12 April 2010 — Mirant Corp. and RRI Energy Inc. entered a definitive agreement to create GenOn Energy, which will be one of the largest independent power producers in the United States, with 24,700 MW of electric generating capacity and a pro forma market capitalization of $3.1 billion. The transaction is structured as an all-stock, tax-free merger.

RRI Energy owns and leases 14,581 MW of generation assets in Southern California (3,392 MW), the Midwest (MISO) (1,696 MW), the Mid Atlantic (PJM) (6,952 MW) and the Southeast (1,911 MW). Mirant owns and leases 10,076 MW of generation assets in Northern California (2,347 MW), the Mid Atlantic (5,194 MW) and the Northeast (2,535 MW). Both companies generate electricity utilizing coal, natural gas and oil.

Among its assets, RRI owns the 878 MW Aurora peaking plant 35 miles west of Chicago. Commercial operation began June 2001. The facility includes 10 simple-cycle, natural gas-fired peaking units; four 165 MW combustion turbines with evaporative cooling and six 47 MW combustion turbines equipped with inlet chillers.

Among Mirant’s assets is the 2,401 MW Chalk Point generating station near Washington, D.C. The plant can operate base load, intermediate and peak levels and is fired by coal, oil and naturalg as. The plant entered service in 1964 and Mirant acquired it in 2001l.

Under terms of the agreement, Mirant stockholders will receive a fixed ratio of 2.835 shares of RRI Energy common stock for each share of Mirant common stock they own. Upon closing, expected before the end of 2010, Mirant stockholders will own  54 percent of the equity of the combined company and RRI Energy stockholders will own 46 percent.

Edward R. Muller, chairman and CEO of Mirant, will be chairman and CEO of the combined company until 2013, when he plans to retire. Mark M. Jacobs, president and CEO of RRI Energy, will be president and COO of GenOn and will serve on its board. Jacobs is to succeed Muller as CEO in 2013. J. William Holden III, currently CFO of Mirant, will be CFO of GenOn. The GenOn Board of Directors will include10 directors, with five members of the current Mirant Board and the five members of the current RRI Energy Board. GenOn’s corporate headquarters will be in Houston. 

GenOn will have a presence in the Mid-Atlantic, California, the Northeast, the Southeast and the Midwest. The merger anticipates annual cost savings of $150 million from reductions in corporate overhead starting in January 2012.

The combined electric power generating fleets are largely complementary, with limited overlap in their  operating regions. The transaction is subject to customary closing conditions, including approval by the stockholders of RRI Energy and Mirant, U.S. antitrust approval and approval by the Federal Energy Regulatory Commission. Closing is also subject to the refinancing of a portion of each company’s existing debt.

Mirant’s financial advisor was J.P. Morgan and its legal advisor was Wachtell, Lipton, Rosen & Katz. Goldman, Sachs & Co. and Morgan Stanley acted as RRI Energy’s financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP acted as RRI Energy’s legal counsel.

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