Talen Energy Reports First Quarter Results, Increases 2024 Guidance for Remaining Fleet and Announces Upsizing of Share Repurchase Program to $1 Billion
"We are pleased today to report Talen's strong start to the year. Building on our Q1 results, we are raising guidance for 2024 and announcing an increase in our remaining share repurchase capacity to
"Specifically, we are increasing our 2024 Adjusted EBITDA and Adjusted Free Cash Flow guidance ranges to reflect forward spark spread expansion and lower debt service costs, while also removing go-forward earnings from the
McFarland continued, "We believe it is an exciting time to be an IPP focused on reliable and dispatchable generation. Talen sits at the intersection of several key value drivers: growing power demand from data centers – where we have a first mover advantage, strengthening power markets, and the Nuclear PTC. We have already demonstrated our ability to deliver value from these drivers and believe we have multiple future levers that will allow us to continue these efforts and further grow our cash flows. All the while, we remain focused on disciplined capital allocation and return of capital to shareholders."
Key Highlights
- Upsizing remaining share repurchase capacity to
$1 billion through 2025. - For first quarter 2024, reported Adjusted EBITDA of
$289 million and Adjusted Free Cash Flow of $194 million. - On
May 1, 2024 , completed the sale of approximately 1.7-gigawatt ("GW")ERCOT generation portfolio for $785 million in gross proceeds (approximately$723 million in net proceeds). - Increasing 2024 guidance ranges for forward spark spread expansion and lower debt service costs while also removing go-forward earnings from the
ERCOT plants. New Adjusted EBITDA range is$600 -$800 million , and new Adjusted Free Cash Flow range is$160 -$310 million . - On
May 8, 2024 , completed repricing of Term Loans B and C, resulting in approximately$13 million in expected annual interest savings and a waiver on required debt paydown related to theERCOT sale proceeds.
Summary of Financial and Operating Results (Unaudited) |
||
|
Three Months |
Three Months |
(Millions of Dollars Unless Otherwise Stated) |
2024 |
2023 |
Adjusted EBITDA |
$ 289 |
$ 660 |
Adjusted Free Cash Flow |
$ 194 |
$ 497 |
Total Generation (a) |
8.1 TWh |
6.6 TWh |
Carbon-Free Generation |
58 % |
63 % |
Total Recordable Incident Rate ("TRIR") (b) |
0.3 |
0.7 |
Equivalent Forced Outage Factor ("EFOF") (c) |
1.9 % |
1.5 % |
__________________ |
|
(a) |
Generated MWhs sold after consumption for station use where applicable. |
(b) |
TRIR is defined as the number of recordable incidents x 200,000 / total number of manhours worked. |
(c) |
EFOF is defined as the percentage of a given period in which a generating unit is not available due to forced outages and forced deratings. Represents all generation facilities, including our portion of partially-owned facilities. |
Given the impacts of fresh start accounting and the implementation of the plan of reorganization on GAAP earnings in 2023, Talen believes its non-GAAP financial measures of Adjusted EBITDA and Adjusted Free Cash Flow are more meaningful in evaluating its performance. Talen's management team evaluates its financial and operating results utilizing these non-GAAP measures.
For the three months ended
Talen achieved solid operational performance and maintained a continued emphasis on safety in Q1 2024, with Fleet EFOF of 1.9% and an OSHA TRIR of 0.3. Total generation was 8.1 terawatt hours ("TWh"), with 58% of that being carbon-free nuclear generation at Susquehanna.
Updating 2024 Guidance
($ in millions) |
Range |
|
Adjusted EBITDA |
|
|
Adjusted Free Cash Flow |
|
Talen is increasing our 2024 Adjusted EBITDA and Adjusted Free Cash Flow guidance ranges to reflect forward spark spread expansion and lower debt service costs, while also updating to account for the sale of the
ERCOT Generation Sale
On
Term Loan Repricing
On
Update on Share Repurchase Program
In
Balance Sheet and Liquidity
Talen is focused on maintaining a strong balance sheet, targeting a net leverage ratio of less than 3.5x net debt-to-Adjusted EBITDA, along with maintaining ample liquidity. As of
Update on Hedging Activities and Nuclear Fuel Supply
As of
As an update on nuclear fuel supply activities, Talen has no
Earnings Call
The Company will hold an earnings call on
About Talen
Talen owns and operates approximately 10.7 gigawatts of power infrastructure in
Talen trades on the OTCQX® Best Market under the ticker "TLNE." OTCQX companies meet high financial standards, follow best practice corporate governance, demonstrate compliance with
Additional Information
For additional information and updates about Talen, please visit our Investor Relations webpage at https://talenenergy.investorroom.com, or contact:
Investor Relations:
Senior Director, Investor Relations
InvestorRelations@talenenergy.com
Media:
Director, Corporate Communications
Taryne.Williams@talenenergy.com
TALEN ENERGY CORPORATION AND SUBSIDIARIES |
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
|
||||
|
Successor |
|
|
Predecessor |
(Millions of Dollars, except share data) |
Three Months |
|
|
Three Months |
Capacity revenues |
$ 45 |
|
|
$ 66 |
Energy and other revenues |
572 |
|
|
862 |
Unrealized gain (loss) on derivative instruments |
(108) |
|
|
145 |
Operating Revenues |
509 |
|
|
1,073 |
|
|
|
|
|
Energy Expenses |
|
|
|
|
Fuel and energy purchases |
(150) |
|
|
(107) |
Nuclear fuel amortization |
(35) |
|
|
(24) |
Unrealized gain (loss) on derivative instruments |
(27) |
|
|
(114) |
Total Energy Expenses |
(212) |
|
|
(245) |
|
|
|
|
|
Operating Expenses |
|
|
|
|
Operation, maintenance and development |
(154) |
|
|
(177) |
General and administrative |
(43) |
|
|
(29) |
Depreciation, amortization and accretion |
(75) |
|
|
(132) |
Impairments |
— |
|
|
(365) |
Other operating income (expense), net |
— |
|
|
(9) |
Operating Income (Loss) |
25 |
|
|
116 |
|
|
|
|
|
Nuclear decommissioning trust funds gain (loss), net |
75 |
|
|
46 |
Interest expense and other finance charges |
(59) |
|
|
(104) |
Reorganization income (expense), net |
— |
|
|
(39) |
Gain (loss) on sale of assets, net |
324 |
|
|
— |
Other non-operating income (expense), net |
23 |
|
|
41 |
Income (Loss) Before Income Taxes |
388 |
|
|
60 |
Income tax benefit (expense) |
(69) |
|
|
(14) |
Net Income (Loss) |
319 |
|
|
46 |
Less: Net income (loss) attributable to noncontrolling interest |
25 |
|
|
(2) |
Net Income (Loss) Attributable to Stockholders (Successor) / Member (Predecessor) |
$ 294 |
|
|
$ 48 |
Per Common Share (Successor) |
|
|
|
|
Net Income (Loss) Attributable to Stockholders - Basic |
$ 5.00 |
|
|
N/A |
Net Income (Loss) Attributable to Stockholders - Diluted |
$ 4.84 |
|
|
N/A |
Weighted-Average Number of Common Shares Outstanding - Basic (in thousands) |
58,807 |
|
|
N/A |
Weighted-Average Number of Common Shares Outstanding - Diluted (in thousands) |
60,716 |
|
|
N/A |
TALEN ENERGY CORPORATION AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
(Millions of Dollars, except share data) |
2024 |
Assets |
|
Cash and cash equivalents |
$ 597 |
Restricted cash and cash equivalents (Note 16) |
483 |
Accounts receivable, net (Note 4) |
126 |
Inventory, net (Note 6) |
279 |
Derivative instruments (Notes 3 and 12) |
14 |
Assets held for sale (Note 17) |
215 |
Other current assets (Note 17) |
383 |
Total current assets |
2,097 |
Property, plant and equipment, net (Note 8) |
3,359 |
Nuclear decommissioning trust funds (Notes 7 and 12) |
1,642 |
Derivative instruments (Notes 3 and 12) |
4 |
Other noncurrent assets |
163 |
Total Assets |
$ 7,265 |
|
|
Liabilities and Equity |
|
Long-term debt, due within one year (Notes 11 and 12) |
$ 9 |
Accrued interest |
61 |
Accounts payable and other accrued liabilities |
177 |
Derivative instruments (Notes 3 and 12) |
98 |
Liabilities held for sale (Note 17) |
17 |
Other current liabilities |
98 |
Total current liabilities |
460 |
Long-term debt (Notes 11 and 12) |
2,619 |
Derivative instruments (Notes 3 and 12) |
4 |
Postretirement benefit obligations (Note 13) |
367 |
Asset retirement obligations and accrued environmental costs (Note 9) |
471 |
Deferred income taxes (Note 5) |
460 |
Other noncurrent liabilities |
118 |
Total Liabilities |
4,499 |
|
|
Stockholders' Equity (Successor) |
|
Common stock ( |
— |
|
(39) |
Additional paid-in capital |
2,339 |
Accumulated retained earnings (deficit) |
428 |
Accumulated other comprehensive income (loss) |
(27) |
Total Stockholders' Equity (Successor) |
2,701 |
Noncontrolling interests |
65 |
Total Equity |
2,766 |
Total Liabilities and Equity |
$ 7,265 |
__________________ |
|
(a) |
Shares as of |
TALEN ENERGY CORPORATION AND SUBSIDIARIES |
||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
|
||||
|
Successor |
|
|
Predecessor |
(Millions of Dollars) |
Three Months |
|
|
Three Months |
Operating Activities |
|
|
|
|
Net income (loss) |
$ 319 |
|
|
$ 46 |
Non-cash reconciliation adjustments: |
|
|
|
|
Unrealized (gains) losses on derivative instruments |
128 |
|
|
(28) |
(Gain) loss on Cumulus Data Center Campus sale |
(324) |
|
|
— |
Nuclear fuel amortization |
35 |
|
|
24 |
Depreciation, amortization and accretion |
74 |
|
|
138 |
Impairments |
— |
|
|
365 |
Nuclear decommissioning trust funds (gain) loss, net (excluding interest and fees) |
(64) |
|
|
(37) |
Deferred income taxes |
57 |
|
|
— |
Other |
(42) |
|
|
(22) |
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable, net |
11 |
|
|
205 |
Inventory, net |
89 |
|
|
(6) |
Other assets |
(1) |
|
|
103 |
Accounts payable and accrued liabilities |
(154) |
|
|
(72) |
Accrued interest |
29 |
|
|
13 |
Other liabilities |
16 |
|
|
15 |
Net cash provided by (used in) operating activities |
173 |
|
|
744 |
Investing Activities |
|
|
|
|
Property, plant and equipment expenditures |
(25) |
|
|
(84) |
Nuclear fuel expenditures |
(41) |
|
|
(46) |
Nuclear decommissioning trust funds investment sale proceeds |
553 |
|
|
598 |
Nuclear decommissioning trust funds investment purchases |
(564) |
|
|
(608) |
Proceeds from Cumulus Data Center Campus Sale |
339 |
|
|
— |
Proceeds from the sale of non-core assets |
1 |
|
|
29 |
Other investing activities |
2 |
|
|
(7) |
Net cash provided by (used in) investing activities |
265 |
|
|
(118) |
Financing Activities |
|
|
|
|
LMBE-MC TLB payments |
— |
|
|
(7) |
Cumulus Digital TLF payments |
(182) |
|
|
— |
Share repurchases |
(30) |
|
|
— |
Repurchase of noncontrolling interest |
(39) |
|
|
— |
Derivatives with financing elements |
— |
|
|
(20) |
Other |
(8) |
|
|
(1) |
Net cash provided by (used in) financing activities |
(259) |
|
|
(28) |
Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash and Cash Equivalents |
179 |
|
|
598 |
Beginning of period cash and cash equivalents and restricted cash and cash equivalents |
901 |
|
|
988 |
End of period cash and cash equivalents and restricted cash and cash equivalents |
$ 1,080 |
|
|
$ 1,586 |
Non-GAAP Financial Measures
We include Adjusted EBITDA and Adjusted Free Cash flow, which the Company uses as measures of its performance and are not financial measures prepared under GAAP, in these materials. Non-GAAP financial measures do not have definitions under GAAP and may be defined and calculated differently by, and not be comparable to, similarly titled measures used by other companies. Non-GAAP measures are not intended to replace the most comparable GAAP measures as indicators of performance. Generally, non-GAAP financial measures are numerical measures of financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measures calculated and presented in accordance with GAAP. Management cautions readers of these materials not to place undue reliance on these non-GAAP financial measures, but to also consider them along with their most directly comparable GAAP financial measures. Non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP.
