What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-13 · 390 added, 447 removed, 735 unchanged (53% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Successor Predecessor Successor Predecessor

(Millions of Dollars, except share data) Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

(Millions of Dollars, except share data) Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Capacity revenues $ 50 $ 44 $ 141 $ 70 $ 108

Energy and other revenues 505 600 1,444 788 1,042

Unrealized gain (loss) on derivative instruments 76 87 ( 85 ) ( 32 ) 87 60

Operating Revenues 489 301 137 998 301 1,210

Unrealized gain (loss) on derivative instruments (Note 3) 95 ( 128 ) 63 ( 41 ) 60

Operating Revenues (Note 4) 650 516 1,648 817 1,210

Fuel and energy purchases ( 222 ) ( 253 ) ( 535 ) ( 310 ) ( 176 )

Nuclear fuel amortization ( 30 ) ( 47 ) ( 93 ) ( 72 ) ( 33 )

Unrealized gain (loss) on derivative instruments 15 ( 46 ) ( 9 ) ( 12 ) ( 46 ) ( 123 )

Unrealized gain (loss) on derivative instruments (Note 3) 7 44 ( 5 ) ( 2 ) ( 123 )

Energy Expenses ( 245 ) ( 256 ) ( 633 ) ( 384 ) ( 332 )

2 unchanged sentences

General and administrative ( 38 ) ( 37 ) ( 121 ) ( 55 ) ( 51 )

Depreciation, amortization and accretion ( 75 ) ( 28 ) ( 68 ) ( 150 ) ( 28 ) ( 200 )

Impairments — — ( 16 ) — — ( 381 )

Operational restructuring ( 1 ) — — ( 1 ) — —

Depreciation, amortization and accretion (Note 8) ( 75 ) ( 66 ) ( 225 ) ( 94 ) ( 200 )

Impairments (Note 8) — ( 2 ) — ( 2 ) ( 381 )

Other operating income (expense), net ( 7 ) ( 8 ) ( 14 ) ( 11 ) ( 37 )

1 unchanged sentence

Nuclear decommissioning trust funds gain (loss), net 67 ( 24 ) 169 15 57

Interest expense and other finance charges ( 62 ) ( 33 ) ( 59 ) ( 121 ) ( 33 ) ( 163 )

Interest expense and other finance charges (Note 11) ( 66 ) ( 68 ) ( 187 ) ( 101 ) ( 163 )

Reorganization income (expense), net — — — — 799

2 unchanged sentences

Income (Loss) Before Income Taxes 179 ( 92 ) 1,137 ( 42 ) 677

Income tax benefit (expense) ( 112 ) ( 19 ) ( 198 ) ( 181 ) ( 19 ) ( 212 )

Income tax benefit (expense) (Note 5) ( 11 ) 16 ( 192 ) ( 3 ) ( 212 )

Net Income (Loss) 168 ( 76 ) 945 ( 45 ) 465

2 unchanged sentences

Per Common Share (Successor)

Net Income (Loss) Attributable to Stockholders - Basic $ 7.90 $ 0.49 N/A $ 12.87 $ 0.49 N/A

Net Income (Loss) Attributable to Stockholders - Diluted 7.60 0.49 N/A 12.41 0.49 N/A

Weighted-Average Number of Common Shares Outstanding - Basic (in thousands) 57,434 59,029 N/A 58,119 59,029 N/A

Weighted-Average Number of Common Shares Outstanding - Diluted (in thousands) 59,775 59,088 N/A 60,269 59,088 N/A

Net Income (Loss) Attributable to Stockholders - Basic $ 3.30 $ ( 1.30 ) $ 16.44 $ ( 0.81 ) N/A

Net Income (Loss) Attributable to Stockholders - Diluted 3.16 ( 1.30 ) 15.86 ( 0.81 ) N/A

Weighted-Average Number of Common Shares Outstanding - Basic (in thousands) 50,924 59,029 55,703 59,029 N/A

Weighted-Average Number of Common Shares Outstanding - Diluted (in thousands) 53,169 59,029 57,756 59,029 N/A

The accompanying Notes to the Interim Financial Statements are an integral part of the financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Successor Predecessor Successor Predecessor

(Millions of Dollars) Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

(Millions of Dollars) Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Net Income (Loss) $ 168 $ ( 76 ) $ 945 $ ( 45 ) $ 465

1 unchanged sentence

Available-for-sale securities unrealized gain (loss), net 17 ( 20 ) 5 ( 26 ) 6

Postretirement benefit prior service (credits) costs, net 21 — 21 — —

Income tax benefit (expense) ( 7 ) 7 ( 2 ) 9 ( 2 )

12 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Millions of Dollars, except share data) June 30, 2024 December 31, 2023

(Millions of Dollars, except share data) September 30, 2024 December 31, 2023

Cash and cash equivalents $ 648 $ 400

Restricted cash and cash equivalents (Note 16) 484 501

Accounts receivable, net (Note 4) 151 137

Accounts receivable (Note 4) 97 137

Inventory, net (Note 6) 297 375

Derivative instruments (Notes 3 and 12) 50 89

Other current assets (a)

Other current assets 97 52

Total current assets 1,673 1,554

20 unchanged sentences

Stockholders’ Equity

Common stock ($ 0.001 par value 350,000,000 shares authorized) (b) (c)

Common stock ($ 0.001 par value 350,000,000 shares authorized) (a)(b)

Additional paid-in capital 1,980 2,346

6 unchanged sentences

__________________

(a) Includes $ 300 million of proceeds from the Cumulus Data Campus Sale held in escrow.

(b) As of June 30, 2024 (Successor):

53,259,981 shares issued, 53,254,954 shares outstanding, and 5,027 shares held as treasury stock.

(a) As of September 30, 2024 (Successor):

50,855,417 shares issued and outstanding,

(b) As of December 31, 2023 (Successor):

59,028,843 shares issued and outstanding.

The accompanying Notes to the Interim Financial Statements are an integral part of the financial statements.

2 unchanged sentences

Successor Predecessor

(Millions of Dollars) Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

(Millions of Dollars) Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Operating Activities

32 unchanged sentences

Successor Predecessor

(Millions of Dollars) Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

(Millions of Dollars) Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Financing Activities

3 unchanged sentences

Payment of make-whole premiums on Prepetition Secured Indebtedness — — ( 152 )

TLB proceeds, net — 289 —

LMBE-MC TLB payments — ( 294 ) ( 7 )

4 unchanged sentences

Deferred finance costs — ( 4 ) ( 74 )

Repurchase of warrants — ( 40 ) —

Derivatives with financing elements — — ( 20 )

14 unchanged sentences

Other comprehensive income (loss) — — — ( 4 ) — — ( 4 )

Share repurchase ( 493 ) — — — ( 39 ) — ( 39 )

Share repurchases ( 493 ) — — — ( 39 ) — ( 39 )

Purchase of noncontrolling interest (c)

15 unchanged sentences

June 30, 2024 (Successor) 53,255 $ 2,092 $ 448 $ ( 29 ) $ — $ 61 $ 2,572

Net income (loss) — — 168 — — — 168

Other comprehensive income (loss) — — — 24 — — 24

Share repurchases ( 2,560 ) — — — ( 304 ) — ( 304 )

Retirement of treasury stock — ( 100 ) ( 204 ) — 304 — —

Cash settlement of restricted stock units — ( 3 ) — — — — ( 3 )

Exercise of warrants 160 ( 16 ) — — — — ( 16 )

Non-cash distributions (b)

— — — — — ( 3 ) ( 3 )

Stock-based compensation — 7 — — — — 7

September 30, 2024 (Successor) 50,855 $ 1,980 $ 412 $ ( 5 ) $ — $ 58 $ 2,445

__________________

(a) Shares in thousands.

(b) Related primarily to distribution of Bitcoin to TeraWulf.

(b) Related primarily to distributions of Bitcoin to TeraWulf.

See Note 15 for additional information.

(d) Distribution to noncontrolling interest owners of Cumulus Digital Holdings.

(d) Distributions to noncontrolling interest owners of Cumulus Digital Holdings.

The accompanying Notes to the Interim Financial Statements are an integral part of the financial statements.

21 unchanged sentences

Common equity from member's equity exchange 59,029 2,321 — — ( 2,321 ) — —

Non-cash distributions (d)

Non-cash distributions (b)

— — — — — ( 3 ) ( 3 )

7 unchanged sentences

June 30, 2023 (Successor) 59,029 $ 2,325 $ 29 $ ( 3 ) $ — $ 109 $ 2,460

Net income (loss) — — ( 77 ) — — 1 ( 76 )

Other comprehensive income (loss) — — — ( 9 ) — — ( 9 )

Repurchase of NCI — 5 — — — ( 24 ) ( 19 )

Non-cash distributions (d)

— — — — — ( 5 ) ( 5 )

Other — 7 — — — — 7

September 30, 2023 (Successor) 59,029 $ 2,337 $ ( 48 ) $ ( 12 ) $ — $ 81 $ 2,358

__________________

(a) Shares in thousands.

23 unchanged sentences

The majority of our generation is produced at our zero-carbon nuclear and lower-carbon gas-fired facilities.

As of June 30, 2024 (Successor), our generation capacity was 10,665 MW (summer rating).

As of September 30, 2024 (Successor), our generation capacity was 10,676 MW (summer rating).

Talen is headquartered in Houston, Texas.

10 unchanged sentences

The Interim Financial Statements and Notes thereto should be read in conjunction with the Annual Financial Statements and Notes thereto.

The results of operations presented in our Interim Financial Statements are not necessarily indicative of the results to be expected for the full year or for other future periods because interim period results can be disproportionately influenced by operational developments, seasonality, and other various factors.

Emergence from Restructuring, Fresh Start Accounting, and Reverse Acquisition.

12 unchanged sentences

(i) the Predecessor period from January 1 through May 17, 2023;

and (ii) the Successor periods from May 18 through June 30, 2023, and from January 1 through June 30, 2024.

and (ii) the Successor periods from May 18 through September 30, 2023, and from January 1 through September 30, 2024.

The Interim Financial Statements and Notes thereto have been presented with a black line division to delineate the lack of comparability between the Predecessor and Successor.

11 unchanged sentences

At retirement, the common stock balance is reduced for the par value of the shares.

The excess of the acquisition cost of treasury shares over the par value is recognized in additional paid-in capital (up to the amount credited to additional paid-in capital upon original issuance of the shares), with any remaining cost deducted from retained earnings.

The excess of the acquisition cost of repurchased shares over the par value is recognized in additional paid-in capital (up to the amount credited to additional paid-in capital upon original issuance of the shares), with any remaining cost deducted from retained earnings.

Nuclear PTCs.

6 unchanged sentences

Credits that are utilized to reduce federal income taxes payable are presented as a reduction of “Other current liabilities” on the Consolidated Balance Sheets.

There have been no transfers of Nuclear PTCs to third parties during the six months ended June 30, 2024 (Successor).

There have been no transfers of Nuclear PTCs to third parties during the nine months ended September 30, 2024 (Successor).

Additional guidance expected to be issued from the U.S.

Treasury and IRS may impact the credit value received.

Treasury and IRS may impact the credit value recognized.

See Note 2 in Notes to the Annual Financial Statements for additional information on significant accounting policies.

18 unchanged sentences

Within the parameters of our risk policy, we generally utilize conventional first lien, exchange-traded, and over-the-counter traded derivative instruments and, in certain instances, structured products, to economically hedge the commodity price risk of the forecasted future sales and purchases of commodities associated with our generation portfolio.

Open commodity purchase (sales) derivatives as of June 30, 2024 (Successor) range in maturity through 2026.

Open commodity purchase (sales) derivatives as of September 30, 2024 (Successor) range in maturity through 2026.

The net notional volumes of open commodity derivatives were:

June 30, 2024 (a)

September 30, 2024 (a)

December 31, 2023 (a)

8 unchanged sentences

To the extent possible, first lien interest rate fixed-for-floating swaps are utilized to hedge this risk.

Open interest rate derivatives are related to the TLB indebtedness and range in maturity dates through 2026.

Open interest rate derivatives are related to the TLB indebtedness and mature in 2026.

The net notional volumes of open interest rate derivatives were:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Interest rate (in millions)

1 unchanged sentence

The maximum amount of credit exposure associated with financial assets is equal to the carrying value.

Credit risk, which cannot be completely eliminated, is managed through a number of practices such as ongoing reviews of counterparty creditworthiness, prepayment, inclusion of termination rights in contracts which are triggered by certain events of default and executing master netting arrangements which permit amounts between parties to be offset.

Credit risk, which cannot be completely eliminated, is managed through a number of practices such as ongoing reviews of counterparty creditworthiness, prepayment, inclusion of termination rights in contracts which are triggered by certain events of default, and executing master netting arrangements that permit amounts between parties to be offset.

Additionally, credit enhancements such as cash deposits, LCs, and credit insurance may be employed to mitigate credit risk.

7 unchanged sentences

The majority of outstanding receivables, which are continually monitored, have customary payment terms.

The allowance for doubtful accounts was a non-material amount as of June 30, 2024 (Successor) and December 31, 2023 (Successor).

As of June 30, 2024 (Successor), Talen’s aggregate credit exposure, which excludes the effects of netting arrangements, cash collateral, LCs and any allowances for doubtful collections, was $ 437 million and its credit exposure net of such effects was $ 66 million.

The allowance for doubtful accounts was a non-material amount as of September 30, 2024 (Successor) and December 31, 2023 (Successor).

As of September 30, 2024 (Successor), Talen’s aggregate credit exposure, which excludes the effects of netting arrangements, cash collateral, LCs, and any allowances for doubtful collections, was $ 309 million and its credit exposure net of such effects was $ 68 million.

Excluding ISO and RTO counterparties, whose accounts receivable settlements are subject to applicable market controls, the ten largest single net credit exposures account for approximately 66 % of Talen’s total net credit exposure, which are primarily with entities assigned investment grade credit ratings.

Certain derivative instruments contain credit risk-related contingent features, which may require us to provide cash collateral, LCs, or guarantees from a creditworthy entity if the fair value of a liability eclipses a certain threshold or upon a decline in Talen’s credit rating.

The fair values of derivative instruments in a net liability position, and that contain credit risk-related contingent features, were non-material as of June 30, 2024 (Successor) and December 31, 2023 (Successor).

The fair values of derivative instruments in a net liability position, and that contain credit risk-related contingent features, were non-material as of September 30, 2024 (Successor) and December 31, 2023 (Successor).

Derivative Instrument Presentation

1 unchanged sentence

The fair value of derivative instruments presented within assets and liabilities on the Consolidated Balance Sheets were:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Assets Liabilities Assets Liabilities

10 unchanged sentences

Generally, the right of setoff within master netting arrangements permits the fair value of derivative assets to be offset with derivative liabilities.

As an election, derivative assets and derivative liabilities are presented on the Consolidated Balance Sheets with the effect of such permitted netting as of June 30, 2024 (Successor) and December 31, 2023 (Successor).

As an election, derivative assets and derivative liabilities are presented on the Consolidated Balance Sheets with the effect of such permitted netting as of September 30, 2024 (Successor) and December 31, 2023 (Successor).

The net amounts of “Derivative instruments” presented as assets and liabilities on the Consolidated Balance Sheets considering the effect of permitted netting and where cash collateral is pledged in accordance with the underlying agreement were:

Gross Derivative Instruments Eligible for Offset Net Derivative Instruments Collateral (Posted) Received Net Amounts

June 30, 2024 (Successor)

$ 286 $ ( 246 ) $ 40 $ — $ 40

September 30, 2024 (Successor)

Assets $ 211 $ ( 139 ) $ 72 $ — $ 72

Liabilities 172 ( 139 ) 33 ( 23 ) 10

4 unchanged sentences

The location and pre-tax effect of “Derivative instruments” presented on the Consolidated Statements of Operations for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Realized gain (loss) on commodity contracts

14 unchanged sentences

The disaggregation of our operating revenues for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Capacity revenues $ 50 $ 44 $ 141 $ 70 $ 108

Electricity sales and ancillary services,

ISO/RTO 249 130 85 514 130 281

Physical electricity sales, bilateral

contracts, other 22 6 13 86 6 62

Electricity sales and ancillary services, ISO/RTO 351 558 865 688 281

Physical electricity sales, bilateral contracts, other 38 35 124 41 62

Other revenue from customers 20 29 91 44 27

Total revenue from contracts with

customers 346 177 158 762 177 478

Realized and unrealized gain (loss) on

derivative instruments 100 124 ( 21 ) 157 124 732

Total revenue from contracts with customers 459 666 1,221 843 478

Realized and unrealized gain (loss) on derivative instruments 119 ( 150 ) 276 ( 26 ) 732

Nuclear PTC and other revenue (a)

43 — — 79 — —

Operating revenues $ 650 $ 516 $ 1,648 $ 817 $ 1,210

__________________

(a) During the six months ended June 30, 2024, $ 51 million of estimated Nuclear PTCs were utilized as a credit against our federal income tax payable.

(a) During the nine months ended September 30, 2024, $ 90 million of estimated Nuclear PTCs were utilized as a credit against our federal income tax payable.

See Note 5 for additional information on the tax impact of the Nuclear PTC .

1 unchanged sentence

“Accounts receivable, net” presented on the Consolidated Balance Sheets were:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Customer accounts receivable $ 50 $ 52

1 unchanged sentence

Accounts receivable, net $ 97 $ 137

During the six months ended June 30, 2024 (Successor), the period from May 18 through June 30, 2023 (Successor), and the period from January 1 through May 17, 2023 (Predecessor) , there were no significant changes in accounts receivable other than normal receivable recognition and collection transactions.

During the nine months ended September 30, 2024 (Successor), the period from May 18 through September 30, 2023 (Successor), and the period from January 1 through May 17, 2023 (Predecessor), there were no significant changes in accounts receivable other than normal receivable recognition and collection transactions.

See Note 3 for additional information on Talen’s credit risk on the carrying value of its receivables.

1 unchanged sentence

In the normal course of business, Talen has future performance obligations for capacity sales awarded through market-based capacity auctions and (or) for capacity sales under bilateral contractual arrangements.

As of June 30, 2024 (Successor), the expected future period capacity revenues subject to unsatisfied or partially unsatisfied performance obligations were:

2025 2026 2027 2028

Expected capacity revenues $ 101 $ 85 $ 3 $ 3 $ 1

__________________

(a) For the period from July 1 through December 31, 2024.

The PJM capacity auction for the 2025/2026 PJM Capacity Year was held in July 2024.

1 unchanged sentence

The PJM capacity auctions for any years thereafter have not yet been held.

See Note 10 for additional information on the PJM RPM and auctions.

See Note 10 for additional information on the PJM BRAs.

As of September 30, 2024 (Successor), the expected future period capacity revenues subject to unsatisfied or partially unsatisfied performance obligations were:

2025 2026 2027 2028

Expected capacity revenues $ 51 $ 478 $ 280 $ 3 $ 1

__________________

(a) For the period from October 1 through December 31, 2024.

Effective Tax Rate Reconciliations

The reconciliations of the effective tax rate for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Income (loss) before income taxes $ 179 $ ( 92 ) $ 1,137 $ ( 42 ) $ 677

16 unchanged sentences

The assessment of future taxable income includes the scheduled reversal of taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations.

For the six months ended June 30, 2024 (Successor), Talen recognized a $ 34 million tax benefit for the reduction in federal and state valuation allowances, primarily related to year-to-date divestitures which increase the amount of tax attributes that can be utilized.

See Note 17 for information on the sale transactions.

For the nine months ended September 30, 2024 (Successor), Talen recognized a $ 63 million tax benefit for the reduction in federal and state valuation allowances, primarily related to year-to-date divestitures and year-to-date income which increase the amount of tax attributes that can be utilized.

See Note 17 for information on divestitures.

At each period, management will continue to assess the available positive and negative evidence to determine the need for a valuation allowance.

June 30, 2024 December 31, 2023

We believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance may no longer be needed.

September 30, 2024 December 31, 2023

Coal $ 104 $ 152

5 unchanged sentences

Inventory net realizable value and obsolescence charges on coal and fuel oil inventories are presented as “Other operating income (expense), net” on the Consolidated Statements of Operations.

Such non-cash charges were non-material for the six months ended June 30, 2024 (Successor), non-material for the period from May 18 through June 30, 2023 (Successor), and $ 37 million for the period from January 1 through May 17, 2023 (Predecessor)

Such non-cash charges were non-material for the nine months ended September 30, 2024 (Successor), non-material for the period from May 18 through September 30, 2023 (Successor), and $ 37 million for the period from January 1 through May 17, 2023 (Predecessor) .

Of the above charges incurred during the period from January 1 through May 17, 2023 (Predecessor), $ 24 million is related to Brandon Shores inventories.

1 unchanged sentence

Nuclear Decommissioning Trust Funds

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cost Unrealized

9 unchanged sentences

See Note 12 for additional information on the NDT fair value.

There were no available-for-sale debt securities with credit losses as of June 30, 2024 (Successor) and December 31, 2023 (Successor).

As of June 30, 2024 (Successor), there was no intent to sell available-for-sale debt securities with unrealized losses, and it is not more likely than not that each of these investments will be required to be sold before the recovery of its amortized cost.

The aggregate related fair value of available-for-sale debt securities with unrealized losses as of June 30, 2024 (Successor) were:

Value Unrealized

Corporate debt securities $ 78 $ ( 1 )

Municipal debt securities 64 ( 1 )

Government debt securities 183 ( 3 )

Total debt securities in unrealized loss position

$ 325 $ ( 5 )

Securities in an unrealized loss position for a duration of one year or longer as of June 30, 2024 (Successor):

Value Unrealized

Municipal debt securities $ 49 $ ( 1 )

Government debt securities 105 ( 2 )

Total debt securities in unrealized loss position for one year or longer (a)

$ 154 $ ( 3 )

__________________

(a) Excludes corporate debt securities which, in the aggregate, had a fair value of $ 23 million, as the unrealized losses were non-material.

There were no available-for-sale debt securities with credit losses as of September 30, 2024 (Successor) and December 31, 2023 (Successor).

The contractual maturities for available-for-sale debt securities presented on the Consolidated Balance Sheets were:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Maturities within one year $ 63 $ 105

3 unchanged sentences

The sales proceeds, gains, and losses for available-for-sale debt securities for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Sales proceeds of NDT funds investments (a)

6 unchanged sentences

Property, Plant and Equipment

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Estimated Useful Life (years) Gross Value Accumulated

8 unchanged sentences

148 ( 36 ) 112 358 ( 21 ) 337

Intangible assets 2 - 26

Capitalized software 1 - 5

3 unchanged sentences

The components of “Depreciation, amortization and accretion” presented on the Consolidated Statements of Operations for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Depreciation expense (a)

12 unchanged sentences

Reliability Impact Assessments

Reliability Impact Assessments.

PJM RMR Assessments.

In 2023, Talen provided notifications to PJM it intends to deactivate electric generation at both Brandon Shores and H.A.

1 unchanged sentence

PJM has notified Talen that the generation units at each facility are needed for reliability.

In April 2024, cost-of-service rate schedules covering the period of June 1, 2025 through December 31, 2028 were filed at FERC for the continued Reliability-Must-Run operation and provision of service from Brandon Shores Units 1 and 2 and H.A Wagner Units 3 and 4.

In April 2024, cost-of-service rate schedules covering the period of June 1, 2025 through December 31, 2028 were filed at FERC for the continued operation and provision of service from Brandon Shores Units 1 and 2 and H.A Wagner Units 3 and 4.

Each of the filed rate schedules sets forth the terms, conditions, and cost-based rates under which the applicable generation facility will agree to continue to operate its generation units.

7 unchanged sentences

Brandon Shores is required by contract and permit to cease coal combustion by December 31, 2025.

In the first quarter of 2023, Talen canceled its plan to convert Brandon Shores to an oil combustion facility due to an increase in expected conversion costs.

In the first quarter 2023, Talen canceled its plan to convert Brandon Shores to an oil combustion facility due to an increase in expected conversion costs.

This decision triggered a recoverability assessment of the carrying value of the Brandon Shores asset group.

2 unchanged sentences

Asset Retirement Obligations and Accrued Environmental Costs

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Asset retirement obligations $ 495 $ 464

4 unchanged sentences

__________________

(a) Presented as “Other current liabilities” on the Consolidated Statements of Operations.

(a) Presented as “Other current liabilities” on the Consolidated Balance Sheets.

Asset Retirement Obligations

3 unchanged sentences

Accretion expense 40

Carrying value, June 30, 2024 (Successor) $ 484

Carrying value, September 30, 2024 (Successor) $ 495

Supplemental information for the ARO:

June 30, 2024 December 31,

September 30, 2024 December 31,

Supplemental Information

3 unchanged sentences

(a) Obligations are expected to be settled with available funds in the NDT at the time of decommissioning.

See Note 12 for additional information on the NDT.

(b) Certain obligations are:

1 unchanged sentence

or (ii) partially prefunded under phased installment agreements.

See Note 12 for additional information on Susquehanna’s NDT.

See “Talen Montana Financial Assurance” in Note 10 for additional information on Talen Montana’s requirement to provide financial assurance related to certain environmental decommissioning and remediation liabilities related to the Colstrip Units.

As a result of environmental regulations issued by the EPA or other rule-making entities, the Company may be required to revise and (or) recognize new AROs.

See “Environmental Matters” in Note 10 for additional information.

See “Talen Montana Financial Assurance” in Note 10 for information on Talen Montana’s requirement to provide financial assurance for certain environmental decommissioning and remediation liabilities related to Colstrip.

Commitments and Contingencies

1 unchanged sentence

Talen is involved in certain legal proceedings, claims, and litigation.

While we believe that we have meritorious positions and will continue to defend our positions vigorously in these matters, we may not be successful in our efforts.

While we believe that we have meritorious positions and will continue to defend our positions in these matters vigorously, we may not be successful in our efforts.

If an unfavorable outcome is probable and can be reasonably estimated, a liability is recognized.

3 unchanged sentences

Pending Legal Matters

ERCOT Weather Event Lawsuits.

Beginning in March 2021, many power generation facility market participants, including the former Talen subsidiaries that at the time owned the Barney Davis, Nueces Bay and Laredo generation facilities, were sued in multiple Texas courts.

In these suits, the plaintiffs:

(i) allege, among other things, that they suffered losses due to the generation defendants’ failure to properly prepare their facilities to withstand extreme winter weather and other operational failures during Winter Storm Uri in February 2021, and (ii) seek unspecified compensatory, punitive and other damages.

The lawsuits were consolidated into a multi-district litigation (“MDL”) pre-trial court.

In January 2023, the court denied a motion to dismiss the MDL filed by the generation defendants.

In December 2023, the Texas First Court of Appeals granted the generation defendants’ request for mandamus relief and ordered dismissal of the claims against the generation defendants.

The plaintiffs have filed a motion seeking rehearing en banc with the First Court of Appeals.

If unsuccessful, the plaintiffs are expected to petition the Texas Supreme Court to review the decision.

Plaintiffs asserting prepetition Winter Storm Uri claims are limited to recovering any damages solely from the Talen defendants’ insurers pursuant to the Plan of Reorganization.

Certain plaintiffs filed lawsuits asserting Winter Storm Uri claims after commencement of the Restructuring.

If any of these post-commencement plaintiffs did not receive effective notice of the Restructuring under applicable bankruptcy law, they may not be subject to the terms of the Plan of Reorganization.

Talen cannot predict the outcome of this matter for any such claims or its effect on Talen, which has retained these potential liabilities.

See Note 17 for information on Talen’s sale of ERCOT generation assets.

In June 2021, TEC intervened in five cases in which certain market participants are challenging the validity of two Public Utility Commission of Texas (“PUCT”) orders directing ERCOT to ensure energy prices were at their maximum of $ 9,000 per MWh during Winter Storm Uri.

One case has since been dismissed, one case is pending in the Texas Third Court of Appeals and two cases are pending in State District Court in Travis County, Texas.

In March 2023, the Third Court of Appeals issued an opinion in Luminant v.

PUCT that, in part, reversed and remanded the PUCT orders directing ERCOT to ensure prices were at their maximum of $ 9,000 per MWh during Winter Storm Uri.

The PUCT (along with TEC and others) filed petitions for review with the Texas Supreme Court, which were granted in September 2023.

In June 2024, the Texas Supreme Court reversed the judgment of the Texas Third Court of Appeals and affirmed the orders of the PUCT.

The Court held that, in issuing its orders, the PUCT substantially complied with the Administrative Procedure Act’s procedural rulemaking requirements.

Subject to any successful motion for rehearing in the Texas Supreme Court, this matter is effectively concluded in the Company’s favor.

ERCOT Weather Event (Winter Storm Uri) Lawsuits.

In May 2024, the Company closed on the ERCOT Sale but retained certain potential liabilities in connection with Winter Storm Uri (see Note 17 for information on the ERCOT Sale).

In December 2023, five multi-district litigation (“MDL”) bellwether suits against Talen’s former subsidiaries and other power generation facility market participants were dismissed by the MDL court.

The plaintiffs allege they suffered losses due to the defendants’ failure to provide sufficient power to the grid and have been seeking unspecified damages.

The plaintiffs filed a motion for rehearing on the matter and, if unsuccessful, it’s expected the plaintiffs will petition the Texas Supreme Court to review the decision.

The cases dismissed and now on appeal were selected by the MDL court as representative of all 58 cases filed in the Winter Storm Uri litigation.

If affirmed by the Texas Supreme Court, Talen expects the MDL court to apply its dismissal ruling broadly to all Winter Storm Uri cases involving Talen defendants.

Talen’s maximum potential damages on prepetition Winter Storm Uri claims are expressly limited to payments from the Talen defendants’ insurers pursuant to the Plan of Reorganization.

However, claims filed by plaintiffs after the Restructuring commenced who did not receive effective notice of the Restructuring, if any, may not be subject to the Plan of Reorganization.

Talen cannot predict the effect of an adverse outcome for any such claims.

Resolved Legal Matters

Pension Litigation.

In November 2020, four former Talen employees filed a lawsuit in the U.S.

District Court for the Eastern District of Pennsylvania against TES, TEC, the TERP, the TERP committee, and (as amended) ten former retirement plan committee members alleging that they are owed enhanced benefits under the TERP.

In September 2023, the parties reached an agreement to settle all claims on a class-wide basis, inclusive of attorneys’ fees, in exchange for $ 20 million.

The settlement was approved by the court and became final by its terms in July 2024.

Approximately $ 14 million of the settlement will be paid by the TERP to class members, with the remainder paid by the Company, net of insurance recoveries, to the plaintiffs’ attorneys and for certain administrative costs of the settlement.

TES, at its discretion, may elect to fund a contribution into the TERP to cover settlement payments paid by the TERP.

The settlement amounts and the expected insurance recoveries are presented on the Consolidated Balance Sheets as of June 30, 2024.

See Note 12 in Notes to the Annual Financial Statements for additional resolved legal matters.

In July 2024, the U.S.

District Court for the Eastern District of Pennsylvania approved a $ 20 million settlement in a class action lawsuit brought by former Talen employees who alleged they were owed enhanced benefits under the TERP.

Under the terms of the settlement, Talen agreed to pay:

(i) approximately $ 6 million for administrative costs of the settlement and for plaintiff attorneys fees, which were partially offset by insurance recoveries;

and (ii) approximately $ 14 million to class members from the TERP.

Both payment obligations were substantially completed during the three months ended September 30, 2024 (Successor).

PUCT Repricing.

In June 2021, Talen intervened in proceedings in which certain market participants challenged the validity of two Public Utility Commission of Texas (“PUCT”) orders directing ERCOT to price energy at the maximum of $ 9,000 per MWh during Winter Storm Uri.

Talen opposed this relief.

In June 2024, the Texas Supreme Court found the PUCT substantially complied with the Administrative Procedure Act’s procedural rulemaking requirements.

Subject to any successful motion for rehearing in the Texas Supreme Court, this matter is effectively concluded in the Company’s favor.

See Note 12 in Notes to the Annual Financial Statements for legal matters resolved previously.

Regulatory Matters

Talen is subject to regulation by federal and state agencies and other bodies that exercise regulatory authority in the various regions where we conduct business, including but not limited to:

Talen is subject to regulation by federal and state agencies and other bodies that exercise regulatory authority in the various regions where we conduct business, including but not limited to, FERC;

the Department of Energy;

the Federal Communications Commission;

public utility commissions in various states in which we conduct business;

and RTOs and ISOs in the regions in which we conduct business.

Talen is party to proceedings before such agencies arising in the ordinary course of business and has other regulatory exposure due to new or amended regulations promulgated by such agencies from time to time.

While the outcome of these regulatory matters and proceedings is uncertain, the likely results are not expected, either individually or in the aggregate, to have a material adverse effect on our financial condition or results of operations, although the effect could be material to our results of operations in any interim reporting period.

Susquehanna ISA Amendment.

In June 2024, PJM filed at FERC an Amended Interconnection Service Agreement (“Amended ISA”) executed by PJM, PPL Electric Utilities Corporation (“PPL Electric,” a subsidiary of PPL), and Susquehanna, to enable Susquehanna to decrease the amount of power it will provide to the grid and thus increase, up to 480 MW, power that can be sold and provided directly to load via transmission owned by that load and connected directly to Susquehanna (and not to the power grid).

The current Interconnection Service Agreement, previously accepted by FERC and similarly approved and executed by PJM and PPL Electric, already allows Susquehanna to decrease power to the grid by up to 300 MW in order to sell and provide that power to load.

The increase to 480 MW was studied by PJM, which confirmed that such increase would have no reliability impacts on the grid.

PJM requested an effective date of August 3, 2024 for the Amended ISA filing.

In June 2024, Exelon Corporation and AEP filed a protest, despite the Amended ISA not being in their service territories and despite PPL Electric’s agreement to the terms.

The protest raised generic issues about the service of load behind generators and requests that FERC set the Amended ISA proceeding for hearing or, in the alternative, reject the filing.

Talen believes nearly all issues raised by Exelon Corporation and AEP are not within FERC’s limited jurisdictional review and lack merit, and Talen intends to defend against them quickly and vigorously.

In July 2024, Talen filed responses at FERC opposing the aforementioned protest and urging FERC to accept the Amended ISA.

In August 2024, FERC issued a deficiency letter seeking a more information about the Amended ISA.

Talen will work closely with PJM and PPL to respond quickly to the deficiency letter.

Additionally, in a separate order, FERC opened a new proceeding through which it will hold a commissioner-led technical conference in Fall 2024 to discuss generic issues related to the co-location of large loads.

Talen intends to fully participate in that process.

In July 2021, PJM filed proposed tariff language to significantly reduce the application of the existing PJM MOPR by applying it only when the state requires an entity to act in a certain manner in the capacity market in exchange for receiving a subsidy.

FERC did not act on PJM’s July 2021 filing, and the PJM MOPR tariff language went into effect in September 2021.

In December 2023, the U.S.

Court of Appeals for the Third Circuit denied the petitions for review of the MOPR tariff language.

In March 2024, the Public Utilities Commission of Ohio filed at the U.S.

Supreme Court a petition for certiorari asking the Court to review the Third Circuit’s December 2023 order, which the U.S.

Supreme Court denied in May 2024.

The final impacts on Talen’s financial condition, results of operations and liquidity are not known at this time.

PJM Market Seller Offer Cap.

In March 2021, FERC responded to complaints filed by the PJM IMM on behalf of PJM and various consumer advocates alleging that the PJM MSOC was above a competitive offer level and was, therefore, unjust and unreasonable.

In September 2021, FERC issued an order requiring the PJM ACR for each generator to be determined administratively by the PJM IMM.

In August 2023, the U.S.

Court of Appeals for the District of Columbia Circuit denied petitions by Talen and others for review of FERC’s order.

In January 2024, the Electric Power Supply Association filed at the U.S.

Supreme Court a petition for certiorari asking the Court to review the D.C.

Circuit’s August 2023 order, which the U.S.

Supreme Court denied in May 2024.

The final impacts of this order on Talen’s financial condition, results of operations and liquidity are not known at this time.

and state public utility commissions.

The RTOs and ISOs in the regions in which we conduct business inherently have complex rules that are intended to balance the interests of market stakeholders.

Proposed market structure modifications may lead to disputes among stakeholders that might not be resolved for a period of time as a result of regulatory and (or) legal proceedings.

Accordingly, Talen is subject to uncertainty with respect to:

(i) new or amended regulations issued by regulatory agencies;

and (ii) changes in market design, tariff structure, capacity auctions, and (or) pricing rules.

Unless otherwise discussed below, we are unable to predict the outcome of any regulatory matters or reasonably estimate the amount of any associated costs and (or) potential liabilities.

Additionally, it is possible that any outcome to Talen with respect to such matters, including market modifications, could have a material impact on our capacity revenues, energy revenues, results of operations, liquidity, or financial condition.

PJM Capacity Market Reform.

In February 2023, the PJM Board of Managers directed PJM and its stakeholders to resolve:

(i) key issues that address the energy transition taking place in PJM;

and (ii) issues observed from Winter Storm Elliott.

The PJM Board of Managers directive included reliability risks, risk drivers and resource availability.

The stakeholder process is referred to as Critical Issue Fast Path (“CIFP”) on resource adequacy.

In October 2023, PJM made two filings at FERC regarding certain capacity market reforms developed through the CIFP process.

In January 2024, FERC accepted one of PJM’s filings, subject to the condition that PJM submit a compliance filing within 30 days.

However, in February 2024, FERC rejected the second of PJM’s capacity market reform filings and approved a request from PJM for a 35-day delay of Base Residual Auction.

PJM held the Base Residual Auction for the 2025/2026 Delivery Year in July 2024.

At this time, Talen cannot fully predict the impacts of PJM’s reforms on its operations and liquidity.

In June 2023, FERC accepted a request by PJM to delay certain PJM Base Residual Auctions in order to propose additional changes to the PJM RPM.

The delay scheduled the PJM Base Residual Auctions for 2026/2027 in December 2024, for 2027/2028 in June 2025, and for 2028/2029 in December 2025.

Although PJM has established dates for the next three auctions, there is no guarantee that the auctions will take place on those dates or at all.

Depending on the ultimate outcome of matters related to PJM’s capacity auctions, capacity revenues in PJM could be affected, but the final impacts on Talen’s financial condition, results of operations and liquidity are not known at this time.

In June 2023, FERC accepted a request by PJM to delay certain PJM BRAs in order for PJM to propose market reforms.

PJM filed its market reform proposals with FERC in October 2023.

In early 2024, FERC accepted portions of PJM’s proposed market changes.

PJM held the PJM BRA for the 2025/2026 PJM Capacity Year in July 2024 which incorporated the FERC accepted changes.

The PJM BRAs for the 2026/2027, 2027/2028, and 2028/2029 PJM Capacity Years were previously scheduled for December 2024, June 2025, and December 2025, respectively;

however in September 2024, the Sierra Club and other public interest organizations filed a complaint at FERC challenging PJM’s rules establishing must-offer exceptions for PJM BRA participation by PJM RMR resources and seeking to delay the 2026/2027 PJM BRA pending resolution of its complaint.

In October 2024, PJM announced it has concerns about FERC considering the Sierra Club’s complaints about PJM RMR resources in isolation and therefore intends to file a Section 205 proceeding under the Federal Power Act seeking FERC’s approval of to-be-determined market reforms not limited to potential revisions to the treatment of PJM RMR resources.

As a result, in October 2024 PJM formally requested that FERC approve six-month delays in the PJM BRAs for the 2026/2027, 2027/2028, 2028/2029, and 2029/2030 PJM Capacity Years and in November 2024, FERC approved the auction delays.

Talen can provide no assurance that the four scheduled auctions will be held as scheduled or at all.

Susquehanna ISA Amendment.

Under a prior, FERC-accepted interconnection agreement between PJM, Susquehanna, and a subsidiary of PPL Corporation (“PPL”) (collectively, the “ISA Parties”), Susquehanna is permitted to decrease by up to 300 MW the amount of power supply that it would otherwise provide to the power grid within PPL’s service area.

Susquehanna currently provides that power to load via load-owned transmission directly connected to Susquehanna rather than supplying load from the power grid.

In June 2024, PJM filed at FERC an Amended Interconnection Service Agreement (“Amended ISA”) executed between the ISA Parties permitting Susquehanna to decrease by up to 480 MW the amount of power supply that it would otherwise provide to the power grid and now intends to sell to AWS instead.

PJM previously concluded such increase in the amount of withheld power would have no reliability impacts on the grid.

In June 2024, despite the Amended ISA being applicable solely to the PPL service area, Exelon Corporation and AEP filed a protest to the Amended ISA at FERC and raised generic issues involving the direct connection of load service to generators.

FERC responded by issuing a deficiency letter in August 2024 seeking more information about the arrangement described in the Amended ISA and separately setting a Technical Conference for November 2024 to discuss broader issues related to (i) co-located load connected directly to generation;

and (ii) emerging reliability issues resulting from the dramatic rise in data center demand for power.

In September 2024, PJM provided a response to FERC’s August 2024 deficiency letter on the Amended ISA and filed a Construction Service Agreement between the ISA Parties and Mid-Atlantic Interstate Transmission, LLC to facilitate certain network upgrades to ultimately accommodate a 960 MW decrease of power supply to the grid.

Talen filed its own comments in September 2024 and written testimony in the Technical Conference proceeding in October 2024.

Shortly after the conclusion of the FERC Technical Conference on November 1, 2024, FERC issued a 2-1 decision rejecting the Amended ISA.

Talen may seek a rehearing of the FERC order within the 30-day deadline for such motions and, if necessary, file a subsequent appeal in a U.S.

Court of Appeals.

The prior FERC-accepted interconnection agreement between the ISA Parties permitting Susquehanna to decrease 300 MW of its current power supply from the power grid remains in place and facilitates the initial sale of power to AWS under the AWS PPA.

The Company is evaluating its commercial and legal options to provide the most efficient path to full development of the AWS data center campus.

Such options include, but are not limited to, potential submission of a revised form of Amended ISA or alternate contract structures with AWS.

If the Company is unable commercially or legally to resolve the Amended ISA approval impediments and realize the full development of the AWS data center campus, there may be a material impact on our future results of operations and (or) financial condition.

Environmental Matters

Extensive federal, state, and local environmental laws and regulations are applicable to our business, including those related to air emissions, water discharges, and hazardous and solid waste management.

From time to time, in the ordinary course of our business, Talen may become involved in other environmental matters or become subject to other, new or revised environmental statutes, regulations or requirements.

From time to time, in the ordinary course of our business, Talen may be:

(i) subject to environmental remediation work at its facilities;

(ii) involved in other environmental matters;

or (iii) become subject to other, new or revised environmental statutes, regulations, or requirements.

It may be necessary for us to modify, curtail, replace, or cease operation of certain facilities or performance of certain operations to comply with statutes, regulations, and other requirements imposed by regulatory bodies, courts, or environmental groups.

We may incur costs to comply with environmental laws and regulations, including increased capital expenditures or operation and maintenance expenses, monetary fines, penalties or other restrictions, which could be material.

Legal challenges to environmental permits or rules add to the uncertainty of estimating the future cost of complying with these permits and rules.

In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed.

Water and Waste.

Changes made by the EPA to the EPA CCR Rule and the EPA ELG Rule in 2020 allow coal generation facility operators to request an extension to compliance deadlines if the facility commits to cessation of coal-fired generation by the end of 2028.

Pursuant to Talen’s plans to cease wholly owned coal operations, Talen requested extensions for compliance under these rules for certain of its generation facilities;

some have been approved and some are still under review.

The most significant extension under review is the EPA CCR Rule Part A extension request for Montour Ash Impoundment 1, and a negative result would have a significant impact on the closure plan for this impoundment.

In 2023, the EPA proposed additional changes to the EPA ELG Rule and the EPA CCR Rule and finalized those changes in May 2024.

The new EPA ELG Rule does not add treatment requirements to Talen’s coal-fired power generation facilities planning to cease burning coal by 2028, but it does establish discharge limits for waters collected from CCR units.

Under the revised EPA CCR Rule, the EPA developed new categories of CCR units which are areas that were previously unregulated.

These new CCR units, which are subject to the closure performance standards set by the EPA, are:

(i) legacy CCR impoundments;

and (ii) areas where CCR was disposed of or managed on land outside of regulated units called CCR management units (subject to a minimum threshold).

Furthermore, the EPA’s interpretations of the EPA CCR Rule continue to evolve through litigation, enforcement, and other regulatory actions.

Talen submitted formal comments on both proposed rules citing their flaws.

A number of challenges against the EPA ELG Rule have been filed in multiple U.S.

Courts of Appeals.

The various challenges have been filed by 15 state attorneys general, environmental groups, and industry parties and groups, including the Utility Water Act Group (“UWAG”), of which Talen is a member.

In June 2024, the U.S.

Court of Appeals for the Eighth Circuit was selected to hear the consolidated petitions for review and UWAG filed a motion to stay the EPA ELG Rule during the pendency of the litigation.

Multiple parties have filed challenges to the EPA CCR Rule in the U.S.

Court of Appeals for the District of Columbia, including USWAG”), of which Talen is a member.

It is uncertain at this time whether the revised Rules will withstand the filed and anticipated legal challenges by power producers, industry groups, state attorneys general, and others.

The Company continues to review the rule’s provisions, perform the required applicability assessments, and await additional information and guidance from the EPA in order to sufficiently interpret the rule’s requirements.

Accordingly, as of June 30, 2024 (Successor), the Company did not have sufficient information to determine the scope of work required under the rule’s provisions and associated estimates.

As the Company completes its assessment and determines the scope of work on its properties imposed by the new rule, new AROs and (or) revisions to existing AROs could be required.

Such AROs could be material, and as a result, may have a material impact on our results of operations and financial condition.

Since 2016, the coal-fired generation facilities in which Talen has ownership, including Brunner Island, Montour, Keystone and Conemaugh, have been the subject of various efforts under the Clean Air Act to strengthen applicable nitrogen oxides (“NOx”) emission limits.

These include Section 126 petitions by downwind states, recommendations by the Ozone Transport Commission, and a ruling on Pennsylvania’s Reasonably Available Control Technology (“RACT”) 2 program by the U.S.

District Court for the Southern District of New York.

Although the petitions and recommendations are not withdrawn, open concerns appear to have been addressed by the EPA’s issuance of a federal implementation plan with short-term RACT2 NOx limits at these plants in 2022 (resulting from the above court case) (“2022 NOx RACT2 FIP”) and the EPA’s “Good Neighbor Plan FIP” issued in June 2023.

Both the 2022 NOx RACT2 FIP and the Good Neighbor Plan FIP are further discussed below.

Concerns by upwind states regarding NOx controls were not limited to coal plants owned by Talen.

Although EPA’s 2022 NOx RACT2 FIP for Pennsylvania, which Talen supported, was challenged by other parties, on May 2, 2024, the U.S.

Court of Appeals for the Third Circuit upheld the 2022 NOx RACT2 FIP, and the Pennsylvania DEP has now proposed a new state implementation plan (“SIP”) that is consistent with the 2022 NOx RACT2 FIP.

In November 2022, Pennsylvania finalized its NOx RACT3 standards for all power generation facilities to address the EPA’s 2015 Ozone Standard.

Affected Talen facilities have submitted permit applications demonstrating their compliance methods.

At this time, Talen cannot predict the outcome of these potential rule changes on the operations of its generation facilities and its results of operations.

Further, to address the EPA’s 2015 Ozone Standard, in June 2023, the EPA published a final rule covering the EPA CSAPR ozone season NOx allowance trading program for 2023 and beyond.

The final rule is known as the Good Neighbor Plan FIP.

The EPA made some reductions in allowance allocations, among other changes, to minimize NOx emissions during the Ozone Season.

Talen’s plants in Texas had originally been covered by the Good Neighbor Plan FIP;

however, Talen sold its Texas facilities in the second quarter of 2024 and therefore is no longer impacted by the rule in Texas.

Talen’s facilities in Maryland, Pennsylvania and New Jersey remain subject to the new rule;

however, the entire rule has been challenged by multiple parties, and the Good Neighbor Plan FIP was stayed in its entirety by the U.S.

Supreme Court in June 2024 pending a complete review of the rule by the U.S.

Court of Appeals for the D.C.

At this time, Talen cannot predict the long-term outcome of these rule changes on the operations of its generation facilities and its results of operations.

The EPA MATS Rule, which is the original EPA NESHAP for coal plants, has been in effect since 2012.

In April 2023, the EPA proposed, and in May 2024, finalized, its Risk and Technology Review for coal-fired generation facilities under the EPA NESHAP.

The final rule most notably requires coal plants to reduce particulate matter (“PM”) emissions by the end of 2027 (or 2028 in certain circumstances).

Colstrip cannot meet the new PM standard without substantial upgrades to its control equipment;

therefore, Talen and the Colstrip co-owners face the decision either to invest in new cost-prohibitive control equipment or retire the plant.

That decision must be made in conjunction with compliance requirements under EPA’s new GHG Rule, finalized in May 2024.

Talen submitted formal comments on the new PM standard and revisions to the EPA MATS Rule, citing the rule’s flaws.

A number of challenges to the EPA MATS Rule have been filed in the U.S.

Court of Appeals for the D.C.

Circuit, including challenges by Talen and by 23 state attorneys general.

Multiple motions to stay the EPA MATS Rule during the pendency of the litigation have been filed by Talen and other parties, and in August 2024 the stay motions were denied.

In light of the on-going legal challenges, Talen cannot predict the full impact of the revised EPA MATS Rule on the operations of its coal-fired generation facilities and its results of operations.

In April 2022, Pennsylvania formally entered the RGGI program, with compliance set to begin on July 1, 2022.

However, certain third parties filed lawsuits and appeals questioning the legality of the regulation and the implementation of RGGI in Pennsylvania was stayed.

In November 2023, the Commonwealth Court of Pennsylvania ruled RGGI was an invalid tax and voided the rulemaking.

The Pennsylvania Department of Environmental Protection appealed this decision to the Pennsylvania Supreme Court in November 2023, and the following day filed notice with the court that the RGGI program would not be implemented while the appeal is pending.

In July 2024, the Pennsylvania Supreme Court permitted certain non-profit environmental groups (including Citizens for Pennsylvania’s Future, Clean Air Council, Sierra Club, and the Environmental Defense Fund) to intervene in the litigation.

At this time, Talen is unable to determine the full impact of the RGGI program, when and if implemented, on its results of operations and liquidity.

Federal Climate Change Actions.

The current federal administration has identified climate change policy as a priority that includes, but is not limited to, greenhouse gas (“GHG”) emission reductions.

In May 2024, the EPA issued a new rule under the Clean Air Act that establishes New Source Performance Standards for new electric generating units and GHG Emissions Guidelines for existing electric generating units (“EGUs”) for state implementation.

The guidelines would allow all existing EGUs to continue to operate until at least the end of 2031 without having to meet new GHG limits.

Existing oil/gas steam EGUs (for example, Martins Creek) will not require additional controls at this time.

However, if existing coal-fired EGUs (for example, Colstrip) are to be able to operate beyond 2031, they must install a GHG reduction technology, like carbon capture and sequestration (CCS), by the end of 2031.

Talen will need to evaluate the viability and costs of additional controls and decide whether to invest in those controls at Colstrip or retire the units.

That decision may be influenced by the cost of compliance with the revised EPA MATS Rule.

The EPA stated that it chose not to finalize emission guidelines for existing fossil fuel-fired combustion turbines (for example, Lower Mt.

however, the EPA intends to take further action on such emission guidelines at a later date.

In 2023, Talen submitted formal comments on the proposed EPA GHG Rule, citing the rule’s flaws.

A number of petitions for review of the EPA GHG Rule have been filed in the U.S.

Court of Appeals for the D.C.

Circuit, including by coalitions representing 27 states and an ad hoc coalition of power producers, of which Talen is a member.

Various parties, including the ad hoc coalition of power producers that includes Talen, filed motions to stay the EPA GHG Rule during the pendency of the litigation;

however, in July 2024, the D.C.

Circuit denied the motions to stay the rule.

Shortly thereafter, the coalition of West Virginia and 24 other states and other petitioners, including the ad hoc coalition of power producers that includes Talen, filed at the U.S.

Supreme Court requests for an emergency stay of the EPA GHG Rule.

If the rule withstands these legal challenges by power producers (including Talen), industry groups, state attorneys general, and others, the EPA GHG Rule could materially impact Colstrip and Talen.

Talen is currently evaluating that potential impact.

At this time, Talen cannot predict the full impact of the EPA GHG Rule on the operations of its coal-fired generation facilities and its results of operations.

Environmental Remediation.

From time-to-time, Talen undertakes investigative or remedial actions in response to notices of violations, spills or other releases at various on-site and off-site locations, negotiates with the EPA and state and local agencies regarding actions necessary for compliance with applicable requirements, negotiates with property owners and other third parties alleging impacts from our operations and undertakes similar actions necessary to resolve environmental matters that arise in the course of normal operations.

Future investigation or remediation work at sites currently under review, or at sites not currently identified, may result in additional costs, but at this time we are unable to determine if such investigation or remediation work will have a material adverse effect on our financial condition or results of operations.

We may incur significant costs to comply with these requirements, including increased capital expenditures or operation and maintenance expenses, monetary fines, remediation costs, penalties, or other restrictions.

Legal challenges to environmental rules or permits add to the uncertainty of estimating future compliance costs.

Additionally, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed.

Unless otherwise discussed below, we are unable to predict the outcome of any environmental matters or reasonably estimate the amount of any associated costs and (or) potential liabilities.

It is possible that any adverse outcome to Talen with respect to such matters could have a material impact on our results of operations, liquidity, and (or) financial condition.

EPA Cross-State Air Pollution Rule (“EPA CSAPR”) and Nitrogen Oxides (“NOx”) Requirements.

Coal-fired generation facilities, including those in which Talen has ownership, have been the subject of EPA regulations and efforts by certain states and other parties to strengthen applicable NOx emission limits under the Clean Air Act.

In 2015, the EPA’s 2015 revision to the 8-hour ozone National Ambient Air Quality Standards for ground-level ozone to 70 parts per billion (the “EPA 2015 Ozone Standard”) was issued, which triggered updates to state-specific compliance requirements as well as provisions that are intended to limit cross-state emissions.

In June 2023, the EPA published a rule in connection with the EPA 2015 Ozone Standard updating the EPA CSAPR ozone season NOx allowance trading program for 2023 and beyond (“Good Neighbor Plan FIP”).

Talen’s facilities in Maryland, Pennsylvania, and New Jersey are subject to the new rule;

however, the entire rule has been challenged by multiple parties.

The Good Neighbor Plan FIP was stayed in its entirety by the U.S.

Supreme Court in June 2024 pending a complete review of the rule by the D.C.

Circuit Court of Appeals.

In the meantime, EPA has issued a direct final rule indicating it plans to provide NOx allocations and budgets from the previously applicable and less restrictive revised CSAPR rule until the Good Neighbor Plan FIP matter is resolved.

EPA Mercury and Air Toxics Standards Rule (“EPA MATS Rule”).

In May 2024, the EPA published a rule that requires coal-fired generation facilities to reduce particulate matter (“PM”) emissions by the middle of 2027 (or 2028, if an extension is approved).

Colstrip is not expected to meet the new PM standard without substantial upgrades to its control equipment.

As a result, Talen Montana and the other Colstrip co-owners face the decision either to invest in new cost-prohibitive control equipment or retire the Colstrip facility.

Such decision must be evaluated in conjunction with compliance requirements under the May 2024 EPA GHG Rule due to timing and costs.

Challenges to the EPA MATS Rule have been filed in the D.C.

Circuit Court of Appeals, including by Talen and 23 states.

After motions to stay the EPA MATS Rule during the pendency of the litigation were denied by the D.C.

Circuit Court of Appeals, Talen and other parties filed emergency stay request applications with the U.S.

Supreme Court in September 2024, which were denied in October 2024.

The appeal on the merits of the new rule remains pending in the D.C.

Circuit Court of Appeals.

No assurance can be provided as to when the challenges to the EPA MATS Rule will be resolved or whether such challenges will be resolved in the Company’s favor.

As the timeline for compliance with the new standards is accelerated and must be considered in tandem with the new EPA GHG Rule, it is possible the Company will need to make operating decisions about the future of Colstrip before the Company has clarity about the outcome of the litigation.

EPA Greenhouse Gas Rule (“EPA GHG Rule”).

In May 2024, the EPA published a rule that establishes carbon dioxide limits for new electric generating units (“EGUs”) and greenhouse gas (“GHG”) emission guidelines for certain existing EGUs.

Under the guidelines, if existing coal-fired EGUs operate beyond 2031, GHG reductions, such as those achieved by the addition of carbon capture and sequestration (“CCS”), are required to be implemented by the end of 2031.

Colstrip is not expected to meet the new rules without substantial technology upgrades and pipeline infrastructure build-out.

As a result, Talen Montana and the other Colstrip co-owners face the decision either to invest in new cost-prohibitive controls (e.g., CCS technology) or retire the Colstrip facility by the end of 2031.

Such decision must be evaluated in conjunction with compliance requirements under the May 2024 EPA MATS Rule.

Petitions have been filed in the D.C.

Circuit Court of Appeals, including by coalitions representing 27 states and an ad hoc coalition of power producers of which Talen is a member, requesting a review of the EPA GHG Rule.

Stay motions were denied by the D.C.

Circuit Court of Appeals in July 2024 and the U.S.

Supreme Court in October 2024.

Appeals of the EPA GHG Rule remain pending in the D.C.

Circuit Court of Appeals.

No assurance can be provided as to when the challenges to the EPA GHG Rule will be resolved or whether such challenges will be resolved in the Company’s favor.

The EPA has also stated its intent to develop GHG regulations for existing natural gas combustion turbines;

however, no rule has been proposed.

As the timeline for compliance with the new standards is accelerated and must be considered in tandem with the new EPA MATS Rule, it is possible the Company will need to make operating decisions about the future of Colstrip before the Company has clarity about the outcome of the litigation.

Pennsylvania RGGI.

In April 2022, Pennsylvania entered the RGGI program, with compliance set to begin on July 1, 2022.

However, in November 2023, the Commonwealth Court of Pennsylvania ruled RGGI was an invalid tax and voided the rulemaking.

The Pennsylvania Department of Environmental Protection appealed this decision to the Pennsylvania Supreme Court and filed notice with the court that the RGGI program would not be implemented while the appeal is pending.

In July 2024, the Pennsylvania Supreme Court permitted certain non-profit environmental groups to intervene in the litigation.

EPA Effluent Limitation Guidelines Rule (“EPA ELG Rule”).

In November 2015, the EPA revised the effluent limitation guidelines for certain power generation facilities, which imposed more stringent standards for wastewater streams as facility discharge permits are renewed.

In 2020, the EPA issued changes that would exempt coal generation facility operators from meeting certain wastewater standards if the facility would commit to cease coal-fired generation by the end of 2028, which Talen elected for its wholly owned coal operations.

In May 2024, the EPA published revisions to the EPA ELG Rule, which imposed additional requirements for legacy wastewater and combustion residual leachate.

Such EPA ELG Rule revisions impact Talen’s active generation facilities that have both CCR units and hold National Pollutant Discharge Elimination System (“NPDES”) discharge permits.

These sites include Brandon Shores, Brunner Island, Montour, and potentially Martins Creek.

Talen is evaluating what:

(i) potential discharge limits may apply;

(ii) treatment may be required;

and (iii) the implementation timeline may be.

Obligations for installing any new wastewater treatment equipment, if necessary, will not be known until each applicable state where the active generation facilities operate makes their own determination with respect to NPDES permit renewals with new limits and associated timing.

As a result of the future permit conditions, additional capital expenditures and (or) AROs may be required, which may have a material impact on our results of operations and (or) financial condition.

Multiple challenges, including stay requests, to the EPA ELG Rule have been filed in various U.S.

Courts of Appeal by parties that include 15 states, environmental groups, and industry groups, including the Utility Water Act Group (“UWAG”), of which Talen is a member.

The appeals have been consolidated in the U.S.

Court of Appeals for the Eighth Circuit, and in October 2024, stay requests were denied.

No assurance can be provided as to when the challenges to the EPA ELG Rule merits will be resolved or whether such challenges will be resolved in the Company’s favor.

EPA Coal Combustion Residuals Rule (“EPA CCR Rule”).

In April 2015, the EPA established regulations under the Resource Conservation and Recovery Act to identify CCRs as nonhazardous solid waste and provided CCR management and siting requirements.

The 2015 rule was modified in 2020 after a 2018 D.C.

Circuit Court of Appeals ruling found that, among other things, the EPA did not adequately regulate unlined impoundments.

In its 2020 rulemaking, the EPA specified procedures for owners to extend the operating timeline of certain unlined impoundments.

Talen submitted an extension request under this process for an unlined impoundment at Montour, which the EPA has not yet acted upon.

The 2018 D.C.

Circuit Court of Appeals ruling also found that the EPA did not properly address legacy surface impoundments in the 2015 CCR rule.

As a result of the finding, in May 2024, the EPA finalized additional federal CCR regulations with an effective date in November 2024, which provided new requirements for legacy CCR surface impoundments and new requirements for other CCR disposal and management areas at active power plants (“CCR Management Units” or “CCRMUs”).

This rule has been challenged in the D.C.

Circuit Court of Appeals by multiple parties, including two industry groups of which Talen is a member.

Additionally, the EPA is being challenged by other industry parties on new regulatory interpretations that could be consequential to CCR unit closure practices and costs.

No assurance can be provided at this time as to when the legal challenges to the EPA’s CCR Rule and interpretations will be resolved or whether such challenges will be decided in the Company’s favor.

Talen continues to review the 2024 EPA CCR Rule provisions, perform the required applicability assessments, and await additional information and guidance from the EPA concerning the rule’s requirements.

Pursuant to the regulations, initial facility evaluation reports to identify CCR areas which may become regulated and subject to the rule’s requirements are due in February 2026.

Following that, site investigation may be required to further investigate applicability and a subsequent facility report is due in February 2027.

The Company has initiated reviews under the facility evaluation report requirements at locations with ash impoundments that have long since ceased coal operations as well as at locations with current coal operations.

No assurance can be provided as to whether any specific ash impoundments owned by the Company may or may not be within scope of the new EPA CCR Rule until the Company completes its assessments within the regulatory timeframe.

As of September 30, 2024 (Successor), the Company has recognized required cost estimates in order to comply with the rule’s initial compliance requirements and deadlines.

However, the Company does not yet have sufficient information available to estimate costs for the future compliance obligations under the rule.

As the Company continues its applicability evaluations and site assessments to determine the scope of work on its properties imposed by the new rule, additional new AROs and (or) revisions could be required.

It is expected estimates will be available, under the timeline provided for by the regulations, as described above, at the completion of the initial facility evaluation reports or at the completion of a subsequent site investigation.

Such AROs or ARO changes could be material and, as a result, may have a material impact on our results of operations and (or) financial condition.

Guarantees and Other Assurances

In the normal course of business, Talen enters into agreements that provide financial performance assurance to third parties on behalf of certain subsidiaries.

These agreements primarily support or enhance the creditworthiness attributed to a subsidiary on a stand-alone basis or facilitate the commercial activities in which these subsidiaries engage.

Such agreements may include guarantees, stand-by LCs issued by financial institutions, surety bonds issued by insurance companies, and indemnifications.

In addition, they may include customary indemnifications to third parties related to asset sales and other transactions.

Based on our current knowledge, the probability of expected material payment/performance for the guarantees and other assurances is considered remote.

In the normal course of business, the Company enters into agreements to provide financial performance assurance to third parties on behalf of certain subsidiaries.

These agreements primarily support or enhance the stand-alone creditworthiness attributed to a subsidiary or facilitate the commercial activities in which these subsidiaries engage.

Such agreements may include guarantees, stand-by LCs, and (or) surety bonds.

Additionally, they may include customary indemnifications to third parties related to asset sales and other transactions.

The probability of expected material payment and (or) performance for these assurance agreements is believed to be remote.

Surety Bonds.

Surety bonds provide financial performance assurance to third parties on behalf of certain subsidiaries for obligations including, but not limited to, environmental obligations and AROs.

Surety bonds provide financial performance assurance to third parties on behalf of certain Company subsidiaries for obligations including, but not limited to, environmental obligations and AROs.

In the event of nonperformance by the applicable subsidiary, the beneficiary would make a claim to the surety, and the Company would be required to reimburse any payment by the surety.

Talen’s liability with respect to any surety bond is released once the obligations secured by the surety bond are performed.

Surety bond providers generally have the right to request additional collateral or request that such bonds be replaced by alternate surety providers, in each case upon the occurrence of certain events.

As of June 30, 2024 (Successor) and December 31, 2023 (Successor), the aggregate amount of surety bonds outstanding was $ 235 million and $ 240 million, respectively, including surety bonds posted on behalf of Talen Montana as discussed below.

Talen’s liability with respect to any particular surety bond is released once the obligations secured by the surety bond are performed.

Surety bond providers generally have the right to request additional collateral or request that such bonds be replaced by alternate surety providers.

As of September 30, 2024 (Successor) and December 31, 2023 (Successor), the aggregate amount of surety bonds outstanding was $ 234 million and $ 240 million, respectively, including surety bonds posted on behalf of Talen Montana as discussed below.

Talen Montana Financial Assurance.

Pursuant to the Colstrip AOC, Talen Montana, in its capacity as the Colstrip operator, is obligated to close and remediate coal ash disposal impoundments at Colstrip.

Pursuant to the Colstrip Administrative Order on Consent (the “Colstrip AOC”), Talen Montana, in its capacity as the Colstrip operator, is obligated to close and remediate coal ash disposal impoundments at Colstrip.

The Colstrip AOC specifies an evaluation process between Talen Montana and the Montana Department of Environmental Quality (the “MDEQ”) on the scope of remediation and closure activities, requires the MDEQ to approve such scope, and requires financial assurance to be provided to the MDEQ on approved plans.

Each of the co-owners of the Colstrip Units have provided their proportional share of financial assurance to the MDEQ for estimates of coal ash disposal impoundments remediation and closure activities approved by the MDEQ.

TES has posted an aggregate $ 125 million of surety bonds to the MDEQ on behalf of Talen Montana’s proportional share of remediation and closure activities as of June 30, 2024 (Successor) and $ 115 million as of December 31, 2023 (Successor).

In April 2024, the MDEQ approved a modified work scope that required Talen Montana to post an additional $ 7 million of surety bonds or other financial assurance in the second quarter 2024.

Talen Montana has agreed to reimburse TES and its affiliates in the event that these surety bonds are called.

Each of the co-owners of Colstrip has provided its proportionate share of financial assurance to the MDEQ for estimates of coal ash disposal impoundments remediation and closure activities approved by the MDEQ.

The aggregate amount of surety bonds posted to the MDEQ on behalf of Talen Montana’s proportionate share of such activities was $ 125 million as of September 30, 2024 (Successor) and $ 115 million as of December 31, 2023 (Successor).

Talen Montana’s surety bond requirements may increase due to scope changes, cost revisions, and (or) other factors when the MDEQ conducts annual reviews of approved remediation and closure plans as required under the Colstrip AOC.

The surety bond requirements will decrease as Colstrip’s coal ash impoundments remediation and closure activities are completed.

Cumulus Digital Assurances.

As of December 31, 2023 (Successor), TES had issued LCs in the aggregate amount of $ 50 million to the lenders of the Cumulus Digital TLF, which LCs could be drawn upon, among other events, the acceleration of the loan due to a bankruptcy or other event of default by Cumulus Digital.

The LCs were cancelled upon the repayment in full of the Cumulus Digital TLF in March 2024.

Additionally, TEC had provided a guarantee to the lenders under the Cumulus Digital TLF for certain shortfalls in interest and principal payments by Cumulus Digital (up to a maximum of 23 % of the principal amount of outstanding loans thereunder).

The guarantee was cancelled upon the payment in full of the Cumulus Digital TLF in March 2024.

The surety bond requirements are expected to decrease as Colstrip’s coal ash impoundments remediation and closure activities are completed.

Other Commitments and Contingencies

Nuclear Insurance.

The Price-Anderson Act is a United States federal law that governs liability-related issues and ensures the availability of funds for public liability claims arising from a nuclear incident at any U.S.

licensed nuclear facility.

It also seeks to limit the liability of nuclear reactor owners for such claims from any single incident.

As of June 30, 2024 (Successor), the liability limit per incident is $ 16.3 billion for such claims, which is funded by insurance coverage from American Nuclear Insurers (approximately $ 500 million in coverage), with the remainder covered by an industry retrospective assessment program.

As of June 30, 2024 (Successor), under the industry retrospective assessment program, in the event of a nuclear incident at any of the reactors covered by the Price-Anderson Act, Susquehanna could be assessed deferred premiums of up to $ 332 million per incident, payable at a maximum of $ 49 million per year.

Additionally, Susquehanna purchases property insurance programs from Nuclear Electric Insurance Limited (“NEIL”), an industry mutual insurance company of which Susquehanna is a member.

As of June 30, 2024 (Successor), facilities at Susquehanna are insured against nuclear property damage losses up to $ 2 billion and non-nuclear property damage losses up to $ 1 billion.

Susquehanna also purchases an insurance program that provides coverage for the cost of replacement power during prolonged outages of nuclear units caused by certain specified conditions.

Under the NEIL property and replacement power insurance programs, Susquehanna could be assessed retrospective premiums in the event of the insurers’ adverse loss experience.

The maximum assessment for this premium is $ 48 million as of June 30, 2024 (Successor).

Talen has additional coverage that, under certain conditions, may reduce this exposure.

Talen Montana Fuel Supply.

Talen Montana purchases coal from the Rosebud Mine for its interest in Colstrip Units 3 and 4 under a full requirements contract with an unaffiliated coal mine operator.

In 2015, the MDEQ issued the mine operator an amendment to one of its mine permits expanding the area authorized for mining.

Certain parties challenged the permit amendment in a proceeding at the Montana Board of Environmental Review (“the MBER”) and, after the MBER issued a decision upholding the permit amendment, in a lawsuit in Montana state district court.

In January 2022, the district court entered an order vacating the permit amendment effective April 1, 2022.

Rosebud Mining ceased mining in the expansion area prior to the April 1, 2022 deadline.

The mine operator and the MDEQ appealed the district court’s decisions to the Montana Supreme Court and filed motions seeking to stay the order vacating the permit.

In August 2022, the Montana Supreme Court entered an order staying the district court’s order pending resolution of the appeal.

In November 2023, the Montana Supreme Court remanded the case to the MBER to reanalyze the administrative record, resolve factual questions, and re-examine its prior conclusion.

The MBER is awaiting remand.

In the meantime, however, the Montana Supreme Court reinstated vacatur of the permit amendment pending MBER review.

In May 2022, the MDEQ issued a second permit amendment expanding the area authorized for mining by the coal-mine operator.

A group of complainants initiated proceedings at the MBER and in Montana state district court challenging the second permit amendment.

Summary judgment briefing was completed in the MBER case as of January 2024.

In December 2023 the Montana state district court challenge was stayed for six months pending a ruling from the Montana Supreme Court in analogous cases.

In September 2022, the Montana Federal District Court entered an order upholding challenges to a third permit amendment expanding the area authorized for mining by the mine operator.

The plaintiffs asserted that the U.S.

Office of Surface Mining Reclamation and Enforcement (the “OSM”) violated the National Environmental Policy Act (“NEPA”) when preparing the Environmental Impact Statement (“the EIS”) for the permit amendment.

The court ordered the OSM to complete an updated the EIS in accordance with NEPA’s requirements.

The permit amendment will be vacated unless the OSM completes the updated the EIS within 19 months from the date of the court’s order.

The federal defendants did not appeal and expect to issue a revised decision on the permit amendment within the 19-month deadline, but in November 2022, intervenor-defendants, Westmoreland Rosebud and International Union, appealed the ruling to the Ninth Circuit Court of Appeals.

Montana Environmental Information Center and the other plaintiffs moved to dismiss the appeal for lack of jurisdiction, and the federal defendants did not oppose the motion to dismiss.

The appeal was dismissed in November 2023, and the federal defendants requested an extension of the deadline to complete the updated EIS until June 30, 2025.

In April 2024, the District Court granted an extension, but only to January 31, 2025.

At this time, Talen cannot predict the outcome of these matters or their effect on Talen Montana’s operations, results of operations or liquidity.

Talen Montana purchases coal from a coal mine owned by Westmoreland Rosebud Mining, LLC (the “Rosebud Mine”) for its interest in Colstrip Units 3 and 4 under a full requirements contract with an unaffiliated coal mine operator.

Two lawsuits have been brought against the Rosebud Mine challenging permits issued to it by the State of Montana.

Talen Montana is not party to either lawsuit, but is monitoring the progress of each to assess the impact to its operations.

In the first lawsuit, the Montana Supreme Court affirmed a lower court’s ruling to vacate a mining permit and require the Montana Board of Environmental Review to perform an additional review of the permit.

In the second lawsuit, the Montana Federal District Court ordered a branch of the U.S.

Department of the Interior to complete an updated Environmental Impact Statement (“EIS”).

In April 2024, the Montana Federal District Court granted an extension to the EIS completion date to January 31, 2025.

At this time, Talen cannot predict the effect of that an adverse outcome of these lawsuits to Rosebud Mine would have on:

(i) Talen Montana’s ability to source fuel for its share of Colstrip operations;

or (ii) Talen Montana’s operations, results of operations, or liquidity.

Long-Term Debt and Other Credit Facilities

Long-Term Debt

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

8.60 % $ 859 $ 866

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__________________

(a) Computed interest rate as of June 30, 2024 (Successor).

(b) Limited recourse to TES and TEC.

See “Guarantees and Other Assurances - Cumulus Digital Assurances” in Note 10 for additional information.

The Cumulus Digital TLF was repaid and extinguished in March 2024.

(a) Computed interest rate as of September 30, 2024 (Successor).

(b) The Cumulus Digital TLF was repaid and extinguished in March 2024.

See “2024 Transactions – Cumulus Digital TLF Repayment” below for additional information.

The aggregate long-term debt maturities, including amortization and early redemption provisions, as of June 30, 2024 (Successor) were:

The aggregate long-term debt maturities, including amortization and early redemption provisions, as of September 30, 2024 (Successor) were:

2025 2026 2027 2028 Thereafter Total

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__________________

(a) For the period from July 1 through December 31, 2024.

(a) For the period from October 1 through December 31, 2024.

Revolving Credit and Other Facilities

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Expiration Committed Capacity Direct Cash Borrowings LCs

8 unchanged sentences

__________________

(a) Committed capacity includes $ 475 million of LC commitments.

Outstanding direct cash borrowings under the RCF, when applicable, are presented as “Revolving credit facilities” on the Consolidated Balance Sheets.

(a) RCF committed capacity can be used for direct cash borrowings and (or) LCs, subject to a $ 475 million LC sublimit.

(b) Direct cash borrowings are not permitted under the facility.

(c) These LCs are cash collateralized by $ 472 million as of June 30, 2024 (Successor) and December 31, 2023 (Successor), which is presented as “Restricted cash and cash equivalents” on the Consolidated Balance Sheets.

(c) LCs are collateralized by $ 472 million of cash as of September 30, 2024 (Successor) and December 31, 2023 (Successor), which is presented as “Restricted cash and cash equivalents” on the Consolidated Balance Sheets.

2024 Transactions

Cumulus Digital TLF Repayment.

In connection with the Cumulus Data Campus Sale, the Cumulus Digital TLF was paid in full in March 2024, together with all accrued interest and other outstanding amounts.

See “Non-Recourse Debt and Other Credit Facilities – Cumulus Digital TLF” in Note 13 in Notes to the Annual Financial Statements for additional information on the related release of liens, termination of guarantees, and cancellation of LCs.

See Note 17 for additional information on the Cumulus Data Campus Sale.

Remarketing of PEDFA Bonds.

In June 2024, the Company completed the remarketing of $ 50 million in aggregate principal amount of its PEDFA 2009B and $ 81 million in aggregate principal amount of its PEDFA 2009C Bonds.

The remarketed bonds bear interest at 5.25 % until the end of the new term rate period on June 1, 2027.

In connection with the remarketing, $ 133 million of LCs issued under the TLC LCF that had previously supported the bonds were terminated, providing the Company with increased LC capacity under the TLC LCF.

The remarketing transaction is excluded from the Consolidated Statements of Cash Flows as a non-cash item.

Long-Term Debt Repricing.

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The repricing transaction is excluded from the Consolidated Statements of Cash Flows as a non-cash item.

Remarketing of PEDFA Bonds.

In June 2024, the Company completed the remarketing of $ 50 million in aggregate principal amount of its PEDFA 2009B and $ 81 million in aggregate principal amount of its PEDFA 2009C Bonds.

The bonds will now bear interest at 5.25 % until the end of the new term rate period on June 1, 2027.

The remarketing transaction is excluded from the Consolidated Statements of Cash Flows as a non-cash item.

Cumulus Digital TLF Repayment.

In connection with the Cumulus Data Campus Sale, the Cumulus Digital TLF was paid in full in March 2024, together with all accrued interest and other outstanding amounts.

See Note 17 for additional information on the Cumulus Data Campus Sale.

Talen Energy Supply Long-Term Debt, Revolving Credit, and Other Facilities

As of June 30, 2024 (Successor), Talen was not in default under any of its debt agreements.

As of September 30, 2024 (Successor), Talen was not in default under any of its debt agreements.

See “Talen Energy Supply Post-Emergence Long-Term Debt, Revolving Credit and Other Facilities” in Note 13 in Notes to the Annual Financial Statements for a description of the material terms of our Credit Facilities, Secured Notes, PEDFA Bonds, and Secured ISDAs.

See “Security Interests, Guarantees, and Cross-Defaults on TES Post-Emergence Obligations” in Note 13 in Notes to the Annual Financial Statements for additional information on the security interests and guarantees supporting these obligations.

In addition to the obligations outlined under “Long-Term Debt” and “Revolving Credit and Other Facilities” above, secured obligations included approximately $ 66 million under Secured ISDAs as of June 30, 2024 (Successor).

In addition to the obligations outlined under “Long-Term Debt” and “Revolving Credit and Other Facilities” above, secured obligations included approximately $ 18 million under Secured ISDAs as of September 30, 2024 (Successor).

Recurring Fair Value Measurements

1 unchanged sentence

The classifications of recurring fair value measurements within the fair value hierarchy were:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Level 1 Level 2 NAV Netting (a)

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Interest rate derivatives — 3 — — 3 — 6 — — 6

other — — — — — — — — — —

Total liabilities $ 131 $ 41 $ — $ ( 162 ) $ 10 $ 155 $ 145 $ — $ ( 257 ) $ 43

5 unchanged sentences

and (ii) net sold or purchased investments, but not settled.

There were no recurring fair value measurements classified as Level 3 as of June 30, 2024 (Successor) and December 31, 2023 (Successor).

There were no recurring fair value measurements classified as Level 3 as of September 30, 2024 (Successor) and December 31, 2023 (Successor).

Nonrecurring Fair Value Measurements

There were no nonrecurring fair value measurements related to impairments of long-lived assets during the six months ended June 30, 2024 (Successor).

There were no nonrecurring fair value measurements related to impairments of long-lived assets during the nine months ended September 30, 2024 (Successor) and for the period from May 18 through September 30, 2023 (Successor).

See Note 8 for information on the nonrecurring fair value measurement of Brandon Shores during the period from January 1 through May 17, 2023 (Predecessor).

5 unchanged sentences

The carrying value and fair value of indebtedness presented on the Consolidated Balance Sheets were:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Carrying Value Fair

9 unchanged sentences

The components of net periodic benefit costs for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Postretirement benefits service cost (a)

2 unchanged sentences

Expected return on plan assets ( 17 ) ( 18 ) ( 52 ) ( 26 ) ( 33 )

Resolved litigation settlement 15 — 15 — —

Amortization of:

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See Note 10 for additional information on recently resolved litigation regarding certain of our defined benefit pension obligations.

In March 2024, $ 10 million of excess assets from the PA Mines UMWA Plan VEBA were transferred to a separate VEBA which provides benefits for participants in Talen’s health and welfare “wrap plan.” As such assets were not presented on the Consolidated Balance Sheets prior to the transfer of the assets from the VEBA, a transfer gain of $ 10 million was recognized for the six months ended June 30, 2024 (Successor) and presented as “Other non-operating income (expense), net” on the Consolidated of Operations.

In March 2024, $ 10 million of excess assets from the PA Mines UMWA Plan VEBA were transferred to a separate VEBA, which provides benefits for participants in Talen’s health and welfare “wrap plan.” As such assets were not presented on the Consolidated Balance Sheets prior to the transfer of the assets from the VEBA, a transfer gain of $ 10 million was recognized for the nine months ended September 30, 2024 (Successor) and presented as “Other non-operating income (expense), net” on the Consolidated Statements of Operations.

In September 2024, the Company contributed $ 38 million to the TERP that is presented as “Postretirement benefit obligations” on the Consolidated Balance Sheets as of September 30, 2024 (Successor).

In October 2024, the Company contributed an additional $ 6 million to the TERP.

In September 2024, the Company approved a plan amendment for certain other postretirement benefit plans, resulting in the recognition of prior service credits of $ 21 million and presented as “Postretirement benefit prior service (credits) costs, net” on the Consolidated Statements of Comprehensive Income (Loss).

Earnings Per Share

2 unchanged sentences

EPS for the periods were:

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

(Millions of Dollars)

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Weighted-Average Number of Common Shares Outstanding - Basic 50,924 59,029 55,703 59,029 —

Warrants 268 32 — 234 32 —

Restricted stock units 376 — 292 — —

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Weighted-Average Number of Common Shares Outstanding - Diluted 53,169 59,029 57,756 59,029 —

Earnings per Share - Basic $ 7.90 $ 0.49 N/A $ 12.87 $ 0.49 N/A

Earnings per Share - Diluted 7.60 0.49 N/A 12.41 0.49 N/A

Earnings per Share - Basic $ 3.30 $ ( 1.30 ) $ 16.44 $ ( 0.81 ) N/A

Earnings per Share - Diluted 3.16 ( 1.30 ) 15.86 ( 0.81 ) N/A

Stockholders' Equity

Common Stock Transactions

In May 2024, the Board of Directors approved an increase of the remaining capacity under the Company’s share repurchase program to $ 1 billion.

In September 2024, the Board of Directors approved an increase of the remaining capacity under the Company’s share repurchase program to $ 1.25 billion through December 31, 2026.

See Note 16 in Notes to the Annual Financial Statement for more information on the Company’s share repurchase program.

In the six months ended June 30, 2024, the Company repurchased a total of 5,773,889 shares of the Company’s common stock, of which 5,275,862 shares were repurchased in a tender offer, at a weighted average price of $ 114.48 per share, for an aggregate purchase price of $ 661 million, inclusive of transaction costs and excise taxes.

The shares repurchased in the tender offer represented 9 % of the Company’s outstanding common stock.

In June 2024, the Company retired 5,768,862 shares of treasury stock at a weighted average price of $ 114.58 per share with a carrying value of $ 661 million.

The retired shares are now included in the pool of authorized but unissued shares.

As of June 30, 2024 (Successor), the company had 53,254,954 shares outstanding.

In July 2024, the Company repurchased 2,413,793 shares of the Company’s common stock from affiliates of Rubric Capital Management LP at a price of $ 116.00 per share, for an aggregate purchase price of $ 280 million and retired the shares.

There were de minimis transaction costs associated with this repurchase.

The shares repurchased during nine months ended September 30, 2024 (Successor) represent 14 % of the Company’s outstanding common stock.

Summary of activity under the Company’s share repurchase program:

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Number of Shares (a)

Share Price (b)

Total Amount Number of Shares (a) (c)

Share Price (b)

Share repurchases 2,559,826 $ 118.82 $ 304 8,333,715 $ 115.87 $ 966

Share retirements ( 2,564,853 ) 118.81 ( 304 ) ( 8,333,715 ) 115.87 ( 966 )

_____________

(a) Includes 2,413,793 shares repurchased from affiliates of Rubric Capital Management LP in July 2024 at a weighted average price of $ 116.00 per share.

(b) Weighted average price per share, including transaction costs and excise taxes.

In July 2024, a former executive exercised equity-classified warrants to 457,142 shares of the Company’s common stock in a non-cash transaction.

After giving effect to the non-cash exercise and related tax withholding, the Company issued 160,289 shares of the Company’s common stock.

As of September 30, 2024 (Successor), the Company had 50,855,417 shares of common stock outstanding.

Acquisition of Noncontrolling Interests

Purchase of Equity in Nautilus.

In October 2024, the Company acquired TeraWulf’s 25 % equity interest in in Nautilus in exchange for $ 85 million in cash and the distribution by Nautilus of its Bitcoin mining equipment to TeraWulf.

As a result of the transaction, the Company owns 100 % of the equity of Nautilus.

Purchase of Equity in Cumulus Digital Holdings.

In March 2024, TES acquired all of the equity of Cumulus Digital Holdings held by affiliates of Orion and two former members of Talen senior management in exchange for an aggregate of $ 39 million.

Following these transactions, TES owns 100 % of the equity of Cumulus Digital Holdings.

Accumulated Other Comprehensive Income

1 unchanged sentence

Successor Predecessor

Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Beginning balance $ ( 23 ) $ — $ ( 167 )

Gains (losses) arising during the period 1 ( 6 ) 6

Reclassifications to Consolidated Statements of Operations (a)

Gains (losses) arising during the period (a)

Reclassifications to Consolidated Statements of Operations ( 1 ) 7 5

Income tax benefit (expense) ( 7 ) 7 ( 5 )

Other comprehensive income (loss) 18 ( 12 ) 6

Cancellation of equity at Emergence — — 161

Accumulated other comprehensive income (loss) $ ( 5 ) $ ( 12 ) $ —

_____________

(a) Primarily reclassification to “Nuclear decommission trust fund gain (loss), net”.

The components of AOCI, net of tax, at June 30 were:

Successor Predecessor

(a) Primarily related to “Postretirement benefit prior service (credits) costs, net” for the nine months ended September 30, 2024 (Successor) and “Available-for-sale securities unrealized gain (loss), net” for the period from May 18 through September 30, 2023 (Successor).

The components of AOCI, net of tax, at September 30 were:

Available-for-sale securities unrealized gain (loss), net $ 7 $ ( 12 )

Postretirement benefit prior service credits (costs), net 16 —

Postretirement benefit actuarial gain (loss), net ( 28 ) —

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Supplemental Cash Flow Information

Supplemental information for the Consolidated Statements of Cash Flows for the periods were:

Supplemental information for the Consolidated Statements of Cash Flows for the periods was:

Successor Predecessor

Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Cash paid (received) during the period

Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Cash paid during the period

Interest and other finance charges, net of capitalized interest (a)

1 unchanged sentence

Income taxes, net 14 9 7

Non-cash investing and operating activities

Capital expenditure accrual increase (decrease) ( 16 ) 1 ( 28 )

Depreciation, amortization and accretion included on the Statements of Operations:

Unrealized (gain) loss on derivative instruments included on the Statements of Cash Flows

Commodity contracts $ ( 58 ) $ 43 $ 63

Interest rate swap contracts (interest expense) ( 1 ) 6 2

Unrealized (gain) loss on derivative instruments $ ( 59 ) $ 49 $ 65

Depreciation, amortization and accretion included on the Statements of Cash Flows

Depreciation, amortization and accretion $ 225 $ 94 $ 200

Amortization of deferred finance costs and original issuance discounts (interest expense) (b)

Other ( 9 ) ( 5 ) 8

Total depreciation, amortization and accretion $ 144 $ 27 $ 208

Non-cash financing/investing activities

Non-cash increase to PP&E and decrease to other current assets for transfer of miners by Cumulus Coin (b)

Non-cash decrease to PP&E and decrease to noncontrolling interest for transfer of miners to TeraWulf — — 3

Non-cash increase to PP&E and increase to noncontrolling interest for transfer of miners by TeraWulf (b)

Unrealized (gain) loss on derivatives:

Commodity contracts 44 ( 41 ) 63

Interest rate swap contracts ( 8 ) 2 2

Total unrealized (gain) loss on derivatives $ 36 $ ( 39 ) $ 65

Operating activities reconciliation adjustments, other:

Net periodic defined benefit cost $ — $ 1 $ ( 3 )

Depreciation, amortization and accretion $ 216 $ 89 $ 208

Reconciliation of other non-cash operating activities

Stock-based compensation $ 24 $ 11 $ —

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Bitcoin revenue ( 91 ) ( 44 ) ( 27 )

Nonrecourse paid-in-kind interest — 3 9

Mark-to-market on warrants — 14 —

Debt restructuring (gain) loss, net ( 9 ) — —

Other 1 5 ( 1 )

$ ( 58 ) $ 23 $ 7

Non-cash investing activities

Capital expenditure accrual increase (decrease) $ ( 16 ) $ ( 8 ) $ ( 28 )

Non-cash financing activities

Non-cash increase to PP&E and decrease to other current assets for contribution of Bitcoin miners to Nautilus (b)

Non-cash decrease to PP&E and decrease to noncontrolling interest for distribution of Bitcoin miners to TeraWulf — — 3

Non-cash increase to PP&E and increase to noncontrolling interest for contribution of Bitcoin miners by TeraWulf (b)

__________________

(a) Capitalized interest totaled $ 3 million for the six months ended June 30, 2024 (Successor);

$ 3 million for May 18 through June 30, 2023 (Successor);

(a) Capitalized interest totaled $ 3 million for the nine months ended September 30, 2024 (Successor);

$ 7 million for May 18 through September 30, 2023 (Successor);

and $ 12 million for January 1 through May 17, 2023 (Predecessor).

(b) In 2023, each of the joint venture partners of Nautilus made non-cash contributions to Nautilus of cryptocurrency miners that increased PP&E.

(b) In 2023, each of the joint venture partners of Nautilus made non-cash contributions to Nautilus of Bitcoin miners that increased PP&E.

Cash and Restricted Cash

The following provides a reconciliation of “Cash and cash equivalents” and “Restricted cash and cash equivalents” presented on the Consolidated Statements of Cash Flows to line items within the Consolidated Balance Sheets:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 648 $ 400

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Acquisitions and Divestitures

Completed Divestitures

2024 Activities

In March 2024, the Company and CPS Energy entered into an agreement for CPS Energy to acquire the Company’s 1,710 MW Texas generation portfolio located within the ERCOT market for $ 785 million, subject to customary net working capital adjustments.

The sale closed in May 2024.

A gain on sale of $ 563 million is presented as “Gain (loss) on sale of assets, net” on the Consolidated Statements of Operations.

A gain on sale of $ 564 million is presented as “Gain (loss) on sale of assets, net” on the Consolidated Statements of Operations for the nine months ended September 30, 2024 (Successor).

Cumulus Data Campus Sale.

In March 2024, AWS purchased substantially all the assets of Cumulus Data and certain other assets for gross proceeds of $ 650 million.

Gross proceeds of $ 350 million were initially received at closing with the remaining $ 300 million of variable consideration, presented as “Other current assets” on the Consolidated Balance Sheets, expected to be received from escrow at the completion of certain development milestones.

Cumulus Digital Holdings distributed $ 109 million of the initial net proceeds from the sale to its members, including $ 108 million to TES.

In connection with the Cumulus Data Campus Sale, the Company entered into a power purchase agreement with AWS, pursuant to which (i) the Company agreed to supply up to 960 MW of long-term, carbon-free power to the Cumulus Data Campus from Susquehanna;

(ii) the parties agreed to fixed-price power commitments that increase in 120 MW increments over several years;

and (iii) AWS, under certain conditions, has the option to cap their commitments at 480 MW.

AWS also became lessor under the ground lease agreement with Nautilus.

For the six months ended June 30, 2024 (Successor), a $ 324 million net gain on sale is presented as “Gain (loss) on sale of assets, net” on the Consolidated Statements of Operations.

Pennsylvania Minerals Divestiture.

In March 2023, Talen sold certain mineral interests located in Pennsylvania for $ 29 million, while preserving the right to certain royalty payments from existing and future producing natural gas wells.

For the period from January 1 through May 17, 2023 (Predecessor), a $ 29 million gain was presented as “Gain (loss) on sale of assets, net” on the Consolidated Statements of Operations.

In March 2024, AWS purchased substantially all the assets related to the Cumulus Data Campus and certain other assets for gross proceeds of $ 650 million, of which $ 350 million were received at closing with the remaining $ 300 million held in escrow pending achievement of certain development milestones.

In August 2024, the milestones were met and the Company received the remaining consideration.

For the nine months ended September 30, 2024 (Successor), a $ 324 million gain on sale is presented as “Gain (loss) on sale of assets, net” on the Consolidated Statements of Operations.

In connection with the Cumulus Data Campus Sale, the Company entered into the AWS PPA.

See Note 10 for additional information on the AWS PPA and the Amended ISA.

2023 Activities

Western Gas Book Divestiture.

1 unchanged sentence

For the period from January 1 through May 17, 2023 (Predecessor), a $ 15 million gain was presented as “Gain (loss) on sale of assets, net” on the Condensed Consolidated Statements of Operations.

Acquisition of Noncontrolling Interests

In March 2024, TES acquired all of the equity units of Cumulus Digital Holdings held by affiliates of Orion and two former members of Talen senior management in exchange for an aggregate of $ 39 million.

Following these transactions, TES owns 100 % of the equity of Cumulus Digital Holdings.

Pennsylvania Minerals Divestiture.

For the period from January 1 through May 17, 2023 (Predecessor), a $ 29 million gain was presented as “Gain (loss) on sale of assets, net” on the Consolidated Statements of Operations.

Talen’s operating segments are based on the market areas in which our generation facilities operate and reflect the manner in which our chief operating decision maker review results and allocate resources.

2 unchanged sentences

“PJM” is engaged in electricity generation, marketing activities, commodity risk and fuel management within the PJM RTO or ISO markets and is comprised of Susquehanna and Talen’s natural gas and coal generation facilities.

“Other” represents a non-reportable segment that includes the operating and marketing activities of Talen Montana’s proportionate share of the Colstrip Units in the WECC market, the operating activities of Nautilus, and other non-material operating and development activities.

“Other” represents a non-reportable segment that includes the operating and marketing activities of Talen Montana’s proportionate share of Colstrip in the WECC market, the operating activities of Nautilus, and other non-material operating and development activities.

The “Other” segment also included the operating activities of our Texas power generation facilities in the ERCOT market prior to their disposal in May 2024.

We have determined it appropriate to aggregate results of Talen’s remaining non-reportable segments and other operating activities.

“Corporate and Eliminations” represents a non-reportable segment represents the remaining grouping that includes:

(i) General and administrative expenses incurred by our corporate and commercial functions that are not allocated to our reportable segments;

(ii) other non-material components that are not regularly reviewed by our chief operating decision maker;

“Corporate and Eliminations” represents a non-reportable segment that includes:

(i) general and administrative expenses incurred by our corporate function;

(ii) interest expense and other corporate activities not allocated to our operating segments;

and (iii) intercompany eliminations.

2 unchanged sentences

PJM Other Corporate and Eliminations Total

Three Months Ended June 30, 2024 (Successor)

Operating revenues $ 438 $ 58 $ ( 7 ) $ 489

Interest expense — — 62 62

Capital expenditures 14 — — 14

Adjusted EBITDA 95 5 100

May 18 through June 30, 2023 (Successor)

Three Months Ended September 30, 2024 (Successor)

Operating revenues $ 575 $ 96 $ ( 21 ) $ 650

2 unchanged sentences

Adjusted EBITDA 217 28 245

April 1 through May 17, 2023 (Predecessor)

Three Months Ended September 30, 2023 (Successor)

Operating revenues $ 343 $ 243 $ ( 70 ) $ 516

3 unchanged sentences

PJM Other Corporate and Eliminations Total

Six Months Ended June 30, 2024 (Successor)

Nine Months Ended September 30, 2024 (Successor)

Operating revenues $ 1,446 $ 304 $ ( 102 ) $ 1,648

2 unchanged sentences

Adjusted EBITDA 592 71 663

May 18 through June 30, 2023 (Successor)

May 18 through September 30, 2023 (Successor)

Operating revenues $ 698 $ 213 $ ( 94 ) $ 817

$ 355 $ ( 30 ) $ ( 24 ) $ 301

Interest expense — — 101 101

6 unchanged sentences

Adjusted EBITDA 688 37 725

Successor Predecessor Successor Predecessor

Three Months Ended June 30, 2024 May 18 through June 30, 2023 April 1 through May 17, 2023 Six Months Ended June 30, 2024 May 18 through June 30, 2023 January 1 through May 17, 2023

Successor Predecessor

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 May 18 through September 30, 2023 January 1 through May 17, 2023

Adjusted EBITDA:

1 unchanged sentence

Other 28 83 71 104 37

Total Adjusted EBITDA $ 100 $ 93 $ 47 $ 418 $ 93 $ 725

Total Segment Adjusted EBITDA $ 245 $ 251 $ 663 $ 344 $ 725

Reconciling Items:

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements