Talen Energy Corporation · NASDAQ:TLN
Talen Energy — Corporate Update (June 2023)
36 slides from Talen Energy's corporate update, Jun 28, 2023
Slide 1: Talen Energy Company Update
Talen Energy Company Update June 28th, 2023
Slide 2: Legal Disclaimers
Legal Disclaimers Non-GAAP Financial Measures We include in this presentation Adjusted EBITDA, Adjusted Free Cash Flow and Realized Energy Margin which are not financial measures prepared under United States Generally Accepted Accounting Principles (“GAAP”). Non-GAAP measures, such as Adjusted EBITD
Slide 3: Legal Disclaimers (Cont'd)
Legal Disclaimers (Cont’d) Forward-Looking Information This presentation may include statements concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not statements of historical fact and that are
Slide 4: Table of Contents
Table of Contents 1. Company Update 4 2. Key Highlights 10 3. Supplemental Materials 23 © Talen Energy Corporation 3
Slide 5: 1. Company Update
1. Company Update
Slide 6: Talen Energy Asset Overview
Talen Energy Asset Overview Talen owns a strategically located ~12.4 GW generation portfolio, including ~2.2 GW of nuclear generation 1, and potential growth options in digital infrastructure, renewables and battery storage Asset Overview Generation Portfolio Breakdown2 Nuclear Natural Gas Planned C
Slide 7: Strong Start to the Year
Strong Start to the Year Warm winters in PJM and ERCOT lowered our fleet’s generation and capacity factors, but we locked in higher prices with hedges executed in 2022 to deliver hedge gains of $586mm and realized energy margin of $749mm in Q1 2023 Delivered Strong Results in Q1 Produced Generation
Slide 8: Multiple Drivers of Value Creation
Multiple Drivers of Value Creation ~2.2 GW Interest in Zero-Carbon Susquehanna Facility1 ~18.5 – 18.8 TWh of annual generation1 eligible for up to $15/MWh Production Tax Credit (“PTC”) beginning in 2024 ▪ Susquehanna delivered all-in cost of $22/MWh in 2022, better than the top quartile of all U.S.
Slide 9: 2023 Focus Areas
2023 Focus Areas Strong Operational Performance with Capital Discipline Focus on Public Equity and Shareholder Returns ➢ Continue our exceptional operations, with focus on core generation ➢ Establish a liquid equity instrument with increased public and potential cost savings transparency and focus o
Slide 10: Building Blocks of Company Value
Building Blocks of Company Value Susquehanna Nuclear Growth and Conversion Capex Deployed in 2020 to 2023 Catalyzes Future Value ▪ ~18.5 – 18.8 TWh annual generation1 with all-in cost better than top Creation and Unlocks Higher EBITDA to Free Cash Flow Conversion in 2024+ quartile of all U.S. nuclea
Slide 11: 2. Key Highlights
2. Key Highlights
Slide 12: Key Highlights
Key Highlights Diverse and Stable Cash Flows with Limited Go-Forward Growth Capex Enable Focus on Shareholder Return Programs 2.2 GW Interest in Industry-Leading, Carbon-Free Susquehanna Nuclear Plant1 Zero-Carbon Digital Infrastructure Optimally Positioned for Monetization and Value Creation Strong
Slide 13: Diverse and Stable Cash Flows Backed by Multiple Sources…
Diverse and Stable Cash Flows Backed by Multiple Sources… Nuclear Contribution ▪ ~18.5 – 18.8 TWh annual generation1 from long-lived, low-cost Susquehanna, which benefits from capacity revenue and, starting in 2024, the nuclear PTC ▪ The PTC creates an effective revenue put on Susquehanna, materiall
Slide 14: …Including the New Nuclear Production Tax Credit
…Including the New Nuclear Production Tax Credit 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
Slide 15: Susquehanna: Cornerstone of Talen's Generation Fleet
Susquehanna: Cornerstone of Talen’s Generation Fleet Asset Highlights Location Salem Township, PA Supported by Up to Sixth Largest Nuclear Delivering Better Than Top Owned $15/MWh Production Tax 2,245 MW (2 Units) Facility in the U.S.2 Quartile Cost Performance3 Capacity1 Credit Starting in 2024 Fue
Slide 16: Susquehanna: Multiple Paths to Cash Flow Generation and Value Creation
Susquehanna: Multiple Paths to Cash Flow Generation and Value Creation Illustrative Support of PTC (2024-2025) All-in Price ~$44 – $45/MWh Wholesale Market (Incl. PTC) Supported by Capacity Revenues and PTC All-in Cost5 ~$23 – $24/MWh PJM Wholesale Market Pre-tax FCF ~$20 – $22/MWh ▪ Talen’s average
Slide 17: Zero-Carbon-Powered Digital Infrastructure Assets with Minimal Go-Forward Spend
Zero-Carbon-Powered Digital Infrastructure Assets with Minimal Go-Forward Spend Other Growth Assets Cumulus Digital (Largely Renewables and (Talen Owns 80%)1 Battery Storage) Existing Generation Portfolio4 Current Assets: ▪ 4 expandable substations and related campus infrastructure on 1,200 acres Ze
Slide 18: Digital Infrastructure Assets Optimally Positioned for Monetization and Value Creation
Digital Infrastructure Assets Optimally Positioned for Monetization and Value Creation Unlocking Significant Value of Substantial Investment in Prior Years 1,200-acre campus Monetization Options Large-scale opportunity Current campus could host fully operational 48 MW • First 48 MW data center shell
Slide 19: Data Center Market Dynamics Are Highly Supportive
