energy, Inc. at NRG's 2009 shareholders meeting.

The company also has asked investors to consider a proposal to increase the number of directors to 19 from 12.

In response, NRG said in a statement, "The company believes Exelon's actions to initiate a proxy fight are a clear attempt to compromise the independence of NRG's board in order to force a sale of NRG to Exelon at a price that is highly dilutive to NRG stockholders on a free cash flow basis. Through this latest aggressive tactic, Exelon is attempting to dilute NRG's board of directors and NRG stockholder value, while attempting to take all the value for Exelon's stockholders."

The board also noted that Exelon's unsolicited exchange offer lacks committed financial backing.

NRG's board said it concluded Exelon's purchase offer significantly undervalues NRG and fails to reflect the underlying fundamental value of NRG's assets, operations and strategic plan, including its strong market position and future growth prospects.

NRG said it continues to believe that allowing Exelon to conduct due diligence is premature given that the offer price remains unchanged and is unlikely to increase materially.

If elected, Exelon's nominees would be required to exercise their fiduciary duties on behalf of all NRG stockholders. But NRG said it questions the independence of Exelon's slate and is concerned about possible conflicts of interest in evaluating any deal between NRG and Exelon or any alternative transaction.

Exelon's board nominees

"We are looking forward to election of nominees who will exercise their fiduciary duty and act in the best interests of NRG and its shareholders and who will take seriously the value creation opportunity represented by the proposed combination with Exelon in comparison with any other strategic choices NRG may have," John W. Rowe, Exelon chairman and chief executive officer, said in a company press release.

He said that NRG shareholders have shown their support by participating in Exelon's exchange offer.

Four nominees proposed to replace the NRG class III directors up for election are Betsy S. Atkins, Ralph E. Faison, Coleman Peterson and Thomas C. Wajnert.

Exelon is also proposing five additional nominees: John M. Albertine, Marjorie L. Bowen, Donald DeFosset Jr., Richard H. Koppes and Ralph G. Wellington.

Exelon said that if the NRG board is expanded and the slate of directors nominated by Exelon is elected, it will represent slightly less than a majority of NRG's board. The two remaining seats on the expanded board would remain open to NRG's own director nominees.

The company said that its decision to leave two seats open was designed to avoid a change in control of NRG that could trigger a requirement for NRG to pay a significant amount of its debt.

"Despite the substantial premium our proposal represents to NRG's stock price as of Oct. 17, 2008," Rowe said, "and the large number of shares of common stock tendered into Exelon's exchange offer, NRG's current board and management have continued their refusal to allow due diligence - an essential step for a company that takes its fiduciary obligations to shareholders seriously and wants to create shareholder value. We strongly encourage NRG shareholders to support the slate of director nominees and to tender their shares into Exelon's exchange offer to further drive this point home."

Atkins is the CEO and president of B.S.A. Baja Corp., an early stage venture capital company investing in technology, life sciences and renewable energy.

Faison was recently president, CEO and a director of Andrew Corp., a wireless communications equipment manufacturer that was acquired by CommScope in 2007.

Peterson is founder, president and CEO of Hollis Enterprises, LLC, a human resources consulting firm based in Bentonville, Ark.

Wajnert has been self-employed since July 2006, providing advisory services to the financial services industry.

Albertine is chairman and CEO of Albertine Enterprises, Inc., a consulting, merchant banking and lobbying firm.

Bowen retired as managing director with Houlihan Lokey Howard & Zukin, an international investment-banking firm based in Los Angeles.

DeFosset retired in November 2005 as chairman, president and CEO of Walter Industries, Inc., a diversified company with principal operating businesses in homebuilding and home financing, water infrastructure and energy products.

Koppes is of counsel at Jones Day and corporate governance fellow in the executive education programs at Stanford Law School.

Wellington is chairman of Schnader Harrison Segal & Lewis LLP, a Philadelphia-based law firm, where he has been a partner since 1978.

Exelon is a Chicago-based utility services holding company.

NRG is a Princeton, N.J.-based power company.

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