Talen Energy Corporation · NASDAQ:TLN
Talen Energy — Q2 2023 Earnings Presentation
23 slides from Talen Energy's earnings presentation, Aug 14, 2023
Slide 1: Q2 2023 Earnings Presentation
Q2 2023 Earnings Presentation Talen Energy Corporation l August 14, 2023
Slide 2: Disclaimers
Disclaimers The information contained herein, as well as any information that has been supplied orally in connection herewith, speaks only as of the date of this presentation. Talen Energy Corporation (“Talen,” “TEC,” the “Company,” “we,” “our,” or “us”) and our affiliates and representatives expres
Slide 3: Agenda
Agenda 1. 1 Business Review 2. 2 Financial Review 3. 3 Q&A © Talen Energy Corporation 2
Slide 4: Significant Progress on Multiple Strategic Areas
Significant Progress on Multiple Strategic Areas Strong Performance and Establishing Guidance: 2023 Guidance1 ▪ Strong operational and financial performance in first half 2023 (“1H 2023”) Adj. EBITDA: $1,070 – $1,245mm ▪ Establishing 2023 Adjusted EBITDA and Adjusted Free Cash Flow guidance Adj. FCF
Slide 5: Strong Financial and Operational Performance
Strong Financial and Operational Performance Key Operational Metrics Key Financial Metrics 0.6 $774mm 1H 2023 OSHA Total Recordable Incident Rate1 1H 2023 Adjusted EBITDA5 2.6% $464mm 1H 2023 Fleet Equivalent Forced Outage Factor2 1H 2023 Adjusted Free Cash Flow5 13.5 TWh ~$840mm 1H 2023 Total Gener
Slide 6: Plant Conversions Near Completion and Digital Campus Ready for Value Capture
Plant Conversions Near Completion and Digital Campus Ready for Value Capture ▪ The 1.5 GW Montour coal-to-gas conversion is nearly complete: Unit 2 went commercial (fully operational) on natural gas in early August; Unit 1 is expected to be commercial on natural gas by end of August ▪ Conversion of
Slide 7: Strong Financial Results Year to Date Driven by Hedging Program
Strong Financial Results Year to Date Driven by Hedging Program ($mm) Q2 2023 1H 2023 $774 ▪ Strong Adjusted EBITDA and Adjusted Free Cash Flow performance in both Q2 2023 and 1H 2023 $464 ▪ Disciplined risk management activity through our hedging program complemented solid operational performance a
Slide 8: Establishing 2023 Guidance Better Than Prior Disclosure
Establishing 2023 Guidance Better Than Prior Disclosure Jan 27th Forecast 2023 Guidance Range Refresh Adjusted EBITDA $1,070 – $1,245 million $1,130 million Adjusted Free Cash Flow1 $550 – $595 million $570 million2 ▪ Establishing 2023 Adjusted EBITDA and Adjusted Free Cash Flow guidance ranges with
Slide 9: Lower PJM Pricing and Elevated ERCOT Spark Spreads
Lower PJM Pricing and Elevated ERCOT Spark Spreads PJM West Hub ATC ERCOT South Hub Peak Spark Spreads1 $75 $105 $65 $85 $55 $65 ($/MWh) ($/MWh) $45 $45 $35 $25 $25 $5 TETCO M3 (PJM) Commentary $12 ▪ In the last 9 months, tight natural gas supply and demand $10 conditions have reversed, and gas pric
Slide 10: Hedging Program Supports Cash Flow Stability and Maintains Upside Optionality
Hedging Program Supports Cash Flow Stability and Maintains Upside Optionality 2H 2023 FY ’24 % Hedged as of 3/31/2023 68% 53% % Hedged as of 6/30/2023 64% 76% Average Regional Pricing Summary 2H 2023 FY ’24 PJM WHUB as of 1/27/2023 ($/MWh) $44.49 $47.17 PJM WHUB as of 6/30/2023 ($/MWh) $37.48 $44.30
Slide 11: Maintaining Modest Leverage and Ample Liquidity
Maintaining Modest Leverage and Ample Liquidity On August 9, 2023, Talen successfully refinanced its non-recourse LMBE-MC debt through upsizing the 2030 Term Loan B by $290mm Capitalization Summary ($mm unless otherwise noted) As of 8/11/2023 Unrestricted Cash ~$140 Secured Debt $2,070 Total Debt $2
Slide 12: Talen Offers a Unique Investment Opportunity
