Talen Energy Corporation · NASDAQ:TLN

Talen Energy — Debt Investor Presentation (October 2015)

32 slides from Talen Energy's debt investor presentation, Oct 13, 2015

  1. Slide 1: Lender Presentation: $400 Million Senior Secured Term Loan B

    Lender Presentation October 2015 We Generate Energy for a Brighter Tomorrow $400 Million Senior Secured Term Loan B

  2. Slide 2: Introduction

    2 © Talen Energy Corporation 2015 – Proprietary Introduction  On July 18, 2015, Talen Energy Supply, LLC (“Talen Energy") entered into an agreement to acquire MACH Gen for an enterprise value of $1.175 billion: - As part of the transaction, MACH Gen’s existing $565 million of debt will remain outst

  3. Slide 3: MACH Gen Transaction Highlights

    3 © Talen Energy Corporation 2015 – Proprietary MACH Gen Transaction Highlights Transaction Overview  The MACH Gen portfolio provides an attractive combined-cycle fleet consisting of 2.5 GW of natural gas-fired capacity located in ISO-NE, NYISO and Desert Southwest Strategic Objectives  Grow asset

  4. Slide 4: Key Credit Highlights

    4 © Talen Energy Corporation 2015 – Proprietary 2. Key Credit Highlights

  5. Slide 5: Key Credit Highlights

    5 © Talen Energy Corporation 2015 – Proprietary Key Credit Highlights Modern gas, flexible dual-fuel, low-cost nuclear, and efficient supercritical coal requiring modest environmental capital for known requirements. Fleet operates across dispatch curve. Strong fleet-wide reliability Diverse Asset Po

  6. Slide 6: Diverse Asset Portfolio

    6 © Talen Energy Corporation 2015 – Proprietary 37% 30% 17% 14% 2% 43% 18% 20% 16% 3% Pro Forma MACH Gen adds scale in key markets that favorably diversifies fuel mix and improves cash flow profile  Scale: Increases generating capacity 18% to approximately 16.5 GWs(1)  Geographic Diversity: Growth

  7. Slide 7: With Strong Fleet Reliability

    7 © Talen Energy Corporation 2015 – Proprietary Net Generation (GWh) Capacity Factor EAF 2Q 2015 YTD 2Q 2015 YTD 2Q 2015 YTD East Segment: Coal - PJM 3,332 9,214 36.8% 49.5% 82.5% 86.6% Coal - Montana 707 1,743 61.2% 68.7% 72.6% 85.2% Hydro 308 529 48.1% 41.6% 99.1% 99.1% Natural Gas CCGT 2,129 4,67

  8. Slide 8: Exposure to Attractive Markets

    8 © Talen Energy Corporation 2015 – Proprietary $1,500 $2,250 $3,000 $3,000 $3,000 $4,500 $5,000 $7,000 $9,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 25 30 35 40 45 50 55 Lo ad (G W) Average Monthly System Load Linear Trendline Exposure to Attractive Markets PJM Spark Spreads ERCOT Load Growth

  9. Slide 9: PJM: Review of the Transitional Auction Results

    9 © Talen Energy Corporation 2015 – Proprietary Assets subject to divestiture : PJM: Review of the Transitional Auction Results (1) After taking into account announced sale of Talen Energy Renewables which is expected to close by 12/31/2015 (2) Sale of between 1,300 and 1,400 MW of generating capaci

  10. Slide 10: PJM: Review of the 2018/19 BRA Results

    10 © Talen Energy Corporation 2015 – Proprietary PJM: Review of the 2018/19 BRA Results (1) After taking into account announced sale of Talen Energy Renewables which is expected to close by 12/31/2015 (2) Sale of between 1,300 and 1,400 MW of generating capacity is required to comply with the FERC o

  11. Slide 11: PJM Capacity: Risks and Opportunities

    11 © Talen Energy Corporation 2015 – Proprietary $111.00 $153.56 $184.77 $119.13 $119.13 $- $25.00 $50.00 $75.00 $100.00 $125.00 $150.00 $175.00 $200.00 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2015/16 1st IA 2015/16 2nd IA 2015/16 3rd IA 2016/17 1st IA 2016/17 2nd IA 2016/17 3rd IA -$9

