Talen Energy Corporation Investor Update Summary Company Overview - **Company**: Talen Energy Corporation (NasdaqGS: TLN) - **Date of Call**: September 09, 2025 - **Key Speakers**: Mark McFarland (CEO), Terry Nutt (CFO), Chris Maurice (CCO), Cole Muller (EVP Strategic Ventures) Core Industry Insights - **Industry**: Independent Power Producers (IPP) - **Market Focus**: Concentrated in PJM, particularly Pennsylvania and expanding into Ohio - **Trends**: Increasing power demand fundamentals and data center participation are driving growth opportunities Financial Performance and Projections - **Market Capitalization**: More than doubled since the last investor update - **Adjusted Free Cash Flow**: Expected to grow by 35% through 2028, with projections of $23.60 per share for 2026 and $27.40 per share for 2028 [19][18] - **Share Repurchase Program**: Increased to $2 billion, with plans to repurchase approximately 23% of shares outstanding, creating over $3 billion in value on a mark-to-market basis [5][7] Strategic Initiatives - **Data Center Contracts**: First mover advantage with Amazon Web Services (AWS), securing an $18 billion notional contract over 17 years, expected to generate stable cash flows [6][17] - **Acquisitions**: Acquiring Freedom and Guernsey plants, adding approximately 3 gigawatts of capacity, expected to generate over $3 billion in cash through 2028 [6][37] - **Tax Benefits**: Recent legislation reducing federal tax rate to approximately 2-3%, enhancing free cash flow [12][31] Market Dynamics - **Capacity Prices**: The 2026-2027 capacity auction cleared at $3.29 per megawatt day, with expectations of flat pricing due to market uncertainties [14][50] - **Demand Growth**: Significant growth in summer peak load, with 2025 summer peak load hitting levels not seen in 15 years [32] - **PJM Reserve Margins**: Concerns about potential shortfalls by 2030, indicating a need for new supply resources [34] Risk Management and Hedging - **Hedging Strategy**: Approximately 50% of generation hedged for the next year, with a focus on managing commodity risk amid market volatility [35] - **Market Sentiment**: Current forward pricing does not reflect tightening supply-demand dynamics, with expectations for gradual price increases over time [66] Future Outlook - **Growth Opportunities**: Potential for 40%+ incremental per share growth through various levers, including share repurchases, accelerated AWS contract volumes, and accretive M&A [25][20] - **Long-term Strategy**: Focus on long-term contracting capabilities and low-carbon power sources to meet evolving customer needs [41] Additional Considerations - **Operational Efficiency**: Emphasis on maintaining low operational costs and improving balance sheet health through strategic asset management [9][30] - **Market Positioning**: Talen Energy aims to leverage its position in the market to capitalize on emerging trends in energy demand and data center growth [32][41] This summary encapsulates the key points discussed during the Talen Energy Corporation investor update, highlighting the company's strategic direction, financial performance, and market outlook.

Financial Performance & Projections - Talen expects to be in the lower end of Adjusted EBITDA and Adjusted Free Cash Flow ranges for 2025[17] - Talen projects Adjusted EBITDA of $1750 million to $2050 million and Adjusted Free Cash Flow of $980 million to $1180 million for 2026, including the Freedom and Guernsey acquisitions[23, 86] - Talen anticipates Adjusted EBITDA of $1790 million to $2290 million and Adjusted Free Cash Flow of $1055 million to $1425 million for 2027[23, 89] - Talen projects Adjusted Free Cash Flow per share to grow from $9.80 in 2025E to $23.10 in 2027E and $25.80 in 2028E[19] Strategic Initiatives & Growth - Talen is acquiring ~3,000 MWs CCGTs via Freedom and Guernsey acquisitions, projected ~50% Adj FCF/share accretion[12] - Talen's AWS PPA is expected to add ~20% Adjusted Free Cash Flow per share growth beyond 2028[21] - Talen's share repurchase program has $2 billion remaining and extends through year end 2028[12] Market Dynamics - PJM installed reserve margins are steadily shrinking as power demand grows[34] - The '26/'27 BRA capacity clear at price cap of ~$270/MWd[17] - The '26/'27 BRA capacity clear at price cap of ~$329/MWd[17]

