Filed pursuant to Rule 424(b)(3)

Registration No. 333-167192

 

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

 

Each of the boards of directors of RRI Energy, Inc. and Mirant Corporation has approved a strategic merger, combining RRI and Mirant in what we intend to be a “merger of equals.” RRI and Mirant think that the proposed merger brings together two organizations with complementary electric generating assets and a history of operating excellence to create a stronger, larger and more geographically diverse organization that will be well positioned to create greater value for all of our stockholders.

 

RRI and Mirant entered into an agreement and plan of merger on April 11, 2010 pursuant to which, subject to stockholder approvals and certain other customary closing conditions, RRI and Mirant will combine their businesses through the merger of Mirant with a newly formed, wholly owned subsidiary of RRI, with Mirant thereupon becoming a wholly owned subsidiary of RRI.

 

If the merger is completed, Mirant stockholders will receive 2.835 shares of RRI common stock for each share of Mirant common stock. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing. The exchange ratio will be adjusted, however, if the proposed reverse stock split of RRI common stock is approved by the stockholders of RRI and implemented by the RRI board of directors prior to completion of the merger. RRI stockholders will continue to own their existing shares and, other than any adjustment made to RRI common stock in connection with the proposed reverse stock split, the RRI common stock will not be affected by the merger. Upon completion of the merger, Mirant’s former stockholders will own approximately 54% of the then outstanding RRI common stock, based on the number of shares and equity awards (including warrants) of RRI and Mirant outstanding on September 13, 2010. The value of the merger consideration to be received in exchange for each share of Mirant common stock will fluctuate with the market value of RRI common stock until the merger is completed.

 

Based on the closing sale price for RRI common stock on April 9, 2010, the last trading day before public announcement of the merger, the 2.835 exchange ratio represented approximately $11.20 in value for each share of Mirant common stock. Based on the closing sale price for RRI common stock on September 13, 2010, the last trading day before the printing of this joint proxy statement/prospectus, the 2.835 exchange ratio represented approximately $10.69 in value for each share of Mirant common stock.

 

RRI common stock is listed on the New York Stock Exchange under the symbol “RRI.” Mirant common stock is listed on the New York Stock Exchange under the symbol “MIR.” We urge you to obtain current market quotations for the shares of common stock of RRI and Mirant.

 

Your vote is very important.  The merger cannot be completed unless RRI stockholders approve the issuance of RRI common stock in the merger and Mirant stockholders adopt the merger agreement. Each of Mirant and RRI is holding a special meeting of its stockholders to vote on the proposals necessary to complete the merger. Information about these meetings, the merger and the other business to be considered by stockholders at each of the special meetings is contained in this joint proxy statement/prospectus. We urge you to read this joint proxy statement/prospectus carefully. You should also carefully consider the risks that are described in the “Risk Factors” section beginning on page 20.

 

Whether or not you plan to attend your company’s special meeting of stockholders, please submit your proxy as soon as possible to make sure that your shares are represented at that meeting.

 

The RRI board of directors recommends that RRI stockholders vote “FOR” the proposal to approve the issuance of RRI common stock in the merger, which is necessary to complete the merger.

 

The Mirant board of directors recommends that Mirant stockholders vote “FOR” the proposal to adopt the merger agreement, which is necessary to complete the merger.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the other transactions described in this joint proxy statement/prospectus or the securities to be issued in connection with the merger or determined if this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated September 14, 2010, and is first being mailed to stockholders of RRI and Mirant on or about September 16, 2010.

 

ADDITIONAL INFORMATION

 

This joint proxy statement/prospectus incorporates by reference important business and financial information about RRI and Mirant from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a listing of the documents incorporated by reference into this joint proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 159.

 

You can obtain any of the documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from Innisfree M&A Incorporated, RRI’s proxy solicitor, or D.F. King & Co., Inc., Mirant’s proxy solicitor, at the following addresses and telephone numbers:

 

 

To receive timely delivery of the documents in advance of the special meetings, you should make your request no later than October 18, 2010.

 

You may also obtain any of the documents incorporated by reference into this joint proxy statement/prospectus without charge through the Securities and Exchange Commission, which is referred to as the SEC, website at www.sec.gov. In addition, you may obtain copies of documents filed by RRI with the SEC by accessing RRI’s website at www.rrienergy.com under the tab “Investor Relations” and then under the heading “Company Filings.” You may also obtain copies of documents filed by Mirant with the SEC by accessing Mirant’s website at www.mirant.com under the tab “Investor Relations” and then under the heading “SEC Filings.”

 

We are not incorporating the contents of the websites of the SEC, RRI, Mirant or any other entity into this joint proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this joint proxy statement/prospectus at these websites only for your convenience.

 

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON MONDAY, OCTOBER 25, 2010

 

 

To the Stockholders of RRI Energy, Inc.:

 

A special meeting of stockholders of RRI Energy, Inc. will be held at RRI’s corporate headquarters, 1000 Main Street, Houston, Texas 77002, on October 25, 2010 at 8:00 a.m., Central Time, for the following purposes:

 

1. To approve the issuance of RRI common stock, par value $0.001 per share, pursuant to the Agreement and Plan of Merger, dated as of April 11, 2010, by and among RRI Energy, Inc., RRI Energy Holdings, Inc. and Mirant Corporation, as the same may be amended from time to time, a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice (the “Share Issuance” proposal).

 

2. To approve amendments to RRI’s restated certificate of incorporation that would effect a reverse stock split of RRI common stock, pursuant to which 3, 3.5, 4, 4.5 or 5 issued and outstanding shares of RRI common stock, as determined by the RRI board of directors, would be combined and reclassified into one share of RRI common stock, and pursuant to which the total number of authorized shares of RRI common stock and RRI preferred stock would be proportionately reduced (the “Reverse Stock Split” proposal).

 

3. To approve an amendment to RRI’s restated certificate of incorporation to change the corporate name of RRI from “RRI Energy, Inc.” to “GenOn Energy, Inc.” (the “Name Change” proposal).

 

4. To approve the GenOn Energy, Inc. 2010 Omnibus Incentive Plan (the “2010 Incentive Plan” proposal).

 

5. To approve any motion to adjourn the RRI special meeting, if necessary, to solicit additional proxies (the “RRI Adjournment” proposal).

 

The Share Issuance proposal is not conditioned on the approval of any of the Reverse Stock Split proposal, the Name Change proposal or the 2010 Incentive Plan proposal, and only approval of the Share Issuance proposal is required to complete the merger. The Reverse Stock Split proposal is conditioned on approval of the Share Issuance proposal and subject to the discretion of the RRI board of directors. The Name Change proposal and the 2010 Incentive Plan proposal are each conditioned on completion of the merger.

 

RRI will transact no other business at the special meeting, except for business properly brought before the special meeting or any adjournment or postponement thereof.

 

The accompanying joint proxy statement/prospectus further describes the matters to be considered at the RRI special meeting.

 

The RRI board of directors has set September 13, 2010 as the record date for the RRI special meeting. Only holders of record of RRI common stock at the close of business on September 13, 2010 will be entitled to notice of and to vote at the RRI special meeting and any adjournments or postponements thereof. Any stockholder entitled to attend and vote at the RRI special meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of RRI common stock.

Your vote is very important. To ensure your representation at the RRI special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend the RRI special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the RRI special meeting.

 

The RRI board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the Share Issuance proposal, “FOR” the Reverse Stock Split proposal, “FOR” the Name Change proposal, “FOR” the 2010 Incentive Plan proposal and “FOR” the RRI Adjournment proposal.

 

By Order of the Board of Directors,

 

Michael L. Jines

Executive Vice President,

General Counsel and Corporate Secretary

and Chief Compliance Officer

Houston, Texas

 

September 14, 2010

 

PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT VOTING YOUR SHARES, PLEASE CALL INNISFREE M&A INCORPORATED TOLL-FREE AT (877) 800-5187 (BANKS AND BROKERS CALL COLLECT AT (212) 750-5833).

 

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON MONDAY, OCTOBER 25, 2010

 

 

To the Stockholders of Mirant Corporation:

 

A special meeting of stockholders of Mirant Corporation will be held at Mirant’s corporate headquarters, 1155 Perimeter Center West, Atlanta, Georgia 30338-5416, on October 25, 2010 at 9:00 a.m., Eastern Time, for the following purposes:

 

1. To adopt the Agreement and Plan of Merger, dated as of April 11, 2010, by and among RRI Energy, Inc., RRI Energy Holdings, Inc. and Mirant Corporation as the same may be amended from time to time, a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice (the “Merger” proposal).

 

2. To approve any motion to adjourn the Mirant special meeting, if necessary, to solicit additional proxies (the “Mirant Adjournment” proposal).

 

Approval of the Merger proposal is required for completion of the merger.

 

Mirant will transact no other business at the special meeting, except for business properly brought before the special meeting or any adjournment or postponement thereof.

 

The Mirant board of directors has set September 13, 2010 as the record date for the Mirant special meeting. Only holders of record of shares of Mirant common stock at the close of business on September 13, 2010 will be entitled to notice of and to vote at the Mirant special meeting and any adjournments or postponements thereof.

 

Your vote is very important. To ensure your representation at the Mirant special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend the Mirant special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the Mirant special meeting.

