Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Talen Energy
November 5, 2015
Third Quarter Conference Call
We Generate Energy for a Brighter Tomorrow
© Talen Energy Corporation 2015 2
Safe Harbor
Forward Looking Statements:
Any statements made in this presentation about future operating results
or other future events are forward-looking statements under the Safe
Harbor Provisions of the Private Securities Litigation Reform Act of
1995. Actual results may differ materially from such forward-looking
statements. A discussion of factors that could cause actual results or
events to vary is contained in the Supplemental Information to this
presentation and in the Company’s SEC filings, including the factors
discussed under “Risk Factors” in the Company’s prospectus filed with
the SEC pursuant to Rule 424(b)(3) on November 3, 2015 and the
Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2015.
© Talen Energy Corporation 2015 3
Agenda
P. Farr
P. Farr
J. McGuire
Quarterly Review & Strategic Update
Commercial & Operational Review
Financial Review
Q&A
© Talen Energy Corporation 2015 4
$247
$605
$357
$765
$357
$841
Q3 YTD
2014 2015 2015 (Guidance Basis)
$265
$375
$415 $425
Prior 2015E Updated 2015E
$935 $1,050
$1,085 $1,100
Prior 2015E Updated 2015E
3rd Quarter Review
Note: Refer to “Supplemental Information – Regulation G Reconciliations” for reconciliation of non-GAAP financial measures
(1) RJS Power was consolidated into Talen Energy’s financials as of June 1, 2015. Excludes contributions from the five-month period prior to acquisition of RJS Power
(2) Reflects RJS Power results for the five months of 2015 prior to the acquisition and an adjustment for PPL allocations not expected to continue in future periods
(3) 2015 projections have not been adjusted to reflect the acquisition of MACH Gen or the sale of Talen Renewable Energy, which both closed on November 2, 2015
3rd Quarter Highlights Q3 Adjusted EBITDA Review
Increasing 2015 Projections
(1)
($ in millions)
(2)
Solid financial results drive increase in
2015 Adjusted EBITDA & FCF projections
Strong quarter for generation fleet - Continued excellent performance at Susquehanna
nuclear plant; operated at capacity factors >100%
- Strong PJM spark spreads deliver year-over-year
outperformance in eastern gas fleet
Continuing progress on synergies from
RJS merger - Now project to achieve $135 million in 2015
(previously estimated at $115 million)
- Maintain run-rate target of $165 - $175 million
Closed acquisition of 2,500 MW MACH
Gen portfolio
Announced sales of Eastern Hydro,
Ironwood and C.P. Crane for combined
$1.5 billion in gross proceeds
Raising midpoints & narrowing guidance ranges
Adjusted EBITDA Adjusted FCF
(2)(3)
© Talen Energy Corporation 2015 5
Athens | 1,080 MW CCGT; NYISO
Experienced commercial operations team to enhance
capability of a high-quality asset, expected to lead to
substantial improved capacity factors in the near-term with
additional upside due to key location for expanding pipeline
interconnection in NYISO
Millennium | 360 MW CCGT; ISO-NE
Poised to capitalize on the robust capacity market and
pending retirements in ISO-NE
Harquahala | 1,092 MW CCGT; WECC
Multiple opportunities to enhance a highly reliable asset that is
well-positioned to capture value from 111(d) compliance
East Hydro | 292 MW; PJM
Ironwood | 704 MW CCGT; PJM
Renewables | 25 various projects totaling 65 MW; PJM
C.P. Crane | 399 MW Coal; PJM
Exceptional value of ~$3,000 / kW
Over $900 / kW for PJM CCGT with a 7,100 heat rate
Group of small non-core assets netting ~$1,800 / kW
Clean exit from a challenged asset
Optimizing Talen Energy’s Portfolio
Maximizing Value from Dispositions
Through Exceptional Execution
Strategically Expanding the Fleet
at Attractive Value
Purchases @ ~6.0x Adjusted EBITDA Sales @ ~11.0x Adjusted EBITDA
Reinvesting capital in an accretive manner, while diversifying
into key markets and efficient, gas-fired assets (1) East Hydro, Ironwood and C.P. Crane sales expected to close in Q1 2016
(2) Based on purchase price adjusted for net present value of tax attributes, monetization of Harquahala and projected 2016 Adjusted EBITDA as reflected in July 20, 2015
investor presentation
(3) Based on gross sale proceeds and projected 2016 Adjusted EBITDA as previously disclosed
(1)
(2) (3)
(1)
(1)
© Talen Energy Corporation 2015 6
Achieving Key Priorities
(1) Project under review and dependent on development of certain natural gas pipelines
Execution on these fronts expected to enhance shareholder value
Catalyst
2018/19 PJM Capacity Auction Results
Announce Mitigation Divestitures
MACH Gen Closing/Begin Integration
Brunner Island Dual-Fuel Project
Keystone & Conemaugh Operational Improvements
Harquahala Optimization
Montour Dual-Fuel Project
Expected Timing
Q3 2015
Q4 2015
Q4 2015
Q4 2016 COD
2016-2017
2017
2018 (1)
© Talen Energy Corporation 2015 7
Commercial & Operational Review
© Talen Energy Corporation 2015 8
Net Generation (GWh) Capacity Factor EAF
3Q 2015 YTD 3Q 2015 YTD 3Q 2015 YTD
East Segment:
Coal - PJM 6,273 15,487 47.2% 48.0% 92.4% 89.2%
Coal - Montana 1,027 2,770 87.9% 74.8% 92.7% 87.5%
Hydro 182 711 28.2% 37.1% 97.5% 98.5%
Natural Gas CCGT 2,304 6,981 86.6% 88.4% 88.5% 88.7%
Natural Gas/Oil 2,256 3,889 36.0% 26.3% 91.4% 87.2%
Nuclear 4,982 13,690 100.5% 93.1% 99.7% 91.2%
West Segment
Natural Gas 1,203 1,495 30.4% 28.5% 95.7% 90.3%
TOTAL 18,227 45,023 55.3% 52.4% 93.5% 89.4%
1.80
YTD 2015
3rd Quarter Operational Review Solid Asset Performance Unit Reliability – EFOF
Safety - TCIR Susquehanna Operations
(1) EFOF – Equivalent Forced Outage Factor
(2) EAF – Equivalent Availability Factor, which includes scheduled outages
(3) YTD excludes metrics from RJS Power for the five-month period prior to acquisition
(4) TCIR – Total Case Incidence Rate using OSHA measurement standards. Reflects nine months of RJS statistics
(5) Based upon 2013 average incident rate for the utilities sector (NAICS 221)
(4)
(1)
(2)
Average recordable incident rate per Bureau of Labor Statistics
2.10
(5)
Cap
acity F
acto
r (%
) 95.3% 104.0% 100.5% 100.8%
Q4 2014 Q1 2015 Q2 2015 Q3 2015
102.7% 103.6%
49.5%
101.5%
Q4 2014 Q1 2015 Q2 2015 Q3 2015
101.5%
Unit 1 Unit 2
Adjusting for 2Q 2015 refueling outage at Unit 2, Susquehanna
has averaged a station CF of > 100% over LTM
(3)
1%
7%
0%2%
3%
0%
3%3%4%
3% 3%1% 1%
5%
Q3 2015 Q3 2014
Strong fleet-wide reliability supporting solid 3Q results
© Talen Energy Corporation 2015 9
$10
$15
$20
$25
$30
12/31/2013 6/30/2014 12/31/2014 6/30/2015
Sp
ark
Sp
rea
d $
/ M
Wh
2016 ERCOT Spark Spread 2017 ERCOT Sprak Spread
$10
$15
$20
$25
$30
12/31/2013 6/30/2014 12/31/2014 6/30/2015
Sp
ark
Sp
rea
d $
/ M
Wh
2016 PJM Spark Spread 2017 PJM Spark Spread
Market Overview PJM On-peak Spark Spreads ERCOT On-peak Spark Spreads
Past Five ERCOT Hourly Peak Records Supportive PJM CP Auction Results
Source: ICE, Talen Energy. Assumes PJM West Hub vs. TETCO M3 forward prices at a 7 heat rate Source: ICE, Talen Energy. Assumes ERCOT North Hub vs. Henry Hub forward prices at a 7 heat rate
(1)
(1) CP / Transitional clearing price results for MAAC
New Peak Demand Records Reflect
Demand Growth & Support Prices
MW
$/M
Wh
65,761
65,414
66,950
68,242
69,395
67,929
68,305 68,459
68,912
69,783
$-
$500
$1,000
$1,500
$2,000
$2,500
65,000
66,000
67,000
68,000
69,000
70,000
2-Aug-2011 3-Aug-2011 5-Aug-2015 6-Aug-2015 10-Aug-2015
Peak Hour Load Forecast Peak Hour Actual Load Peak Hour Day-Ahead South Hub Price
$133.37
$226.15
$136.50
$167.46
$119.13
$120.00
$134.00
$151.50
$164.77
$75
$125
$175
$225
2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019
$/M
W-d
ay
MAAC - Base CP / Transional Results
© Talen Energy Corporation 2015 10
2015 2016
East Segment:
PJM Power: Nuclear, Coal, Hydro ($/MWh) $41-42 $40-42
PJM Consumed Coal (Delivered $/ton) $71-72 $67-70
Spark Spread ($/MWh) $14-15 $12-13
MT Power: Coal ($/MWh) $40-41 $36-38
MT Consumed Coal (Delivered $/ton) $26-28 $27-33
West Segment:
Spark Spread ($/MWh) $22-23 -
Hedging & Commercial Management
Notes: As of September 30, 2015. 2016 hedge position and sensitivities reflect announced assets sales of Ironwood, the East Hydros and C.P. Crane
(1) Gas price sensitivity assumes system heat rate is unchanged. Heat Rate sensitivity assumes power prices move and gas price is unchanged. Power price sensitivity assumes gas price is unchanged
(2) Excludes out of the money heat rate call options related to the Sapphire portfolio that were included in the RJS Power acquisition and expire by the end of 2016
Portfolio Targets:
Expected Generation Hedge Position Coal and Nuclear Fuel Hedge Position
Average Hedge Prices Margin Sensitivities ($ millions)
2015
(1)
(2)
Gas
+/-
$0.50/mmBtu
Heat Rate
+/-
1.0 mmBtu
Power
+/- $5/MWh
ERCOT
1 hour
@ Offer Cap
75% – 1-year forward
25% – 2-years forward
Note: Excludes expected generation from MACH Gen assets, which are expected to be unhedged at acquisition date
100% 100%97%
54%
100% 100%
2015 2016
Nuclear East Coal West Coal
98%
67%
92%
56%
98%
63%
85%
0%
96%
60%
2015 2016
East Nuclear, Coal & Hydro East Gas/Oil Montana Coal West Gas/Oil Total Portfolio
2016
$16 $9 $17 $18
$182
$140
$221
$18
($13) ($8) ($15)
($131)($109)
($172)
© Talen Energy Corporation 2015 11
Financial Review
© Talen Energy Corporation 2015 12
3rd Quarter Financial Highlights
Adjusted EBITDA Walk – Q3 2015 vs. Q3 2014
Adjusted EBITDA by Segment Adjusted EBITDA Highlights
East margins up 10% year-over-year driven by:
- Higher PJM capacity prices
- Improved nuclear operational performance
- Higher spark spreads
- Addition of Raven assets
Solid asset performance in ERCOT
- 96% unit availability
Lower Corporate O&M costs
East West Other
Notes: Refer to “Supplemental Information – Regulation G Reconciliations” for reconciliation of non-GAAP financial measures
($ in millions)
($ in millions)