Core Viewpoint - Talen Energy (NASDAQ: TLN) is entering a phase of qualitative upgrade, securing multi-year green revenues from AWS and enhancing flexibility with efficient natural gas units located near data hubs [1] Group 1: Company Developments - Talen Energy is focusing on securing long-term green revenues, which indicates a strategic shift towards sustainable energy sources [1] - The company is strengthening its operational flexibility by utilizing efficient natural gas units, which are strategically positioned next to data hubs [1] Group 2: Management and Expertise - Mr. Mavroudis, a professional portfolio manager, emphasizes risk management and in-depth financial market analysis, which is crucial for controlling portfolio risks [1] - The management team has successfully navigated major crises, including the COVID-19 pandemic, showcasing their resilience and adaptability in challenging market conditions [1]

Core Viewpoint - The nuclear power sector is experiencing a surge, driven by major tech companies' interest in nuclear energy to support the growing demand for data centers and artificial intelligence [1] Group 1: Market Performance - Talen Energy (TLN.US) has seen an increase of over 5% [1] - Energy Fuels (UUUU.US) and Centrus Energy (LEU.US) have both risen by more than 11% [1] - Oklo Inc (OKLO.US) has gained over 6.5% [1] Group 2: Strategic Developments - X-energy has signed a strategic cooperation agreement with Amazon (AMZN.US), Korea Hydro & Nuclear Power, and Doosan Energy [1] - The agreement aims to accelerate the deployment of the Xe-100 fourth-generation advanced small modular reactor and TRISO-X fuel in the U.S. market [1] - This initiative is intended to meet the increasing electricity demand from data centers and the artificial intelligence sector [1]

Group 1 - Tidewater (TDW) is a notable stock in the Oils-Energy sector, currently outperforming the sector with a year-to-date return of 9.3% compared to the sector average of 3.9% [4] - The Zacks Consensus Estimate for Tidewater's full-year earnings has increased by 22.8% in the past quarter, indicating a stronger analyst sentiment and improving earnings outlook [4] - Tidewater is ranked 11 in the Zacks Sector Rank, which evaluates 240 companies across 16 sector groups [2] Group 2 - Tidewater belongs to the Oil and Gas - Integrated - United States industry, which has seen a decline of about 3.4% year-to-date, further highlighting Tidewater's relative strength [6] - Talen Energy Corporation (TLN), another stock in the Oils-Energy sector, has achieved a year-to-date return of 76.5% and has a Zacks Rank of 2 (Buy) [5] - The Alternative Energy - Other industry, to which Talen Energy belongs, has increased by 29.1% this year, ranking 184 among 41 stocks [7]

Group 1 - Talen Energy (TLN.US) shares increased by over 5%, reaching $373.59 [1] - S&P Dow Jones Indices announced that Talen Energy will replace Interactive Brokers in the S&P MidCap 400 Index [1] - The change will take effect before the market opens on August 28 [1]

Group 1 - Interactive Brokers (IBKR.US) saw a night trading increase of over 4%, reaching $65.3 [1] - Talen Energy (TLN.US) experienced a night trading rise of 4.2%, closing at $370.46 [1] - S&P Dow Jones Indices announced that Interactive Brokers will replace Walgreens Boots Alliance in the S&P 500 Index, with the change effective before the market opens on August 28 [1] Group 2 - Walgreens will be privatized by Sycamore Partners, with the transaction expected to be completed later this week [1] - Talen Energy will replace Interactive Brokers in the S&P MidCap 400 Index, effective before the market opens on August 28 [1]

