Talen Energy Corp Q3 FY2024 earnings call

• Market and regulatory events underscore the criticality of existing generation for demand growth and grid reliability. The U.S. data center market is expected to grow significantly, and Talen is pursuing various solutions like co-location, hybrid arrangements, etc. - Active third quarter with solid operational and financial performance: generated $230M adjusted EBITDA and $97M adjusted free cash flow in Q3; year-to-date adjusted EBITDA was $606M and adjusted free cash flow was $262M. - Acquired TeraWulf’s 25% share in Nautilus, suspending operational activities there to release 150MW of power. - Added to 5 equity indices, driving passive fund demand for stock. - Participated in FERC technical conference on large co-located load, supporting all solutions being on the table for resource adequacy.

In the third quarter of 2024, Talen reported adjusted EBITDA of $230 million and adjusted free cash flow of $97 million. Year-to-date, adjusted EBITDA was $606 million and adjusted free cash flow was $262 million. There are no specific product segments detailed in terms of revenue contribution % as the focus is on overall financial performance.

• Raised and narrowed 2024 adjusted EBITDA range to $750 million to $780 million and adjusted free cash flow range to $265 million to $285 million. - Reaffirmed 2025 adjusted EBITDA range of $925 million to $1.175 billion and adjusted free cash flow range of $395 million to $595 million. - 2026 outlook remains unchanged from Investor Day, with a focus on nearly tripling adjusted free cash flow per share by 2026.

• PJM capacity auction delays create uncertainty in incentivizing new build. - Requiring RMR units to bid into capacity market or be accounted as phantom supply distorts price signals. - Uncertainties in resource adequacy solutions and regulatory processes affecting timely resolution of issues like the ISA amendment.

Q: Shar Pourreza asked about PA state level conversations regarding resource adequacy and Talen's involvement in new development.

A: Mac McFarland said there are discussions in Harrisburg about solutions like a TEF, and Talen is engaged in PUC conferences. Terry Nutt added they plan to participate in PA PUC's resource adequacy conference.

Q: Jeremy Tonet asked about thoughts on the FERC technical conference and data center development.

A: Mac McFarland discussed the need to parse co-location and resource adequacy separately, and Cole Muller talked about evaluating options with AWS for the existing agreement.

Q: Angie Storozynski asked about the timing of resolving the Susquehanna issue.

A: Mac McFarland and Cole Muller said they are being methodical in analyzing options, considering economics and customer needs, and will provide an update when ready.

Q: Nicholas Campanella asked about hedges and RMR processes.

A: Mac McFarland clarified hedges weren't taken off due to increased generation forecast, and John Wander discussed separate aspects of RMR agreement and capacity market inclusion.

Q: Michael Sullivan drilled down on RMR settlement timing.

A: John Wander explained the distinction between RMR agreement and capacity market inclusion, and Mac McFarland emphasized the need for timely settlement to prepare for plant operations.

Q: Unidentified Analyst asked about uprates at Susquehanna.

A: Mac McFarland said they are looking at uprates, considering safety margin and reliability factors.