NRG Energy says it reached an agreement to buy power provider GenOn in an all-stock deal worth about $1.7 billion.

Under the terms of the deal, GenOn Energy Inc. shareholders will get 0.1216 of a NRG Energy Inc. share for each of their GenOn shares.

Based on NRG's Friday closing stock price, the offer equates to about $2.20 per GenOn share. That represents about an 18 percent premium over Houston-based GenOn's Friday closing stock price.

Once the deal closes, Princeton, N.J.-based NRG says its shareholders will own 71 percent of the combined company and GenOn shareholders will own 29 percent.

NRG says the acquisition allow it to cut costs, while boosting efficiency and free cash flow.

The deal is expected to close by the first quarter of 2013.