$247
$357$97 $9 $10 ($6)
Q3 2014Adjusted EBITDA
Margins O&M Other Taxes, other thanincome
Q3 2015Adjusted EBITDA
$290
($43)
$337
$43
($23)
Q3 2014 Q3 2015
© Talen Energy Corporation 2015 13
Prior 2015 Guidance Updated 2015 Guidance
Low Mid High Low Mid High
Adjusted EBITDA $935 $1,010 $1,085 $1,050 $1,075 $1,100
(excluding MACH Gen Contribution) +$115 +$65 +$15
Adjusted Free Cash Flow $265 $340 $415 $375 $400 $425
(excluding MACH Gen Contribution) +$110 +$60 +$10
Projected Net Debt Outstanding at 12/31/2015 $3,700 $3,500
(excluding MACH Gen Financing)
Projected Net Debt / Adjusted EBITDA 3.7x 3.3x
($ in millions)
2015 EBITDA and FCF
Notes: Refer to “Supplemental Information – Regulation G Reconciliations” for reconciliation of non-GAAP financial measures
(1) 2015 forecasts include twelve months of performance from RJS, including the five-month period prior to the acquisition and an adjustment for PPL allocations not
expected to continue in future periods. 2015 projections have not been adjusted to reflect the acquisition of MACH Gen or the sale of Talen Renewable Energy, which
both closed on November 2, 2015. Does not reflect announced sales of Ironwood, East Hydro and C.P. Crane which are expected to close in Q1 2016
(2) Does not include growth capex of $38 million
(3) Includes $170 million in projected short-term debt outstanding
Strong performance leads to over 6% increase to Adjusted EBITDA
midpoint & ~18% increase to Adjusted FCF midpoint
(3)
(2)
(1) (1)
© Talen Energy Corporation 2015 14
Prior 2016 Estimate 2016E 2016E
Adjusted for MACH
Gen & Sale of Talen
Renewable Energy
Adjustment for
Ironwood, East Hydro
& Crane Sales
Adjusted
Projections
Adjusted EBITDA $990 ($145) $845
Adjusted Free Cash Flow $310 ($50) $260
Projected Net Debt at 12/31/2015 $4,785 Projected Net Debt at 12/31/2016 $3,200
(including MACH Gen Financing) (including net asset sale proceeds)
Projected Net Debt / Adjusted EBITDA 4.8x 3.8x
($ in millions)
2016 EBITDA and FCF
Notes: Refer to “Supplemental Information – Regulation G Reconciliations” for reconciliation of non-GAAP financial measures
(1) Does not reflect sales of Ironwood, East Hydro and C.P. Crane
(2) Adjustment reflects full year projections for Ironwood, East Hydro or C.P. Crane announced sales, which are expected to close in Q1 2016
(3) Does not include growth capex of $85 million
(4) Reflects $35 million of after-tax interest savings by retiring debt with asset sale proceeds
(5) Reflects gross proceeds from announced sales of Ironwood, East Hydro and C.P Crane less marginal taxes and 2016 projected change in cash
(1)
(3)
(2)
(5)
(4)
Substantial Asset Sale Proceeds Expected to Drive Down Talen Energy’s Leverage
© Talen Energy Corporation 2015 15
Post MACH Gen transaction, de-levering the
balance sheet with substantial proceeds from asset
sales - Pay down revolver used to finance a portion of the
transaction and other maturing & pre-payable debt
Will continue to assess growth opportunities to
diversify the portfolio in an accretive manner
“Leverage Lane” of 3x – 5x Net Debt / Adj. EBITDA - ≤ 3x – bias towards growth investment/capital return
- ≥ 5x – bias towards debt retirement
Capital Allocation Capital Priorities Long-term Maturities / Pre-payable Debt
Leverage Lane: Net Debt / Adjusted EBITDA Before and After Asset Sale Proceeds
3.0 x
5.0 x
3.0 x
5.0 x
4.8x
3.8x
Expect to use
mitigation proceeds to
pay down revolver and
additional cash
available to extinguish
maturing and pre-
payable debt
2015 2016
Leverage ticks
upward due to MACH
Gen acquisition
Maturing Debt Pre-payable Debt (3)
(1) $300 million 5.70% REset Put Securities due 2035 were repurchased and retired on October 15, 2015. In connection with the repurchase, Talen Energy Supply paid $134 million to terminate the
remarketing of the notes
(2) Maturing debt includes $41 million for Talen Ironwood LLC’s 8.857% senior notes that are expected to be repaid and retired in Q1 2016 in connection with the announced sale of Ironwood
(3) Pre-payable debt reflects existing debt at New MACH Gen, LLC, including $475 million under a Term Loan B facility and approximately $103 million drawn under a revolving credit facility. The
Term Loan B is eligible to be paid down without a make whole premium starting in July 2016
(4) $400 million Talen Energy Supply revolver draw to partially fund the MACH Gen acquisition expected to be paid down in 2016 wi th proceeds from announced asset sales
(1) (2)
$301 $391 $400
$1,220
$1,743
$578
$400
2015 2016 2017 2018 2019 2020 &Beyond
Revolving Credit Facility (4)
© Talen Energy Corporation 2015 16
Closing Remarks
© Talen Energy Corporation 2015 17
Talen Energy Investment Highlights
Power production and marketing through wholesale and retail
channels Focused Purpose
Best Markets
Superior Fleet
Attractive Value
Value
Catalysts
With the addition of MACH Gen, will have presence in the most
constructive and liquid competitive markets