  12. Slide 12: ISO-NE and NYISO Overview

    12 © Talen Energy Corporation 2015 – Proprietary ISO-NE FCM - Capacity Results ISO-NE and NYISO Overview  The retirement of over 2,000 MW (coal and oil) by summer 2017 will tighten reserve margins. New capacity, particularly in southern New England, will likely be required by 2017/18 to maintain ta

  13. Slide 13: Prudent Hedging Strategy

    13 © Talen Energy Corporation 2015 – Proprietary 2015 2016 East Segment: PJM Power: Nuclear, Coal, Hydro ($/MWh) $41-43 $40-42 PJM Consumed Coal (Delivered $/ton) $73-75 $72-74 Spark Spread ($/MWh) $14-15 $12-13 Montana ($/MWh) $40-42 $39-41 Montana Consumed Coal (Delivered $/ton) $27-30 $27-33 West

  14. Slide 14: Supported by Strong Liquidity

    14 © Talen Energy Corporation 2015 – Proprietary $352 $500 $1,850 $800 $3,502 1 Cash CDS Backed Facility Syndicated Revolver Secured Trading Facility ... Supported by Strong Liquidity (1) $309 million of letters of credit outstanding on the $1,850 million syndicated secured credit facility as of 6/3

  15. Slide 15: Allocating Capital to Remain within Leverage Lane

    15 © Talen Energy Corporation 2015 – Proprietary 2015 2016 Capital Expenditures(1): Maintenance $515 $490 Grow th 50 85 Debt Maturities: 5.70% REPs due 10/2035(2) 300 6.20% Senior Notes due 5/2016 350 MACH Gen Acquisition 625 Total $1,490 $925 3.0 x 5.0 x  Growth through strategic acquisitions - Ac

  16. Slide 16: Future Value Catalysts Strengthen Cash Flow Profile

    16 © Talen Energy Corporation 2015 – Proprietary ($ in millions) EBITDA Driver Low High Expected Realization Reduce/Eliminate Harquahala Negative EBITDA $5 $10 2017 Expiration of Sapphire HRCOs (Dec-2016) $30 $30 2017 Expiration of Longview PPA (Dec-2016) $30 $30 2017 Brunner Island Dual-Fuel Projec

  17. Slide 17: Brunner Island Project: Increasing Flexibility

    17 © Talen Energy Corporation 2015 – Proprietary $0 $100 $200 $300 +45% Gas, +25% Pwr Base Case -45% Gas, -25% Pwr Brunner Island Project: Increasing Flexibility Attractive capital allocation that increases operational flexibility and margin resilience under various commodity price environments, whi

  18. Slide 18: Harquahala: Multiple Paths to Improve Cash Flow Profile

    18 © Talen Energy Corporation 2015 – Proprietary Harquahala: Multiple Paths to Improve Cash Flow Profile  Efficient 7,100 heat rate CCGT plant in southwestern Arizona with 1,054 MW of capacity  Adequate water supply provides competitive advantage  Current market dynamics have limited the operatio

  19. Slide 19: Experienced Management Team

    © Talen Energy Corporation 2015 – Proprietary 19 Seasoned leaders with the right experience to successfully execute Talen Energy’s strategy  Management team has extensive experience in fossil and nuclear power generation, commercial operations, strategy, corporate finance and governance  Senior le

  20. Slide 20: Talen Energy Investment Summary

    © Talen Energy Corporation 2015 – Proprietary 20 Talen Energy Investment Summary Power production and marketing through wholesale and retail channels Focused Purpose Best Markets Superior Fleet Attractive Value Value Catalysts The addition of MACH Gen will enhance presence in constructive and liquid

  21. Slide 21: Financing & Syndication Overview

    21 © Talen Energy Corporation 2015 – Proprietary 3. Financing & Syndication Overview

