Harbinger, which owns more than 24 percent of Calpine's shares, said it believes the offer represents a good starting point and that Calpine's board should immediately negotiate with NRG over terms. (For more details, see the CNBC video at left.)
"The timing of this offer is excellent for Calpine, as it has not yet settled on a strategic view or chief executive officer," Harbinger Managing Director Howard Kagan said in the letter. "NRG offers the combined company a fully focused management team and a well articulated strategy already in place," he said.
NRG has about 23,000 megawatts of generation in the United States and 1,200 megawatts internationally. Its portfolio of power plants includes coal, natural gas and part of one nuclear plant.
Calpine has close to 24,000 megawatts of generation in the United States, nearly all of which are natural gas-fired plants. The remainder are geothermal power plants.
A combination with Calpine would give NRG more presence in the Western U.S. power market, NRG's smallest market, and in the Southeast, with little overlap in the Northeast, where NRG already owns 15 power plants.
It would also deliver at least $100 million a year in general and administrative savings as well as billions of dollars in tax benefits, NRG said.
In Texas, where NRG is the second-largest generation owner with nearly 11,000 megawatts, a merger with Calpine could lead to some power plant sales as the combined company would likely exceed a 20-percent limit on generation ownership in the state's deregulated market.
Without divestitures, NRG would have difficulty pursuing its plan to double output at the South Texas Project, the state's largest nuclear plant, by 2,700 megawatts by 2016.
Crane said they would need to sell somewhere between 3,000 megawatts and 5,000 megawatts of generation in the state.
NRG shares closed up 36 cents to $42.51, while Calpine added 8 cents to $21.28, both on the New York Stock Exchange. Calpine rose 3.4 percent to $22 in light trading after the market closed.