Core Viewpoint - Investors in the Alternative Energy sector may consider Clearway Energy (CWENA) and Talen Energy Corporation (TLN) as potential undervalued stocks [1] Group 1: Valuation Metrics - CWENA has a forward P/E ratio of 19.07, while TLN has a forward P/E of 59.28 [5] - CWENA's PEG ratio is 0.34, indicating better expected EPS growth compared to TLN's PEG ratio of 3.82 [5] - CWENA has a P/B ratio of 1.04, significantly lower than TLN's P/B of 13.15, suggesting CWENA is more undervalued [6] Group 2: Earnings Outlook - Both CWENA and TLN have a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and improving earnings outlooks [3] - CWENA earns a Value grade of A, while TLN has a Value grade of C, highlighting CWENA's superior valuation metrics [6][7]

Core Viewpoint - Talen Energy Corporation (TLN) has experienced a bearish trend recently, losing 5.3% over the past week, but the formation of a hammer chart pattern suggests a potential trend reversal as buying interest may be increasing [1][2]. Technical Analysis - The hammer chart pattern indicates a possible bottom formation, suggesting that selling pressure may be subsiding, which could lead to a bullish trend [2][5]. - A hammer pattern typically forms when a stock opens lower, makes a new low, but then closes near or above its opening price, indicating a shift in control from bears to bulls [4][5]. - The effectiveness of the hammer pattern as a bullish indicator is enhanced when used alongside other technical indicators [6]. Fundamental Analysis - There has been a positive trend in earnings estimate revisions for TLN, with a 5.4% increase in the consensus EPS estimate for the current year over the last 30 days, indicating that analysts expect better earnings than previously predicted [7][8]. - TLN holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which historically correlates with outperformance in the market [9][10].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Talen Energy Corporation (TLN) - Talen Energy Corporation currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy), indicating a favorable outlook for the stock [2][3] - The stock has shown significant price performance, with a 55.05% increase over the past quarter and a remarkable 173.8% rise over the last year, compared to the S&P 500's 8.58% and 17.39% respectively [6] Price Performance - TLN shares have increased by 0.84% over the past week, while the Zacks Alternative Energy - Other industry remained flat during the same period [5] - The monthly price change for TLN is 21.52%, significantly outperforming the industry's 0.41% [5] Trading Volume - TLN's average 20-day trading volume is 1,148,103 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - Over the past two months, 3 earnings estimates for TLN have been revised upwards, while 2 have been revised downwards, leading to an increase in the consensus estimate from $5.64 to $6.07 [9] - For the next fiscal year, 6 estimates have moved upwards with no downward revisions, indicating positive sentiment [9] Conclusion - Given the strong momentum indicators and positive earnings outlook, TLN is positioned as a promising investment opportunity with a Momentum Score of B and a Zacks Rank of 2 (Buy) [11]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **PJM capacity auction** within the **Power & Utilities** sector, highlighting the supply-demand dynamics and potential price trends through 2030. Core Insights and Arguments - **Capacity Price Projections**: In the absence of a cap, clearing prices for the PJM capacity auctions could reach approximately **$700, $1,000, and $1,150 per MW-day** for the auctions in 2027/28, 2028/29, and 2029/30 respectively [1][2][11]. - **Supply-Demand Shortfall**: A projected **2.6 GW shortfall** in the 2027/28 auction is expected to drive prices up to the ceiling, with anticipated shortfalls of **5 GW and 7 GW** in subsequent auctions [2][11][31]. - **Cap Extension Likely**: The current cap of **$329 per MW-day** is expected to be extended due to affordability concerns, rather than increased, which may not sufficiently incentivize new supply [1][4][11][15]. - **PJM Reforms**: PJM is exploring reforms to prevent capacity prices from soaring, including potential bifurcated auction markets for existing versus new resources and requiring data centers to curtail load or increase demand response participation [3][19][22]. - **Data Center Impact**: Data centers are driving over **90% of demand growth**, and their participation in capacity procurement could significantly influence market dynamics and pricing [3][18][29]. Additional Important Insights - **Deactivation Withdrawals**: A **70% withdrawal rate** from the deactivation queue is anticipated, which could lead to a **1.5 GW, 2.2 GW, and 1.7 GW** impact on supply for the next three auctions [6][34]. - **Reliability Requirement Growth**: The reliability requirement is expected to grow by approximately **3% year-over-year**, increasing from **135 GW in 2026/27 to 149 GW in 2029/30** [27][29]. - **Inflation Effects**: Rising inflation is projected to drive up demand curves, with increases in gross cone estimates for gas generation [16][17]. - **Market Bifurcation**: There is a potential for the market to be bifurcated, with new resources compensated at higher levels compared to existing resources, which could create pricing disparities [22][23]. - **State-Level Procurement**: States may consider detaching from the auction process to pursue their own procurement strategies, which could impact the dynamics of capacity decisions [23]. Company-Specific Risks - **NRG Energy, Talen Energy, and Vistra Corp**: Each company faces various risks including regulatory changes, capital market access, commodity price volatility, and operational challenges that could affect their valuations and market performance [38][39][40]. This summary encapsulates the critical insights and projections discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the PJM capacity auction market.