  22. Slide 22: Sources and Uses & Pro Forma Capitalization

    22 © Talen Energy Corporation 2015 – Proprietary Talen Energy Talen Energy Pro Forma As of As of 6/30/2015 Adjustments 6/30/2015 Cash & Cash Equivalents $352 $1,275 $1,627 RCF at New MACH Gen ($200mm) -- $92 $92 TLB at New MACH Gen -- 473 473 Total MACH Gen Debt -- $565 $565 Senior Secured RCF ($1,8

  23. Slide 23: Pro Forma Corporate Structure as of June 30, 2015

    23 © Talen Energy Corporation 2015 – Proprietary Pro Forma Corporate Structure as of June 30, 2015(1) Talen Energy Corporation (NYSE: TLN) Talen Energy Holdings, Inc. Talen Energy Supply, LLC Legacy Energy Supply Subsidiaries Legacy RJS Subsidiaries MACH Gen, LLC $400mm New Senior Secured Term Loan

  24. Slide 24: MACH Gen Corporate Structure as of June 30, 2015

    24 © Talen Energy Corporation 2015 – Proprietary MACH Gen Corporate Structure as of June 30, 2015 MACH Gen, LLC Delaware New MACH Gen, LLC Delaware New Athens Generating Company, LLC Delaware Existing Credit facilities New Harquahala Generating Company, LLC Delaware MACH Gen GP, LLC Delaware Millenn

  25. Slide 25: Appendix

    25 © Talen Energy Corporation 2015 – Proprietary Appendix

  26. Slide 26: Talen Energy Asset List

    26 © Talen Energy Corporation 2015 – Proprietary Project Location Fuel Type Ownership Net Heat Rate (Btu / kWh) Owned Capacity (MW) COD Region East Assets Brandon Shores MD Coal 100% 10,252 1,284 1984 - 1991 PJM-SWMAAC Brunner Island PA Coal 100% 9,842 1,411 1961 - 1969 PJM-MAAC C.P. Crane MD Coal 1

  27. Slide 27: MACH Gen Asset Overview

    27 © Talen Energy Corporation 2015 – Proprietary MACH Gen Asset Overview Athens Millennium Location Athens, NY Capacity 1,138 MW COD June 2004 Heat Rate 7,100 Btu/kWh Market NYISO Trading Hub NYISO Zone F Capacity NYISO Rest-of-State Primary Fuel Natural Gas(1) Gas Interconnection Iroquois Gas Facil

  28. Slide 28: Long-term Debt Maturities as of June 30, 2015

    28 © Talen Energy Corporation 2015 – Proprietary $302 $354 $4 $403 $1,254 $1,770 2015 2016 2017 2018 2019 2020 & Beyond Long-term Debt Maturities as of June 30, 2015 Note: Maturities shown include annual amortization of $42 million of indebtedness associated with the Ironwood facility, which is expe

  29. Slide 29: Regulation G Reconciliations

    29 © Talen Energy Corporation 2015 – Proprietary Regulation G Reconciliations Last Twelve Months Ended June 30, 2015 Income (Loss) from continuing operations after income taxes 294 Interest expense 231 Income taxes 136 Depreciation and amortization 376 EBITDA $1,037 Unrealized loss (gain) on derivat

  30. Slide 30: Forward-Looking Information Statement

    30 © Talen Energy Corporation 2015 – Proprietary Forward-Looking Information Statement This presentation and the oral statements made in connection therewith may contain “forward-looking statements” within the meaning of securities laws. All statements other than statements of historical fact includ

  31. Slide 31: Industry and Market Data

    31 © Talen Energy Corporation 2015 – Proprietary Industry and Market Data This presentation has been prepared by Talen Energy and includes market data and other information from sources believed by us to be reliable, industry and market data including our own research and surveys or industry publica

  32. Slide 32: Non-GAAP Financial Measures

    32 © Talen Energy Corporation 2015 – Proprietary Non-GAAP Financial Measures EBITDA as presented in this presentation represents net income (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA as presented in this presentation represents EBITDA further adjuste

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