Modern gas, flexible dual-fuel, low-cost nuclear and hydro and
efficient supercritical coal requiring modest environmental capital
for known requirements. Strong fleet wide reliability
Strong free cash flow generation and lower financial leverage
relative to peers
Brunner Island dual-fuel project, Keystone & Conemaugh
Operational Improvements, Harquahala optimization, Gas
infrastructure improvements at Athens and Millennium
© Talen Energy Corporation 2015 18
Supplemental Information
© Talen Energy Corporation 2015 19
Quarter-to-date
Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014
East:Coal - PJM 6,273 3,771 47.2% 28.4% 92.4% 87.4% 1.0% 2.7%
Coal - Montana 1,027 1,227 87.9% 82.1% 92.7% 91.1% 7.1% 4.1%
Hydro 182 126 28.2% 19.5% 97.5% 62.4% 0.1% 2.9%
Natural Gas Combined Cycle 2,304 2,613 86.6% 98.2% 88.5% 97.1% 1.6% 2.8%
Natural Gas/Oil 2,256 1,453 36.0% 24.0% 91.4% 96.5% 3.3% 0.8%
Nuclear 4,982 4,509 100.5% 91.0% 99.7% 90.0% 0.0% 1.0%
West:Natural Gas 1,203 959 30.4% 23.7% 95.7% 94.5% 2.8% 5.0%
TOTAL GENERATION 18,227 14,657 55.3% 44.1% 93.5% 90.8% 1.8% 2.5%
Year-to-date
YTD 2015 YTD 2014 YTD 2015 YTD 2014 YTD 2015 YTD 2014 YTD 2015 YTD 2014
East:Coal - PJM 18,462 19,015 47.2% 48.2% 86.1% 85.4% 2.1% 2.6%
Coal - Montana 2,770 2,843 74.8% 64.1% 87.5% 80.1% 5.8% 12.0%
Hydro 711 765 37.1% 39.9% 98.5% 83.8% 0.2% 1.9%
Natural Gas Combined Cycle 6,981 7,052 88.4% 89.6% 88.7% 90.1% 1.9% 3.9%
Natural Gas/Oil 4,481 2,859 24.1% 15.6% 84.4% 91.0% 2.9% 2.3%
Nuclear 13,690 11,995 93.1% 81.1% 91.2% 80.1% 0.0% 0.4%
West:Natural Gas 2,654 2,723 22.4% 22.3% 78.7% 84.6% 16.9% 3.0%
TOTAL GENERATION 49,750 47,252 50.9% 47.7% 86.2% 85.7% 3.8% 2.4%
Net Generation (GWh) Capacity Factor Availability
EFOF
EFOF
Net Generation (GWh) Capacity Factor Availability
Operational Statistics
(1) EAF – Equivalent Availability Factor, which includes scheduled outages
(2) EFOF – Equivalent Forced Outage Factor
(3) Includes Ironwood and Lower Mount Bethel
(4) Includes nine month RJS operating statistics for comparative purposes
(5) Includes Corette
(3)
(3)
(4)(5)
(1) (2)
(1) (2)
© Talen Energy Corporation 2015 20
$206
$289 $256
$299
$224
$101
$85 $120
$126
$129
$38
$85
$1
$1
$1 $45
$42
$21
$13
$11
$31
$28
$37
$20
$32
$29
$25
$23 $11
$2
$2
$6
$6 $6
$6
$452
$560
$464 $476
$405
2015 2016 2017 2018 2019
Sustenance Nuclear Fuel Growth Information Technology Environmental Regulatory Discretionary
Projected Capital Expenditures
(1) Reflects RJS Power expenditures for the five months of 2015 prior to the acquisition
(1)
($ in millions)
Updated to reflect MACH Gen Acquisition & Anticipated Sales of Ironwood, East Hydro & C.P. Crane
© Talen Energy Corporation 2015 21
$648
$500
$1,850
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Cash CDS Backed Syndicated
($ millions) 9/30/2015 6/30/2015
Cash & cash equivalents $648 $352
Credit facility commitments 2,350 2,350
Total Liquidity $2,998 $2,702
Less: Current credit facility usage 334 309
Total Available Liquidity $2,664 $2,393
Liquidity
(1) Excludes $800 million secured trading facility
(2) $334 million of letters of credit outstanding on the $1,850 million syndicated secured credit facility as of 9/30/2015
(3) In October 2015, Talen Energy borrowed $400 million under the syndicated secured credit facility to finance a portion of the MACH Gen acquisition
Available Liquidity Liquidity Facilities as of 9/30/2015
($ millions)
$2,998
$2,664 Available (2)(3)
(1)
Substantial liquidity to support
asset optimization
(1)
(1)
(3)
© Talen Energy Corporation 2015 22
2020
Talen Energy Supply, LLC 2015 2016 2017 2018 2019 & Beyond
Senior Notes: Maturity (yr)
Talen ES 5.70% 2015 300 - - - - -
Talen ES 6.20% 2016 - 350 - - - -
Talen ES 6.50% 2018 - - - 400 - -
Talen ES 5.125% 2019 - - - - 1,220 -
Talen ES 4.60% 2021 - - - - - 712
Talen ES 6.50% 2025 - - - - - 600
Talen ES 6.00% 2036 - - - - - 200
Total Senior Notes 300 350 - 400 1,220 1,512
Municipal Bonds: Maturity (yr)
Talen ES variable-rate Series A 2038 - - - - - 100
Talen ES variable-rate Series B 2038 - - - - - 50
Talen ES variable-rate Series C 2037 - - - - - 81
Total Municipal Bonds - - - - - 231
Talen Ironwood, LLC Maturity (yr)
Talen Ironwood 8.857% 2025 1 41 - - - -
Total Maturities 301 391 - 400 1,220 1,743
Long-term Debt Maturities
Note: As of September 30, 2015
(1) $300 million 5.70% REset Put Securities due 2035 were repurchased and retired on October 15, 2015. In connection with the repurchase, Talen Energy Supply paid
$134 million to terminate the remarketing of the notes in October
(2) Bonds are subject to mandatory repurchase and optional remarketing in 2020
(3) Talen Ironwood LLC’s 8.857% senior notes are expected to be repaid and retired in Q1 2016 in connection with the announced sale of Ironwood
($ in millions)
(1)
(3)
(2)
(2)
© Talen Energy Corporation 2015 23
Talen Energy Corporate Structure
Talen Energy Corporation
(NYSE: TLN)
Talen Energy Holdings, Inc.