 

The Mirant board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the Merger proposal and “FOR” the Mirant Adjournment proposal.

 

By Order of the Board of Directors,

 

Julia A. Houston

Senior Vice President, General Counsel,

Chief Compliance Officer and Corporate Secretary

Atlanta, Georgia

September 14, 2010

 

PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT VOTING YOUR SHARES, PLEASE CALL D.F. KING & CO., INC. TOLL-FREE AT (800) 549-6697 (BANKS AND BROKERS CALL COLLECT AT (212) 269-5550).

 

Table of Contents

 

 

The following questions and answers briefly address some commonly asked questions about the RRI and Mirant special meetings. They may not include all the information that is important to stockholders of RRI and Mirant. Stockholders should carefully read this entire joint proxy statement/prospectus, including the annexes and the other documents referred to herein.

 

 

 

 

 

 

 

 

 

 

SUMMARY

 

The Parties

 

The Merger

 

Consideration to be Received in the Merger by Mirant Stockholders

 

Treatment of Stock Options and Other Stock-based Awards; Mirant Warrants

 

Directors and Executive Officers Following the Merger; Headquarters; Amendments to the Combined Company’s Bylaws

 

Recommendations of the RRI Board of Directors

 

Recommendation of the Mirant Board of Directors

 

Opinions of Financial Advisors

 

Interests of Directors and Executive Officers in the Merger

 

Material U.S. Federal Income Tax Consequences of the Merger

 

Accounting Treatment of the Merger

 

No Appraisal Rights

 

Regulatory Matters

 

Litigation Related to the Merger

 

Conditions to Completion of the Merger

	•	approval by RRI stockholders of the Share Issuance proposal;
	•	approval by Mirant stockholders of the Merger proposal;
	•	absence of any injunction prohibiting the consummation of the merger;
	•	termination or expiration of any waiting period (and any extension thereof) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act;

	•	receipt of all required regulatory approvals from the Federal Energy Regulatory Commission, which is referred to as FERC, and the New York Public Service Commission, which is referred to as the NYPSC (or, with regard to the NYPSC, a determination that such approval is not required), and filing of notice with the California Public Utility Commission, which is referred to as the CPUC;
	•	authorization of the listing of the shares of RRI common stock to be issued in the merger on the NYSE, subject to official notice of issuance;
	•	effectiveness of the Form S-4 registration statement of which this joint proxy statement/prospectus is a part and the absence of a stop order or proceedings threatened or initiated by the SEC for that purpose;
	•	receipt by RRI and Mirant of acceptable debt financing in an amount sufficient to fund the refinancing transactions contemplated by the merger agreement (see “The Merger — Refinancing” beginning on page 61 and “The Merger Agreement — Financing” on page 78);
	•	accuracy of the other party’s representations and warranties in the merger agreement;
	•	the prior performance by the other party, in all material respects, of its obligations under the merger agreement;
	•	receipt of a certificate executed by the chief executive officer or another senior officer of the other party as to the satisfaction of the conditions described in the preceding two bullets; and
	•	receipt of a legal opinion from its counsel to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

Refinancing

Timing of the Merger

No Solicitation of Other Offers

	•	solicit, initiate, seek or knowingly encourage or facilitate any proposal that constitutes or would reasonably be expected to lead to an alternative proposal (as described in the section entitled “The Merger Agreement — No Solicitations” beginning on page 74);
	•	furnish any non-public information, or afford access to properties, books and records in connection with or in response to an alternative proposal;
	•	engage or participate in any discussions or negotiations with any person regarding an alternative proposal;
	•	approve, endorse or recommend an alternative proposal; or
	•	enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or any other agreement providing for an alternative proposal.

 

Termination of the Merger Agreement

	•	by mutual written consent of RRI and Mirant; or
	•	by either party, if:

	•	the merger has not been completed on or prior to December 31, 2010; provided that each party has the right to extend such termination date to up March 31, 2011 if the only unsatisfied conditions to completion of the merger are those regarding the receipt of required regulatory approvals;
	•	an injunction has been entered permanently restraining, enjoining or otherwise prohibiting completion of the merger and such injunction becomes final and non-appealable, so long as the party seeking to terminate the merger agreement for this reason has used its reasonable best efforts to remove or prevent such injunction;
	•	the requisite approval by the stockholders of RRI or Mirant has not been obtained at the respective stockholders’ meeting (or at any adjournment or postponement thereof);
	•	the other party has breached any representation, covenant or other agreement in the merger agreement, in a way that the related condition to closing would not be satisfied, and this breach is either incurable or not cured within 30 days;
	•	the other party’s board of directors changes its recommendation that its stockholders vote for, in the case of RRI, the Share Issuance proposal or, in the case of Mirant, the Merger proposal; or
	•	prior to obtaining approval by its stockholders, the party terminates the merger agreement in order to enter into a definitive agreement with respect to a superior offer and concurrently pays a termination fee to the other party.

Matters to be Considered at the Special Meetings

	•	the Share Issuance proposal;
	•	the Reverse Stock Split proposal;
	•	the Name Change proposal;
	•	the 2010 Incentive Plan proposal; and
	•	any RRI Adjournment proposal.

	•	the Merger proposal; and
	•	any Mirant Adjournment proposal.

 

Voting by RRI and Mirant Directors and Executive Officers

 

SELECTED HISTORICAL FINANCIAL DATA OF RRI

		Years Ended December 31,																																								Six Months Ended June 30,
		2009								2008								2007								2006								2005								2010								2009
		(1)(2)(3)								(1)(2)(3)								(1)(2)(3)								(1)(2)(3)								(1)(2)(3)								(1)(3)								(1)(2)
		(4)(17)				—				(5)(6)(17)				—				(7)(8)(17)				—				(9)(10)(17)				—				(11)(17)				—				(4)(17)				—				(3)(17)
		(in millions)
Statements of Operations Data:
Revenues		$	1,825							$	3,394							$	3,203							$	3,040							$	3,068							$	1,005							$	856
Operating income (loss)			(413	)							201								(10	)							(207	)							(591	)							(322	)							(235	)
Loss from continuing operations			(479	)							(110	)							(202	)							(374	)							(579	)							(453	)							(209	)
Cumulative effect of accounting changes, net of tax			—								—								—								1								1								—								—
Net income (loss)			403								(740	)							365								(328	)							(331	)							(449	)							652

																																										Six Months Ended
		Years Ended December 31,																																								June 30,
										2008
		2009								(1)(2)(3)								2007								2006								2005								2010								2009
		(1)(2)				—				(5)(6)(7)				—				(1)(2)(7)(8)				—				(1)(2)(9)(10)				—				(1)(2)(11)				—				(1)				—				(1)(2)
Diluted Loss per Share:
Loss from continuing operations		$	(1.36	)						$	(0.32	)						$	(0.59	)						$	(1.22	)						$	(1.91	)						$	(1.28	)						$	(0.60	)

																																										Six Months Ended
		Years Ended December 31,																																								June 30,
		2009								2008								2007								2006								2005
		(1)(2)								(1)(2)(5)								(1)(2)(7)(8)								(1)(2)(9)								(1)(2)								2010								2009
		(12)(13)				—				(6)(12)(13)				—				(10)(12)(13)				—				(11)(12)(13)				—				(12)(13)				—				(1)(13)				—				(1)(2)(13)
																										(in millions)
Statements of Cash Flow Data:
Cash flows provided by (used in) operating activities		$	193							$	183							$	762							$	1,276							$	(917	)						$	53							$	412
Cash flows provided by (used in) investing activities			154								216								(179	)							1,057								306								(39	)							235
Cash flows provided by (used in) financing activities			(509	)							(45	)							(292	)							(1,957	)							594								(398	)							(268	)

		December 31,																																				June 30,
		2009								2008								2007								2006								2005
		(1)(2)(14)				—				(1)(2)				—				(1)(2)				—				(1)(2)				—				(1)(2)(15)				2010(1)
																		(in millions)
Balance Sheet Data:
Total assets		$	7,461							$	10,722							$	11,373							$	11,827							$	13,569			$	6,516
Current portion of long-term debt and short-term borrowings(16)			405								13								52								355								339				—
Long-term debt(16)			1,950								2,610								2,642								2,917								4,056				1,950
Stockholders’ equity			4,238								3,778								4,477								3,950								3,864				3,802

(1)		RRI sold or transferred the following operations, which have been classified as discontinued operations: Desert Basin, European energy, Orion Power’s hydropower facilities, Liberty, Ceredo, Orion Power’s New York facilities and its retail energy business. RRI sold the following operations, which are included in continuing operations: REMA hydropower facilities in April 2005, landfill-gas fueled power facilities in July 2005, its El Dorado investment in July 2005 and its Bighorn facilities in October 2008.
(2)		RRI deconsolidated Channelview in August 2007 and sold its assets in July 2008. Channelview emerged from bankruptcy in October 2009 and RRI reconsolidated the entities at that time.
(3)		During 2009, 2008, 2007, 2006 and 2005, RRI had net gains on sales of assets and emission and exchange allowances of $22 million, $93 million, $26 million, $159 million and $168 million, respectively. During the six months ended June 30, 2010 and 2009, RRI had net gains on sales of assets and emission and exchange allowances of $1 million and $20 million, respectively.
(4)		During 2009, RRI recorded non-cash long-lived assets impairments of $211 million related to its New Castle and Indian River facilities. During the six months ended June 30, 2010, RRI recorded non-cash long-lived assets impairments of $248 million related to its Elrama and Niles facilities.
(5)		During 2008, RRI recorded a non-cash goodwill impairment charge of $305 million related to its historical wholesale energy segment.
(6)		During 2008, RRI recorded $37 million in expenses and paid $34 million for Western states litigation and similar settlements relating to natural gas cases.
(7)		During 2007, RRI recorded and paid a $22 million charge related to resolution of a 2004 indictment for alleged violations of the Commodity Exchange Act, wire fraud and conspiracy charges.
(8)		During 2007, RRI recorded $73 million in debt extinguishments expenses and expensed $41 million of deferred financing costs related to accelerated amortization for refinancings and extinguishments.
(9)		During 2006, RRI recorded $37 million in debt conversion expense.
(10)		During 2006, RRI recorded a $35 million charge (paid in 2007) related to a settlement of certain class action natural gas cases relating to the Western states energy crisis.
(11)		During 2005, RRI recorded charges of $359 million relating to various settlements associated with the Western states energy crisis, which were paid during 2006.