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $90 million and an adjusted free cash flow use of $78 million, impacted by an extended outage at Susquehanna [6][19] - The incremental maintenance investment during the outage was approximately $30 million, with an expected payback period of less than two years [19] - The earnings now include higher capacity pricing of approximately $270 per megawatt day for 2025-2026 [19] Business Line Data and Key Metrics Changes - The company expanded its agreement with Amazon to a total of 1.9 gigawatts, doubling the size of the original contract [8] - The acquisition of Freedom Energy Center and Guernsey power plant is expected to add over 40% free cash flow per share accretion in 2026 and more than 50% in the following two years [9] Market Data and Key Metrics Changes - The PJM market continues to show strong energy fundamentals, with peak summer heat and demand driving increases in forward summer spark spreads [17] - The company experienced several PJM max generation alert events, indicating a sign of demand growth in the market [17] Company Strategy and Development Direction - The company is focused on executing its strategy to create long-term value, emphasizing free cash flow per share growth and maintaining a disciplined balance sheet [23] - The company is exploring opportunities for upgrades at Susquehanna and considering small modular reactors (SMRs) as part of its commitment with AWS [36][57] Management's Comments on Operating Environment and Future Outlook - Management believes the IPP space will continue to be favorable, driven by AI and data center growth [5] - The company is committed to returning capital to shareholders, having repurchased approximately 23% of its outstanding shares for about $2 billion since the start of 2024 [20] Other Important Information - The company has approximately $861 million in liquidity and over $161 million in cash on the balance sheet [21] - The company plans to provide further updates on its 2026 and 2027-2028 outlook at the Investor Update on September 9 [10] Q&A Session Questions and Answers Question: Thoughts on Susquehanna work and capacity - Management discussed the 75 megawatts increase at Unit 2 and potential for similar recovery at Unit 1, emphasizing that this is about maintaining system capacity rather than upgrading [29][30][32] Question: Share repurchase plans - Management confirmed that they have repurchased roughly $100 million year-to-date and remain committed to the $500 million target for share repurchases, despite recent acquisitions impacting their ability to execute [34][38] Question: Insights on PJM auction and supply-demand trends - Management noted that the recent auction showed a significant supply response and expects continued demand growth, indicating a constructive outlook for future auctions [44][46] Question: Contracting gas plants and market direction - Management highlighted the need for structured long-term contracts and the importance of managing gas supply risks, especially with the recent acquisitions [66][68] Question: Future of generation in Pennsylvania - Management expressed confidence in their existing assets competing effectively and emphasized the advantages of acquiring existing assets over new builds [53][55] Question: Nuclear fuel procurement and hedging - Management stated they are substantially hedged through 2029 and are actively considering future procurement strategies [106][107] Question: Data center clustering and market implications - Management is bullish on data center clustering in Pennsylvania and believes it will positively impact their portfolio and contracting capabilities [114][115]

Financial Performance - Net Income Attributable to Stockholders decreased by $382 million for the three months ended June 30, 2025, compared to the same period in 2024 [189]. - Operating Revenues increased by $141 million to $630 million for the three months ended June 30, 2025, driven by a $42 million increase in Capacity Revenues [188]. - Energy Expenses rose by $76 million, totaling $252 million for the three months ended June 30, 2025, primarily due to higher fuel and energy purchases [188]. - For the six months ended June 30, 2025, Net Income Attributable to Stockholders decreased by $811 million compared to the same period in 2024 [191]. - Net Income for the six months ended June 30, 2025, was $458 million, compared to a loss of $(63) million for the same period in 2024 [213]. - Total Adjusted EBITDA for the six months ended June 30, 2025, was $290 million, down from $376 million for the same period in 2024 [213]. - Adjusted EBITDA for the three months ended June 30, 2025, was $90 million, compared to $87 million for the same period in 2024 [213]. - The company emphasizes that Adjusted EBITDA is not a GAAP measure and should be considered alongside GAAP measures [209]. Liquidity and Cash Flow - Total available liquidity decreased to $752 million as of June 30, 2025, down from $1,028 million at the end of 2024 [197]. - Cash and cash equivalents, unrestricted, were reported at $122 million as of June 30, 2025, compared to $328 million at the end of 2024 [197]. - Operating activities generated a net cash outflow of $65 million for the six months ended June 30, 2025, a decrease of $215 million compared to the prior year [204]. - A change of $(215) million in net cash provided by (used in) operating activities aligns with operational results and working capital changes [205]. - A change of $(1,093) million in net cash provided by (used in) investing activities was primarily due to $(339) million from the AWS Data Campus Sale and $(754) million from the ERCOT Sale [206]. - A change of $864 million in net cash provided by (used in) financing activities resulted from a $182 million repayment of the Cumulus Digital TLF and a $551 million decrease in share repurchases [207]. Acquisitions and Capacity - The company is acquiring Freedom Energy Center (1,045 MW) and Guernsey Power Station (1,836 MW) for approximately $3.8 billion, expected to close in Q4 2025 [166][168]. - The acquisitions will increase Talen's generating capacity by approximately 3 GW, enhancing its ability to provide low-carbon capacity to large commercial off-takers [167]. - A new retail PPA with AWS will provide 1,920 MW of power through 2042, supporting AI and cloud technologies, with full volume expected by 2032 [170]. - Talen cleared 6,702 MWs at a price of $329.17/MWd for the 2026/2027 PJM Capacity Year, significantly higher than previous years [165][181]. Operational Costs and Maintenance - Incremental maintenance during Susquehanna's Unit 2 outage cost approximately $25 million in operations and maintenance expenses and $6 million in capital expenditures [184]. - The company anticipates similar incremental maintenance costs for Unit 1 during its planned outage in Spring 2026, expected to be in line with or below Unit 2 costs [184]. Tax Credits and Financial Reporting - The Nuclear Production Tax Credit program will provide transferable tax credits for electricity produced by Susquehanna from December 31, 2023, through December 31, 2032 [182]. - The financial statements are prepared in conformity with GAAP, requiring significant judgments and assumptions that may affect reported amounts [214]. - The company acknowledges inherent uncertainties in future events that could materially impact financial reporting [214]. - The company guarantees certain agreements and obligations for its subsidiaries, which may require contingent payments [208]. Market Trends - The average settled on-peak power prices in PJM increased significantly, with PJM West Hub Day Ahead Peak at $52.71/MWh in Q2 2025 compared to $37.67/MWh in Q2 2024 [175]. - The company experienced a $(552) million unfavorable decrease in Gain (Loss) on Sale of Assets, primarily due to the ERCOT Sale that closed in the second quarter of 2024 [189]. Hedging Strategy - The company’s hedging strategy focuses on maintaining appropriate risk tolerances to protect cash flows across its generation fleet [194].

