Talen Energy Corporation · NASDAQ:TLN
Talen Energy — Investor Presentation (July 2024)
30 slides from Talen Energy's investor presentation, Jul 9, 2024
Slide 1: Investor Presentation
Investor Presentation Talen Energy Corporation | July 9, 2024
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 Business Review 2 Financial Review 3 Q&A 2
Slide 4: Talen's Building Blocks of Value
Talen’s Building Blocks of Value First-mover on providing “behind-the-meter” power to data center customers, well- positioned for repeatability – First-of-its-kind transaction with Amazon Web Services (“AWS”) to provide up to 960 MW of carbon-free power at premium long-term fixed prices – Creates bl
Slide 5: Creating Shareholder Value, with More Upside to Unlock
Creating Shareholder Value, with More Upside to Unlock Talen Share Price ($/share) Future Value Drivers $ 160.00 Over +150% Tendered Strategically evaluate $ 140.00 to Date $612mm of Stock additional opportunities to Upsized Share Repurchase supply power to data $ 120.00 Program by $1B $115.70 cente
Slide 6: Power Markets: Then & Now
Power Markets: Then & Now Past 10 – 15 Years Today Talen Captures All of These Catalysts Stagnant power demand growth Significant increases in power demand growth forecasts Data center Power price Substitution of 5x16 commercial demand market 7x24 demand driven by data centers and spark for 7x24 ind
Slide 7: Strong Power Demand Growth For the First Time in Years
Strong Power Demand Growth For the First Time in Years 5-year U.S. Growth Forecast1 ▪ Over the past year, grid planners have nearly doubled 40 Summer Peak Demand their 5-year power demand growth forecast1 Growth (GW) 30 20 4.7% Growth: ▪ Much of the new growth is demanding clean, reliable, 852 GW Pe
Slide 8: Talen Portfolio at a Glance
Talen Portfolio at a Glance Strategically located ~10.7 GW generation portfolio, including ~2.2 GW Colstrip ISO-NE MAAC of nuclear generation, that offers both Montour Susquehanna stable cash flows and upside trajectory WECC Lower Mount Bethel EMAAC Dartmouth Martins Creek Keystone1 Conemaugh1 Brunn
Slide 9: Susquehanna: 24x7 Carbon-Free Energy
Susquehanna: 24x7 Carbon-Free Energy 6th largest U.S. nuclear facility, with dual units and 2.5 GW gross capacity1 Units commissioned in 1982 and 1984, licensed through 2042 and 2044, and beginning work on additional 20- year extensions Over 50% of Talen’s annual generation Multiple revenue sources:
Slide 10: Transformative Data Center Transaction
Transformative Data Center Transaction Net sale proceeds of ~$361mm to be deployed in line with capital allocation and shareholder returns strategy Long-term PPA with investment grade counterparty establishes contracted cash flows and growth trajectory for Susquehanna Talen will receive additional r
Slide 11: Incremental Value Creation from AWS Contracts
Incremental Value Creation from AWS Contracts Illustrative Incremental Impact Above PTC on Adjusted EBITDA ($mm/year, rounded to nearest $5mm) +$255 960 MW Power Sales + Additional Revenue Related to CFE +$215 480 MW Power Sales + Additional Revenue Related to CFE +$150 Contractual Minimums +$140 +$
Slide 12: 2025 & 2026 PJM Power Prices Rising & Sparks Expanding
2025 & 2026 PJM Power Prices Rising & Sparks Expanding PJM West Hub ATC Power Prices ($/MWh) PJM West Hub ATC Spark Spreads ($/MWh) $75 $40 $65 $30 $55 $20 $45 $35 $10 Since YE 2023, PJM forward prices have increased and forward spark spreads have expanded in 2025 and 2026 Note: Spark spreads are co
Slide 13: Talen's Gas Fleet Benefits from Spark Spread Expansion
Talen’s Gas Fleet Benefits from Spark Spread Expansion Illustrative Impact of PJM ATC Spark Spread Expansion on Talen’s Gas Fleet1 Commentary Spark Spreads As of Dec 29th, 2023 vs Mar 28th, 2024 ▪ When spark spreads expand, more gas generation Expected Generation becomes economic, and existing gener
Slide 14: Talen's Hedging Strategy Well-Positioned to Monetize the Recent Market Environment
Talen’s Hedging Strategy Well- Total Fleet: % Hedged and Power Price Sensitivities as Apr – Dec 2024 2025 2026 Positioned to Monetize the of 3/28/2024 % Hedged 88% 38% 17% Recent Market Environment +$10/MWh +$40mm +$265mm +$335mm Hedging targets are based on % of deterministic Margin & Cash Gross Ma
Slide 15: 2024 Performance to Date and Guidance
2024 Performance to Date and Guidance Q1 2024 2024 Guidance Adjusted EBITDA $289 million $600 – $800 million Adjusted Free Cash Flow $194 million $160 – $310 million ▪ Strong Q1 results, with hedge performance protecting margin in the face of mild winter prices ▪ Forward spark spread expansion and l
