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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-28 · 219 added, 420 removed, 227 unchanged (74% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Annual Financial Statements and the accompanying notes.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Annual Financial Statements and the accompanying notes included elsewhere in this Report.

This MD&A discusses activity for the years ended December 31, 2025 (Successor) and December 31, 2024 (Successor).

The operating results for the period from May 18 through December 31, 2023 (Successor) and for the period from January 1 through May 17, 2023 (Predecessor) are not comparable with the operating results for the years presented in this MD&A due to the application of fresh start accounting after our Emergence from Restructuring in May 2023.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on Form 10-K, filed with the SEC on February 28, 2025, for a discussion of the activities and results of operations for each of these periods.

The discussion contains forward-looking statements as well as estimates regarding market and industry data, which involve risks, uncertainties, and assumptions.

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Recent Developments

Common Stock Transactions

Share Repurchases.

During the year ended December 31, 2024 (Successor), we repurchased and retired a total of 13,227,222 shares, or approximately 22%, of TEC’s outstanding common stock through a combination of the SRP and direct repurchases from affiliates of Rubric Capital Management LP (collectively, “Rubric”) .

(i) 7,307,300 shares were purchased from Rubric;

(ii) 5,275,862 shares through a tender offer;

and (iii) 644,060 shares in the open market.

The aggregate purchase price after transaction fees and excise tax was approximately $2.0 billion at a weighted average price of $149.50 per share.

As of December 31, 2024 (Successor), the remaining capacity under the SRP is approximately $1.1 billion through 2026.

See Note 18 to the Annual Financial Statements for additional information on the SRP, other share repurchases, and other common stock transactions.

Financing Transactions

S ecured Notes Consent.

In January 2025, we received consents from noteholders representing a majority in principal amount of the Secured Notes to adopt certain amendments to the Indenture to, among other things:

(i) modify certain provisions, including certain covenants and related definitions, in order to substantially conform to the corresponding amendments to the Credit Agreement obtained in the December 2024 transactions discussed below;

and (ii) waive TES’s right to optionally redeem up to 10% of the Secured Notes at a price of 103% of par prior to June 1, 2025.

December 2024 Financing Activities.

In December 2024, we completed several financing transactions that resulted in the:

(i) issuance of $380 million in net additional long-term indebtedness through full repayment of the TLC utilizing restricted cash collateralizing the TLC and issuance of the TLB-2 (at an initial rate of SOFR + 2.5%);

(ii) issuance of the new $900 million LCF and termination of the TLC LCF and Bilateral LCF, which had the combined effect of increasing our LC capacity by $355 million;

and (iii) favorable repricing and covenant improvements on the existing TLB-1 and RCF (repriced to initial rates of SOFR + 2.5% and SOFR + 2.0%, respectively) as well an extension of the RCF maturity.

The proceeds of the TLB-2 issuance were used, together with cash on hand, to repurchase shares of our outstanding common stock held by Rubric.

See Note 13 to the Annual Financial Statements for additional information on long-term debt, other credit facilities, and recent financing activities.

Power Transactions

In connection with the AWS Data Campus Sale in 2024, we and AWS entered into the AWS PPA, pursuant to which we agreed to supply long-term, carbon-free power from Susquehanna to the AWS Data Campus through fixed-price power commitments.

Under the AWS PPA, AWS has minimum contractual power commitments that increase in 120 MW increments annually (or earlier, at AWS’s option), with a one-time option to either cap commitments at 480 MW or otherwise purchase, in continuing annual steps, up to 960 MW.

Each step up in capacity commitment has a fixed price for an initial 10-year term, after which AWS has the option to renew each step at a price that includes a fixed margin above then-applicable PJM energy and capacity prices.

The initial term of the AWS PPA is 18 years, with two 10-year extensions at AWS’s option.

Under a separate agreement, we will receive additional revenue from AWS related to the sales of carbon-free energy to the grid.

We expect to begin receiving initial revenues from power sales in 2025.

See Note 20 to the Annual Financial Statements for additional information on the AWS Data Campus Sale.

Susquehanna ISA Amendment.

In November 2024, FERC issued an order denying the Susquehanna ISA Amendment between PJM, PPL Corporation, and Susquehanna that would permit Susquehanna to decrease the amount of power supply it would otherwise provide to the power grid.

Such order does not have an impact on the existing ISA permitting 300 MW of co-located load at Susquehanna to supply power for the first phases of the AWS Data Campus.

In December 2024, FERC issued an order stating that it would address our request for rehearing in a future order, which FERC has not yet issued.

Due to FERC’s decision not to address the merits of our motion for rehearing, we have filed an appeal in the U.S.

Court of Appeals for the Fifth Circuit.

Delivery “behind-the-meter” of more than 300 MW of power under the AWS PPA requires that FERC approve an amended ISA between Susquehanna, PPL, and PJM.

Without an amendment we will be unable to deliver the full amount of contract volume under the AWS PPA on a behind-the-meter basis, which may require a contract renegotiation to deliver the additional power “in-front-of-the-meter.” See “Item 3.

Legal Proceedings” and “Item 1A.

Risk Factors—Regulatory, Environmental, and Legal Risks—Our business is subject to extensive energy-related regulation and oversight.” for additional information on the Susquehanna ISA Amendment.

Cornerstone Acquisition

On January 15, 2026, we entered into the Cornerstone Merger Agreement to acquire from affiliates of Energy Capital Partners (“ECP”) the 875 MW Waterford Energy Center and 456 MW Darby Generating Station, both located in Ohio, and the 1,120 MW Lawrenceburg Power Plant located in Indiana, for an aggregate purchase price of $3.45 billion, consisting of $2.55 billion in cash, subject to working capital and other customary adjustments, and 2,400,000 shares of Talen common stock, valued at approximately $900 million at the time of the entry into the Cornerstone Merger Agreement.

The Company expects the cash portion of the purchase price to be funded from the proceeds of new indebtedness.

The stock consideration will be subject to lock-ups of 90 days on 50% of the stock consideration and 180 days on the remaining stock consideration.

Form 10-K Table of Contents

Brandon Shores and H.A Wagner RMR Arrangements.

In 2023, we notified PJM of our intent to deactivate electric generation at both our Brandon Shores and H.A.

Wagner facilities on June 1, 2025.

However, PJM subsequently notified us that both Brandon Shores and H.A Wagner are needed past their previously planned retirement dates to maintain reliability in PJM.

In January 2025, we reached a settlement (which remains subject to FERC approval) with key stakeholders on the terms of an RMR arrangement and filed with FERC the resulting Joint Offers of Settlement regarding both facilities’ RMR Continuing Operations Rates Schedules.

If approved, the proposed RMR arrangements will extend the operating life of these plants through May 31, 2029, or until such time as the necessary transmission upgrades are placed into service.

See Note 10 to the Annual Financial Statements for additional information on the RMR proceedings and settlement and the related impairment of the Brandon Shores asset group.

The addition of these assets to Talen’s portfolio will increase generation capacity by approximately 2.5 GW of natural gas generation, substantially expanding Talen’s presence in the western PJM market and adding additional efficient baseload generation assets to its fleet.

In connection with the stock consideration, at the closing of the Cornerstone Acquisition, we intend to enter into the Cornerstone RRA with certain parties thereto substantially in the form attached to this Report as Exhibit 4.16.

Pursuant to the terms of the Cornerstone RRA, the Company will agree to use its commercially reasonable efforts to file a registration statement on Form S-3 under the Securities Act of 1933, as amended, to register the TEC common stock issued pursuant to the Cornerstone Merger Agreement with the SEC within three business days (and in any event within five business days) after issuance.

What changed 10-K

Item 7. Management’s Discussion and Analysis