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $90 million and an adjusted free cash flow use of $78 million, impacted by an extended outage at Susquehanna [5][18] - The incremental maintenance investment during the outage was approximately $30 million, with an expected payback period of less than two years [18] - The earnings now include higher 2025-2026 PJM capacity pricing of approximately $270 per megawatt day [18] Business Line Data and Key Metrics Changes - The company expanded its agreement with Amazon to a front of the meter arrangement for a total of 1.9 gigawatts, doubling the size of the original contract [6][7] - The acquisition of Freedom Energy Center and Guernsey power plant is expected to add over 40% free cash flow per share accretion in 2026 and more than 50% for the following two years [7][11] Market Data and Key Metrics Changes - The PJM market continues to show strong energy fundamentals, with peak summer heat and demand driving increases in forward summer spark spreads [14][15] - The company noted that average electricity demand remained flat despite cooler weather compared to the same period in 2024, indicating potential demand growth [15] Company Strategy and Development Direction - The company is focused on creating value in the IPP space, leveraging AI-driven data center growth and increasing CapEx plans from hyperscalers [4][5] - The strategy includes maintaining a disciplined balance sheet while targeting $500 million in annual share repurchases during the post-acquisition deleveraging period [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the IPP space, indicating that the current environment is conducive to value creation [4][23] - The company reaffirmed its 2025 guidance and plans to provide updates on 2026 and 2027-2028 outlooks at the upcoming Investor Update [8][19] Other Important Information - The company was added to two Russell equity indices in June, which is expected to drive passive fund demand for its stock [9] - The company has approximately $861 million in liquidity, with over $161 million in cash on the balance sheet [20] Q&A Session Summary Question: Thoughts on Susquehanna work and capacity - Management clarified that the 75 megawatts increase at Unit 2 is not an upgrade but a recovery of previously lost capacity due to maintenance [28][30] Question: Share repurchase plans - Management confirmed that they are committed to returning capital to shareholders, with approximately $100 million repurchased year-to-date, and are still targeting $500 million by year-end [33][36] Question: Insights on PJM auction and supply-demand trends - Management noted that the recent auction showed a significant supply response, indicating constructive trends in the market [42][45] Question: Competition with new supply initiatives - Management believes existing assets can compete effectively against new builds, especially given the ability to acquire assets at a discount to new build costs [51][52] Question: Gas plant contracting discussions - Management indicated that they are focused on structuring long-term contracts and managing risks associated with gas supply [64][66] Question: Nuclear fuel procurement strategy - Management stated that they are actively hedging nuclear fuel and will provide further updates at the Investor Day [100][101] Question: Data center clustering in Pennsylvania - Management expressed optimism about data center clustering in Pennsylvania, particularly around the Susquehanna site and the recent acquisition of Freedom [109][110]

Core Viewpoint - Talen Energy Corporation reported quarterly earnings of $1.5 per share, significantly exceeding the Zacks Consensus Estimate of a loss of $1.13 per share, and showing a substantial increase from earnings of $0.19 per share a year ago [1][2]. Financial Performance - The earnings surprise for the quarter was +232.74%, with the company previously expected to post earnings of $1.17 per share but actually reporting $0.82, resulting in a surprise of -29.91% [2]. - Talen Energy's revenues for the quarter ended June 2025 were $630 million, surpassing the Zacks Consensus Estimate by 31.07%, compared to $489 million in the same quarter last year [3]. - Over the last four quarters, Talen Energy has exceeded consensus EPS estimates two times and has also topped consensus revenue estimates twice [2][3]. Stock Performance - Talen Energy shares have increased approximately 88% since the beginning of the year, outperforming the S&P 500, which gained 7.9% during the same period [4]. - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and future earnings expectations [4]. Future Outlook - The current consensus EPS estimate for the upcoming quarter is $4.47, with expected revenues of $736.04 million, and for the current fiscal year, the estimate remains at $4.47 with revenues projected at $2.3 billion [8]. - The estimate revisions trend for Talen Energy was favorable ahead of the earnings release, resulting in a Zacks Rank 1 (Strong Buy) for the stock, indicating expected outperformance in the near future [7]. Industry Context - The Alternative Energy - Other industry, to which Talen Energy belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, suggesting that the overall industry outlook may impact stock performance [9].