Slide 16: Maintaining Modest Leverage and Ample Liquidity
Maintaining Modest Leverage and Ample Liquidity Capitalization Summary ($mm unless otherwise noted) May 6, 2024 Successful Term Loan Refinancing Unrestricted Cash $1,349 ▪ Repriced $1.3B of Term Loans B and C from S+4.50% to S+3.50%, generating ~$13mm in Secured Debt $2,063 estimated annual interest
Slide 17: Over $900mm of Capital Returned to Shareholders to Date
Over $900mm of Capital Returned to Shareholders to Date Given Talen’s ample liquidity and modest leverage, the Talen Board has authorized total SRP capacity of ~$1.04B1 through YE 2025 Talen is committed to returning capital to its shareholders and executes repurchases on an opportunistic basis Over
Slide 18: Talen's Value Proposition
Talen’s Value Proposition Susquehanna Nuclear Facility Data Center Co-Location ⧫ 6th largest U.S. nuclear facility with first-of-its-kind ⧫ AWS to develop up to 960 MW data center campus data center transaction with AWS directly connected to carbon-free Susquehanna nuclear facility ⧫ Significant add
Slide 19: Appendix
Appendix
Slide 20: Generation Portfolio Summary
Generation Portfolio Summary Owned Asset Location Primary Fuel Type Plant Type Ownership COD Region Capacity (MW)1 Zero-Carbon Nuclear Susquehanna2 PA Nuclear Baseload 90% 2,228 1983 – 1985 PJM-PPL/MAAC Natural Gas & Peaking Units Lower Mt. Bethel PA Natural Gas Baseload 100% 606 2004 PJM-PPL Martin
Slide 21: 2024 PJM Market Overview
2024 PJM Market Overview PJM West Hub ATC Spark Spreads1 ($/MWh) PJM West Hub ATC Power Prices ($/MWh) $40 $75 $35 $30 $60 $25 $45 $20 $15 $30 $10 $5 $15 TETCO M3 Gas Prices ($/MMBtu) Commentary $8 ▪ Spark spreads have increased in 2H 2024 compared to Sep 29th, $6 driven by the power curve staying f
Slide 22: Hedging Program Supports Cash Flow Stability and Maintains Upside Optionality
Hedging Program Supports Cash Flow Stability and Maintains Upside Optionality Pricing Summary Balance of 20241 2025 2026 PJM West Hub ATC as of 12/29/2023 ($/MWh) $41.51 $46.38 $48.98 PJM West Hub ATC as of 3/28/2024 ($/MWh) $40.60 $50.28 $54.66 TETCO M3 as of 12/29/2023 ($/MMBtu) $2.36 $3.10 $3.42
Slide 23: Nuclear Fuel Largely Contracted Through 2028
Nuclear Fuel Largely Contracted Through 2028 ▪ Nuclear fuel procurement is a Nuclear Fuel Cost Breakdown: four-phase process % Nuclear Fuel Contracted by Reload Year1 2025 Reload Year ▪ Talen contracts fuel years in 8% 3% advance to avoid near-term cost 13% variability 42% ▪ Talen has diverse relati
Slide 24: Nuclear Production Tax Credit Overview
Nuclear Production Tax Credit Overview Nuclear PTC Overview Nuclear PTC Impact1 $60 ▪ Starting in 2024, the PTC benefit is calculated based on a year’s Gross Receipts + PTC ($/MWh) Below $25/MWh annual “gross receipts” divided by annual generation $55 $1/MWh increase in gross $50 receipts → No decre
Slide 25: No Material Debt Maturities Until 2028
No Material Debt Maturities Until 2028 Debt Maturity Summary1 Term Loans / 1st Lien Bonds Unsecured Municipal Bonds Revolving Credit Facility $2,063 No Material Near-term Debt Maturities $700 $131 2024 2025 2026 2027 2028 2029 2030 2037+ Note: As of May 6, 2024. Excludes $75mm bilateral secured LC f
Slide 26: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures
Slide 27: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures Non-GAAP Financial Measures The following non-GAAP financial measures of Adjusted EBITDA and Adjusted Free Cash Flow discussed below, which we use as measures of our performance and liquidity, are not financial measures prepared under GAAP. Non-GAAP financi
Slide 28: Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Unaudited) The reconciliation from "Net Income (Loss)" presented on the Condensed Consolidated Statements of Operations to Adjusted EBITDA and Adjusted Free Cash Flow for ($Millions) Year Ended Dec 31, 2023 Net Income (Loss) $ 608 Less: Bankr
Slide 29: Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: Q1
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: Q1 (Unaudited) The reconciliation from "Net Income (Loss)" presented on the Condensed Consolidated Statements of Operations to Adjusted EBITDA and Adjusted Free Cash Flow for: ($Millions) Three Months Ended Mar 31, 2024 Three Months Ended Mar
Slide 30: Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: 2024 Guidance
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: 2024 Guidance The reconciliation from forecasted "Net Income (Loss)" to Adjusted EBITDA and Adjusted Free Cash Flow for the year ended December 31: ($Millions) 2024E Low High Notes Net Income (Loss) $125 $325 a) There are no material Cumulus