Talen Energy Supply, LLC
Legacy Energy
Supply Subs
RJS
Subs
$42mm Ironwood Senior Secured
Notes Outstanding
$4,013mm Senior Unsecured Notes Outstanding
As of September 30 ,2015
Note: Reflects Talen Energy capital structure post closing of MACH Gen acquisition on November 2, 2015. Ironwood debt expected to be repaid in connection with
closing of pending sale in Q1 2016
(1) Non-recourse debt
MACH Gen LLC
$475mm MACH Gen Term Loan B
(in millions)
First Lien New MACH Gen Term Loan B 475$
Senior Secured Talen Ironwood Notes 42
Senior Unsecured Talen Energy Supply Notes 4,013
Total Long-Term Debt 4,530$
(1)
(1)
© Talen Energy Corporation 2015 24
Talen Energy Asset Overview
Note: Does not reflect the announced sale of Ironwood, East Hydro and C.P.Crane
(1) Includes Holtwood and Wallenpaupack
(1)
Asset Location Fuel Type Ownership Net Heat Rate (Btu / kWh) Owned Capacity COD Region
East Assets
Brandon Shores MD Coal 100% 10,252 1,274 1984 - 1991 PJM-SWMAAC
Brunner Island PA Coal 100% 9,842 1,428 1961 - 1969 PJM-MAAC
C.P. Crane MD Coal 100% 10,616 402 1961 - 1967 PJM-SWMAAC
Conemaugh PA Coal 16% 9,700 285 1970 - 1971 PJM-RTO
Keystone PA Coal 12% 9,600 212 1967 - 1968 PJM-RTO
Montour PA Coal 100% 9,661 1,528 1972 - 1973 PJM-MAAC
H.A. Wagner MD Coal/NG/Oil 100% 10,663 966 1956 - 1972 PJM-SWMAAC
Eastern Hydro PA Hydro 100% N/A 308 1910 - 1926 PJM-MAAC
Ironwood PA Natural Gas 100% 7,127 661 2001 PJM-MAAC
Lower Mt. Bethel PA Natural Gas 100% 7,170 555 2004 PJM-MAAC
York PA Natural Gas 100% 9,551 46 1989 PJM-MAAC
Bayonne NJ Natural Gas/Oil 100% 8,857 165 1988 PJM-PS North
Camden NJ Natural Gas/Oil 100% 8,675 145 1993 PJM-PSEG
Dartmouth MA Natural Gas/Oil 100% 8,715 (CCGT) / 11,326 (Peaker) 82 1996 ISO-NE
Elmwood Park NJ Natural Gas/Oil 100% 9,500 70 1989 PJM-PS North
Martins Creek 3&4 PA Natural Gas/Oil 100% 11,744 (Gas) / 10,676 (Oil) 1,708 1975 - 1977 PJM-MAAC
Newark Bay NJ Natural Gas/Oil 100% 8,680 122 1993 PJM-PS North
Peakers PA Natural Gas/Oil 100% Various 370 1967 - 1973 PJM
Pedricktown NJ Natural Gas/Oil 100% 8,455 117 1992 PJM-EMAAC
Susquehanna PA Nuclear 90% N/A 2,262 1983 - 1985 PJM-MAAC
Renewables PA Renewables 100% Various 7 Various PJM-MAAC
Colstrip 1 & 2 MT Coal 50% 10,941 307 1975, 1976 WECC
Colstrip 3 MT Coal 30% 10,660 222 1984, 1986 WECC
Subtotal 13,241
West Assets
Barney Davis 1 TX Natural Gas 100% 10,100 318 1974 ERCOT-South
Barney Davis 2 TX Natural Gas 100% 7,100 646 2010 ERCOT-South
Laredo 4 TX Natural Gas 100% 8,900 92 2008 ERCOT-South
Laredo 5 TX Natural Gas 100% 8,900 89 2008 ERCOT-South
Nueces Bay 7 TX Natural Gas 100% 7,100 648 2010 ERCOT-South
Subtotal 1,793
MACH Gen Assets
Athens NY Natural Gas 100% 7,100 1,138 2004 NYISO
Millennium MA Natural Gas 100% 6,975 335 2001 ISO-NE
Harquahala AZ Natural Gas 100% 7,100 1,054 2004 WECC
Subtotal 2,527
Total Talen 17,561
© Talen Energy Corporation 2015 25
Group 1 Mitigation Overview
PPL and RJS Power identified possible FERC horizontal
market power concerns in PJM submarket 5004/5005 in their
FERC application for approval on July 15, 2014 and proposed
two divestiture options
Each divestiture option requires divestiture of one of two
proposed groups of between 1,300 and 1,400 MW of
generating capacity (based on summer ratings), with some
overlapping assets
On December 19, 2014, FERC conditionally approved the
transaction pending additional mitigation measures
- Option 1: Divest all assets from one group while limiting
assets retained from other group to cost-based rates
- Option 2: Divest all 2,000 MW of capacity from both groups
- Option 3: Propose an alternative mitigation plan
PPL, Talen Energy and RJS Power accepted Option 1 and
committed that Talen Energy would divest all assets from one
group and bid the retained assets at cost-based rates in the
energy market
In September 2015, Talen Energy requested that the FERC
approve a third option for complying with the mitigation
requirement that consists of Ironwood, Holtwood,
Wallenpaupack and C.P. Crane, and excludes the Sapphire
facilities. The timing of FERC's response is not known at this
time
Talen Energy has until June 2016 to enter into definitive
agreements under the terms of the existing order
Group 2
