NRG Energy Inc, the second-largest power producer in Texas, has rejected an unsolicited $6.1-billion takeover offer from Exelon Corp., the largest US utility owner. NRG said yesterday its board of directors had rejected the unsolicited bid, which it described as significantly undervaluing the company.

The statement said Exelon's offer was "opportunistically timed" and, in addition to being too low, was "highly conditional, as Exelon has yet to obtain committed financing and has had its credit rating downgraded." The offer, made last month, involved exchanging 0.485 Exelon share for each NRG share, in a deal valued at about $6.2 billion.

Exelon's all-stock bid came after NRG lost half of its market value in two months. The acquisition would have made Exelon the largest US power producer, ahead of Atlanta-based Southern Co. and Columbus, Ohio-based American Electric Power Co. Exelon owns and operates electric utilities in Illinois and Pennsylvania and power plants throughout the US, including the nation's largest fleet of nuclear plants. NRG owns more than 24,000 megawatts of generation.

But in a letter to Exelon Chairman and CEO John Rowe, the board said the bid "is not in the best interests of NRG shareholders, as it manifestly undervalues NRG both on an absolute basis and relative to your own share value."

In the letter NRG CEO David Crane and Chairman Howard Cosgrove cited lack of secured financing as one reason for the rejection, posing ''real risk of non consummation to NRG's shareholders.''

''Under your proposal, NRG shareholders would own only 17 per cent of the combined company while contributing over 30 per cent of a combined NRG-Exelon free cash flow in 2008,'' they said in the letter, made public today by NRG.

At the time of the offer, Exelon has said it expected downgrades to its credit rating from the unsolicited bid. Standard & Poor's already cut Exelon's debt rating to BBB from BBB+. Exelon said it plans to restore this rating, but NRG said doing this is likely more challenging than Exelon realizes.

"It is surprising to us, that in the wake of the rating downgrade-driven collapse of Constellation Energy, and the massive destruction of equity value which ensued, that any power industry professional would consider the lowest investment grade rung as a stable foundation to run a 48,000 (megawatt) merchant power company," NRG said in its letter.

Constellation Energy Group Inc. was pushed into the arms of Berkshire Hathaway Inc.'s MidAmerican Energy Holdings Co. in mid-September after concerns over liquidity caused Constellation's share price to plummet. (See: Warren Buffett's MidAmerican Energy bids $4.7 billion for Constellation Energy)

However, NRG CEO Crane made it clear that he was not averse to a takeover at a higher bid. ''It's not the nature of the consideration, it's the amount,'' he said. ''Their credit rating gives us pause. It's not that common for people to go forward at this point with no debt financing in place.''

Just a few months ago, NRG was in the same position as Exelon. The company offered more than $9 billion last spring for fellow merchant power generator Calpine Corp., looking for some of the same benefits of size and geographic diversity that Exelon cited in its bid. But the deal also collapsed over price, with Calpine saying NRG was undervaluing it.