Financial Performance - Talen Energy delivered $90 million in Adjusted EBITDA and $(78) million in Adjusted Free Cash Flow in Q2 2025 [10] - The company reaffirmed its 2025 guidance for Adjusted EBITDA to be between $975 million and $1125 million, and Adjusted Free Cash Flow to be between $450 million and $540 million [10, 33] - Talen Energy reported ~$09 billion in liquidity and a net debt to 2025E Adjusted EBITDA ratio of ~27x [24] - Since the start of 2024, Talen has repurchased ~14 million shares, representing ~23% of total outstanding shares, with ~$1 billion SRP capacity remaining through year-end 2026 [35] Acquisitions and Capacity - Talen Energy is acquiring Freedom and Guernsey plants, which are expected to increase FCF/share by >40% in 2026 and >50% in 2027-2029 [10] - The company cleared 6,702 MW at $329/MWd in the strong 2026/2027 PJM Capacity Auction results [10] - The Freedom plant is a 1,045 MW CCGT, and Guernsey is an 1,836 MW CCGT [13] Powering Data Centers - Talen Energy expanded its Amazon PPA to 19 GW, totaling ~$18 billion in revenues under a 17-year contract [10] - The expanded PPA unlocks premium value on the 2nd Unit by expanding PPA to 1,920 MW at full contract quantity through 2042 [16] Market and Generation - Talen Energy's total generation was 17 TWh, with ~44% being carbon-free generation [24] - Q2 2025 average electricity demand was flat compared to Q2 2024 [22]

[Executive Summary](index=1&type=section&id=executive-summary) Summarizes Talen Energy's Q2 2025 performance, strategic initiatives, and reaffirmed 2025 guidance [Second Quarter 2025 Performance Overview](index=1&type=section&id=second-quarter-2025-performance-overview) Talen Energy reported Q2 2025 results, with **$90 million** Adjusted EBITDA and **$(78) million** Adjusted Free Cash Flow, reaffirming 2025 guidance | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | GAAP Net Income (Loss) Attributable to Stockholders | $72 million | $454 million | $(63) million | $748 million | | Adjusted EBITDA | $90 million | $87 million | $290 million | $376 million | | Adjusted Free Cash Flow | $(78) million | $(29) million | $9 million | $165 million | | Total Generation (TWh) | **7.3** | **8.2** | **17.0** | **16.3** | | Carbon-Free Generation | **41%** | **49%** | **44%** | **53%** | | OSHA TRIR | **0.7** | **0.2** | **0.6** | **0.3** | | Fleet EFOF | **2.3%** | **2.2%** | **1.8%** | **2.0%** | - Second quarter GAAP Net Income Attributable to Stockholders was **$72 million**[7](index=7&type=chunk) - Second quarter Adjusted EBITDA was **$90 million** and Adjusted Free Cash Flow use was **$(78) million**[7](index=7&type=chunk) [Strategic Highlights](index=1&type=section&id=strategic-highlights) Talen Energy expanded its Amazon partnership, acquired Freedom and Guernsey plants, and cleared significant PJM capacity, enhancing data center service - Expanded existing relationship with Amazon to provide additional energy to Amazon Web Services ("AWS"), offering flexibility to support power delivery to other Pennsylvania sites[7](index=7&type=chunk) - Signed definitive agreements to acquire Caithness Energy's Freedom Energy Center in Pennsylvania and Guernsey Power Station in Ohio, both baseload combined-cycle gas-fired plants located within the PJM power market[7](index=7&type=chunk) - Cleared **6,702 megawatts** ("MWs") in the 2026/2027 PJM Base Residual Auction ("BRA") at **$329.17 per megawatt-day** ("MWd") for the MAAC, PPL, and PSEG locational deliverability areas[7](index=7&type=chunk) [2025 Guidance Reaffirmation](index=1&type=section&id=2025-guidance-reaffirmation) Talen Energy reaffirmed its 2025 guidance for Adjusted EBITDA and Adjusted Free Cash Flow, demonstrating confidence in its financial projections - Reaffirming 2025 guidance[5](index=5&type=chunk)[7](index=7&type=chunk) [Financial and Operational Performance](index=1&type=section&id=financial-and-operational-performance) Provides a comprehensive overview and detailed analysis of Talen Energy's financial and operational results for Q2 and H1 2025 [Summary of Financial and Operating Results](index=1&type=section&id=summary-of-financial-and-operating-results) This section provides a high-level overview of Talen Energy's financial and operational performance for Q2 and H1 2025, highlighting key metrics | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | GAAP Net Income (Loss) Attributable to Stockholders | $72 million | $454 million | $(63) million | $748 million | | Adjusted EBITDA | $90 million | $87 million | $290 million | $376 million | | Adjusted Free Cash Flow | $(78) million | $(29) million | $9 million | $165 million | | Total Generation (TWh) | **7.3** | **8.2** | **17.0** | **16.3** | | Carbon-Free Generation | **41%** | **49%** | **44%** | **53%** | | OSHA TRIR | **0.7** | **0.2** | **0.6** | **0.3** | | Fleet EFOF | **2.3%** | **2.2%** | **1.8%** | **2.0%** | [Detailed Financial Performance Analysis](index=2&type=section&id=detailed-financial-performance-analysis) GAAP Net Income decreased significantly due to a prior-year asset sale gain absence; Adjusted EBITDA increased modestly, while Adjusted Free Cash Flow declined - GAAP Net Income (Loss) Attributable to Stockholders decreased **$(382) million** primarily due to the absence of the gain and associated tax expense from the sale of the ERCOT portfolio. This was partially offset by an increase in capacity revenues, but also impacted by higher operation and maintenance expenses due to the extended Susquehanna refueling outage[17](index=17&type=chunk) - Adjusted EBITDA increased **$3 million**, mainly due to an increase in capacity revenues, partially offset by higher operation and maintenance expenses from the extended Susquehanna refueling outage[17](index=17&type=chunk) - Adjusted Free Cash Flow decreased **$(49) million**, primarily attributable to higher cash income tax payments and capital expenditures associated with the extended Susquehanna refueling outage[17](index=17&type=chunk) - The generation fleet maintained reliability and safety with a Fleet EFOF of **2.3%** and an OSHA TRIR of **0.7**. Total generation was **7.3 terawatt-hours** ("TWh"), with **41%** from carbon-free nuclear generation[9](index=9&type=chunk) [Strategic Initiatives and Business Development](index=2&type=section&id=strategic-initiatives-and-business-development) Details Talen Energy's key strategic moves, including an expanded AWS PPA, significant acquisitions, and PJM capacity auction results [Data Center Power Purchase Agreement with AWS](index=2&type=section&id=data-center-power-purchase-agreement-with-aws) Talen expanded its PPA with AWS to supply up to **1,920 MWs** of power through 2042, reducing market risk and exploring new nuclear options - New PPA with AWS, entered in June 2025, will supply electricity for AWS' data center campus adjacent to Susquehanna, with flexibility to deliver to other Pennsylvania sites[11](index=11&type=chunk) - Talen and AWS will explore building new small modular reactors within Talen's Pennsylvania footprint and pursue expanding the nuclear plant's energy output through uprates, with the intent to add net-new energy to the PJM grid[11](index=11&type=chunk) - Under the expanded PPA, Talen expects to provide AWS with up to **1,920 MWs** of power through 2042, with options to extend. This long-term transaction will significantly decrease Talen's market risk and minimize its reliance on the Federal nuclear production tax credit[12](index=12&type=chunk) [Freedom and Guernsey Acquisitions](index=2&type=section&id=freedom-and-guernsey-acquisitions) Talen agreed to acquire Freedom and Guernsey power plants for **$3.5 billion**, expected to be immediately accretive to free cash flow per share and close in **Q4 2025** - On July 17, 2025, Talen entered into definitive agreements to acquire Freedom Energy Center (Pennsylvania) and Guernsey Power Station (Ohio), both baseload combined-cycle gas-fired plants located within the PJM power market[13](index=13&type=chunk) - The net acquisition price is **$3.5 billion** (after estimated tax benefits), or approximately **$3.8 billion** gross, reflecting an attractive acquisition multiple of **6.7x 2026 EV/EBITDA**[14](index=14&type=chunk) - The transaction is expected to be immediately accretive to free cash flow per share by **over 40%** in 2026, and **over 50%** from 2027 through 2029. Talen expects to issue approximately **$3.8 billion** in new debt to fund the acquisitions and refinance target debt[14](index=14&type=chunk)[15](index=15&type=chunk) - Both acquisitions are expected to close in the **fourth quarter 2025**, subject to customary closing conditions and regulatory approvals[16](index=16&type=chunk) [PJM Capacity Auction Results](index=3&type=section&id=pjm-capacity-auction-results) Talen cleared **6,702 MWs** in the 2026/2027 PJM auction at **$329.17/MWd**, projected to generate approximately **$805 million** in capacity revenues - Talen cleared **6,702 MWs** in the 2026/2027 PJM BRA at a price of **$329.17/MWd**[18](index=18&type=chunk) - This equates to approximately **$805 million** in capacity revenues for the 2026/2027 PJM Capacity Year (excluding potential impacts from Freedom and Guernsey transactions)[18](index=18&type=chunk) - The 2027/2028 PJM BRA is scheduled for December 2025[18](index=18&type=chunk) [Index Inclusion](index=3&type=section&id=index-inclusion) Talen was added to various Russell indices in Q2 2025 and other major indices since September 2024, potentially increasing stock demand - During the second quarter 2025, Talen was added to various Russell indices[19](index=19&type=chunk) - Since September 2024, Talen has been added to the S&P Total Market Index, S&P Completion Index, CRSP Total Market Index, CRSP Small Cap Index and MSCI USA Small Cap Index[19](index=19&type=chunk) [Financial Position and Outlook](index=2&type=section&id=financial-position-and-outlook) Presents Talen Energy's current liquidity, leverage targets, hedging strategy, and reaffirmed financial guidance for 2025 [Balance Sheet and Liquidity](index=3&type=section&id=balance-sheet-and-liquidity) As of August 4, 2025, Talen reported **$861 million** liquidity, committed to **below 3.5x** net leverage by year-end 2026, with a projected ratio of **2.7x** - As of August 4, 2025, Talen had ample total available liquidity of approximately **$861 million**, comprised of **$161 million** of unrestricted cash and **$700 million** of available capacity under the revolving credit facility[20](index=20&type=chunk) - The company is committed to net leverage targets **below 3.5x** net debt-to-Adjusted EBITDA following the post-acquisition deleveraging period and intends to be **below 3.5x** net leverage by year-end 2026[20](index=20&type=chunk) - The projected net leverage ratio, utilizing the 2025E Adjusted EBITDA midpoint and net debt balance as of August 4, 2025, is approximately **2.7x**[20](index=20&type=chunk) [Hedging Activities](index=3&type=section&id=hedging-activities) Talen's hedging program secured **100%** of 2025, **66%** of 2026, and **33%** of 2027 expected generation volumes, aiming for cash flow stability | Year | Expected Generation Volumes Hedged (as of June 30, 2025, including Nuclear PTC) | | :--- | :--------------------------------------------------------------------------------- | | 2025 | **~100%** | | 2026 | **66%** | | 2027 | **33%** | - The Company's hedging program is a key component of our comprehensive risk policy and supports the objective of increasing cash flow stability while maintaining upside optionality[21](index=21&type=chunk) [2025 Guidance](index=2&type=section&id=2025-guidance) Talen Energy reaffirmed its 2025 guidance, providing expected ranges for Adjusted EBITDA and Adjusted Free Cash Flow | (Millions of Dollars) | 2025E Low | 2025E High | | :-------------------- | :-------- | :--------- | | Adjusted EBITDA | $975 | $1,125 | | Adjusted Free Cash Flow | $450 | $540 | [Company Information](index=3&type=section&id=company-information) Offers an overview of Talen Energy's business, contact details for investor relations, and a standard disclosure on forward-looking statements [About Talen Energy](index=3&type=section&id=about-talen-energy) Talen Energy is a leading independent power producer operating approximately **10.5 gigawatts** of power infrastructure, positioned to serve AI data centers - Talen Energy (NASDAQ: TLN) is a leading independent power producer and energy infrastructure company dedicated to powering the future[23](index=23&type=chunk) - We own and operate approximately **10.5 gigawatts** of power infrastructure in the United States, including **2.2 gigawatts** of nuclear power and a significant dispatchable fossil fleet[23](index=23&type=chunk) - Talen is well-positioned to serve the growing digital infrastructure revolution, as artificial intelligence data centers increasingly demand more reliable, clean power[23](index=23&type=chunk) [Investor Relations & Media Contacts](index=3&type=section&id=investor-relations-media-contacts) This section provides contact details for investor relations and media inquiries - Investor Relations contact: Sergio Castro, Vice President & Treasurer, InvestorRelations@talenenergy.com[24](index=24&type=chunk) - Media contact: Taryne Williams, Director, Corporate Communications, Taryne.Williams@talenenergy.com[24](index=24&type=chunk) [Forward-Looking Statements](index=4&type=section&id=forward-looking-statements) This standard disclosure highlights that the communication contains forward-looking statements subject to substantial risks and uncertainties - This communication contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties[25](index=25&type=chunk) - Forward-looking statements address future events and conditions concerning, among other things, proposed acquisitions, financing, capital expenditures, earnings, litigation, regulatory matters, hedging, liquidity, and capital resources[25](index=25&type=chunk) - All forward-looking statements include assumptions that may cause actual results to differ materially from expectations and are subject to numerous factors that present considerable risks and uncertainties[25](index=25&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=condensed-consolidated-financial-statements-unaudited) Contains the unaudited condensed consolidated statements of operations, balance sheets, and cash flows for specified periods [Statements of Operations](index=5&type=section&id=statements-of-operations) This section presents the unaudited condensed consolidated statements of operations, detailing revenues, expenses, and net income (loss) | (Millions of Dollars, except share data) | 2025 (3 Months) | 2024 (3 Months) | 2025 (6 Months) | 2024 (6 Months) | | :--------------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Capacity revenues | $88 | $46 | $137 | $91 | | Energy and other revenues | $366 | $367 | $948 | $939 | | Unrealized gain (loss) on derivative instruments | $176 | $76 | $(65) | $(32) | | **Operating Revenues** | **$630** | **$489** | **$1,020** | **$998** | | Fuel and energy purchases | $(150) | $(163) | $(418) | $(313) | | Nuclear fuel amortization | $(18) | $(28) | $(44) | $(63) | | Unrealized gain (loss) on derivative instruments | $(84) | $15 | $(25) | $(12) | | **Energy Expenses** | **$(252)** | **$(176)** | **$(487)** | **$(388)** | | Operation, maintenance and development | $(192) | $(164) | $(338) | $(318) | | General and administrative | $(41) | $(40) | $(75) | $(83) | | Depreciation, amortization and accretion | $(70) | $(75) | $(144) | $(150) | | Other operating income (expense), net | $(9) | $(7) | $(16) | $(7) | | **Operating Income (Loss)** | **$66** | **$27** | **$(40)** | **$52** | | Nuclear decommissioning trust funds gain (loss), net | $80 | $27 | $68 | $102 | | Interest expense and other finance charges | $(62) | $(62) | $(136) | $(121) | | Gain (loss) on sale of assets, net | $9 | $561 | $11 | $885 | | Other non-operating income (expense), net | $4 | $17 | $7 | $40 | | **Income (Loss) Before Income Taxes** | **$97** | **$570** | **$(90)** | **$958** | | Income tax benefit (expense) | $(25) | $(112) | $27 | $(181) | | **Net Income (Loss)** | **$72** | **$458** | **$(63)** | **$777** | | Less: Net income (loss) attributable to noncontrolling interest | — | $4 | — | $29 | | **Net Income (Loss) Attributable to Stockholders** | **$72** | **$454** | **$(63)** | **$748** | | Net Income (Loss) Attributable to Stockholders - Basic | $1.58 | $7.90 | $(1.38) | $12.87 | | Net Income (Loss) Attributable to Stockholders - Diluted | $1.50 | $7.60 | $(1.38) | $12.41 | | Weighted-Average Number of Common Shares Outstanding - Basic (in thousands) | 45,554 | 57,434 | 45,699 | 58,119 | | Weighted-Average Number of Common Shares Outstanding - Diluted (in thousands) | 47,905 | 59,775 | 45,699 | 60,269 | [Balance Sheets](index=6&type=section&id=balance-sheets) This section presents the unaudited condensed consolidated balance sheets, providing a snapshot of assets, liabilities, and equity | (Millions of Dollars, except share data) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $122 | $328 | | Restricted cash and cash equivalents | $13 | $37 | | Accounts receivable | $226 | $123 | | Inventory, net | $224 | $302 | | Derivative instruments | $80 | $66 | | Other current assets | $165 | $184 | | **Total current assets** | **$830** | **$1,040** | | Property, plant and equipment, net | $3,089 | $3,154 | | Nuclear decommissioning trust funds | $1,790 | $1,724 | | Derivative instruments | — | $5 | | Other noncurrent assets | $118 | $183 | | **Total Assets** | **$5,827** | **$6,106** | | **Liabilities and Equity** | | | | Revolving credit facilities | $70 | — | | Long-term debt, due within one year | $17 | $17 | | Accrued interest | $30 | $18 | | Accounts payable and other accrued liabilities | $226 | $266 | | Derivative instruments | $32 | — | | Other current liabilities | $77 | $154 | | **Total current liabilities** | **$452** | **$455** | | Long-term debt | $2,972 | $2,987 | | Derivative instruments | $62 | $7 | | Postretirement benefit obligations | $282 | $305 | | Asset retirement obligations and accrued environmental costs | $478 | $468 | | Deferred income taxes | $297 | $362 | | Other noncurrent liabilities | $38 | $135 | | **Total Liabilities** | **$4,581** | **$4,719** | | **Stockholders' Equity** | | | | Common stock | — | — | | Additional paid-in capital | $1,711 | $1,725 | | Accumulated retained earnings (deficit) | $(456) | $(326) | | Accumulated other comprehensive income (loss) | $(9) | $(12) | | **Total Stockholders' Equity** | **$1,246** | **$1,387** | | **Total Liabilities and Stockholders' Equity** | **$5,827** | **$6,106** | [Statements of Cash Flows](index=7&type=section&id=statements-of-cash-flows) This section provides the unaudited condensed consolidated statements of cash flows, detailing cash from operating, investing, and financing activities | (Millions of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :----------------------------- | :----------------------------- | | **Operating Activities** | | | | Net Income (Loss) | $(63) | $777 | | Non-cash reconciliation adjustments: | | | | Depreciation, amortization and accretion | $141 | $144 | | Unrealized (gains) losses on derivative instruments | $103 | $36 | | Deferred income taxes | $(66) | $94 | | Nuclear fuel amortization | $44 | $63 | | Nuclear decommissioning trust funds (gain) loss, net (excluding interest and fees) | $(44) | $(80) | | (Gain) loss on AWS Data Campus Sale and ERCOT Sale | — | $(886) | | Other | $34 | $(58) | | Changes in assets and liabilities: | | | | Accounts receivable | $(103) | $(14) | | Inventory, net | $78 | $90 | | Other assets | $15 | $34 | | Accounts payable and accrued liabilities | $(57) | $(114) | | Accrued interest | $12 | $(1) | | Collateral received (posted), net | $(58) | $35 | | Other liabilities | $(101) | $30 | | **Net cash provided by (used in) operating activities** | **$(65)** | **$150** | | **Investing Activities** | | | | Nuclear decommissioning trust funds investment purchases | $(1,201) | $(1,110) | | Nuclear decommissioning trust funds investment sale proceeds | $1,186 | $1,095 | | Nuclear fuel expenditures | $(50) | $(44) | | Property, plant and equipment expenditures | $(51) | $(45) | | Proceeds from AWS Data Campus Sale and ERCOT Sale | — | $1,089 | | Other | $2 | $(6) | | **Net cash provided by (used in) investing activities** | **$(114)** | **$979** | | **Financing Activities** | | | | Share repurchases | $(103) | $(654) | | Revolving credit facility borrowings | $75 | — | | Revolving credit facility repayments | $(5) | — | | Debt repayments | $(9) | — | | Deferred financing costs | $(9) | — | | Cumulus Digital TLF repayment | — | $(182) | | Repurchase of noncontrolling interest | — | $(39) | | Cash settlement of restricted stock units | — | $(28) | | Other | — | $(12) | | **Net cash provided by (used in) financing activities** | **$(51)** | **$(915)** | | Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents | $(230) | $214 | | Beginning of period cash and cash equivalents and restricted cash and cash equivalents | $365 | $901 | | End of period cash and cash equivalents and restricted cash and cash equivalents | $135 | $1,115 | [Non-GAAP Financial Measures](index=8&type=section&id=non-gaap-financial-measures) Explains and reconciles non-GAAP financial measures, including Adjusted EBITDA and Adjusted Free Cash Flow, for historical periods and 2025 guidance [Explanation of Non-GAAP Measures](index=8&type=section&id=explanation-of-non-gaap-measures) This section defines and explains Adjusted EBITDA and Adjusted Free Cash Flow, outlining their purpose, computation, and limitations - Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures used to compare operating performance, plan forecasts, evaluate results, and communicate financial performance to stakeholders[34](index=34&type=chunk)[35](index=35&type=chunk)[38](index=38&type=chunk) - Adjusted EBITDA is computed as net income (loss) adjusted for nonrecurring charges/gains, non-cash items, unusual market events, depreciation, amortization, mark-to-market gains/losses, NDT gains/losses, asset sales, impairments, interest expense, income taxes, legal settlements, development expenses, noncontrolling interests, and other adjustments[36](index=36&type=chunk) - Adjusted Free Cash Flow is computed as Adjusted EBITDA reduced by capital expenditures (excluding development, growth, and conversion capex), cash payments for interest and finance charges, cash payments for income taxes (with specific exclusions), and pension contributions[38](index=38&type=chunk) [Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Historical)](index=9&type=section&id=adjusted-ebitda-adjusted-free-cash-flow-reconciliation-historical) This section provides a detailed reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA and Adjusted Free Cash Flow for historical periods | (Millions of Dollars) | 2025 (3 Months) | 2024 (3 Months) | 2025 (6 Months) | 2024 (6 Months) | | :------------------------------------------ | :-------------- | :-------------- | :-------------- | :-------------- | | Net Income (Loss) | $72 | $458 | $(63) | $777 | | Adjustments: | | | | | | Interest expense and other finance charges | $62 | $62 | $136 | $121 | | Income tax (benefit) expense | $25 | $112 | $(27) | $181 | | Depreciation, amortization and accretion | $70 | $75 | $144 | $150 | | Nuclear fuel amortization | $18 | $28 | $44 | $63 | | Unrealized (gain) loss on commodity derivative contracts | $(92) | $(91) | $90 | $44 | | Nuclear decommissioning trust funds (gain) loss, net | $(80) | $(27) | $(68) | $(102) | | Stock-based and other long-term incentive compensation expense | $18 | $14 | $31 | $32 | | (Gain) loss on asset sales, net | $(9) | $(561) | $(11) | $(885) | | Operational and other restructuring activities | — | $19 | $9 | $21 | | Noncontrolling interest | — | $(7) | — | $(18) | | Other | $6 | $5 | $5 | $(8) | | **Total Adjusted EBITDA** | **$90** | **$87** | **$290** | **$376** | | Capital expenditures, net | $(35) | $(21) | $(99) | $(80) | | Interest and finance charge payments | $(84) | $(91) | $(107) | $(125) | | Income taxes | $(42) | $(2) | $(51) | $(2) | | Pension contributions | $(7) | $(2) | $(24) | $(4) | | **Total Adjusted Free Cash Flow** | **$(78)** | **$(29)** | **$9** | **$165** | [Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (2025 Guidance)](index=10&type=section&id=adjusted-ebitda-adjusted-free-cash-flow-reconciliation-2025-guidance) This section provides a reconciliation of 2025 guidance for Net Income (Loss) to projected Adjusted EBITDA and Adjusted Free Cash Flow ranges | (Millions of Dollars) | 2025E Low | 2025E High | | :------------------------------------------ | :-------- | :--------- | | Net Income (Loss) | $205 | $325 | | Adjustments: | | | | Interest expense and other finance charges | $235 | $245 | | Income tax (benefit) expense | $60 | $80 | | Depreciation, amortization and accretion | $295 | $295 | | Nuclear fuel amortization | $105 | $105 | | Unrealized (gain) loss on commodity derivative contracts | $75 | $75 | | **Adjusted EBITDA** | **$975** | **$1,125** | | Capital expenditures, net | $(195) | $(205) | | Interest and finance charge payments | $(220) | $(230) | | Income taxes | $(40) | $(60) | | Pension contributions | $(70) | $(90) | | **Adjusted Free Cash Flow** | **$450** | **$540** |