(1) Pedricktown capacity includes capacity dedicated to serving landlord load (which has historically averaged 9 MW)
Facility MW
Bayonne 0165
Camden 0145
Elmwood Park 0070
Newark Bay 0122
Pedricktown 0117
York 0046
Ironwood 0661
Total 1,326
Facility MW
Bayonne 0165
Camden 0145
Elmwood Park 0070
Newark Bay 0122
Pedricktown 0117
York 0046
C.P. Crane 0402
Holtwood 0262
Wallenpaupack 0045
Total 1,374
FERC Required Mitigation
(1)
(1)
© Talen Energy Corporation 2015 26
Regulation G Reconciliations
Quarter-to-date Adjusted EBITDA ($ in millions)
Note: Please refer to Regulation G Reconciliation footnotes for quarter-to-date and year-to-date EBITDA on slide 28
Three Months
2015 2014
East West Other Total East West Other Total
Net income (loss) $ (401 ) $ 101
(Income) loss from discontinued operations (net of tax) 62 (7 )
Interest expense 55 31
Income taxes 39 74
Other (income) expense - net (1 ) (10 )
Operating income (loss) $ (230 ) $ 24 $ (40 ) $ (246 ) $ 242 $ — $ (53 ) $ 189
Depreciation 84 10 1 95 74 — — 74
Other income (expense) - net 1 — — 1 11 — (1 ) 10
Sapphire EBITDA (a) (100 ) — — (100 ) — — — —
EBITDA $ (245 ) $ 34 $ (39 ) $ (250 ) $ 327 $ — $ (54 ) $ 273
Unrealized (gain) loss on derivative contracts (b) (59 ) 9 — (50 ) (26 ) — — (26 )
Stock-based compensation expense (c) — — 1 1 — — 3 3
(Gain) loss from NDT funds (1 ) — — (1 ) (10 ) — — (10 )
ARO accretion 8 — — 8 8 — — 8
Coal contract adjustment (d) 41 — — 41 — — — —
Impairments (e) 588 — — 588 — — — —
Mechanical subsidiary revenue adjustment (f) — — — — (14 ) — — (14 )
TSA costs — — 14 14 — — — —
Separation benefits (g) — — — — — — 8 8
RJS transaction costs — — 1 1 — — — —
Other (l) 5 — — 5 5 — — 5
Adjusted EBITDA $ 337 $ 43 $ (23 ) $ 357 $ 290 $ — $ (43 ) $ 247
© Talen Energy Corporation 2015 27
Regulation G Reconciliations
Year-to-date Adjusted EBITDA ($ in millions)
Note: Please refer to Regulation G Reconciliation footnotes for quarter-to-date and year-to-date EBITDA on slide 28
Net income (loss) $ (279) $ 48
(Income) loss from discontinued operations (net of tax)
Interest expense
Income taxes
Other (income) expense - net
O perating income (loss) $ 132 $ 18 $ (184) $ (34) $ 307 $ — $ (181) $ 126
Depreciation
Other income (expense) - net
Sapphire EBITDA (a)
EBITDA $ 289 $ 31 $ (183) $ 137 $ 554 $ — $ (180) $ 374
Unrealized (gain) loss on derivative contracts (b)
Stock-based compensation expense (c)
(Gain) loss from NDT funds
ARO accretion
Coal contract adjustment (d)
Impairments (e)
Mechanical subsidiary revenue adjustment (f)
TSA costs
Separation benefits (g)
Corette closure costs (h)
Terminated derivative contracts (i)
Revenue adjustment (j)
RJS transaction costs
Restructuring costs (k)
Other (l)
Adjusted EBITDA $ 825 $ 45 $ (105) $ 765 $ 740 $ — $ (135) $ 605
— —
12 — — 12 9 — — 9
— — 10 10 — —
— —
— — 6 6 — — — —
7 — — 7 — —
— —
(13) — — (13) — — — —
4 — — 4 — —
— —
— — 2 2 — — 30 30
— — 19 19 — —
— —
— — — — (17) — — (17)
588 — — 588 — —
— 23
41 — — 41 — — — —
25 — — 25 23 —
15 15
(11) — — (11) (21) — — (21)
— — 41 41 — —
— —
(117) 14 — (103) 192 — — 192
(99) — — (99) — —
— 225
12 — (1) 11 22 — 1 23
244 13 2 259 225 —
16
(11) (23)
49
(10)
146 95
61
Total
Nine Months
2015 2014
East West O ther Total East West O ther
© Talen Energy Corporation 2015 28
Regulation G Reconciliations
Quarter-to-date and Year-to-date Adjusted EBITDA Footnotes
(a) Sapphire has been classified as discontinued operations since its June 1, 2015 acquisition. This includes an impairment recorded
during the three and nine months ended September 30, 2015.
(b) Represents unrealized gains (losses) on derivatives. Amounts have been adjusted for option premiums of $5 million and $14 million
for the three and nine months ended September 30, 2015 and $2 million and $6 million for the same periods in 2014.
(c) For periods prior to June 2015, represents the portion of PPL's stock-based compensation cost allocable to Talen Energy. Amounts for
the 2014 periods were cash settled with a former affiliate.
(d) To mitigate the risk of oversupply, Talen Energy incurred pre-tax charges of $41 million for the three and nine months ended September
30, 2015 to reduce its 2015 – 2018 contracted coal deliveries.
(e) Includes charges for goodwill and certain long lived assets.
(f) In 2014, Talen Energy recorded $14 million and $17 million for the three and nine month periods to "Energy-related businesses"
revenues on the 2014 Statement of Income related to prior periods and the timing of revenue recognition for a mechanical contracting
and engineering subsidiary.
(g) In June 2014, Talen Energy Supply's largest IBEW local ratified a new three-year labor agreement. In connection with the new
agreement, estimated bargaining unit one-time voluntary retirement benefits were recorded. In addition, the three and nine month
periods in 2014 include separation costs related to the spinoff transaction.
(h) Operations were suspended and the Corette plant was retired in March 2015.
(i) Represents net realized gains on certain derivative contracts that were early-terminated due to the spinoff transaction.
(j) Relates to a prior period revenue adjustment for the receipt of revenue under a transmission operating agreement with Talen Energy
Supply's former affiliate, PPL Electric.
(k) Costs related to the spinoff transaction, including FERC-required mitigation plan expenses and legal and professional fees.
(l) All periods include OCI amortization on non-active derivative positions and the 2015 periods include an asset write-off.
© Talen Energy Corporation 2015 29
Regulation G Reconciliations
Year-to-Date Adjusted Free Cash Flow ($ in millions)
(a) Operations were suspended and the Corette plant was retired in March 2015.
(b) Costs related to the spinoff transaction, including FERC-required mitigation plan expenses and legal and professional fees.
Nine Months Ended September 30,
2015 2014
Cash from Operations $ 731 $ 465
Capital Expenditures, excluding growth (265 ) (299 )
Counterparty collateral paid (received) (76 ) 18
Adjusted Free Cash Flow, including other adjustments 390
184
Cash adjustments (after tax):
Coal contract adjustment 25 —
Transition Services Agreement costs 11 —
Separation benefits 1 18
Corette closure costs (a) 2 —
RJS transaction costs 4 —
Restructuring costs (b) 6 —
Adjusted Free Cash Flow $ 439 $ 202
© Talen Energy Corporation 2015 30
Regulation G Reconciliations
Adjusted EBITDA Forecast ($ in millions)
(a) 2015 forecasted amounts include twelve months of performance from RJS, including the five-month period prior to acquisition and an adjustment for PPL allocations not expected to
continue in future periods, and have not been adjusted to reflect the acquisition of MACH Gen, LLC or the sale of Talen Renewable Energy.
(b) 2016 forecasted amounts have been adjusted to reflect the acquisition of MACH Gen, LLC and to remove the operations associated with the sales of Talen Renewable Energy and the
Ironwood, Holtwood, Lake Wallenpaupack and C.P. Crane plants. Does not include the impact of the sales transactions gain or loss or related tax effects.
(c) Low, midpoint and high 2015 amounts include $33 million of allocations from PPL and $33 million of TSA costs that are not expected to continue in future periods.
(d) Restructuring costs that are not expected to continue in future periods.
Low -
2015E (a) Midpoint -
2015E (a) High -
2015E (a)
Midpoint
2016E -
Adjusted for
Anticipated
Sales (b)
Net Income (Loss) $ (388 ) $ (373 ) $ (358 ) $ 77
Income Taxes (37 ) (27 ) (17 ) 41
Interest Expense 363 363 363 225
Depreciation and Amortization 401 401 401 409
EBITDA 339 364 389 752
Non-Cash Compensation 45 45 45 21
Asset Retirement Obligation 34 34 34 37
MTM losses (gains) (101 ) (101 ) (101 ) —
Nuclear decommissioning trust losses (gains) (12 ) (12 ) (12 ) (10 )
Impairments 588 588 588
Adjusted EBITDA, including other adjustments 893 918 943 800
Other Adjustments:
Transition Services Agreement costs and allocations (c) 66 66 66 45
Other (d) 91 91 91 —
Adjusted EBITDA $ 1,050 $ 1,075 $ 1,100 $ 845
© Talen Energy Corporation 2015 31
Regulation G Reconciliations
Adjusted Free Cash Flow Forecast ($ in millions)
(a) 2015 forecasted amounts include twelve months of performance from RJS, including the five-month period prior to acquisition and an
adjustment for PPL allocations not expected to continue in future periods, and have not been adjusted to reflect the acquisition of MACH Gen,
LLC or the sale of Talen Renewable Energy.
(b) 2016 forecasted amounts have been adjusted to reflect the acquisition of MACH Gen, LLC and to remove the operations associated with the
sales of Talen Renewable Energy and the Ironwood, Holtwood, Lake Wallenpaupack and C.P. Crane plants. Does not include the impact of the
sales transaction s proceeds or related gain or loss and tax effects.
(c) Low, midpoint and high 2015 amounts include $19 million of allocations from PPL and $20 million of TSA costs that are not expected to
continue in future periods.
(d) Restructuring and certain other costs that are not expected to continue in future periods.
(e) Does not include growth capital expenditures of $38 million in 2015 and $84 million in 2016.
Low - 2015E
(a) Midpoint -
2015E (a) High -
2015E (a)
Midpoint
2016E -
Adjusted for
Anticipated
Sales (b)
Cash from Operations $ 870 $ 885 $ 900 $ 698
Capital Expenditures, excluding growth (500 ) (490 ) (480 ) (465 )
Counterparty collateral paid (received) (76 ) (76 ) (76 ) —
Adjusted Free Cash Flow, including other adjustments 294 319 344 233
Cash adjustments (after tax):
Transition Services Agreement costs and allocations (c) 39 39 39 27
Other (d) 42 42 42 —
Adjusted Free Cash Flow (e) $ 375 $ 400 $ 425 $ 260
© Talen Energy Corporation 2015 32
Forward-Looking Information Statement Statements contained in this presentation, including statements with respect to future earnings, EBITDA, Adjusted EBITDA, Adjusted Free
Cash Flow results, net debt, cash flows, tax attributes, financing, regulation and corporate strategy are "forward-looking statements" within
the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “anticipate,” ”intend,” “plan,”
“estimate,” “target,” “project,” “forecast,” “seek,” “will,” “may,” “should,” “could,” “would” or similar expressions. Although Talen Energy
Corporation believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these
statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results discussed in the
statements. Among the important factors that could cause actual results to differ materially from the forward-looking statements are:
market demand and prices for energy, capacity and fuel; weather conditions affecting customer energy usage and operating costs;
competition in power markets; the effect of any business or industry restructuring; the profitability and liquidity of Talen Energy Corporation
and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance
of generating plants and other facilities; unanticipated difficulties or delays in our ability to successfully integrate the RJS Power
businesses and to achieve anticipated synergies and cost savings as a result of the spinoff transaction and combination with RJS Power
delays in and/or additional costs to complete the proposed sales of Ironwood, East Hydro and C.P. Crane and/or the Brunner Island dual-
fuel project; unforeseen difficulties in successfully integrating the MACH Gen power facilities into Talen Energy's portfolio and/or in
successfully executing efforts to optimize and/or monetize the value of the Harquahala plant; unexpected costs or liabilities associated
with the MACH Gen power facilities; the length of scheduled and unscheduled outages at our generating plants; environmental conditions
and requirements and the related costs of compliance, including environmental capital expenditures and emission allowance and other
expenses; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures;
asset or business acquisitions and dispositions; receipt of necessary governmental permits or approvals; Talen Energy’s level of
indebtedness; capital market conditions and decisions regarding capital structure; the impact of state, federal or foreign investigations
applicable to Talen Energy Corporation and its subsidiaries; the outcome of litigation against Talen Energy Corporation and its
subsidiaries; stock price performance; the market prices of equity securities and the impact on pension income and resultant cash funding
requirements for defined benefit pension plans; the securities and credit ratings of Talen Energy Corporation and its subsidiaries; political,
regulatory or economic conditions in states, regions or countries where Talen Energy Corporation or its subsidiaries conduct business,
including any potential effects of threatened or actual terrorism or war or other hostilities; foreign exchange rates; new state, federal or
foreign legislation, including new tax legislation; changes in earnings estimates or buy/sell recommendations by analysts; volatility in
market demand and prices for energy, capacity, transmission services, emission allowances and RECs; competition in retail and
wholesale power and natural gas markets; and the commitments and liabilities of Talen Energy Corporation and its subsidiaries. Any such
forward-looking statements should be considered in light of such important factors and in conjunction with Talen Energy Corporation's
prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on November 3, 2015 and its other reports on
file with the Securities and Exchange Commission.
© Talen Energy Corporation 2015 33
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 adjusted for certain non-cash and other
items that management believes are not indicative of ongoing operations including, but not limited to, unrealized gains and losses
on derivative contracts, stock-based compensation expense, asset retirement obligation accretion, gains and losses on securities in
the NDT funds, impairments, gains or losses on sales, dispositions or retirements of assets, debt extinguishments and transition,
transaction and restructuring costs. EBITDA and Adjusted EBITDA are not intended to represent cash flows from operations,
operating income (loss) or net income (loss) as defined by U.S. Generally Accepted Accounting Principles ("GAAP") as indicators of
operating performance and are not necessarily comparable to similarly-titled measures reported by other companies. Management
cautions investors that amounts presented in accordance with Talen Energy’s definitions of EBITDA and Adjusted EBITDA may not
be comparable to similar measures disclosed by other companies because not all companies calculate EBITDA and Adjusted
EBITDA in the same manner. Talen Energy believes EBITDA and Adjusted EBITDA are useful to investors in evaluating Talen
Energy’s operating performance because they provide additional tools to compare business performance across companies and
across periods. Talen Energy believes that EBITDA is widely used by investors to measure a company’s operating performance
without regard to such items as interest expense, income taxes, depreciation and amortization, which can vary substantially from
company to company depending upon accounting methods and book value of assets, capital structure and the method by which
assets were acquired. Additionally, Talen Energy believes that investors commonly adjust EBITDA information to eliminate the
effect of restructuring and other expenses, which vary widely from company to company and impair comparability. Talen Energy
adjusts for these and other items, as management believes that these items would distort their ability to efficiently view and assess
the company’s core operating trends. In summary, management uses EBITDA and Adjusted EBITDA as measures of operating
performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as
measures for planning and forecasting overall expectations and for evaluating actual results against such expectations, as
measures of certain corporate financial goals used to determine variable compensation and in communications with the Talen
Energy Corporation Board of Directors, senior management, shareholders, creditors, analysts and investors concerning Talen
Energy’s financial performance. Net debt as presented in this presentation represents total debt less cash and cash equivalents.
Definitions of Non-GAAP Financial Measures
© Talen Energy Corporation 2015 34
Adjusted Free Cash Flow represents Cash from Operations less capital expenditures, excluding growth-related capital
expenditures, adjusted for changes in counterparty collateral and further adjusted for after-tax transaction and restructuring costs,
and certain other after-tax cash items that management believes are not indicative of ongoing operations. Adjusted Free Cash Flow
should not be considered an alternative to Cash from Operations, which is determined in accordance with GAAP. Talen Energy
believes that Adjusted Free Cash Flow although a non-GAAP measure, is an important measure to both management and investors
as an indicator of the company’s ability to sustain operations without additional outside financing beyond the requirement to fund
maturing debt obligations. This measure is not necessarily comparable to similarly-titled measures reported by other companies as
they may be calculated differently.
Net debt as presented in this presentation represents total debt less cash and cash equivalents
Definitions of Non-GAAP Financial Measures