Adjusted EBITDA
We use Adjusted EBITDA to: (i) assist in comparing operating performance and readily view operating trends on a consistent basis from period to period without certain items that may distort financial results; (ii) plan and forecast overall expectations and evaluate actual results against such expectations; (iii) communicate with our Board of Directors, shareholders, creditors, analysts, and the broader financial community concerning our financial performance; (iv) set performance metrics for the Company's annual short-term incentive compensation; and (v) assess compliance with our indebtedness.
Adjusted EBITDA is computed as net income (loss) adjusted, among other things, for certain: (i) nonrecurring charges; (ii) non-recurring gains; (iii) non-cash and other items; (iv) unusual market events; (v) any depreciation, amortization, or accretion; (vi) mark-to-market gains or losses; (vii) gains and losses on the NDT; (viii) gains and losses on asset sales, dispositions, and asset retirement; (ix) impairments, obsolescence, and net realizable value charges; (x) interest expense; (xi) income taxes; (xii) legal settlements, liquidated damages, and contractual terminations; (xiii) development expenses; (xiv) noncontrolling interests; and (xv) other adjustments. Such adjustments are computed consistently with the provisions of our indebtedness to the extent that they can be derived from the financial records of the business. Pursuant to TES's debt agreements, Cumulus Digital contributes to Adjusted EBITDA beginning in the first quarter 2024, following termination of the Cumulus Digital credit facility and associated cash flow sweep.
Additionally, we believe investors commonly adjust net income (loss) information to eliminate the effect of nonrecurring restructuring expenses, and other non-cash charges which vary widely from company to company, from period to period, and impair comparability. We believe Adjusted EBITDA is useful to investors and other users of the financial statements to evaluate our operating performance because it provides an additional tool to compare business performance across companies and across periods. Adjusted EBITDA is widely used by investors to measure a company's operating performance without regard to such items described above. These adjustments can vary substantially from company to company depending upon accounting policies, book value of assets, capital structure and the method by which assets were acquired.
Adjusted Free Cash Flow
Adjusted Free Cash Flow, a key non-GAAP financial measure, is a useful metric utilized by our chief operating decision makers to evaluate cash flow activities. Adjusted Free Cash Flow is computed as Adjusted EBITDA reduced by capital expenditures (including nuclear fuel but excluding development, growth and (or) conversion capital expenditures), cash payments for interest and finance charges, cash payments for taxes (excluding income taxes paid from the nuclear facility decommissioning trust ("NDT")), and pension contributions.
We believe Adjusted Free Cash Flow is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to determine a company's ability to meet future obligations and to compare business performance across companies and across periods. Adjusted Free Cash Flow is widely used by investors to measure a company's levered cash flow without regard to items such as ARO settlements; nonrecurring development, growth and conversion expenditures; and cash proceeds or payments for the sale or purchase of assets, which can vary substantially from company to company and period to period depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Please see below for reconciliations of Adjusted EBITDA and Adjusted Free Cash Flow to "Net Income (Loss)," the most comparable GAAP financial measure. Adjusted EBITDA and Adjusted Free Cash Flow are not intended to replace "Net Income (Loss)," a measure calculated and presented in accordance with GAAP.
Forward Looking Statements
This communication contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this communication, or incorporated by reference into this communication, are forward-looking statements. Throughout this communication, we have attempted to identify forward-looking statements by using words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "forecasts," "goal," "intend," "may," "plan," "potential," "predict," "project," "seek," "should," "will," or other forms of these words or similar words or expressions or the negative thereof, although not all forward-looking statements contain these terms. Forward-looking statements address future events and conditions concerning, among other things capital expenditures, earnings, litigation, regulatory matters, hedging, liquidity and capital resources and accounting matters. Forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this communication. All of our forward-looking statements include assumptions underlying or relating to such statements that may cause actual results to differ materially from expectations, and are subject to numerous factors that present considerable risks and uncertainties.
