What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-13 · 157 added, 216 removed, 292 unchanged (56% of the section changed)

8 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.

Recent Developments

Susquehanna ISA Amendment

On November 1, 2024, FERC issued an order denying the amended interconnection service agreement between PJM, PPL, and Susquehanna that would permit Susquehanna to decrease the amount of power supply that would otherwise be provided to the power grid.

Such order does not have an impact on the existing interconnection service agreement permitting 300 MW of co-located load at Susquehanna to supply power for the first phases of the AWS data center campus.

See Note 10 in Notes to the Interim Financial Statements for additional information on the Susquehanna ISA Amendment.

Purchase of TeraWulf’s Minority Interest in Nautilus

In October 2024, the Company:

(i) increased its ownership in Nautilus to 100% by completing the strategic acquisition of TeraWulf’s 25% interest in Nautilus in exchange for $85 million in cash;

(ii) caused Nautilus to distribute all of the Bitcoin miners that were used in the operations of Nautilus to TeraWulf;

and (iii) suspended operational activities at Nautilus as the Company continues to advance its strategic alternatives for the asset.

Subsequent to the acquisition, Nautilus continues to be party to both the ground lease agreement and the submetered power arrangement with AWS.

See our Registration Statement for additional information on the Nautilus ground lease and submetered power arrangements.

Additional Increase of Share Repurchase Program Capacity

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

As of September 30, 2024 (Successor), the company had repurchased approximately 14% of its outstanding shares of common stock for a total of $952 million, exclusive of transaction cost and excise tax.

See Note 15 in Notes to the Interim Financial Statements for additional information.

Common Stock Transactions

In the six months ended June 30, 2024 (Successor), the company repurchased a total of 5,773,889 shares of the Company’s common stock under the share repurchase program for an aggregate purchase price of $661 million, inclusive of transaction costs and excise taxes, at a weighted average per share price of $114.48.

Of the total shares repurchased, 5,275,862 shares were the result of the tender offer executed in June 2024.

In June 2024, the Company retired 5,768,862 shares of treasury stock repurchased during the six months ended June 30, 2024 (Successor).

In July 2024, the Company repurchased 2,413,793 shares from affiliates of Rubric Capital Management LP at a purchase 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.

In the three months ended September 30, 2024 (Successor), the Company repurchased a total of 2,559,826 shares of the Company’s common stock under its share repurchase program for an aggregate purchase price of $304 million, inclusive of transaction costs and excise taxes, at a weighted average per share price of $118.82.

Of the total shares repurchased during the period, 2,413,793 shares were purchased from affiliates of Rubric Capital Management LP in July 2024.

In the three months ended September 30, 2024 (Successor), the Company retired 2,564,853 shares repurchased and settled during the period.

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 tax impacts, the Company issued 160,289 shares of the Company’s common stock.

As of August 13, 2024, the Company has 51,001,450 shares of common stock outstanding.

See Note 15 in Notes to the Interim Financial Statements for more information related to share repurchases and the retirement of treasury stock.

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 November 14, 2024, the Company has 50,855,417 shares of common stock outstanding.

See Note 15 in Notes to the Interim Financial Statements for additional information related to share repurchases and the retirement of treasury stock.

Receipt of Cumulus Data Campus Sale Funds Previously Held in Escrow

In August 2024, as the result of achieving development milestones under its agreement with AWS governing the Cumulus Data Campus Sale, the Company received the remaining $300 million of sales proceeds that were held in escrow.

See Note 17 to the Interim Financial Statements for additional information on the Cumulus Data Campus Sale.

PJM 2025/2026 Base Residual Auction

In July 2024, PJM reported the results of the PJM Base Residual Auction for the 2025/2026 planning year.

In July 2024, PJM reported the results of the PJM BRA for the 2025/2026 PJM Capacity Year.

Talen cleared a total of 6,820 MW at a clearing price of $269.92 per MW-day for the MAAC, PPL, and PSEG locational deliverability areas.

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 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.

Term Loan Repricing

In May 2024, the Company completed a repricing transaction with respect to the TLB and TLC.

The new rate applicable to the TLB and TLC is SOFR plus 350 basis points, which reduces the interest rate margin by 100 basis points.

The applicable SOFR floor was reduced from 50 to 0 basis points.

Additionally, in connection with the repricing, the lenders under the TLB and TLC agreed to:

(i) waive any mandatory prepayment obligations in connection with the ERCOT Sale;

and (ii) certain other amendments permitting Talen additional capacity for dispositions, restricted payments and investments under the Credit Agreement.

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

Factors Affecting Our Financial Condition and Results of Operations

2 unchanged sentences

Generation Facility Updates

Reliability Impact Assessments.

PJM RMR Assessments.

In the first quarter 2023, the project to convert Brandon Shores’ fuel source from coal to fuel oil was canceled for economic reasons, which resulted in non-cash impairment charges related to property, plant, and equipment and inventories.

In April 2023, Brandon Shores notified PJM that it will deactivate electric generation on June 1, 2025.

In June 2023, PJM notified Brandon Shores that its generation Units 1 and 2 are needed for transmission reliability.

In June 2023, PJM notified Brandon Shores that its generation Units 1 and 2 are needed for reliability.

In October 2023, for economic reasons, the Company provided a notice to PJM that it intends to deactivate H.A.

Wagner on June 1, 2025.

In January 2024, PJM notified H.A Wagner that its generation Units 3 and 4 are needed for transmission reliability.

Each generation facility has filed a cost-of-servicer rate schedule at FERC, which was accepted in June 2024, subject to refund.

In January 2024, PJM notified H.A Wagner that its generation Units 3 and 4 are needed for reliability.

Each generation facility has filed a cost-of-service rate schedule at FERC, which was accepted in June 2024, subject to refund.

Additionally, an administrative settlement judge was appointed in June 2024 and settlement proceedings have commenced.

No assurance can be provided as to when, if at all, a final rate schedule will be approved by FERC or how the rate schedule and resulting revenues may be modified in the course of settlement judge procedures, or, should they be necessary, in the course of any subsequent evidential hearing.

See Note 8 in Notes to the Interim Financial Statements for additional information on the reliability assessments and additional information on the Brandon Shores impairment.

No assurance can be provided as to when, if at all, a final rate schedule will be accepted by FERC or how the rate schedule and resulting revenues may be modified in the course of settlement judge procedures, or, should they be necessary, in the course of any subsequent evidential hearing.

See Note 8 in Notes to the Interim Financial Statements for additional information on the reliability assessments and related impairment of the Brandon Shores asset group.

Commodity Markets

The following tables summarize average on-peak power prices and natural gas prices for the PJM market for the three months ended June 30, 2024 (Successor) and 2023 (Predecessor).

During the second quarter of 2024, natural gas prices for Texas Eastern M-3 settled below its ten-year average resulting from storage levels above the five-year range and ample supply.

The following tables summarize average on-peak power prices and natural gas prices for the PJM market for the three months ended September 30, 2024 (Successor) and 2023 (Successor).

During the third quarter 2024, natural gas prices for Texas Eastern M-3 settled below their ten-year average resulting from storage levels above the five-year average and ample supply.

In PJM, higher than normal temperatures during the quarter contributed to increased power load resulting in higher settled on-peak power prices compared to the same period in the prior year.

The average settled market prices for the three months ended June 30 were:

The weighted average settled market prices for the three months ended September 30 were:

PJM West Hub Day Ahead Peak - $/MWh $ 50.03 $ 42.93

2 unchanged sentences

Texas Eastern M-3 - $/MMBtu 1.50 1.39

The PJM West Hub Day Ahead Peak 2024 quarter average settled prices increased approximately 6% compared to the prior year.

The weighted average forward market prices for the periods from July 1 through December 31 as of June 30:

The PJM West Hub Day Ahead Peak 2024 quarter weighted average settled prices increased approximately 17% compared to the prior year.

The weighted average forward market prices for the periods from October 1 through December 31 as of September 30:

PJM West Hub ATC - $/MWh $ 42.67 $ 41.32

5 unchanged sentences

Our generation capacity is located in markets with capacity products, which are intended to ensure long-term grid reliability for customers by securing sufficient power supply resources to meet predicted future demand.

Capacity prices are affected by supply and demand fundamentals, such as generation facility additions and retirements, capacity imports from and exports to adjacent markets, generation facility retrofit costs, non-performance risk premium penalties, demand response products, ISO demand forecasts, reserve margin targets and adjustments to PJM MSOC as determined by the PJM IMM.

Capacity prices are affected by supply and demand fundamentals, such as generation facility additions and retirements, capacity imports from and exports to adjacent markets, generation facility retrofit costs, non-performance risk premium penalties, demand response products, ISO demand forecasts, reserve margin targets, and adjustments to PJM Market Seller Offer Cap as determined by the PJM Independent Market Monitor.

PJM Capacity Auctions.

Under the RPM, PJM conducts a series of capacity auctions.

Most capacity is procured in the auctions conducted each May for the delivery of generation capacity for the PJM Capacity Year, which is three years from the date of the auction.

Under its reliability pricing model, PJM conducts a series of capacity auctions.

Most capacity is procured in the auctions conducted each May for the delivery of generation capacity for the PJM Capacity Year, which is three

years from the date of the auction.

Capacity auctions have recently been delayed, resulting in the auctions being held with less than 3 years between the auctions and the PJM Capacity Year, with the most recent auction held in July 2024.

1 unchanged sentence

The results of each of these auctions impacts Talen's capacity revenues in the specific PJM Capacity Year.

See “Capacity Prices” below for additional information on capacity prices and see Note 10 in Notes to the Interim Financial Statements for additional information on the PJM RPM and other PJM matters.

See “Capacity Prices” below for additional information on capacity prices and see Note 10 in Notes to the Interim Financial Statements for additional information on PJM matters, including recent developments related to potential delays in future PJM BRAs.

Capacity Prices.

The following table displays the PJM Base Residual Auction’s cleared capacity prices for the markets and zones in which we primarily operate:

2025/2026 (b)

The following table displays the cleared capacity prices for completed PJM BRAs for the markets and zones in which we primarily operate:

2025/2026 2024/2025 2023/2024 2022/2023

4 unchanged sentences

(a) Displayed prices are from the applicable market publications.

(b) 2025/2026 prices were released on July 30, 2024.

Nuclear Production Tax Credit

2 unchanged sentences

The Nuclear PTC program provides qualified nuclear power generation facilities with a $3 per MWh transferable credit for electricity produced and sold to an unrelated party during each tax year.

Electricity produced and sold by Susquehanna after December 31, 2023 through December 31, 2032 will qualify for the credit, which is subject to potential adjustments.

Electricity produced and sold by Susquehanna after December 31, 2023 through December 31, 2032 may be eligible for the credit, which is subject to potential adjustments.

Such adjustments include inflation escalators, a five-times increase in tax credit value (to $15 per MWh) if the qualifying generation facility meets prevailing wage requirements, and a pro-rata decrease in tax credit value once the annual gross receipts of a qualifying generation facility exceeds $25 per MWh.

6 unchanged sentences

The Inflation Reduction Act’s provisions are subject to implementation regulations, whose terms are not yet known.

No assurance can be provided as to the magnitude of the benefit to Susquehanna as the Inflation Reduction Act’s provisions, including the computations of the Nuclear PTC, are subject to implementation regulations that could impact the credit value recognized to date and credit value available in future periods.

As such, Talen cannot fully predict the realization of any minimum price for Susquehanna’s generation and (or) impacts to Talen’s liquidity or results of operations.

8 unchanged sentences

We ordinarily perform facility maintenance during lower or non-peak demand periods to ensure reliability during periods of peak usage.

The pattern of the fluctuations in our operating results varies depending on the type and location of the power generation facilities being serviced, capacity markets served, the maintenance requirements of our facilities and the terms of bilateral contracts to purchase or sell electricity.

The pattern of the fluctuations in our operating results varies depending on the type and location of the power generation facilities being serviced, the capacity markets served, the maintenance requirements of our facilities, and the terms of bilateral contracts to purchase or sell electricity.

The largest recurring maintenance project is the annual spring refueling outage at Susquehanna.

3 unchanged sentences

The results of operations presented below should be reviewed in conjunction with the Interim Financial Statements, the Annual Financial Statements, and their respective notes.

Our financial results for the three months ended June 30, 2024, the six months ended June 30, 2024, and for the period May 18 through June 30, 2023 are referred to as the “Successor” periods.

Our financial results for the period April 1 through May 17, 2023 and for the period from January 1 through May 17, 2023 are referred to as the “Predecessor” periods.

The operating results for the three and six months ended June 30, 2024 cannot be adequately compared with any of the previous periods reported in the Interim Financial Statements or Annual Financial Statements.

Our financial results for the three months ended September 30, 2024, the nine months ended September 30, 2024, and for the period May 18 through September 30, 2023 are referred to as the “Successor” periods.

Our financial results for the period from January 1 through May 17, 2023 are referred to as the “Predecessor” period.

The operating results for the nine months ended September 30, 2024 cannot be adequately compared with any of the previous periods reported in the Interim Financial Statements or Annual Financial Statements.

Our results of operations as reported in the Interim Financial Statements are prepared in accordance with GAAP.

2 unchanged sentences

“Fuel and energy purchases” includes costs for fuel to generate electricity and settlements of financial and physical transactions related to fuel and energy purchases.

In addition, unrealized gains (losses) on derivatives instruments resulting from changes in fair value during the period and are presented separately as revenues within “Operating Revenues” and expenses within “Total Energy Expenses” in the Interim Financial Statements.

In addition, unrealized gains (losses) on derivative instruments resulting from changes in fair value during the period are presented separately as revenues within “Operating Revenues” and expenses within “Total Energy Expenses” in the Interim Financial Statements.

We evaluate them collectively because they represent the changes in fair value of Talen’s economic hedging activities.

Results for the Three Months Ended June 30, 2024 (Successor), May 18 through June 30, 2023 (Successor), and January 1 through May 17, 2023 (Predecessor)

The following table and subsequent sections display the results of operations for the Successor and Predecessor periods:

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

Results for the Three Months Ended September 30, 2024 (Successor) and the Three Months Ended September 30, 2023 (Successor)

The following table and subsequent section display the results of operations:

(Millions of Dollars) Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Favorable (Unfavorable) Variance

Capacity revenues $ 50 $ 44 $ 6

Energy and other revenues 505 600 (95)

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

Operating Revenues 489 301 137

Unrealized gain (loss) on derivative instruments (Note 3) 95 (128) 223

Operating Revenues (Note 4) 650 516 134

Fuel and energy purchases (222) (253) 31

Nuclear fuel amortization (30) (47) 17

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

Unrealized gain (loss) on derivative instruments (Note 3) 7 44 (37)

Energy Expenses (245) (256) 11

2 unchanged sentences

General and administrative (38) (37) (1)

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

Impairments — — (16)

Operational restructuring (1) — —

Depreciation, amortization and accretion (Note 8) (75) (66) (9)

Impairments (Note 8) — (2) 2

Other operating income (expense), net (7) (8) 1

1 unchanged sentence

Nuclear decommissioning trust funds gain (loss), net 67 (24) 91

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

Reorganization income (expense), net — — 838

Gain (loss) on sale of assets, net 561 — 15

Interest expense and other finance charges (Note 11) (66) (68) 2

Other non-operating income (expense), net 20 (7) 27

Income (Loss) Before Income Taxes 179 (92) 271

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

Income tax benefit (expense) (Note 5) (11) 16 (27)

Net Income (Loss) 168 (76) 244

Net income (loss) attributable to noncontrolling interest — 1 (1)

Net Income (Loss) Attributable to Stockholders (Successor) / Member (Predecessor) $ 454 $ 29 $ 431

Successor Period — Three Months Ended June 30, 2024

Net Income (Loss) Attributable to Stockholders totaled $454 million for the three months ended June 30, 2024 (Successor).

Results were driven by:

• Capacity Revenues totaled $46 million.

This primarily included earned capacity awards based on resource clearing prices received from the PJM Base Residual Auction for the 2024/2025 and 2023/2024 delivery periods.

• Energy and Other Revenues, net of Fuel and Energy Purchases totaled $204 million.

This primarily consisted of:

(i) $271 million in third-party wholesale electricity sales and ancillary revenues;

(ii) $72 million in other revenue primarily related to Nautilus operations and Nuclear PTC;

and (iii) $17 million in net realized gains from hedging activities.

Such amounts were partially offset by $(155) million in fuel and purchased power costs.

• Unrealized Gain (Loss) on Derivative Instruments totaled $91 million gain, net.

This consisted of:

(i) unrealized gains incurred as a result of decreases in forward power prices;

and (ii) unrealized gains from the reversal of positions previously recognized as mark-to-market liabilities which settled during the period.

• Nuclear Fuel Amortization totaled $(28) million.

This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment.

Activity also included $8 million of amortization on certain nuclear fuel contracts that were recognized at fair value at Emergence.

• Operation, Maintenance, and Development totaled $(164) million.

This consisted of generation facility operating costs, including wages and benefits for employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies costs.

• Depreciation, Amortization and Accretion totaled $(75) million.

This consisted of the periodic expense of long-lived property, plant and equipment and ARO accretion.

• Nuclear Decommissioning Trust Funds Gain (Loss) , net, totaled $27 million.

This consisted of realized gains and losses on debt and equity securities, unrealized gains on equity securities, dividends, and interest income on investments in the NDT.

See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

• Interest Expense and Other Finance Charges totaled $(62) million.

This primarily consisted of interest expense incurred on the Secured Notes and Term Loans.

• Gain (loss) on Sale of Assets, net totaled $561 million This is primarily related to the ERCOT Sale that closed in May 2024.

See Note 17 in Notes to the Interim Financial Statements for additional information.

• Other Non-operating Income (Expense) , net totaled $17 million.

This is primarily related to interest income.

• Income Tax Benefit (Expense) totaled $(112) million.

This primarily consisted of federal and state income taxes, effects of permanent nondeductible items, trust tax on the nuclear decommissioning trust income, and changes in the valuation allowance.

Successor Period — May 18 through June 30, 2023

See “Successor Period - May 18 through June 30, 2023” within “Results for the Six Months Ended June 30, 2024 (Successor)” below for a discussion of the results of operations for the above period.

Predecessor Period — April 1 through May 17, 2023

Net Income (Loss) Attributable to Member totaled $431 million for the period April 1 through May 17, 2023.

Results were driven by:

• Capacity Revenues totaled $42 million for the period and were primarily based on resource clearing prices received from the PJM Base Residual Auction for the 2022/2023 delivery period.

• Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $111 million.

This consisted of:

(i) $98 million in third-party wholesale electricity sales and ancillary revenues;

(ii) $52 million in net realized gains from hedging activities;

and (iii) $18 million in other revenue primarily related to Nautilus operations.

Such amounts were partially offset by $(57) million in fuel and purchased power costs.

• Unrealized Gain (Loss) on Derivative Instruments totaled $(94) million.

This consisted of:

(i) unrealized losses incurred as a result of increases in forward power prices;

coupled with (ii) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period.

• Nuclear Fuel Amortization totaled $(9) million.

This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment.

• Operation, Maintenance, and Development totaled $(108) million.

• Depreciation, Amortization and Accretion totaled $(68) million.

This consisted of the periodic expense of long-lived property, plant and equipment, and ARO accretion.

• Nuclear Decommissioning Trust Funds Gain (Loss), net, totaled $11 million.

This consisted of realized gains on debt and equity securities, unrealized losses on equity securities, dividends, and interest income on investments in the NDT.

Net Income (Loss) Attributable to Stockholders (Successor) $ 168 $ (77) $ 245

Successor Periods — Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Net Income (Loss) Attributable to Stockholders increased by $245 million, primarily driven by the factors discussed below.

• Operating Revenues, net of Energy Expenses.

$145 million favorable increase due to the following:

Energy and Other Revenues, net of Fuel and Energy Purchases.

$(64) million unfavorable decrease.

This is primarily driven by (i) $(198) million decrease in realized energy margin from electric generation and ancillary revenue due to the ERCOT Sale in April 2024 and lower generation at Susquehanna, partially offset by higher realized prices at Susquehanna and PJM fossil plants;

(ii) $73 million favorable increase in hedge results;

and (iii) $71 million favorable increase in Nuclear PTC revenue.

Unrealized Gain (Loss) on Derivative Instruments, net.

$186 million favorable increase.

This is primarily driven by (i) $130 million of favorable increase in positions existing in both the third quarters 2024 and 2023 resulting from lower forward power prices;

(ii) $35 million favorable increase due to lower unrealized losses on new trades executed in the third quarter 2024 as compared to trades executed in the third quarter 2023;

and (iii) $32 million unrealized gain from the reversal of positions previously recognized as mark-to-market liabilities which settled during the period.

• Nuclear Decommissioning Trust Funds Gain (Loss), net.

$91 million favorable increase.

This is primarily driven by an increase in unrealized gains on equity securities in 2024 as a result of investment returns and a decline in interest rates during the third quarter 2024.

Investment return volatility resulted in losses in the comparative 2023 period.

See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

• Other Operating Income (Expense), net, totaled $(28) million, primarily due to fuel inventory net realizable value adjustment expense.

See Note 6 in Notes to the Interim Financial Statements for additional information.

• Reorganization Income (Expense), net, totaled $838 million for the period, primarily due to the $1,459 million gain on debt discharge recognized upon Emergence, partially offset by a $460 million loss on revaluation adjustments.

See Note 2 in Notes to the Interim Financial Statements for additional information.

• Interest Expense and Other Finance Charges totaled $(59) million.

This primarily consisted of interest expense incurred on prepetition debt and certain LC fees.

• Gain (loss) on Sale of Assets, net, totaled $15 million.

This is primarily due to non-recurring sales during the period.

See Note 17 in Notes to the Interim Financial Statements for additional information.

• Income Tax Benefit (Expense) totaled $(198) million.

This primarily consisted of federal and state income taxes, changes in the valuation allowance, and reorganization adjustments.

Results for the Six Months Ended June 30, 2024 (Successor), May 18 through June 30, 2023 (Successor), and January 1 through May 17, 2023 (Predecessor)

• Other Non-operating Income (Expense), net.

$27 million favorable increase.

This is primarily related to a decrease in pension litigation settlement charges recognized in 2023 and an increase in interest income in 2024.

See Note 10 in Notes to the Interim Financial Statements for additional information on the pension litigation settlement.

• Income Tax Benefit (Expense).

$(27) million unfavorable increase.

This is driven by an increase to federal and state tax expense due to change in pre-tax book income, increase in unfavorable permanent differences, increase in production tax credits benefit, increase in NDT net tax expense, and decrease to valuation allowance expense.

Results for the Nine Months Ended September 30, 2024 (Successor), May 18 through September 30, 2023 (Successor), and January 1 through May 17, 2023 (Predecessor)

The following table and subsequent sections display the results of operations for the Successor and Predecessor periods:

Successor Predecessor

(Millions of Dollars, except share data) 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

Capacity revenues $ 141 $ 70 $ 108

Energy and other revenues 1,444 788 1,042

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

Operating Revenues 998 301 1,210

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

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

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

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

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

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

Energy Expenses (633) (384) (332)

2 unchanged sentences

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

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

Impairments — — (381)

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

Impairments (Note 8) — (2) (381)

Operational restructuring — — —

7 unchanged sentences

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

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

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

Net Income (Loss) 945 (45) 465

1 unchanged sentence

Net Income (Loss) Attributable to Stockholders (Successor) / Member (Predecessor) $ 916 $ (48) $ 479

Successor Period — Six Months Ended June 30, 2024

Net Income (Loss) Attributable to Stockholders totaled $748 million for the six months ended June 30, 2024.

Successor Period — Nine Months Ended September 30, 2024

Net Income (Loss) Attributable to Stockholders totaled $916 million for the nine months ended September 30, 2024.

Results were driven by:

• Capacity Revenues totaled $141 million.

This primarily included earned capacity awards based on resource clearing prices received from the PJM Base Residual Auction for the 2023/2024 and 2024/2025 delivery period.

This primarily included earned capacity awards based on resource clearing prices received from the PJM BRA for the 2023/2024 and 2024/2025 delivery periods.

• Energy and Other Revenues, net of Fuel and Energy Purchases totaled $909 million.

1 unchanged sentence

(i) $989 million in third-party wholesale electricity sales and ancillary revenues;

(ii) $150 million in other revenue primarily related to Nautilus operations and Nuclear PTC;

(ii) $242 million in other revenue primarily related to Nuclear PTC and Bitcoin revenue;

and (iii) $182 million in net realized gains from hedging activities.

Such amounts were partially offset by $(504) million in fuel and purchased power costs.

• Unrealized Gain (Loss) on Derivative Instruments totaled $(44) million loss, net.

• Unrealized Gain (Loss) on Derivative Instruments totaled $58 million gain, net.

This consisted of:

(i) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period;

partially offset by (ii) unrealized gains incurred as a result of decreases in forward power prices.

(i) unrealized gains incurred as a result of decreases in forward power prices;

partially offset by (ii) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period.

• Nuclear Fuel Amortization totaled $(93) million.

5 unchanged sentences

• Nuclear Decommissioning Trust Funds Gain (Loss), net , totaled $169 million.

This consisted of realized gains and losses on debt and equity securities, unrealized gains on equity securities, dividends, and interest income on investments in the NDT.

This consisted of unrealized gains on equity securities, realized gains and losses on debt and equity securities, dividends, and interest income on investments in the NDT.

See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

6 unchanged sentences

This is primarily due to interest income.

Successor Period — May 18 through June 30, 2023

Net Income (Loss) Attributable to Stockholders totaled $29 million for the period from May 18 through June 30, 2023.

Results were driven by:

• Capacity Revenues totaled $26 million and were primarily based on resource clearing prices received from the PJM Base Residual Auction for the 2023/2024 and 2022/2023 delivery periods.

• Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $131 million.

This consisted of:

(i) $136 million in third-party wholesale electricity sales and ancillary revenues;

(ii) $16 million in net realized gains from hedging activities;

and (iii) $15 million in other revenue primarily related to Nautilus operations.

Such amounts were partially offset by $(36) million in fuel and purchased power costs.

• Unrealized Gain (Loss) on Derivative Instruments totaled $41 million gain, net.

This consisted of unrealized gains incurred as a result of decreases in forward power prices.

• Nuclear Fuel Amortization totaled $(25) million.

This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment.

Activity also included $(14) million of amortization on certain nuclear fuel contracts that were recognized at fair value at Emergence.

• Operation, Maintenance, and Development totaled $(69) million.

• Depreciation, Amortization and Accretion totaled $(28) million.

This consisted of the periodic expense of long-lived property, plant and equipment and ARO accretion.

• Nuclear Decommissioning Trust Funds Gain (Loss), net, totaled $39 million.

This consisted of realized losses on debt and equity securities, unrealized gains on equity securities, dividends, and interest income on investments in the NDT.

See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

• Interest Expense and Other Finance Charges totaled $(33) million.

This primarily consisted of interest expense incurred on prepetition debt and certain LC fees.

• Other Non-operating Income (Expense), net, totaled $(11) million, primarily due to mark-to-market adjustments for warrants issued in 2023.

• Income Tax Benefit (Expense) totaled $(192) million.

This primarily consisted of federal and state income taxes and trust tax on nuclear decommissioning trust income.

This primarily consists of federal and state income taxes, effects of permanent items, trust tax on income from the NDT, changes in valuation allowance, and excluded production tax credit income.

Successor Period — May 18 through September 30, 2023

Net Income (Loss) totaled $(48) million for the period of May 18 through September 30, 2023 (Successor).

Results were driven by:

• Capacity Revenues totaled $70 million for the period, which were primarily based on resource clearing prices received from the PJM BRA for the 2023/2024 delivery period.

• Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $478 million for the period and consisted of $729 million in third-party wholesale electricity sales and ancillary revenues, coupled with $44 million in other revenue;

partially offset by $(240) million in fuel and purchased power costs and $(55) million in net realized losses from hedging activities.

Other revenues relate to operations of Nautilus that commenced in February 2023.

• Unrealized Gain (Loss) on Derivative Instruments totaled $(43) million of net losses for the period, which was comprised of unrealized losses incurred as a result of increases in forward power prices, partially offset by unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period.

• Nuclear Fuel Amortization totaled $(72) million for the period and was related to the amortization of nuclear fuel costs that were previously capitalized to property, plant and equipment.

Activity in this period included $38 million of additional amortization related to certain nuclear contracts as a result of fair value adjustments.

• Operation, Maintenance, and Development totaled $(209) million for the period.

This consists of generation facility operating costs, including salary and benefit costs for generation-facility employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies.

• Depreciation, Amortization and Accretion totaled $(94) million for the period.

This consists of depreciation of long-lived property, plant and equipment and accretion related to AROs.

The period includes the effect of fair value adjustments made to property, plant and equipment and AROs upon Emergence.

• Interest Expense and Other Finance Charges totaled $(101) million for the period and primarily consisted of interest expense incurred on the Secured Notes, Term Loans, Cumulus Digital TLF, and LMBE-MC TLB.

Predecessor Period — January 1 through May 17, 2023

1 unchanged sentence

Results were driven by:

• Capacity Revenues totaled $108 million for the period and were primarily based on resource clearing prices received from the PJM Base Residual Auction for the 2022/2023 delivery period.

Capacity revenues were negatively impacted by $(13) million of net PJM capacity penalties related to Winter Storm Elliot.

• Capacity Revenues totaled $108 million for the period and were primarily based on resource clearing prices received from the PJM BRA for the 2022/2023 delivery period.

Capacity revenues were negatively impacted by $(13) million of net PJM capacity penalties related to Winter Storm Elliott.

• Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $866 million for the period and consisted of $637 million in net realized gains from hedging activities, coupled with $343 million in third-party wholesale electricity sales and ancillary revenues and $27 million in other revenue, partially offset by $(141) million in fuel and purchased power costs.

Other revenues relate to operations of Nautilus that commenced operations in February 2023.

Other revenues relate to operations of Nautilus that commenced in February 2023.

• Unrealized Gain (Loss) on Derivative Instruments totaled $(63) million loss, net.

9 unchanged sentences

See Note 8 in Notes to the Interim Financial Statements for additional information.

• Other Operating Income (Expense), net, totaled $(37) million for the period, reflecting fuel inventory net realizable value adjustment expense.

• Other Operating Income (Expense), net, totaled $37 million for the period, primarily consisting of non-cash charges for fuel inventory net realizable value adjustments.

See Note 6 in Notes to the Interim Financial Statements for additional information.

2 unchanged sentences

See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

• Interest Expense and Other Finance Charges totaled $(163) million for the period and primarily consisted of interest expense incurred on the Prepetition Secured Notes, Prepetition RCF, Prepetition TLB, LMBE-MC TLB and certain LC fees.

• Reorganization Income (Expense), net, totaled $799 million for the period, primarily due to the $1,459 million gain on debt discharge recognized upon Emergence partially offset by a $460 million loss on revaluation adjustments, $70 million in backstop commitment letters, and $57 million in professional fees.

11 unchanged sentences

(v) legacy environmental obligations;

and (vi) other working capital requirements.

and (vi) other working capital requirements and (or) the Company’s discretionary expenditures.

Our primary sources of liquidity and capital include available cash deposits, cash flows from operations, amounts available under our debt facilities, and potential incremental financing proceeds.

7 unchanged sentences

Within the bounds of our risk management program and policies, we use a variety of derivative instruments to enhance the stability of future cash flows to maintain sufficient financial resources for working capital, debt service, capital expenditures, debt covenant compliance, and (or) other needs.

In June 2024, using available cash deposits, the Company completed a tender offer which resulted in the purchase of 5,275,862 shares of its common stock for $612 million, exclusive of transaction costs.

In July 2024, the Company repurchased $2,413,793 shares from affiliates of Rubric Capital Management LP for an aggregate purchase price of $280 million.

There were de minimis transaction costs associated with this repurchase.

See Notes 3, 9 and 16 in Notes to the Interim Financial Statements for additional information regarding various liquidity topics discussed below.

See the following Notes to the Interim Financial Statements for additional information regarding various liquidity topics discussed below:

Note 3 for derivatives and hedging, Note 9 for AROs and environmental obligations, Note 11 for long-term debt and credit facilities, and Note 16 for supplemental cash flow information.

Talen Liquidity

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents, unrestricted $ 648 $ 400

2 unchanged sentences

Financial Performance Assurances

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Outstanding surety bonds $ 234 $ 240

5 unchanged sentences

In May 2024, the Company completed a repricing of the TLB and TLC.

The lenders agreed to, among other things lower the interest charges by 100 basis points and waive the prepayment obligation in connection with the ERCOT Sale.

The lenders agreed to, among other things, reduce the SOFR interest rate margin by 100 basis points and waive any prepayment obligations in connection with the ERCOT Sale.

Remarketing of PEDFA Bonds.

4 unchanged sentences

Cash Flow Activities

The net cash provided by (used in) operating, investing and financing activities for the six months ended June 30 were:

The net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30 were:

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

Operating activities $ 246 $ 180 $ 462

1 unchanged sentence

Financing activities (1,240) (62) (539)

Successor Period — Six Months Ended June 30, 2024

Successor Period — Nine Months Ended September 30, 2024

• Operating Cash Flows .

Cash provided by (used in) operating activities totaled $150 million.

This primarily consisted of cash provided from operations of the Company.

Cash provided by operating activities totaled $246 million.

• Investing Cash Flows.

Cash provided by (used in) investing activities totaled $979 million.

Talen received $339 million of initial net proceeds from the Cumulus Data Campus Sale in the first quarter of 2024 and $754 million of initial net proceeds from the ERCOT Sale in the second quarter of 2024.

Partially offsetting these inflows were capital expenditures of $(90) million that primarily consisted of $(45) million for nuclear fuel expenditures.

Cash provided by investing activities totaled $1,225 million.

Talen received $635 million of proceeds from the Cumulus Data Campus Sale in the nine months ended September 30, 2024 (Successor), including $300 million of deferred proceeds that were received in the third quarter 2024, and $763 million of proceeds from the ERCOT Sale in the second quarter 2024, including $8 million of deferred proceeds that were received in the third quarter 2024.

Partially offsetting these inflows were NDT fund investments, net of $(24) million and capital expenditures of $(147) million that primarily consisted of $(89) million for nuclear fuel expenditures and $(58) million for property, plant, and equipment.

See Note 17 in Notes to the Interim Financial Statements for additional information on the Cumulus Data Campus Sale and the ERCOT Sale.

• Financing Cash Flows.

Cash provided by (used in) financing activities totaled $(915) million.

This primarily consisted of $(182) million for the repayment of the Cumulus Digital TLF in the first quarter of 2024 using a portion of the proceeds from the Cumulus Data Campus Sale;

$(39) million in the first quarter of 2024 for the repurchase of noncontrolling interests held by affiliates of Orion and two former members of Talen senior management;

and $(654) million in the six months ended June 30, 2024 (Successor) to repurchase common stock shares.

Cash used in financing activities totaled $(1,240) million.

This primarily consisted of $(182) million for the repayment of the Cumulus Digital TLF in the first quarter 2024 using a portion of the proceeds from the Cumulus Data Campus Sale;

$(39) million in the first quarter 2024 for the repurchase of noncontrolling interests held by affiliates of Orion and two former members of Talen senior management;

and $(956) million in the nine months ended September 30, 2024 (Successor) to repurchase common stock shares.

See “Recent Developments - Shares Repurchases” above for additional information on share repurchases.

In addition, an outflow of $(28) million occurred to cash settle restricted stock units upon vesting.

Successor Period — May 18 through June 30, 2023

In addition, an outflow of $(31) million occurred to settle vested restricted stock units in cash.

Successor Period — May 18 through September 30, 2023

• Operating Cash Flows.

Cash provided by operating activities totaled $180 million.

• Investing Cash Flows .

Cash provided by (used in) investing activities totaled $(38) million and primarily consisted of capital expenditures.

Capital expenditures outflows, including those for nuclear fuel, totaled $(34) million and consisted of:

$(20) million for fuel conversion projects and Cumulus Data Campus project;

and $(14) million related to nuclear fuel expenditures.

Cash used in investing activities totaled $(108) million and primarily consisted of capital expenditures.

Capital expenditures, including those for nuclear fuel, totaled $(103) million and consisted of $(60) million across the Company for then-current projects including the Montour gas conversion project and the Cumulus Data Campus;

and $(43) million related to nuclear-fuel expenditures as Talen purchased uranium needs for future periods.

• Financing Cash Flows.

Cash used by financing activities totaled $(62) million and primarily consisted of $(59) million for payments to former affiliates to settle warrants and to repurchase affiliates’ noncontrolling interests in Cumulus Digital Holdings.

Predecessor Period — January 1 through May 17, 2023

• Operating Cash Flows.

Cash provided by (used in) operating activities totaled $462 million and consisted of cash provided from the operations of the Company, including declines in accounts receivable, partially offset by payments made for accrued interest and other claims at Emergence.

Cash provided by operating activities totaled $462 million.

• Investing Cash Flows.

Cash provided by (used in) investing activities totaled $(157) million and consisted of capital expenditures offset by $46 million in proceeds from the sale of assets.

• Capital expenditures, including those for nuclear fuel, totaled $(187) million and consisted of:

$(138) million across the Company for current projects including the Montour gas conversion project, the Cumulus Data Campus and Nautilus crypto mining projects and projects at Susquehanna;

Cash used in investing activities totaled $(157) million and consisted of capital expenditures offset by $46 million in proceeds from the sale of assets.

Capital expenditures, including those for nuclear fuel, totaled $(187) million and consisted of $(138) million across the Company for then-current projects including the Montour gas conversion project, the Cumulus Data Campus, the Nautilus crypto mining project, and projects at Susquehanna;

and $(49) million related to nuclear fuel expenditures.

• Financing Cash Flows.

Cash provided by (used in) financing activities totaled $(539) million and consisted of the net effect of issuances and repayments of prepetition debt and make-whole premiums of about $(1.9) billion net cash outflow partially offset by $1.4 billion cash inflow for a contribution from member.

Cash used in financing activities totaled $(539) million and consisted of the net effect of issuances and repayments of prepetition debt and make-whole premiums of about $(1.9) billion net cash outflow partially offset by $1.4 billion cash inflow for a contribution from member.

Contractual Obligations and Commitments

34 unchanged sentences

Such adjustments are computed consistently with the provisions of our indebtedness to the extent that they can be derived from the financial records of the business.

Pursuant to TES’s debt agreements, Cumulus Digital contributes to Adjusted EBITDA beginning in the first quarter 2024, following termination of the Cumulus Digital credit facility and associated cash flow sweep.

Pursuant to TES’s debt agreements, Cumulus Digital Holdings contributes to Adjusted EBITDA beginning in the first quarter 2024, following termination of the Cumulus Digital TLF and associated cash flow sweep.

Additionally, we believe investors commonly adjust net income (loss) information to eliminate the effect of nonrecurring restructuring expenses and other non-cash charges, which can vary widely from company to company and from period to period and impair comparability.

3 unchanged sentences

The following table presents a reconciliation of the GAAP financial measure of “Net Income (Loss)” presented on the Consolidated Statements of Operations to the non-GAAP financial measure of Adjusted EBITDA:

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

(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

8 unchanged sentences

Stock-based compensation expense

8 16 — 16 16 —

Long-term incentive compensation expense 3 — 19 — —

2 unchanged sentences

Non-cash impairments (c)

— — 16 — — 381

Operational and other restructuring activities

2 unchanged sentences

Non-cash inventory net realizable value, obsolescence, and other charges (d)

2 3 32 3 3 56

Noncontrolling interest

16 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 2. Management’s Discussion and Analysis