(12)		During 2009, 2008, 2007, 2006 and 2005, RRI had net cash proceeds from sales of assets of $36 million, $527 million, $82 million, $1 million and $149 million, respectively.
(13)		During 2009, 2008, 2007, 2006 and 2005, RRI had net proceeds from sales of (purchases of) emission and exchange allowances of $(3) million, $(19) million, $(85) million, $183 million and $89 million, respectively. During the six months ended June 30, 2010 and 2009, RRI had net proceeds from sales of (purchases of) emission and exchange allowances of $0 and $14 million, respectively.
(14)		For discussion of RRI’s contingencies, see note 15 to RRI’s consolidated financial statements contained in RRI’s annual report on Form 10-K for the year ended December 31, 2009, which is incorporated herein by reference.
(15)		The balance sheet data for total assets as of December 31, 2005 has not been reclassified for the adoption of accounting guidance relating to the offsetting of amounts for contracts with a single counterparty as it was impracticable to reasonably retrieve and reconstruct the historical information as a result of migration of data driven by a system conversion.
(16)		Amounts exclude debt related to discontinued operations for December 31, 2008, 2007, 2006 and 2005.
(17)		During 2009, 2008, 2007, 2006 and 2005, RRI had unrealized gains (losses) on energy derivatives of $22 million, $(9) million, $7 million, $56 million and $(123) million, respectively. During the six months ended June 30, 2010 and 2009, RRI had unrealized gains (losses) on energy derivatives of $61 million and $(37) million, respectively.

 

SELECTED HISTORICAL FINANCIAL DATA OF MIRANT

																						Six Months Ended
		Years Ended December 31,																				June 30,
		2009				2008				2007				2006				2005				2010				2009
		(in millions except per share data)
Statements of Operations Data:
Operating revenues		$	2,309			$	3,188			$	2,019			$	3,087			$	2,620			$	1,124			$	1,374
Income (loss) from continuing operations			494				1,215				433				1,752				(1,385	)			144				543
Income from discontinued operations			—				50				1,562				112				93				—				—
Cumulative effect of changes in accounting principles			—				—				—				—				(15	)			—				—
Net income (loss)			494				1,265				1,995				1,864				(1,307	)			144				543
Basic EPS per common share from continuing operations		$	3.41			$	6.53			$	1.72			$	6.15				N/A			$	0.99			$	3.74
Diluted EPS per common share from continuing operations		$	3.41			$	6.11			$	1.56			$	5.90				N/A			$	0.99			$	3.74
Cash dividend per common share from continuing operations		$	—			$	—			$	—			$	—				N/A			$	—			$	—

																						Six Months
		Years Ended December 31,																				Ended June 30,
		2009				2008				2007				2006				2005				2010				2009
		(in millions)
Unrealized gains (losses) included in operating revenues		$	(2	)		$	840			$	(564	)		$	757			$	(92	)		$	132			$	211
Unrealized losses (gains) included in cost of fuel, electricity and other products			(49	)			54				(28	)			102				(76	)			120				(29	)
Total		$	47			$	786			$	(536	)		$	655			$	(16	)		$	12			$	240

		December 31,																				June 30,
		2009				2008				2007				2006				2005				2010
		(in millions)
Balance Sheet Data:
Total assets		$	9,528			$	10,688			$	10,538			$	12,845			$	14,364			$	9,846
Current portion of long-term debt			75				46				142				142				3				563
Long-term debt, net of current portion			2,556				2,630				2,953				3,133				2,579				1,999
Liabilities subject to compromise			—				—				—				18				18				—
Stockholders’ equity			4,315				3,762				5,310				4,443				3,856				4,472

 

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL DATA

		Six Months Ended				Year Ended
		June 30, 2010				December 31, 2009
		(in millions except per share data)
Operating revenues		$	2,117			$	4,111
Loss from continuing operations			(233	)			(42	)
Basic and diluted EPS			(0.30	)			(0.05	)

		June 30, 2010
		(in millions)
Cash and cash equivalents		$	2,489
Total Assets			14,490
Current portion of long-term debt			542
Long-term debt, net of current portion			4,026
Total stockholders’ equity			6,422

 

COMPARATIVE PER SHARE DATA

		RRI Energy								Mirant
						Pro Forma								Pro Forma
		Historical				Combined				Historical				Equivalent(1)
As of and for the Year Ended December 31, 2009
Income (loss) from continuing operations per common share-basic and diluted		$	(1.36	)		$	(0.05	)		$	3.41			$	(0.14	)
Book value per share(2)			12.01				N/A	(3)			29.77				N/A	(3)
Cash dividends			—				—				—				—
As of and for the Six Months Ended June 30, 2010
Income (loss) from continuing operations per common share-basic and diluted		$	(1.28	)		$	(0.30	)		$	0.99			$	(0.85	)
Book value per share(2)			10.76				8.30				30.73				23.54
Cash dividends			—				—				—				—

(1)		The pro forma equivalent per share amounts were calculated by multiplying the pro forma combined per share amounts by the exchange ratio of 2.835 shares of RRI common stock per share of Mirant common stock.
(2)		Historical book value per share is computed by dividing total stockholders’ equity by the number of shares of RRI Energy or Mirant common stock outstanding, as applicable. Pro forma combined book value per share is computed by dividing pro forma total stockholders’ equity by the pro forma number of shares of the combined company common stock that would have been outstanding as of June 30, 2010.
(3)		Unaudited pro forma condensed combined consolidated balance sheet is not required for December 31, 2009.

 

MARKET PRICES AND DIVIDENDS AND OTHER DISTRIBUTIONS

		RRI Common Stock								Mirant Common Stock
		High				Low				High				Low
2008
First Quarter		$	26.74			$	18.06			$	39.53			$	33.75
Second Quarter		$	28.06			$	20.47			$	42.21			$	36.08
Third Quarter		$	24.15			$	4.94			$	39.20			$	17.32
Fourth Quarter		$	7.60			$	2.77			$	20.28			$	11.99
2009
First Quarter		$	7.38			$	2.03			$	20.20			$	9.11
Second Quarter		$	6.23			$	3.03			$	17.43			$	11.01
Third Quarter		$	7.64			$	4.44			$	19.12			$	14.11
Fourth Quarter		$	7.21			$	4.76			$	16.76			$	13.65
2010
First Quarter		$	6.21			$	3.57			$	17.02			$	10.84
Second Quarter		$	4.91			$	3.50			$	13.83			$	10.16
Third Quarter (through September 13, 2010)		$	4.30			$	3.35			$	11.97			$	9.36

										Equivalent
										Per Share of
										Mirant
		RRI				Mirant				Common
		Common Stock				Common Stock				Stock
April 9, 2010		$	3.95			$	10.73			$	11.20
September 13, 2010		$	3.77			$	10.63			$	10.69

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

	•	statements relating to the benefits of the merger, including anticipated synergies and cost savings estimated to result from the merger;
	•	statements relating to future business prospects, revenue, income, liquidity and financial condition; and
	•	statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “think,” “view,” “seek,” “target” or similar expressions.

	•	the ability to obtain governmental approvals of the merger, or acceptable debt financing, on the proposed terms and time schedule;
	•	the risk that the businesses will not be integrated successfully;
	•	expected cost savings from the merger may not be fully realized within the expected time frames or at all;
	•	revenues following the merger may be lower than expected;
	•	changes in political or other factors such as monetary policy, legal and regulatory changes or other external factors over which the companies have no control;
	•	changes in general economic and market conditions, including demand and market prices for electricity, capacity, fuel and emission allowances; and
	•	those set forth in or incorporated by reference into this joint proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 20.

 

In addition to the other information included or incorporated by reference in this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” on page 19, you should carefully consider the following risks before deciding how to vote.

 

Because the exchange ratio is fixed and the market price of shares of RRI common stock will fluctuate, Mirant stockholders cannot be sure of the value of the merger consideration they will receive.

 

Upon completion of the merger, each outstanding share of Mirant common stock will be converted into the right to receive 2.835 shares of RRI common stock, subject to adjustment if the proposed RRI reverse stock split is effected prior to the issuance of shares of RRI common stock in connection with the merger. The number of shares of RRI common stock to be issued pursuant to the merger agreement for each share of Mirant common stock is fixed and will not change to reflect changes in the market price of RRI or Mirant common stock. The market price of RRI common stock at the time of completion of the merger may vary significantly from the market prices of RRI common stock on the date the merger agreement was executed, the date of this joint proxy statement/prospectus and the date of the respective special stockholder meetings. Accordingly, at the time of the Mirant special stockholder meeting, you will not know or be able to calculate the market value of the merger consideration you will receive upon completion of the merger.

 

In addition, the merger might not be completed until a significant period of time has passed after the respective special stockholder meetings. Because the exchange ratio will not be adjusted to reflect any changes in the market value of RRI common stock or Mirant common stock, the market value of the RRI common stock issued in connection with the merger and the Mirant common stock surrendered in connection with the merger may be higher or lower than the values of those shares on earlier dates. Stock price changes may result from, among other things, changes in the business, operations or prospects of RRI or Mirant prior to or following the merger, litigation or regulatory considerations, general business, market, industry or economic conditions and other factors both within and beyond the control of RRI and Mirant. Neither RRI nor Mirant is permitted to terminate the merger agreement solely because of changes in the market price of either company’s common stock.

 

Current RRI and Mirant stockholders will have a reduced ownership and voting interest after the merger.

 

RRI will issue or reserve for issuance approximately 528 million shares of RRI common stock (subject to adjustment if the proposed RRI reverse stock split is effected prior to the issuance of shares of RRI common stock in connection with the merger) to Mirant stockholders in the merger (including shares of RRI common stock to be issued in connection with outstanding Mirant equity awards). As a result of these issuances, current RRI and Mirant stockholders are expected to hold approximately 46% and 54%, respectively, of the combined company’s outstanding common stock immediately following completion of the merger.

 

RRI and Mirant stockholders currently have the right to vote for their respective directors and on other matters affecting the applicable company. When the merger occurs, each Mirant stockholder that receives shares of RRI common stock will become a stockholder of RRI (proposed to be renamed GenOn Energy) with a percentage ownership of the combined company that will be smaller than the stockholder’s percentage ownership of Mirant. Correspondingly, each RRI stockholder will remain a stockholder of RRI (proposed to be renamed GenOn Energy) with a percentage ownership of the combined company that will be smaller than the stockholder’s percentage of RRI prior to the merger. As a result of these reduced ownership percentages, RRI stockholders will have less voting power in the combined company than they now have with respect to RRI, and former Mirant stockholders will have less voting power in the combined company than they now have with respect to Mirant.

The merger agreement contains provisions that limit each of RRI’s and Mirant’s ability to pursue alternatives to the merger, which could discourage a potential acquirer of either Mirant or RRI from making an alternative transaction proposal and, in certain circumstances, could require RRI or Mirant to pay to the other a significant termination fee.

 

Under the merger agreement, RRI and Mirant are restricted, subject to limited exceptions, from entering into alternative transactions in lieu of the merger. In general, unless and until the merger agreement is terminated, both RRI and Mirant are restricted from, among other things, soliciting, initiating, seeking, knowingly encouraging or facilitating a competing acquisition proposal from any person. Each of the RRI board of directors and the Mirant board of directors is limited in its ability to change its recommendation with respect to the merger-related proposals. RRI or Mirant may terminate the merger agreement and enter into an agreement with respect to a superior proposal only if specified conditions have been satisfied, including compliance with the non-solicitation provisions of the merger agreement. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of RRI or Mirant from considering or proposing such an acquisition, even if such third party were prepared to pay consideration with a higher per share cash or market value than the consideration proposed to be received or realized in the merger, or might result in a potential acquirer proposing to pay a lower price than it would otherwise have proposed to pay because of the added expense of the termination fee that may become payable. As a result of these restrictions, neither RRI nor Mirant may be able to enter into an agreement with respect to a more favorable alternative transaction without incurring potentially significant liability to the other. Under the merger agreement, RRI or Mirant may be required to pay to the other a termination fee of approximately $37 million or $58 million, depending on the nature of the termination. See “The Merger Agreement — No Solicitations” beginning on page 74.

 

RRI and Mirant will be subject to various uncertainties and contractual restrictions while the merger is pending that could adversely affect their financial results.

 

Uncertainty about the effect of the merger on employees, suppliers and customers may have an adverse effect on RRI and/or Mirant. These uncertainties may impair RRI’s and/or Mirant’s ability to attract, retain and motivate key personnel until the merger is completed and for a period of time thereafter, and could cause customers, suppliers and others who deal with RRI or Mirant to seek to change existing business relationships with RRI or Mirant. Employee retention and recruitment may be particularly challenging prior to completion of the merger, as employees and prospective employees may experience uncertainty about their future roles with the combined company.

 

The pursuit of the merger and the preparation for the integration may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect RRI’s and/or Mirant’s financial results.

 

In addition, the merger agreement restricts each of RRI and Mirant, without the other’s consent, from making certain acquisitions and dispositions and taking other specified actions while the merger is pending. These restrictions may prevent RRI and/or Mirant from pursuing attractive business opportunities and making other changes to their respective businesses prior to completion of the merger or termination of the merger agreement. See “The Merger Agreement — Conduct of Business Prior to Closing” beginning on page 72.

 

If completed, the merger may not achieve its intended results, and RRI and Mirant may be unable to successfully integrate their operations.

 

RRI and Mirant entered into the merger agreement with the expectation that the merger will result in various benefits, including, among other things, cost savings and operating efficiencies. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether the businesses of RRI and Mirant can be integrated in an efficient and effective manner.

 

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or

inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger. The combined company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the closing of the merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect the combined company’s future business, financial condition, operating results and prospects.

 

Pending litigation against RRI and Mirant could result in an injunction preventing completion of the merger, the payment of damages in the event the merger is completed and/or may adversely affect the combined company’s business, financial condition or results of operations following the merger.

 

In connection with the merger, purported stockholders of Mirant have filed putative stockholder class action lawsuits against Mirant and its directors, RRI and Merger Sub. Among other remedies, the plaintiffs seek to enjoin the merger. If a final settlement is not reached, these lawsuits could prevent or delay completion of the merger and result in substantial costs to RRI and Mirant, including any costs associated with the indemnification of directors. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect the combined company’s business, financial condition or results of operations. See “Litigation Relating to the Merger” on page 63.

 

RRI and Mirant may be unable to obtain in the anticipated timeframe, or at all, acceptable debt financing in an amount sufficient to fund the refinancing transactions contemplated by the merger agreement or the regulatory approvals required to complete the merger or, in order to do so, RRI and Mirant may be required to comply with material restrictions or conditions that may negatively affect the combined company after the merger is completed or cause them to abandon the merger. Failure to complete the merger could negatively affect the future business and financial results of RRI and Mirant.

 

Completion of the merger is contingent upon, among other things, receipt of acceptable debt financing in an amount sufficient to fund the refinancing transactions contemplated by the merger agreement, the expiration or termination of the applicable HSR Act waiting period, required regulatory approvals from FERC and the NYPSC (or, with regard to the NYPSC, a determination that such approval is not required) and the filing of applicable notices with the CPUC. RRI and Mirant can provide no assurance that acceptable debt financing or all required regulatory authorizations, approvals or consents will be obtained or that the financing, authorizations, approvals or consents will not contain terms, conditions or restrictions that would be detrimental to the combined company after completion of the merger. Obtaining the financing is dependent on numerous factors, including capital market conditions, credit availability from financial institutions and both companies’ financial performance. See “The Merger — Regulatory Approvals Required for the Merger” on page 61 and “The Merger — Refinancing” beginning on page 61.

 

The special meetings of RRI and Mirant stockholders at which the merger-related proposals will be considered may take place before all of the required regulatory approvals have been obtained and before all conditions to such approvals, if any, are known. In this event, if the merger-related proposals are approved, RRI and Mirant may subsequently agree to conditions without further seeking stockholder approval, even if such conditions could have an adverse effect on RRI, Mirant or the combined company.

 

Satisfying the conditions to, and completion of, the merger may take longer than, and could cost more than, RRI and Mirant expect. Any delay in completing or any additional conditions imposed in order to complete the merger may materially adversely affect the synergies and other benefits that RRI and Mirant expect to achieve from the merger and the integration of their respective businesses.

Neither RRI nor Mirant can make any assurances that it will be able to satisfy all the conditions to the merger or succeed in any litigation brought in connection with the merger. If the merger is not completed, the financial results of RRI and/or Mirant may be adversely affected and RRI and/or Mirant will be subject to several risks, including but not limited to:

 

 

The combined company anticipates recording a non-cash gain at the completion of the merger because the estimated fair value of the acquired assets and liabilities exceeds the purchase price. The acquired assets may become impaired in the future and adversely affect the combined company’s operating results.

 

Under the merger agreement, upon completion of the merger, Mirant will become a wholly owned subsidiary of RRI. However, under GAAP, Mirant will be treated as the acquirer for accounting purposes and the merger will be accounted for under the acquisition method of accounting as a purchase by Mirant of RRI. Accordingly, the total implied purchase price deemed paid by Mirant in the merger will be allocated to RRI’s tangible assets and liabilities and identifiable intangible assets based on their estimated fair values as of the date of completion of the merger. The combined company anticipates recording a non-cash gain to the extent the estimated fair value of the acquired assets and liabilities exceeds the purchase price. As a result of future changes in the assumptions used to estimate the fair value of the acquired tangible and intangible assets, these assets may become impaired and the combined company may be required to incur material charges relating to such impairment, which could have a material effect on the combined company’s operating results.

 

The pro forma financial statements included in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the merger.

 

The pro forma financial statements contained in this joint proxy statement/prospectus are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of the combined company’s financial condition or results of operations following the merger for several reasons. See “Unaudited Pro Forma Condensed Combined Consolidated Financial Statements” beginning on page 106. The actual financial condition and results of operations of the combined company following the merger may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the merger. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the stock price of the combined company.

 

RRI and Mirant will incur substantial transaction fees and costs in connection with the merger.

 

RRI and Mirant expect to incur non-recurring expenses totaling approximately $200 million, which include $75 million of transaction costs and $125 million of restructuring or exit costs that may be incurred to achieve the desired cost savings from the merger. In addition to the $200 million of expenses, we expect debt issuance costs of $73 million to be incurred and capitalized in connection with the issuance of new debt by the combined companies. Additional unanticipated costs may be incurred in the course of the integration of the businesses of RRI and Mirant. The companies cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the transaction and integration costs in the near term, or at all.

Certain directors and executive officers of RRI and Mirant have interests in the merger that are different from, or in addition to, those of other RRI and Mirant stockholders, which could have influenced their decisions to support or approve the merger.

 

In considering whether to approve the proposals at the special meetings, RRI and Mirant stockholders should recognize that certain directors and executive officers of RRI and Mirant have interests in the merger that differ from, or that are in addition to, their interests as stockholders of RRI and Mirant. These interests include, among others, ownership interests in the combined company, continued service as a director or an executive officer of the combined company, and the accelerated vesting of certain equity awards and/or certain severance benefits in connection with the merger. These interests, among others, may influence the directors and executive officers of RRI to support or approve the Share Issuance proposal and/or the directors and executive officers of Mirant to support or approve the Merger proposal. See “The Merger — Interests of Directors and Executive Officers in the Merger” beginning on page 52.

 

The combined company’s hedging activities may not be fully protected from fluctuations in commodity prices and cannot eliminate the risks associated with these activities.

 

Currently, a smaller amount of RRI’s fuel purchases and electricity sales are hedged and for a shorter time frame, as compared with those of Mirant. Mirant currently engages in activities to hedge its economic risks related to electricity sales, fuel purchases and emissions allowances. RRI and Mirant expect that the combined company will use appropriate hedging strategies to manage this risk, including opportunistically hedging over multiple year periods to reduce the variability in realized gross margin from its expected generation. The combined company cannot provide assurance that these activities will be successful in managing its price risks or that they will not result in net losses as a result of future volatility in electricity, fuel and emissions markets. Actual power prices and fuel costs may differ from the combined company’s expectations.

 

Furthermore, the hedging procedures that the combined company will have in place may not always be followed or may not always work as planned. If any of the combined company’s employees were able to engage in unauthorized hedging and related activities, it could result in significant penalties and financial losses. As a result of these and other factors, we cannot predict the outcome that risk management decisions may have on the business, operating results or financial position of the combined company.

 

The addition of Mirant’s proprietary trading activities may increase the volatility of the quarterly and annual financial results of the combined company as compared to RRI as a standalone company.

 

Currently, RRI does not engage in proprietary trading. Mirant, however, engages in proprietary trading activities, through which it attempts to achieve incremental returns by transacting where it has specific market expertise. RRI and Mirant expect that the combined company will continue Mirant’s proprietary trading activities. Therefore, the combined company will be subject to risks related to such activities, which are risks to which RRI is not currently exposed.

 

Derivatives from the combined company’s hedging and proprietary trading activities will be recorded on the combined company’s balance sheet at fair value in accordance with GAAP. Accordingly, none of the combined company’s derivatives recorded at fair value will be designated as a hedge and changes in their fair values will be recognized in earnings as unrealized gains or losses. As a result, the combined company’s financial results — including gross margin, operating income and balance sheet ratios — may, at times, be volatile and subject to fluctuations in value primarily because of changes in forward electricity and fuel prices.

There are risks associated with the proposed RRI reverse stock split, including that the reverse stock split may not result in an increase in the per share price of RRI common stock.

 

If the proposed RRI reverse stock split is effected, RRI cannot predict whether the proposed RRI reverse stock split will increase the market price of RRI common stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:

 

 

The market price of RRI common stock will also be based on RRI’s performance and other factors, some of which are unrelated to the number of shares of RRI common stock outstanding. The liquidity of RRI common stock could be adversely affected by the reduced number of shares that would be outstanding after the proposed RRI reverse stock split.

 

The merger is expected to result in an ownership change for Mirant and RRI under Section 382 of the Code, substantially limiting the use of the NOL carryforwards and other tax attributes of both Mirant and RRI to offset future taxable income of the combined company.

 

At December 31, 2009, Mirant had approximately $2.7 billion of net operating loss, which is referred to as NOL, carryforwards for U.S. federal income tax purposes and approximately $4.8 billion of NOL carryforwards for state income tax purposes. At December 31, 2009, RRI had approximately $1.3 billion of NOL carryforwards for U.S. federal income tax purposes and approximately $3.9 billion of state NOL carryforwards for state income tax purposes. The utilization of the combined company’s NOL carryforwards depends on the timing and amount of taxable income earned in the future, which neither Mirant nor RRI is able to predict. Moreover, the merger is expected to result in an ownership change for both Mirant and RRI under Section 382 of the Code, substantially limiting the use of the NOL carryforwards of both Mirant and RRI to offset future taxable income of the combined company for both federal and state income tax purposes. These tax attributes are subject to expiration at various times in the future to the extent that they have not been applied to offset the taxable income of the combined company. These limitations may affect the combined company’s effective tax rate in the future.

 

Risks relating to RRI and Mirant.

 

RRI and Mirant are, and will continue to be, subject to the risks described in the following periodic reports, each of which is incorporated by reference into this joint proxy statement/prospectus:

 

 

Please see “Where You Can Find More Information” beginning on page 159 for how you can obtain information incorporated by reference into this joint proxy statement/prospectus.

 

The following is a discussion of the merger and the material terms of the merger agreement between RRI and Mirant. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein.

 

The power generation industry is cyclical and capital intensive. Competitive power markets are relatively immature. In addition, the ownership of competitive generation assets is fragmented. RRI expects the industry to consolidate over time and thinks scale and diversity are important to long-term stockholder value creation. Part of RRI’s strategy has been to create value from industry consolidation. To that end, from time to time, the senior management of RRI has engaged in discussions with other industry participants regarding consolidation in the sector. The RRI board of directors was regularly briefed on these discussions.

 

Similarly, Mirant has regularly reviewed and evaluated its business strategy and strategic alternatives with the goal of enhancing stockholder value. As a result of these reviews, the Mirant board of directors and its management have undertaken a variety of actions aimed at enhancing Mirant’s performance and prospects and providing current value to stockholders. Much of this activity has been in response to two factors inherent in Mirant’s business: (i) for most of the period between January 2006 (when Mirant emerged from bankruptcy) and 2008, the business had cash in excess of its needs, which the Mirant board of directors distributed to stockholders, and (ii) the geographic footprint of the business and fuel sources of its plants are less diversified than the Mirant board of directors thinks to be optimal. Accordingly, since Mirant emerged from bankruptcy four years ago, it has sought to address the two factors mentioned above by publicly proposing (but later withdrawing) a significant acquisition in 2006, publicly exploring strategic alternatives to enhance stockholder value, including a sale of the entire company, in 2007 (which ended without any financeable acquisition proposal being made), selling its Philippines and Caribbean businesses as well as six U.S. gas plants for aggregate net proceeds of approximately $5 billion in 2007 and returning a total of over $5.3 billion to Mirant stockholders by means of a self-tender offer, an accelerated share repurchase program and open market purchases (at various times in 2006, 2007 and 2008). In June 2008, Mirant was approached by a larger company about a potential business combination in which Mirant stockholders would receive a distribution of cash on hand at Mirant and shares of the acquiring company, which consideration, in the aggregate, represented a premium to the trading value of shares of Mirant common stock. Mirant and the strategic acquiror negotiated with respect to the financial and contractual terms of the combination but had not reached agreement when negotiations were terminated by the other party in August 2008. In connection with all these actions, Mirant retained J.P. Morgan as its financial advisor and Wachtell Lipton as its legal advisor.

 

On October 6, 2008, the RRI board of directors initiated a process to explore the full range of possible strategic alternatives to enhance stockholder value and formed a special committee consisting of Messrs. Steven L. Miller, Chairman of the RRI board of directors, and Evan J. Silverstein, Joel V. Staff and William L. Transier, each directors of RRI, to oversee the process and make associated recommendations to the full RRI board of directors. These alternatives included the sale of all or substantially all of RRI, the sale of some or all of RRI’s retail electric business or the sale of some or all of RRI’s wholesale generation business. The RRI board of directors engaged Goldman Sachs and Morgan Stanley to act as financial advisors in connection with the strategic review. RRI issued a press release announcing the commencement of the strategic review and the formation of the special committee.