Talen Offers a Unique Investment Opportunity Diverse and Stable Cash Flows with Limited Non-Maintenance Capex Going Forward Industry-Leading, Baseload, Carbon-Free Nuclear Plant with Production Tax Credit Benefit Flexible Gas and Peaking Fleet Capable of Capturing Upside from Market Dynamics Zero-Ca
Slide 13: Announcing Investor Day and Upcoming Conference Participation
Announcing Investor Day and Upcoming Conference Participation Save the Date: Susquehanna & Cumulus Digital Investor Day on October 24th Near-term anticipated conference participation: ▪ Barclays CEO Energy/Power Conference: September 5th – 7th in NYC ▪ Bank of America IPP Day: September 21st in Hous
Slide 14: Appendix
TALENS ENERGY
Slide 15: Generation Portfolio Summary
Generation Portfolio Summary Owned Asset Location Primary Fuel Type Plant Type Ownership COD Region Capacity (MW)1 Zero-Carbon Nuclear Susquehanna2 PA Nuclear Baseload 90% 2,245 1983 - 1985 PJM-PPL/MAAC Natural Gas & Peaking Units Barney Davis3 TX Natural Gas Intermediate 100% 897 1974 - 2010 ERCOT-
Slide 16: Zero-Carbon-Powered Digital Infrastructure Assets with Minimal Go-Forward Spend
Zero-Carbon-Powered Digital Infrastructure Assets with Minimal Go-Forward Spend Other Cumulus Digital Stakeholders $197mm Other: Remaining ~95% Equity Term Loan equity interests Cumulus Digital ~4% Equity Cumulus Data (“Data”) First 24x7 Current Assets: carbon-free, ▪ 4 expandable substations and re
Slide 17: Nuclear Production Tax Credit Overview
Nuclear Production Tax Credit Overview Nuclear PTC Overview PTC Monetization ▪ Starting in 2024, the nuclear PTC provides support for nuclear units when gross ▪ IRA has transfer procedures that permit project owners to transfer (sell) their receipts fall below $43.75/MWh, while maintaining upside op
Slide 18: No Recourse Debt Maturities until 2028
No Recourse Debt Maturities until 2028 Capitalization Summary Debt Maturity Summary1 On August 9, 2023, Talen successfully refinanced its LMBE-MC debt through Revolving Credit Facility upsizing the 2030 Term Loan B by $290mm Unsecured Municipal Bonds 5/17/2023 ($mm) 8/11/2023 Recourse Term Loans / 1
Slide 19: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures
Slide 20: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures Non-GAAP Financial Measures The following non-GAAP financial measures of Adjusted EBITDA and Adjusted Free Cash Flow discussed below, which we use as measures of our performance and liquidity, are not financial measures prepared under GAAP. Non-GAAP financi
Slide 21: Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Unaudited)
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Unaudited) The reconciliation from "Net Income (Loss)" presented on the Condensed Consolidated Statements of Operations to Adjusted EBITDA and Adjusted Free Cash Flow for: Three Months Six Months Ended Ended June 30, June 30, Notes ($Millions
Slide 22: Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: 2023 Guidance
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: 2023 Guidance The reconciliation from forecasted "Net Income (Loss)" to Adjusted EBITDA and Adjusted Free Cash Flow for the year ended December 31: ($mm) ($Millions) 2023E Notes Low High a) Represents amounts incurred directly related to Tale
Slide 23: Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: Jan 27th Forecast Refresh
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: Jan 27th Forecast Refresh The reconciliation from forecasted "Net Income (Loss)" to Adjusted EBITDA and Adjusted Free Cash Flow for the year ended December 31: ($mm) ($Millions) 2023E Notes Net Income (Loss) $ (58) a) Illustrative interest co