The reconciliations from "Net Income (Loss)" presented on the Consolidated Statements of Operations to Adjusted EBITDA and Adjusted Free Cash Flow for the three months ended
|
Successor |
|
|
Predecessor |
|
2024 |
|
|
2023 |
Net Income (Loss) |
$ 319 |
|
|
$ 46 |
Adjustments |
|
|
|
|
Interest expense and other finance charges |
50 |
|
|
104 |
Income tax (benefit) expense |
69 |
|
|
14 |
Depreciation, amortization and accretion |
75 |
|
|
132 |
Nuclear fuel amortization |
35 |
|
|
24 |
Reorganization (gain) loss, net (a) |
— |
|
|
39 |
Unrealized (gain) loss on commodity derivative contracts |
134 |
|
|
(31) |
Nuclear decommissioning trust funds (gain) loss, net |
(75) |
|
|
(46) |
Stock-based compensation expense |
8 |
|
|
— |
Long-term incentive compensation expense |
10 |
|
|
— |
(Gain) loss on non-core asset sales, net (b) |
(324) |
|
|
(35) |
Non-cash impairments (c) |
— |
|
|
365 |
Legal settlements and litigation costs (d) |
(2) |
|
|
— |
Unusual market events (e) |
(1) |
|
|
13 |
Net periodic defined benefit cost (f) |
— |
|
|
(2) |
Operational and other restructuring activities |
2 |
|
|
8 |
Development expenses |
— |
|
|
7 |
Non-cash inventory net realizable value, obsolescence, and other charges (g) |
1 |
|
|
24 |
Noncontrolling interest |
(11) |
|
|
(3) |
Other |
(1) |
|
|
1 |
Total Adjusted EBITDA |
$ 289 |
|
|
$ 660 |
|
|
|
|
|
Capital expenditures, net |
(59) |
|
|
(65) |
Interest and finance charge payments |
(34) |
|
|
(98) |
Tax payments |
— |
|
|
— |
Pension contributions |
(2) |
|
|
— |
Total Adjusted Free Cash Flow |
$ 194 |
|
|
$ 497 |
_______________ |
|
(a) |
See Note 2 in Notes to the Interim Financial Statements for additional information. |
(b) |
See Note 17 in Notes to the Interim Financial Statements for additional information. |
(c) |
See Note 8 in Notes to the Interim Financial Statements for additional information. |
(d) |
See Note 10 in Notes to the Interim Financial Statements for additional information. |
(e) |
Adjustments of PJM capacity penalty charges related to Winter Storm Elliott. |
(f) |
Consists of postretirement benefits service cost and postretirement benefits gain (loss). |
(g) |
See Note 6 in Notes to the Interim Financial Statements for additional information. |
Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: 2024 Guidance |
|||
|
|||
|
2024E |
||
(Millions of dollars) |
Low |
|
High |
Net Income (Loss) |
$ 125 |
|
$ 325 |
|
|
|
|
Adjustments |
|
|
|
Interest expense and other finance charges |
$ 270 |
|
$ 270 |
Income tax (benefit) expense |
25 |
|
25 |
Depreciation, amortization and accretion |
290 |
|
290 |
Nuclear fuel amortization |
90 |
|
90 |
Unrealized (gain) loss on commodity derivative contracts |
135 |
|
135 |
(Gain) loss on non-core asset sales |
(325) |
|
(325) |
Other |
(10) |
|
(10) |
Adjusted EBITDA |
$ 600 |
|
$ 800 |
|
|
|
|
Capital expenditures, net (a) |
$ (155) |
|
$ (185) |
Interest and finance charge payments (b) |
(240) |
|
(240) |
Tax payments |
(10) |
|
(20) |
Pension contributions |
(35) |
|
(45) |
Adjusted Free Cash Flow |
$ 160 |
|
$ 310 |
_______________ |
|
Note: Figures include Cumulus and are rounded to the nearest $5mm. |
|
(a) |
There are no material Cumulus maintenance capital expenditures. |
(b) |
Excluding income taxes paid from the NDT. |
SOURCE