Index Changes - S&P 500 will add Interactive Brokers Group (IBKR) and remove Walgreens Boots Alliance (WBA) effective August 28, 2025 [1] - S&P MidCap 400 will add Talen Energy (TLN) and remove Interactive Brokers Group (IBKR) effective August 28, 2025 [1] - S&P SmallCap 600 will add Kinetik Holdings (KNTK) and remove Pacific Premier Bancorp (PPBI) effective September 2, 2025 [1] Acquisition Details - Walgreens Boots Alliance is being acquired by Sycamore Partners, with the deal expected to close soon [4] - Pacific Premier Bancorp is being acquired by Columbia Banking System, with the deal also expected to close soon [4]

Industry Overview - The Zacks Alternative Energy industry is divided into two segments: one focuses on the generation and distribution of alternative energy, while the other is involved in the development and installation of renewable projects [2] - Global spending on clean energy reached a record $2.08 trillion in 2024, with expectations for similar or increased investments in the coming years, indicating solid growth opportunities for the industry [2] Trends Impacting the Industry - Wind energy is a key growth catalyst, with installations in the U.S. increasing by 91% year over year in Q1 2025, and projected installations of 8.1 gigawatts (GW) for the year [3] - The U.S. electric vehicle (EV) market is expected to grow significantly, with a projected compound annual growth rate (CAGR) of 10.5% from 2025 to 2029, driven by rising electrification and declining battery costs [4] Challenges Facing the Industry - Rising costs of renewable installations, particularly due to increased steel prices for wind turbine blades, are posing significant challenges [5] - The U.S. government's heightened import tariffs and the passage of the One Big Beautiful Act (OBBA) have negatively impacted the wind industry, leading to a 50% decline in wind turbine orders in H1 2025 compared to the previous year [6] - The expiration of tax credits under the OBBA is projected to increase the unsubsidized Levelized Cost of Energy (LCOE) by an average of 25%, affecting the near-term growth of alternative energy stocks [6] Industry Performance - The Zacks Alternative Energy industry has outperformed both its sector and the Zacks S&P 500 composite over the past year, with a collective stock surge of 55.7% compared to a 1.3% decline in the Oil-Energy sector [11] - The industry's current valuation, based on the trailing 12-month EV/EBITDA ratio, is 21.24, higher than the S&P 500's 17.55 and the sector's 27.99 [12] Company Highlights - Talen Energy reported a 28.8% year-over-year increase in operating revenues and a 144.4% surge in operating income for Q2 2025, with a long-term earnings growth rate of 15.5% [17][18] - Brookfield Renewable plans to invest up to $1 billion to increase its equity interest in Isagen S.A., with a Zacks Consensus Estimate for 2025 earnings per share indicating a loss of 30 cents, an improvement from the previous year's loss of 89 cents [19][20] - Bloom Energy's revenues improved by 19.5% in Q2 2025, with an adjusted gross margin expansion of 650 basis points to 28.2% [23]

Group 1: Antero Midstream - Antero Midstream is a leading provider of integrated and customized midstream services with a Zacks Rank 1 (Strong Buy) [1] - The Zacks Consensus Estimate for Antero Midstream's current year earnings increased by 2.1% over the last 60 days [1] - Antero Midstream's shares gained 27.9% over the last three months, outperforming the S&P 500's gain of 14.2% [2] - The company possesses a Momentum Score of A [2] Group 2: Jackson Financial - Jackson Financial is a U.S. retirement services provider with a diverse portfolio of differentiated products and a Zacks Rank 1 [2] - The Zacks Consensus Estimate for Jackson Financial's current year earnings increased by 5.9% over the last 60 days [2] - Jackson Financial's shares gained 17.6% over the last three months, also outperforming the S&P 500's gain of 14.2% [3] - The company possesses a Momentum Score of A [3] Group 3: Talen Energy Corporation - Talen Energy Corporation owns and operates power infrastructure primarily in the United States and has a Zacks Rank 1 [3] - The Zacks Consensus Estimate for Talen Energy's current year earnings increased by 7.6% over the last 60 days [3] - Talen Energy's shares gained 150.3% over the last three months, significantly outperforming the S&P 500's gain of 14.2% [4] - The company possesses a Momentum Score of B [4]