Data Center Market Dynamics Are Highly Supportive Historical and Projected Data Center Consumption Overview of Market Dynamics ▪ Available capacity is tight, with constrained ability to access electricity further limiting supply o Northern Virginia (“NoVa”), the world’s largest data center market, h
Slide 20: Talen has Favorable Leverage and Attractive Operating Profile
Talen has Favorable Leverage and Attractive Operating Profile Enhanced Credit Profile In Line with Peers Attractive Operating Profile (FY22 Generation) 6% 9% Peer Significant, PTC-backed nuclear 4.8x 14% Maximum: 36 TWh 50% generation relative to most peers’ 2022 generation profile 3 21% 4,5 5% 3.0x
Slide 21: Talen is Well-Capitalized with Strong Operating and Liquidity Runway
Talen is Well-Capitalized with Strong Operating and Liquidity Runway Liquidity Summary Pro Forma Capitalization2 ($ in millions) Unrestricted Cash $175 Recourse Liquidity at Emergence New Cash-Funded LC Facility (Term Loan C) Cash Collateral 470 ✓ Unrestricted Cash (~$175mm) at close New Cash-Funded
Slide 22: Gas and Peaking Fleet is Well-Positioned to Capture Upside from Market Dynamics
Gas and Peaking Fleet is Well-Positioned to Capture Upside from Market Dynamics PJM Gas & Peaking Portfolio ERCOT Gas Portfolio Diverse Assets with Sizable Capacity Revenue Well Suited for Varying Market Dynamics Synergistic CCGTs With Fast Start Capability and Low Heat Rates Lower Mount Bethel1 (61
Slide 23: Conversions Largely Complete, Extending Plant Lives with Minimal Future Capital
Conversions Largely Complete, Extending Plant Lives with Minimal Future Capital ~3.2 GW of near-complete conversions at fully-owned coal plants preserve capacity revenue and upside potential Estimated Conversion Cost1 Owned Conversion Expected Date to Cease Plant Capacity Type Spent through Coal Ope
Slide 24: 3. Supplemental Materials
3. Supplemental Materials
Slide 25: Generation Portfolio Summary
Generation Portfolio Summary Owned Asset Location Primary Fuel Type Plant Type Ownership Capacity (MW)1 COD Region Zero-Carbon Nuclear Susquehanna2 PA Nuclear Baseload 90% 2,245 1983 - 1985 PJM-PPL/MAAC Natural Gas & Peaking Units Barney Davis TX Natural Gas Intermediate 100% 897 1974 - 2010 ERCOT-S
Slide 26: A. Management and Board Overview
A. Management and Board Overview
Slide 27: Executive Management Team
Executive Management Team ▪ Formerly the President and Chief Executive Officer of California Resources Corporation and has served on the Board of Directors since October 2020 ▪ Previously served on the Board of Directors of GenOn Energy, an independent power producer, until September 2022, and was f
Slide 28: Independent Members of the Board
Independent Members of the Board ▪ Currently serves on the Board of Directors of GenOn Holdings Inc, Texgen Power LLC, Just Energy Corp, and Alpine Summit Energy Partners. Additionally, serves as Chairman of the board for Texgen and as Chairman of the audit committee for Alpine. Stephen ▪ Previously
Slide 29: Independent Members of the Board (Cont'd)
Independent Members of the Board (Cont’d) ▪ Has nearly 30 years of energy and investment experience. He is a Founding Principal of Direct Invest Development and currently serves on the Board of Directors of the New York Independent System Operator as Chairman of the Commerce & Compensation Committee
Slide 30: B. Reconciliation of Non-GAAP Financial Measures
B. Reconciliation of Non-GAAP Financial Measures
Slide 31: 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, Adjusted Free Cash Flow and Realized Energy Margin are discussed below, which we use as a measure of our performance and liquidity. Non-GAAP financial measures do not
Slide 32: Q1 2023 Realized Energy Margin (Unaudited)
Q1 2023 Realized Energy Margin (Unaudited) Realized Energy Margin to "Operating Revenues, net of Total Energy Expenses" presented on the Condensed Consolidated Statements of Operations for the three months ended March 31: 2023 2022 Change Electricity sales and ancillary services $ 250 $ 566 $ (316)
Slide 33: Q1 2023 Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Unaudited)
Q1 2023 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 the three months ended March 31: 2023 2022 Net Income (Loss) At
Slide 34: 2022 Realized Energy Margin (Unaudited)
2022 Realized Energy Margin (Unaudited) Realized Energy Margin to “Gross Margin" presented on the Consolidated Statements of Operations for the years ended December 31: 2022 2021 Change Electricity sales and ancillary services $ 2,832 $ 2,532 $ 300 a) Includes the gain (loss) on non-derivative physi
Slide 35: 2022 Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Unaudited)
2022 Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation (Unaudited) The reconciliation from "Net Income (Loss)" presented on the Consolidated Statements of Operations to Adjusted EBITDA and Adjusted Free Cash Flow for the years ended December 31: 2022 2021 Net Income (Loss) $ (1,293) $ (977) a
Slide 36: Net Income to Adjusted EBITDA Reconciliation – 2023E & 2024E (Unaudited)
Net Income to Adjusted EBITDA Reconciliation – 2023E & 2024E (Unaudited) The reconciliation from forecasted “Net Income (loss)” to Adjusted EBITDA on a Consolidated (Excluding Cumulus Affiliates) and Recourse (Excluding LMBE-MC and Cumulus Affiliates) basis for the year ended December 31: Consolidat