 

From October 2008 to April 2009, Goldman Sachs and Morgan Stanley had contacts with 36 parties regarding their potential interest in engaging in a strategic business combination transaction involving all or a portion of RRI, including Mirant. In the fall of 2008, Mirant’s then chief financial officer contacted Goldman Sachs and indicated Mirant’s possible interest in a transaction with RRI involving its generation business. In January 2009, Mr. Edward R. Muller, the chairman and chief executive officer of Mirant, contacted Mr. Mark M. Jacobs, RRI’s chief executive officer and indicated that Mirant had an interest in exploring a combination involving RRI’s wholesale business in the event that the RRI retail business was sold. There were no further conversations with Mirant or its representatives during this strategic review.

In connection with its strategic review, in November and December 2008, RRI entered into confidentiality agreements with approximately ten parties, all of which conducted some level of due diligence on all or a part of RRI’s business. Throughout November 2008, Goldman Sachs, Morgan Stanley and members of senior management from RRI made presentations to, and conducted preliminary discussions with, several of these parties. During late 2008 and early 2009, RRI’s senior management and financial and legal advisors continued discussions with one such party regarding the potential sale of RRI’s wholesale business.

 

In late 2008, RRI commenced negotiations regarding the sale of its Texas retail business to NRG Energy, Inc., or NRG. On February 28, 2009, RRI announced the execution of a definitive agreement providing for the sale of its Texas retail business to a subsidiary of NRG. No agreement was reached with any other party regarding a strategic business combination transaction. In May 2009, RRI closed the sale of its Texas retail business to NRG and announced that it had concluded its formal review of strategic alternatives.

 

From time to time, Mr. Jacobs has engaged in informal conversations with other CEOs in the merchant energy sector to build and foster long-term relationships and to discuss various industry issues, including, among other things, climate change, industry fundamentals and the commodities markets, as well as consolidation in the industry. During one such meeting on August 27, 2009, Messrs. Jacobs’ and Muller’s conversation evolved into a discussion of exploring a possible combination of RRI and Mirant on an at-market “merger of equals” basis. During meetings on September 9 and 10, 2009, Mr. Jacobs briefed the RRI board of directors of this conversation.

 

On September 15, 2009, Mr. Jacobs informed Mr. Muller that the RRI board of directors was supportive of his continuing to discuss the potential for a combination of RRI and Mirant. On September 15, 2009, RRI and Mirant entered into a confidentiality agreement so that each party could confirm its strategic rationale for and identify potential benefits and issues related to a combination.

 

On September 18, 2009, Messrs. Jacobs and Muller, together with other members of their respective senior management teams, met to discuss a work plan to evaluate the potential benefits of a combination, including potential cost savings and financial impact, and to identify possible impediments to a transaction. Over the next month, management and outside advisors of each of RRI and Mirant exchanged materials and conducted reviews of the business, operations, assets and liabilities of the other company.

 

Between September 15, 2009 and October 19, 2009, Mirant’s senior management informed and periodically updated the Mirant board of directors as to its discussions with RRI’s senior executives and its due diligence review of RRI. Similarly, RRI’s senior management team informed and periodically updated the RRI board of directors as to its discussions with Mirant’s senior executives and its due diligence review of Mirant.

 

On October 19, 2009, the Mirant board of directors met with Mirant’s senior management and outside legal and financial advisors to review the strategic rationale for a business combination with RRI and the status of the discussions with RRI and the results of due diligence performed to date.

 

At a meeting of the RRI board of directors on October 21, 2009, RRI management discussed with its board the strategic rationale for and potential benefits of a business combination transaction with Mirant, including the significant cost synergies, the increased scale and scope of the combined company, and the increased financial flexibility of the combined company. RRI management also outlined for the RRI board of directors the range of issues that would arise in negotiating a transaction, including structuring and governance issues and the methodology for determining an “at-market” exchange ratio. The RRI board of directors and management agreed that there would need to be balance in the resolution of these issues in order to reach an effective merger of equals transaction, and the RRI board of directors authorized management to continue discussions. See “— Rationale for the Merger” beginning on page 30.

 

On October 22, 2009, Messrs. Jacobs and Muller met and discussed potential terms of a transaction, including leadership structure, board composition, headquarters location, and an approach to determine an “at-market” exchange ratio, which would be based on trading prices for a relatively short period of time prior to announcement of a transaction. On October 22, 2009, RRI engaged Goldman Sachs and Morgan Stanley to assist in evaluating the possible transaction.

On October 28, 2009, Messrs. Jacobs and Muller discussed the progress that had been made in evaluating the potential benefits of a combination, including those outlined above, and agreed to continue to pursue a possible transaction. Messrs. Jacobs and Muller determined that the next step would be for the two of them to meet with Mr. Miller and Mr. A.D. Correll, the lead director of Mirant, to discuss governance matters.

 

In late October 2009, Mr. Muller was contacted by the chief executive officer of another company in the power generation industry, which is referred to as Party A, who indicated that Party A was interested in acquiring Mirant for a mix of cash and stock at a premium to Mirant’s then current market price and, in response to Mr. Muller’s request, provided a preliminary, non-binding indication of interest.

 

On November 4, 2009, the Mirant board of directors met for a regularly scheduled meeting, together with Mirant’s senior management and outside advisors, and discussed the progress of the discussions with RRI, the due diligence process and projected financial information for RRI and the company which would result from a combination of Mirant and RRI. The Mirant board of directors were also apprised of the contact that had been made by Party A.

 

On November 18, 2009, the RRI board of directors received an update from Mr. Jacobs, other members of senior management and RRI’s legal and financial advisors on the status of the discussions with Mirant. The RRI board of directors and senior management discussed various governance issues, including the location of the headquarters of the combined company, the need for a lead director, board composition, and CEO succession, as well as alternatives for determining an “at-market” exchange ratio.

 

On December 2, 2009, Messrs. Jacobs and Miller met with Messrs. Muller and Correll to discuss various issues regarding the proposed transaction, including the governance and executive leadership of the combined company and the location of the combined company’s headquarters.

 

On December 8, 2009, Messrs. Jacobs and Muller met to further discuss various terms of the proposed transaction, including the location of the combined company’s headquarters, the size and composition of the board of directors of the combined company, the composition of the senior management of the combined company and the methodology for determining an “at-market” exchange ratio. On December 11, 2009, Mr. Jacobs communicated to Mr. Muller RRI’s position on the terms discussed at their previous meeting, including RRI’s view that the headquarters of the combined company would be in Houston, Mr. Muller would be CEO of the combined company, the leadership team of the combined company would reflect a balance from each company, and that the exchange ratio would be based upon the average trading prices of the Mirant and RRI shares for ten days prior to announcement of a transaction. Mr. Muller indicated that the Mirant board of directors would consider RRI’s position on each of the various terms.

 

Also in December 2009, following the entering into of a confidentiality agreement the previous month and preliminary mutual due diligence, Party A’s chief executive officer informed Mr. Muller that, based on the limited due diligence performed to date, Party A was no longer interested in pursuing an acquisition of Mirant.

 

On January 4, 2010, Mr. Muller communicated to Mr. Jacobs a proposal regarding the issues that Mr. Jacobs had outlined in the December 11th conversation. The Mirant proposal contemplated that the exchange ratio would be set to achieve a specified percentage ownership of the combined company by each company’s respective stockholders, that the combined company would be headquartered in Atlanta, that the combined company’s board would consist of ten members, with five directors from each company, that board committee membership and committee leadership positions would be evenly split, that the lead director position would be filled by an RRI director, and that Mr. Muller would be chairman and chief executive officer, and Mr. Jacobs would be president and chief operating officer, of the combined company.

 

On January 19, 2010, Mr. Jacobs communicated to Mr. Muller a response to the Mirant January 4th proposal. The RRI response contemplated the board size and composition, committee membership and leadership positions and lead director position as proposed by Mirant. The RRI response contemplated that the exchange ratio would be based on the volume weighted average prices of the Mirant and RRI shares over a ten trading-day period ending two days prior to announcement of a transaction, with no premium being applied to such exchange ratio in favor of either Mirant or RRI stockholders, and that the combined company’s headquarters would be in Houston.

On January 26, 2010, Mr. Correll informed Mr. Miller that the reaction of the Mirant board of directors to the January 19th RRI proposal was generally favorable, including with respect to the location of the corporate headquarters and the methodology for determining the exchange ratio.

 

In late January 2010, Mr. Muller was contacted by and met with the chief executive officer of a smaller company in the power generation industry, which is referred to as Party B. At this meeting, Party B’s chief executive officer informed Mr. Muller that Party B was interested in entering into a strategic business combination with Mirant. In late February 2010, following the entering into of a confidentiality agreement the previous month and preliminary mutual due diligence, Mirant’s management determined that a strategic business combination with Party B did not present a sufficiently attractive strategic alternative and Mr. Muller advised Party B’s chief executive officer that Mirant was not interested in pursuing a business combination with Party B.

 

On February 1, 2010, following meetings between the senior management teams to further explore potential benefits of the transaction, Messrs. Jacobs and Muller discussed the composition of a senior leadership team, organizational structure and the operating philosophy for the combined company.

 

On February 3, 2010, Mr. Jacobs and RRI’s advisors updated the members of the RRI board of directors regarding the February 1 discussions between Messrs. Jacobs and Muller. The RRI board of directors decided to invite Messrs. Muller and Correll to meet with the RRI board of directors to discuss their operating philosophy and strategic vision for the combined company.

 

Between February 3, 2010 and March 13, 2010, Messrs. Jacobs and Muller continued to have periodic discussions regarding the composition of a senior leadership team, organizational structure and the operating philosophy for the combined company.

 

On March 13 and 14, 2010, Messrs. Muller and Correll met with the RRI board of directors. Mr. Muller outlined for the RRI board of directors Mirant’s views of the operating philosophy and strategic vision of the combined company, as well as the challenges facing the industry, including the impact of proposed carbon legislation and environmental regulations, the strategic benefits of a combination and the business strategy of the combined company. Following that meeting, the RRI board of directors authorized Mr. Jacobs to pursue further discussions with a view to finalizing the terms of a transaction.

 

On March 19, 2010, Wachtell Lipton delivered an initial draft merger agreement to RRI’s legal counsel, Skadden. Over the course of the following three weeks, Wachtell Lipton and Skadden, as well as representatives of RRI and Mirant, completed their due diligence and continued to negotiate the terms of the merger agreement including, among other things, the terms and scope of the parties’ “no shop” restrictions, the circumstances under which the proposed merger could be terminated, the amount of the termination fee and the circumstances under which such fee would be payable by either party, the conditions to completion of the merger and the parties’ respective covenants relating to the satisfaction of those conditions, and terms and scope of the representations and warranties and interim operating and other pre-closing covenants of the parties.

 

On April 1, 2010, the RRI board of directors, representatives of RRI management, Skadden, Goldman Sachs and Morgan Stanley met and reviewed the status of the discussions with Mirant and the results of its due diligence on Mirant to date and provided an updated analysis of the merits of a strategic combination of the two companies.

 

On April 10, 2010, the RRI board of directors met to consider the proposed strategic business combination of RRI and Mirant. Prior to the meeting, the RRI board of directors was provided with a substantially final draft of the merger agreement and other materials related to the proposed transaction. At the meeting, RRI’s management updated the RRI board of directors on the terms of the proposed transaction and the results of its due diligence on Mirant, and reviewed the strategic rationale and the anticipated benefits of the proposed transaction to the RRI stockholders; and representatives of Skadden reviewed with the RRI board of directors the terms of the proposed merger agreement and addressed various other issues and related matters. Representatives of Goldman Sachs and Morgan Stanley reviewed the financial terms of the transaction and presented certain financial analyses conducted with respect to the merger, and each of Goldman Sachs and

Morgan Stanley rendered an oral opinion (as subsequently confirmed in writing in opinions dated April 10, 2010 and April 11, 2010, respectively), as described under “— Opinion of RRI’s Financial Advisors,” that as of that date and based on and subject to the assumptions made, procedures followed, matters considered and limitations of review set forth in their respective opinions, the proposed exchange ratio was fair, from a financial point of view, to RRI. RRI management, Goldman Sachs and Morgan Stanley also discussed with the board of directors the contemplated financing terms. Following discussions, and taking into consideration the factors described under “— Rationale for the Merger” and “— RRI Board of Directors’ Recommendation and Its Reasons for the Merger,” the RRI board of directors unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, and resolved to recommend the approval by the RRI stockholders of the issuance of shares of RRI common stock in the merger.

 

On April 10, 2010, the Mirant board of directors also met to consider the proposed strategic business combination between RRI and Mirant. Wachtell Lipton reviewed with the Mirant board of directors its fiduciary duties and then described to the Mirant board of directors the principal terms of the proposed merger agreement and addressed compensation and benefit matters and general timing considerations. J.P. Morgan reviewed with the Mirant board of directors J.P. Morgan’s financial analysis performed in connection with the proposed merger and delivered to the Mirant board of directors an oral opinion (confirmed by delivery of a written opinion dated April 10, 2010), to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the exchange ratio pursuant to the merger agreement was fair, from a financial point of view, to the holders of Mirant common stock. After considering the foregoing and the proposed terms of the merger agreement, and taking into consideration the factors described under “— Rationale for the Merger” and “— Mirant Board of Directors’ Recommendation and Its Reasons for the Merger,” the Mirant board of directors unanimously determined that the merger and the other transactions contemplated by the merger agreement were advisable and in the best interests of the Mirant stockholders, and adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and recommended that the Mirant stockholders adopt the merger agreement.

 

Following the approvals of the RRI board of directors and the Mirant board of directors, RRI and Mirant executed the merger agreement. On April 11, 2010, RRI and Mirant issued a joint press release announcing execution of the merger agreement.

 

In the course of their discussions, both RRI and Mirant recognized that there were substantial potential strategic and financial benefits of the proposed merger of equals. This section summarizes the principal potential strategies and financial benefits that the parties expect to realize in the merger. For a discussion of various factors that could prevent or limit the parties from realizing some or all of these benefits, see “Risk Factors” beginning on page 20.

 

Each of Mirant and RRI thinks that the merger will enhance stockholder value through, among other things, enabling RRI and Mirant to capitalize on the following strategic advantages and opportunities:

 

 

 

The actual synergistic benefits from the merger and costs of integration could be different from the foregoing estimates and these differences could be material. Accordingly, there can be no assurance that any of the potential benefits described above or included in the factors considered by the RRI board of directors described under “— RRI Board of Directors’ Recommendation and Its Reasons for the Merger” beginning on page 31 or by the Mirant board of directors described under “— Mirant Board of Directors’ Recommendation and Its Reasons for the Merger” beginning on page 34 will be realized. See “Risk Factors” beginning on page 20 and “Cautionary Statement Regarding Forward-Looking Statements” on page 19.

 

At a meeting on April 10, 2010, the RRI board of directors, by unanimous vote, (i) determined that the merger and entering into the merger agreement are advisable and in the best interests of RRI and its stockholders, (ii) approved the merger and the merger agreement and the transactions contemplated thereby, including the Share Issuance, and (iii) determined to recommend that the holders of RRI common stock vote “FOR” the Share Issuance proposal.

 

In evaluating the merger, the RRI board of directors consulted with RRI’s management, as well as RRI’s legal and financial advisors, and, in reaching its conclusion, considered the following factors in addition to the specific reasons described above under “— Rationale for the Merger”:

 

 

 

The RRI board of directors also considered potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including:

 

 

 

In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the RRI board of directors did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to these factors.

 

In addition, the RRI board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather the RRI board of directors conducted an overall analysis of the factors described above, including discussions with the senior management team and outside legal and financial advisors. In considering the factors described above, individual members of the RRI board of directors may have given different weight to different factors.

 

On April 10, 2010, the Mirant board of directors, by a unanimous vote, determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Mirant and its stockholders, and approved the merger, the merger agreement and the other transactions contemplated by the merger agreement. The Mirant board of directors recommends that Mirant stockholders vote “FOR” the Merger proposal.

 

In evaluating the merger, the Mirant board of directors consulted with Mirant’s management, as well as Mirant’s legal and financial advisors and, in reaching its conclusion, considered the following factors in addition to the specific reasons described above under “— Rationale for the Merger” beginning on page 30:

 

 

 

The Mirant board of directors also considered potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including:

 

 

In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Mirant board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger and the merger agreement and to recommend that Mirant stockholders vote “FOR” the Merger proposal. In addition, individual members of the Mirant board of directors may have given differing weights to different factors. The Mirant board of directors conducted an overall review of the factors described above and consulted with Mirant’s management and Mirant’s outside legal and financial advisors regarding certain of the matters described above.

 

RRI has retained Goldman Sachs and Morgan Stanley as its financial advisors to advise the RRI board of directors in connection with the merger. Goldman Sachs and Morgan Stanley are collectively referred to herein as “RRI’s Financial Advisors.” In connection with this engagement, RRI requested that RRI’s Financial Advisors evaluate the fairness from a financial point of view to RRI of the exchange ratio of 2.835 shares of RRI common stock per share of Mirant common stock, as provided for in the merger agreement.

 

On April 10, 2010, at a meeting of the RRI board of directors held to evaluate the merger, each of RRI’s Financial Advisors delivered to the RRI board of directors its oral opinion, which opinion was confirmed by delivery of a written opinion, dated April 11, 2010 for Goldman Sachs and April 10, 2010 for Morgan Stanley, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the exchange ratio pursuant to the merger agreement was fair, from a financial point of view, to RRI.

 

The Goldman Sachs opinion and the Morgan Stanley opinion, the full texts of which describe the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinions, are attached as Annex B and Annex C, respectively, and are incorporated into this joint proxy statement/prospectus by reference. The summaries of the Goldman Sachs opinion and the Morgan Stanley opinion described below are qualified in their entirety by reference to the full texts of the opinions.

 

Opinion of Goldman Sachs

 

Goldman Sachs rendered its opinion to the RRI board of directors that, as of April 11, 2010 and based upon and subject to the factors and assumptions set forth therein, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to RRI.

 

The full text of the written opinion of Goldman Sachs, dated April 11, 2010, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the Goldman Sachs opinion, is attached as Annex B. Goldman Sachs provided its opinion for the information and assistance of the RRI board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of RRI common stock should vote with respect to the merger, or any other matter.

 

In connection with rendering its opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

 

Goldman Sachs also held discussions with members of the senior managements of RRI and Mirant regarding their assessment of the past and current business operations, financial condition and future prospects of Mirant and with the members of senior management of RRI regarding their assessment of the past and current business operations, financial condition and future prospects of RRI and the strategic rationale for, and the potential benefits of, the merger; reviewed the reported price and trading activity for the shares of RRI common stock and the shares of Mirant common stock; compared certain financial and stock market information for RRI and Mirant with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the energy industry specifically and in other industries generally; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

 

For purposes of rendering its opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, tax, accounting and other information provided to, discussed with or reviewed by it, and Goldman Sachs does not assume any responsibility for any such information. In that regard, Goldman Sachs assumed with RRI’s consent that the Forecasts, including the Synergies, had been reasonably prepared on a basis reflecting the best available estimates and judgments of the management of RRI. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of RRI or Mirant or any of their respective subsidiaries, nor was any evaluation or appraisal of the assets or liabilities of RRI or Mirant or any of their respective subsidiaries furnished to Goldman Sachs. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for completion of the merger would be obtained without any adverse effect on RRI or Mirant or on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the merger would be completed on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

 

Goldman Sachs’ opinion does not address the underlying business decision of RRI to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that may be available to RRI; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, RRI, or any other alternative transaction. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the exchange ratio pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including, without limitation, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any class of securities, creditors or other constituencies of RRI, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of RRI or Mirant, or any class of such persons in connection with the merger, whether relative to the exchange ratio pursuant to the merger agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which shares of RRI’s common stock will trade at any time or as to the impact of the merger on the solvency or viability of either RRI or Mirant or the ability of RRI or Mirant to pay its obligations when they come due. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of third parties, RRI, Mirant and any of their respective affiliates or any currency or commodity that may be involved in the merger contemplated by the merger agreement for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to RRI in connection with, and participated in certain of the negotiations leading to, the merger. In addition, Goldman Sachs has provided certain investment banking and other financial services to RRI and its affiliates from time to time for which the investment banking division of Goldman Sachs has received, and may receive, compensation, including, but not limited to, having acted as a lender under RRI’s revolving credit facility (which had an initial aggregate principal amount of $500 million in May 2007), as an arranger of a $1 billion financing for RRI in September 2008, and as financial advisor to RRI in the sale of its Texas retail business in May 2009. Goldman Sachs also has provided certain investment banking and other financial services to Mirant and its affiliates from time to time for which the investment banking division of Goldman Sachs has received, and may receive, compensation. Goldman Sachs also may provide investment banking and other financial services to RRI, Mirant and their respective affiliates in the future for which the investment banking division of Goldman Sachs may receive compensation.

 

The RRI board of directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated March 19, 2010, RRI engaged Goldman Sachs to act as its financial advisor in connection with the merger. Pursuant to the terms of this engagement letter, RRI has agreed to pay Goldman Sachs a transaction fee of $10.5 million, a principal portion of which is payable upon completion of the merger, and an incentive fee of $4 million, which is payable at RRI’s sole discretion. Payment of the $10.5 million transaction fee includes satisfaction of any applicable payment under a prior structuring agent engagement letter between RRI and Goldman Sachs. In addition, RRI has agreed to reimburse Goldman Sachs for its expenses, including the reasonable fees and disbursements of Goldman Sachs’ attorneys, and to indemnify Goldman Sachs and certain related persons against various liabilities, including certain liabilities under the federal securities laws, arising out of the engagement.

 

Opinion of Morgan Stanley

 

RRI retained Morgan Stanley to provide financial advisory services and a financial opinion to the RRI board of directors in connection with RRI’s review of strategic alternatives and any resulting transactions. The RRI board of directors selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, experience and expertise. Morgan Stanley rendered its opinion to the RRI board of directors that, as of April 10, 2010 and based upon and subject to the factors and assumptions set forth therein, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to RRI.

 

The full text of Morgan Stanley’s written opinion, dated April 10, 2010, is attached as Annex C. That opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley in rendering its opinion. We encourage you to read the entire opinion carefully. Morgan Stanley’s opinion is directed to the RRI board of directors and addresses only the fairness from a financial point of view to RRI of the exchange ratio pursuant to the merger agreement as of the date of the opinion. Morgan Stanley’s opinion does not address any other aspect of the merger and does not express an opinion or a recommendation to any stockholder of RRI or Mirant as to how such stockholder should vote or act on any matter with respect to the merger. In addition, the opinion does not in any manner address the prices at which RRI common stock or Mirant common stock will trade at any time. The summary of Morgan Stanley’s opinion set forth herein is qualified in its entirety by reference to the full text of the written opinion of Morgan Stanley attached as Annex C.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

 

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by RRI and Mirant and formed a substantial basis for its opinion. With respect to the financial projections, including information relating to certain strategic, financial and operational benefits anticipated from the merger, Morgan Stanley assumed that such projections had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the respective managements of RRI and Mirant of the future financial performance of RRI and Mirant. In addition, Morgan Stanley assumed that the merger will be completed in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that the merger will be treated as a tax-free reorganization and/or exchange, each pursuant to the Code. Morgan Stanley relied upon, without independent verification, the assessment by the managements of each of RRI and Mirant of: (i) the strategic, financial and other benefits expected to result from the merger; (ii) the timing and risks associated with the integration of RRI and Mirant; (iii) the ability of each of RRI and Mirant to retain key employees and (iv) the validity of, and risks associated with, RRI’s and Mirant’s existing and future technologies, intellectual property, products, services and business models. Morgan Stanley assumed that in connection with the receipt of all of the necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessments of RRI and Mirant and their legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of RRI’s officers, directors or employees, or any class of such persons,

relative to the consideration to be paid to the holders of shares of Mirant common stock in the merger. Morgan Stanley has not made any independent valuation or appraisal of the assets or liabilities of RRI, nor has Morgan Stanley been furnished with any such appraisals. Morgan Stanley’s opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, April 10, 2010. Events occurring after April 10, 2010 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion. In arriving at its opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to an acquisition, a business combination or any other extraordinary transaction, involving RRI.

 

The RRI board of directors retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise. Morgan Stanley is an internationally recognized investment banking and advisory firm. Morgan Stanley, as part of its investment banking business, is continuously engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate, estate and other purposes. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.

 

Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of RRI, Mirant, or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument. In the two years prior to the date of its opinion, Morgan Stanley provided financial advisory and financing services for RRI and received fees in connection with such services. Morgan Stanley may also seek to provide such services to RRI and Mirant in the future and expects to receive fees for the rendering of these services.

 

Under the terms of its engagement letter, Morgan Stanley provided RRI financial advisory services and a financial opinion in connection with the merger, and RRI has agreed to pay Morgan Stanley a transaction fee of $8 million, a principal portion of which is payable upon completion of the merger, and an incentive fee of $5 million, which is payable at RRI’s sole discretion. RRI has also agreed to reimburse Morgan Stanley for its expenses, including attorney’s fees, incurred in connection with its services. In addition, RRI has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each other person, if any, controlling Morgan Stanley and any of its affiliates from and against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to, arising out of or in connection with Morgan Stanley’s engagement.

 

Summary of Material Financial Analyses

 

The following is a summary of the material financial analyses contained in the joint presentation that was made by RRI’s Financial Advisors to the RRI board of directors on April 10, 2010 and that were used by RRI’s Financial Advisors in connection with rendering their respective opinions described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by RRI’s Financial Advisors, nor does the order of analyses described represent relative importance or weight given to those analyses by RRI’s Financial Advisors. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of RRI’s Financial Advisors’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 7, 2010 and is not necessarily indicative of current or future market conditions. In connection with the RRI Financial Advisors’ financial analyses described below, the RRI Financial Advisors were provided with financial forecasts relating to RRI and Mirant prepared by the

managements of RRI and Mirant (and, in the case of Mirant, as adjusted by RRI’s management) based on March 16, 2010 forward curves.

 

Selected Companies Analysis.  RRI’s Financial Advisors reviewed and compared certain financial information for RRI and Mirant to corresponding financial information, ratios and public market multiples for the following publicly traded corporations (collectively, the “Selected Companies”) in the energy industry:

 

 

Although none of the Selected Companies is directly comparable to RRI or Mirant, the companies included were chosen because they are publicly traded companies with operations that, for purposes of analysis, may be considered similar to certain operations of RRI and Mirant.

 

RRI’s Financial Advisors also derived and compared various financial multiples based on financial data as of April 7, 2010. The multiples of each of the Selected Companies were based on the most recent publicly available information obtained from SEC filings and IBES estimates. The multiples of each of RRI and Mirant were calculated using the closing price of each such party on April 7, 2010 and were based on information provided by their respective managements and on IBES estimates. With respect to each of the Selected Companies, RRI and Mirant, RRI’s Financial Advisors calculated:

 

 

The results of these analyses are summarized as follows: