Q2 2024 Talen Energy Corp Earnings Call

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Talent Energy Corporation's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: Corporation second quarter 2024 earnings. At this time, all, or in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone.

Operator: Corporation, 2nd quarter, 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

Operator: To ask a question during the session, you would need to press Star 11 on your telephone. You would then hear an automated message advising your hand is raised. Two would draw your question; please press star 11 again.

Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Operator: Please be advised that today's conference is being recorded.

Ellen Liu: I would like now to turn the conference over to Ellen Liu, Senior Director, Investor Relations. Please go ahead.

Operator: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Ellen Liu, Senior Director, Investor Relations. Please go ahead.

Speaker Change: Please be advised that today's conference is being recorded. I would like now to turn the conference over to Ellen Liu, Senior Director, Investor Relations. Please go ahead.

Ellen Liu: Thanks, Michelle.

Ellen Liu: Thanks, Michelle. Welcome to Talen Energy's second quarter 2024 conference call. Participating on today's call are Chief Executive Officer Mack McFarland and Chief Financial Officer Terry Nutt. They will be joined by other Talen senior executives to address questions during the second part of today's call, as necessary. We issued our earnings release this morning, along with the presentation, all of which can be found in the investor relations section of Talen's website, www.talenenergy.com. Today, we are making some forward-looking statements based on current expectations and assumptions. Actual results could differ due to risk factors and other considerations described in our financial disclosures and other SEC filings.

Ellen Liu: Welcome to Talen Energy's 2nd quarter, 2024 conference call. Participating on today's call are Chief Executive Officer Mack McFarland and Chief Financial Officer Carrie Nutt. They are joined by other Talen senior executives to address questions during the 2nd part of today's call as necessary.

Ellen Liu: Thanks, Michelle. Welcome to Talon Energy's second quarter 2024 conference call. Participating on today's call are Chief Executive Officer Mack McFarland and Chief Financial Officer Terry Nutt. They are joined by other Talon senior executives to address questions during the second part of today's call as necessary.

Ellen Liu: We issued our earnings release this morning, along with the presentation, all of which can be found in the Investor Relations section of Talen's website, www.talenenergy.com. Today we are making some forward-looking statements based on current expectations and assumptions. Actual results could differ due to risk factors and other considerations described in our financial disclosures and other SEC filings. Today's discussion also includes references to certain non-gavel financial measures.

Ellen Liu: We issued our earnings release this morning, along with the presentation, all of which can be found in the investor relations section of Talon's website, www.TalonEnergy.com.

Speaker Change: Today, we are making some forward-looking statements based on current expectations and assumptions. Actual results could differ due to risk factors and other considerations described in our financial disclosures and other SEC filings.

Ellen Liu: We have provided information reconciling our non-gavel measures to the most directly comparable GAAP measures in our earnings release and the appendix of our presentation.

Speaker Change: Today's discussion also includes references to certain non-GAAP financial measures. We have provided information reconciling our non-GAAP measures to the most directly comparable GAAP measures in our earnings release and the appendix of our presentation.

Mack McFarland: With that, I will now turn the call over to Matt. Great. Thank you, Ellen. Good morning, everyone. And thank you for joining us.

Ellen Liu: Today's discussion also includes references to certain non-GAAP financial measures. We have provided information reconciling our non-GAAP measures to the most directly comparable GAAP measures in our earnings release and the appendix of our presentation. With that, I will now turn the call over to Matt.

Speaker Change: With that, I will now turn the call over to Matt.

Speaker Change: Great, thank you. Ellen. Good morning. Everyone. And thank you for joining us.

Mack McFarland: Before we get into our earnings results and presentation, I'd like to comment on the challenges and opportunities facing our industry as we meet the growing electrification needs of the AI economy. At Talen, we have come up with one creative cost-effective solution by co-locating a one-gigawatt AWS data center campus next door assessment plan, a nuclear plan. Everyone seems interested in our efforts, our colleagues in the IPP space, regulated utilities, and RTOs. And the issue now sits at Burke's doorstep, where it plans to hold a technical conference on the broader issues this fall. In the investment community, our deal created excitement about increased demand and incremental value creation across the entire power sector, attracting new investors.

Matt McFarland: Before we get into our earnings results and presentation, I'd like to comment on the challenges and opportunities facing our industry as we meet the growing electrification needs of the AI economy. At Talen, we have come up with one creative, cost-effective solution by co-locating a 1 gigawatt AWS data center campus next to our Susquehanna nuclear plant. Everyone seems interested in our efforts, our colleagues in the IPP space, regulated utilities, and RTOs, and the issue now sits at Berks doorstep, where it plans to hold a technical conference on the broader issues this fall.

Matt: Before we get into our earnings results and presentation, I'd like to comment on the challenges and opportunities facing our industry as we meet the growing electrification needs of the AI economy.

Speaker Change: At Talon we have come up with one creative cost-effective solution by co-locating a 1 gigawatt AWS data center campus next to our Susquehanna nuclear plant.

Speaker Change: Everyone seems interested in our efforts, our colleagues in the IPP space, regulated utilities, and RTOs. And the issue now sits at Burke's doorstep, where it plans to hold a technical conference on the broader issues this fall.

Matt McFarland: In the investment community, our deal created excitement about increased demand and incremental value creation across the entire power sector, attracting new investors. And I'll admit, it is one of the most exciting times I've seen in my power career.

Speaker Change: In the investment community, our deal created excitement about increased demand and incremental value creation across the entire power sector, attracting new investors.

Mack McFarland: And I'll admit, it is one of the most exciting times I've seen in my power career. It will drive unprecedented change in our industry, change that will yield great opportunity. The focus has now turned to the question, how will the value creation get shared across companies? The recent high PGM capacity auction prices coupled with this new demand have caused people to discuss the repeal of deregulation, RTOs coming apart, state separating from PGM and to engage in other comments and distracting discussions. These ideas are misguided and missed the point that PGM has been a highly successful competitive market.

Matt McFarland: It will drive unprecedented change in our industry, change that will yield great opportunities. The focus has now turned to the question, how will value creation get shared across companies? The recent high PJM capacity auction prices, coupled with this new demand, have caused people to discuss the repeal of deregulation, RTOs coming apart, states separating from PJM, and to engage in other comments and distracting discussions. These ideas are misguided and miss the point that PJM has been a highly successful competitive market, keeping prices relatively low and providing reliable electricity and bringing to market nearly 60 gigawatts of new built capacity in the past two decades.

Speaker Change: I'll admit it is one of the most exciting times I've seen in my power career. It will drive unprecedented change in our industry, change that will yield great opportunity.

Speaker Change: The focus has now turned to the question, how will the value creation get shared across companies?

Speaker Change: The recent high PJM capacity auction prices, coupled with this new demand, have caused people to discuss the repeal of deregulation, RTOs coming apart, states separating from PJM, and to engage in other comments and distracting discussions.

Speaker Change: These ideas are misguided and miss the point that PJM has been a highly successful competitive market, keeping prices relatively low and providing reliable electricity and bringing to market nearly 60 gigawatts of new build capacity in the past two decades.

Mack McFarland: Keeping prices relatively low and providing reliable electricity and bringing to market nearly 60 gigawatts of new build capacity in the past two decades. This rhetoric creates uncertainty which, if allowed to persist, chills investment and job creation at a moment in time when we all have an exciting new demand to serve. They also miss the point that the opportunity here is so large that regulated companies, TND companies, and generators will all participate in the value creation and, in fact, are all necessary for the solution. I typically agree with the saying, "where you stand depends on where you sit."

Matt McFarland: This rhetoric creates uncertainty, which, if allowed to persist, chills investment and job creation at a moment in time when we all have exciting new demand to serve. They have also missed the point that the opportunity here is so large that regulated companies, T&D companies, and generators will all participate in the value creation and, in fact, are all necessary for the solution. I typically agree with the saying, "where you stand depends on where you sit."

Speaker Change: This rhetoric creates uncertainty which, if allowed to persist,

Speaker Change: chills investment and job creation at a moment in time when we all have an exciting new demand to serve.

Speaker Change: They also missed the point that the opportunity here is so large that regulated companies, T&D companies, and generators will all participate in the value creation and, in fact, are all necessary for the solution.

Matt McFarland: However, I think at this time we all sit in the same place. As I see it, it is a win-win for everyone if we can get it right. The IPPs, T&Ds, as well as the customers in the region we serve, who will benefit from increased reliability, lower costs, and much-needed economic development. This is an opportunity for us as an industry to lead. Everyone's talking about 15 gigawatts of backlog here, 5 gigawatts of backlog there, and so on with respect to data centers.

Mack McFarland: However, I think at this time we all sit in the same place. As I see it, it is a win-win for everyone if we can get it right. The IPPs, TNDs, as well as the customers in the region we serve, who will benefit from increased reliability, lower cost, and much needed economic development.

Speaker Change: I typically agree with the saying, where you stand depends on where you sit.

Speaker Change: However, I think at this time, we all sit in the same place.

Speaker Change: As I see it, it is a win-win for everyone if we can get it right. The IPPs, T&Ds, as well as the customers in the region we serve, who will benefit from increased reliability, lower cost, and much needed economic development.

Mack McFarland: This is an opportunity for us as an industry to lead. Everyone is talking about 15 gigawatts of backlog here, 5 gigawatts of backlog there, and so on with respected data centers. While these estimates seem large, the customer need is really large and a matter of win and, to some extent, where but not if.

Speaker Change: This is an opportunity for us as an industry to lead.

Speaker Change: Everyone's talking about 15 gigawatts of backlog here, 5 gigawatts of backlog there, and so on with respect to data centers. While these estimates seem large, the customer need is really large, and a matter of when, and to some extent where, but not if.

Matt McFarland: While these estimates seem large, the customer need is really large, and it is a matter of when and, to some extent, where, but not if. How will we as an industry rise to the occasion to meet the challenge of electrifying the future? You've heard me discuss it before.

Mack McFarland: How will we as an industry rise to the occasion to meet the challenge of electrifying the future? You've heard me discuss it before. The big four hyper-scalers have a 2024 CAPEX budget of nearly $250 billion, and those estimates have been rising. And they're on a pace to spend over a trillion dollars by 2028. And you can reach a similar conclusion if you look at SHIFT maker production forecasts. Electrifying that growth in data center demand will challenge the industry to deploy capital for new generation and transmission enhancements in the billions of dollars for every gigawatt of data center capacity when the existing capacity on the grid is insufficient.

Speaker Change: How will we as an industry rise to the occasion to meet the challenge of electrifying the future?

Matt McFarland: The big four hyperscalers have a 2024 CapEx budget of nearly $250 billion, and those estimates have been rising, and they're on a pace to spend over a trillion dollars by 2028. And you can reach a similar conclusion if you look at the chip maker production forecast. Electrifying that growth and data center demand will challenge the industry to deploy capital for new generation and transmission enhancements in the billions of dollars for every gigawatt of data center capacity when the existing capacity on the grid is insufficient. The generators cannot do it alone, and the T&D cannot do it alone.

Speaker Change: You've heard me discuss it before, the big 4 hyperscalers have a 2024 CapEx budget of nearly 250 billion dollars.

Speaker Change: And those estimates have been rising.

Speaker Change: And they're on a pace to spend over a trillion dollars by 2028.

Speaker Change: And, you can reach a similar conclusion if you look at chip maker production forecasts.

Speaker Change: Electrifying that growth in data center demand will challenge the industry to deploy capital for new generation and transmission enhancements in the billions of dollars for every gigawatt of data center capacity when the existing capacity on the grid is insufficient.

Mack McFarland: The generators cannot do it alone, and the TNDs cannot do it alone. One forecast of data center growth total 60 gigawatts of capacity by the end of this decade nationally, with nearly 15 gigawatts of that being in PGM. That means we, as an industry, will need to deploy hundreds of billions of dollars to meet this need. This will mean an opportunity for generation developers and significant rate base growth for TND companies alike. If we can bring these solutions to the customers and meet the needs of the AI economy, we can help drive economic development for the states we operate in.

Matt McFarland: One forecast of data center growth totals 60 gigawatts of capacity by the end of this decade nationally, with nearly 15 gigawatts of that being in PJM. That means we as an industry will need to deploy hundreds of billions of dollars to meet this need. This will mean an opportunity for generation developers and significant rate-based growth for T&D companies alike. If we can bring these solutions to customers and meet the needs of the AI economy, we can help drive economic development for the states we operate in. For every gigawatt of data centers built, direct investment is roughly $10 billion, and the total economic impact is a multiple of two to three times that when you add the ancillary jobs and investment created.

Speaker Change: The generators cannot do it alone, and the T&Ds cannot do it alone. One forecast of data center growth totals 60 gigawatts of capacity by the end of this decade nationally, with nearly 15 gigawatts of that being in PJM.

Speaker Change: That means we as an industry will need to deploy hundreds of billions of dollars to meet this need.

Speaker Change: This will mean an opportunity for generation developers and significant rate-based growth for T&D companies alike.

Speaker Change: If we can bring these solutions to the customers and meet the needs of the AI economy, we can help drive economic development for the states we operate in.

Mack McFarland: For every gigawatt of data centers built, direct investment is roughly $10 billion, and the total economic impact is a multiple of two to three times that when you add the end salary jobs and investment created. So we really should think about this as a $20 to $30 billion of economic development for every gigawatt of data center investment. This is a big economic opportunity for those who get it right: housing, schools, services, jobs.

Speaker Change: For every gigawatt of data centers built, direct investment is roughly $10 billion and the total economic impact is a multiple of two to three times that when you add the ancillary jobs and investment created.

Matt McFarland: So we really should think about this as $20 to $30 billion of economic development for every gigawatt of data center investment. This is a big economic opportunity for those who get it right.

Speaker Change: So, we really should think about this as a $20 to $30 billion of economic development for every gigawatt of data center investment.

Matt McFarland: It's no wonder the labor leaders I talk to are highly supportive, and I am optimistic we can get it right. Now, let's turn to our specific deal with AWS. When we announced our deal, we did not kid ourselves. We knew we had a solution, one that was quick to market, cost-effective, and reliable. But we also recognized that it was not the only solution. Our behind-the-meter Direct Connect solution is just one innovative way to solve just one gigawatt of the challenge. Many others will have to follow, and the next evolution will need to be balanced.

Speaker Change: This is a big economic opportunity for those who get it right, housing, schools, services, jobs. It's no wonder the labor leaders I talk to are highly supportive, and I am optimistic we can get it right.

Mack McFarland: It's no wonder the labor leaders I talk to are highly supportive, and I am optimistic we can get it right.

Mack McFarland: Turning to our specific deal with AWS. When we announced our deal, we did not kid ourselves; we knew we had a solution, one that was quick to market, cost effective, and reliable. But we also recognize that it is not the only solution. Our behind the meter direct connect solution is just one innovative way to solve but one gigawatt of the challenge. Many others will have to follow, and the next evolution will need to be balanced. Balanced in its form of supply for customers behind the meter, front of the meter, and whatever creative solution can be developed.

Speaker Change: Turning to our specific deal with AWS.

Speaker Change: When we announced our deal, we did not kid ourselves. We knew we had a solution, one that was quick to market, cost effective, and reliable.

Speaker Change: But we also recognize that it is not the only solution.

Speaker Change: Our behind-the-meter Direct Connect solution is just one innovative way to solve but one gigawatt of the challenge.

Matt McFarland: Balanced in its form of supply for customers, behind-the-meter, front-of-the-meter, and whatever creative solution can be developed. Balanced in terms of appropriate cost-sharing, protecting residential rates, and maintaining grid reliability. Our one deal brings hundreds of jobs and tens of billions of dollars of economic development to the state of Pennsylvania and, importantly for us, the greater Berwick area. Our one deal matters because data centers form in multi-site clusters, so we hope that proving one working model in Pennsylvania is a sign of good things to come for further build out.

Speaker Change: Many others will have to follow, and the next evolution will need to be balanced.

Speaker Change: Balanced in its form of supply for customers behind the meter, front of the meter, and whatever creative solution can be developed. Balanced in terms of the appropriate cost sharing, protecting residential rates, and maintaining grid reliability.

Mack McFarland: Balanced in terms of the appropriate cost sharing, protecting residential rates and maintaining grid reliability. Our one deal brings hundreds of jobs and tens of billions of dollars of economic development to the state of Pennsylvania, and importantly for us, the Greater Burwick Area. Our one deal matters because data centers form in multi-site clusters, so we hope that proving one working model in Pennsylvania is a sign of good things to come for further build out. While our ISA has been the subject of much debate, we remain optimistic that FERC will approve the file amendments once PGM responds to FERC's question, and the commission has had time to fully review.

Speaker Change: Our one deal brings hundreds of jobs and tens of billions of dollars of economic development to the state of Pennsylvania, and importantly for us, the greater Berwick area.

Speaker Change: Our one deal matters because data centers form in multi-site clusters, so we hope that proving one working model in Pennsylvania is a sign of good things to come for further build-out.

Matt McFarland: While our ISA has been the subject of much debate, we remain optimistic that FERC will approve the filed amendments once PJM responds to FERC's question and the Commission has had time to fully review them. We look forward to participating in the technical conference this fall, and I am confident that as an industry, we can meet the challenges in front of us, seize the opportunity to power the AI economy, and do it swiftly so that we can bring about the economic benefits and investment capital to PJM Pennsylvania and the entire U.S.

Speaker Change: While our ISA has been the subject of much debate, we remain optimistic that FERC will approve the filed amendments once PJM responds to FERC's question and the Commission has had time to fully review.

Mack McFarland: We look forward to participating in the technical conference this fall, and I am confident that as an industry we can meet the challenges in front of us, see the opportunity to power the AI economy, and do it swiftly so that we can bring about the economic benefits and investment capital to PGM, Pennsylvania, and the entire U.S.

Speaker Change: We look forward to participating in the technical conference this fall, and I am confident that as an industry, we can meet the challenges in front of us, seize the opportunity to power the AI economy, and do it swiftly so that we can bring about the economic benefits and investment capital to PJM Pennsylvania.

Mack McFarland: I'd like to quickly mention our RMR proceedings at Brandon Wagner. After the recent PGM capacity auction results, people asked us if we're going to change course from the RMR process, said simply no; that's not how it works and it's more complicated than that. So, as long as we are paid a fair rate, we are committed to the RMR process and are working with stakeholders in settlement discussions before FERC to try to reach an agreed-upon rate that will allow us to stay online. That said, we are willing to consider repowering the site and potentially adding batteries under the right circumstances.

Matt McFarland: I'd like to quickly mention our RMR proceedings at Brandon and Wagner. After the recent PJM Capacity Auction results, people asked us if we were going to change course from the RMR process. Said simply, no. That's not how it works, and it's more complicated than that.

Speaker Change: and the entire U.S.

Speaker Change: I'd like to quickly mention our RMR proceedings at Brandon and Wagner. After the recent PJM capacity auction results, people who have

Speaker Change: asked us if we're going to change course from the RMR process. Said simply, no, that's not how it works and it's more complicated than that. So as long as we are paid a fair rate, we are committed to the RMR process and are working with stakeholders in settlement discussions before FERC.

Matt McFarland: So, as long as we are paid a fair rate, we are committed to the RMR process and are working with stakeholders in settlement discussions before FERC to try to reach an agreed-upon rate that will allow us to stay online. That said, we are willing to consider repowering the site and potentially adding batteries, under the right circumstances. This could make sense and could potentially eliminate costly transmission upgrades.

Speaker Change: to try to reach an agreed-upon rate that will allow us to stay online.

Speaker Change: That said, we are willing to consider repowering the site and potentially adding batteries.

Mack McFarland: This could make sense and could potentially eliminate costly transmission upgrades. We look forward to continuing the process and finding a solution, as I said, with all stakeholders.

Speaker Change: under the right circumstances. This could make sense and could potentially eliminate costly transmission upgrades.

Matt McFarland: We look forward to continuing the process and finding a solution, as I said, with all stakeholders. I look forward to your questions on these important matters and will now turn to our key highlights for this earnings call. So, starting with slide three, TALEN had an active second quarter.

Speaker Change: We look forward to continuing the process and finding a solution, as I said, with all stakeholders.

Mack McFarland: I look forward to your questions on these important matters and will now turn to our key highlights for this earnings call. So starting with slide three, Talon has had an active second quarter. I'd like to highlight several of our achievements. One overarching theme is the increasingly visible impact of rising power demand through higher prices in both energy and capacity markets. In the second quarter, our fleet ran well during periods of unusually high temperatures and demand in PGM, enabling us to capture healthy generation margin. As our gas fleet ran significantly more than it did in Q2 of last year, demonstrating the value of dispatchable generation in a rising power market.

Speaker Change: I look forward to your questions on these important matters and will now turn to our key highlights for this earnings call.

Speaker Change: So, starting with slide three, TALEN has had an active second quarter. I'd like to highlight several of our achievements. One overarching theme is the increasingly visible impact of rising power demand through higher prices in both energy and capacity markets.

Matt McFarland: I'd like to highlight several of our achievements. One overarching theme is the increasingly visible impact of rising power demand through higher prices in both energy and capacity markets. In the second quarter, our fleet ran well during periods of unusually high temperatures and demand in PJM, enabling us to capture healthy generation margin as our gas fleet ran significantly more than it did in Q2 of last year, demonstrating the value of dispatchable generation in a rising power market.

Speaker Change: In the second quarter, our fleet ran well during periods of unusually high temperatures and demand in PJM, enabling us to capture healthy generation margin.

Speaker Change: As our gas fleet ran significantly more than it did in Q2 of last year, demonstrating the value of dispatchable generation in a rising power market. Given our solid first half performance, we are raising our 2024 adjusted EBITDA and adjusted free cash flow guidance ranges.

Mack McFarland: Given our solid first half performance, we are raising our 2024 adjusted EBITDA and adjusted free cash flow guidance ranges and the representative midpoints. With respect to the recent PGM option, our fleet cleared 6.8 gigawatts of capacity at roughly $270 per megawatt day in the 2526 option compared to $50 per megawatt day in the prior planning year. This equals $600 million in capacity revenues for the 2526 planning year. AWS continues to make progress on its data center campus near Susquehanna. The local township recently granted AWS's zoning amendment that will allow the construction and operation of 960 megawatts of data centers.

Matt McFarland: Given our solid first half performance, we are raising our 2024 adjusted EBITDA and adjusted free cash flow guidance ranges and the representative midpoints. With respect to the recent PJM option, our fleet cleared 6.8 gigawatts of capacity at roughly $270 per megawatt day in the 2025-2026 option compared to $50 per megawatt day in the prior planning year. This equals $600 million in capacity revenues for the 2025-2026 planning year. AWS continues to make progress on its data center campus near Susquehanna.

Speaker Change: and the representative midpoints.

Speaker Change: With respect to the recent PJM auction, our fleet cleared 6.8 gigawatts of capacity at roughly $270 per megawatt day in the 2025-26 auction, compared to $50 per megawatt day in the prior planning year.

Speaker Change: This equals $600 million in capacity revenues for the 2025-2026 planning year.

Speaker Change: AWS continues to make progress on its data center campus near Susquehanna.

Terry Nutt: The local township recently granted AWS a zoning amendment that will allow the construction and operation of 960 megawatts of data centers, and in Q3, we expect to receive the 300M dollars of sale proceeds currently in escrow. Additionally, we reached another strategic milestone by listing on the NASDAQ exchange on July 10th, which in turn improved the trading liquidity of our equity, enabled greater access for more investors, and made us eligible for major indices.

Speaker Change: The local township recently granted AWS a zoning amendment that will allow the construction and operation of 960 megawatts of data centers. And in Q3, we expect to receive the 300M dollars of sale proceeds currently in escrow.

Mack McFarland: And in Q3, we expect to receive the $300 million of sale proceeds currently in escrow. Additionally, we reached another strategic milestone by listing on the NASDAQ exchange on July 10th, which in turn improved the trading liquidity of our equity, enabled greater access for more investors, and made us eligible for major indices. We are proud of the value that we have unlocked and believe there's more opportunities for value creation to come, especially in the current market backdrop.

Speaker Change: Additionally, we reached another strategic milestone by listing on the NASDAQ exchange on July 10th, which in turn improved the trading liquidity of our equity.

Speaker Change: enabled greater access for more investors, and made us eligible for major indices.

Terry Nutt: We are proud of the value that we have unlocked and believe there are more opportunities for value creation to come, especially in the current market backdrop. So, please join us at our Investor Day in New York on September 5th. I'll now turn the call over to Terry for further details. Thank you, Matt, and good morning, everyone. Moving to slide four, let's take a look at our year-to-date operational and financial results. Our fleet ran well during the period, generating over 16 terawatt hours of power with an equivalent force outage factor of only 2%.

Speaker Change: We are proud of the value that we have unlocked and believe there's more opportunities for value creation to come, especially in the current market backdrop. So please join us at our Investor Day in New York on September 5th.

Mack McFarland: So please join us at our Investor Day in New Work on September 5th.

Carrie Nutt: I'll now turn the call over to Terry for further details.

Carrie Nutt: Thank you, Matt, and good morning, everyone. Moving to slide 4, let's take a look at our year-to-date operational and financial results. Our fleet ran well during the period, generating over 16 kilowatt hours of power with an equivalent 4-stattage factor of only 2%. 53% of that generation came from our carbon-free, Susquehanna nuclear facility, with a successfully completed spring refueling outage in April. Importantly, our whole team works safely. With the year-to-date, total reportable incident rate of only 0.3, this is in line with, or better than our peers, and we continue to emphasize safety as our first priority across the fleet.

Terry Nutt: 53% of that generation came from our carbon-free Susquehanna Nuclear, with a successfully completed spring refueling outage in a. Importantly, our whole team works safely, with a year-to-date total reportable incident rate of only 0.3. This is in line with or better than our peers, and we continue to emphasize safety as our first priority across the board. We leverage our strong operational foundation and commercial strategy to earn $376 million of adjusted EBITDA and $165 million of adjusted free cash flow year-to-date.

Speaker Change: I'll now turn the call over to Terry for further details.

Terry: Thank you, Matt. And good morning, everyone.

Terry: Moving to slide four, let's take a look at our year-to-date operational and financial results.

Terry: Our fleet ran well during the period generating over 16 terawatt hours of power with an equivalent force outage factor of only 2%.

Terry: 53% of that generation came from our carbon-free Susquehanna nuclear facility.

Terry: with successfully completed spring refueling outage in April.

Terry: Importantly, our whole team works safely, with year-to-date total reportable incident rate of only 0.3.

Terry: This is in line with or better than our peers, and we continue to emphasize safety as our first priority across the fleet.

Carrie Nutt: We leverage our strong operational foundation and commercial strategy to earn $376 million of adjustity with off and $165 million of adjusted free cash flow year-to-date. We continue to prioritize capital returns and balance sheet discipline. Our net leverage is only 2.4 times, far below our 3.5 times target, and we currently have over 1.1 billion of liquidity, thanks to cash generated from operations. This gives us capital allocation flexibility and enables us to focus on shareholder returns.

Terry: We leverage our strong operational foundation and commercial strategy to earn $376 million of adjusted EBITDA and $165 million of adjusted free cash flow year-to-date.

Terry Nutt: We continue to prioritize capital returns and balance sheet; our net leverage is only 2.4 times, far below our 3.5 times target, and we currently have over 1.1 billion of liquidity thanks to cash generated from operations. This gives us capital allocation flexibility and enables us to focus on shareholder returns. I'd like to take this opportunity to recognize and thank our employees across the company, who have worked safely to deliver impressive operational performance. The past couple of months were the busiest time of year for many of our operation team members, as they successfully navigated our spring outage schedule across. These team members are key to our overall performance as they operate, maintain, and improve our generation fleet and other assets. Without their hard work and commitment to excellence, none of this would be possible

Terry: We continue to prioritize capital returns and balance sheet discipline.

Terry: Our net leverage is only 2.4 times, far below our 3.5 times target, and we currently have over $1.1 billion of liquidity thanks to cash generated from operations.

Terry: This gives us capital allocation flexibility and enables us to focus on shareholder returns.

Carrie Nutt: I'd like to take this opportunity to recognize and thank our employees across the company who have worked safely to deliver impressive operation results. The past couple of months were the busiest time of year for many of our operation team members. As they successfully navigated, our spring-outage schedule across the fleet. These team members are key to our overall performance as they operate, maintain, and improve our generation fleet and other assets. Without their hard-working commitment, text once, none of this would be possible.

Speaker Change: I'd like to take this opportunity to recognize and thank our employees across the company who have worked safely to deliver impressive operational results.

Speaker Change: The past couple of months were the busiest time of year for many of our operation team members, as they successfully navigated our spring outage schedule across the fleet.

Speaker Change: These team members are key to our overall performance as they operate, maintain, and improve our generation fleet and other assets.

Speaker Change: Without their hard work and commitment to excellence, none of this would be possible.

Carrie Nutt: Turning now to the PGM capacity option result on slide 5. As Mack mentioned earlier, the 2025-2026 option cleared at significantly higher prices than prior years, with PGM's reserve margin declining from 20% to 18.5%. Focusing on calendar year impacts, talent will earn roughly $285 million more in capacity revenues in 2025 when compared to 2024. These results illustrate how talent is the IPP most levered to PGM capacity option outcomes. These option results are a strong indication of a tightening market, but I will caution that it's currently just one data point. The results also demonstrate the value proposition for reliable, dispatchable, generous.

Terry Nutt: Turning now to the PJM Capacity Auction results on slide five. As Mack mentioned earlier, the 2025-2026 auction cleared at significantly higher prices than prior years, with PJM's reserve margin declining from 20% to 18.5%, focusing on calendar year impact. Talent will earn roughly $285 million more in capacity revenues in 2025 when compared to 2025. These results illustrate how Talen is the IPP most levered to PJM's capacity option output.

Speaker Change: Turning now to the PJM Capacity Auction results on slide five.

Speaker Change: As Mack mentioned earlier, the 2025-2026 auction cleared at significantly higher prices than prior years.

Mack: with PJM's reserve margin declining from 20% to 18.5%.

Speaker Change: focusing on calendar year impacts.

Speaker Change: Talon will earn roughly $285 million more in capacity revenues in 2025 when compared to 2024.

Speaker Change: These results illustrate how TALEN is the IPP most levered to PJM capacity auction outcomes.

Terry Nutt: These auction results are a strong indication of a tightening market, but I will caution that it's currently just one data point. The results also demonstrate the value proposition of reliable, dispatchable generation. Looking ahead to the next auction, we expect supply tightness to persist, years of low energy margins and capacity prices to lead to a large exit of reliable legacy generation assets, and investment signals need to be persistent to spur long-term investments in new dispatchable resources that have 30-year investment horizons. Furthermore, the supply chain for turbines, transformers, and other equipment in the global market presents a challenge. Meaning that building and bringing a new gas-fired plant online could take five years or longer.

Speaker Change: These auction results are a strong indication of a tightening market.

Speaker Change: But I will caution that it's currently just one data point.

Carrie Nutt: Foundation. Looking ahead to the next auction, we expect supply tightness to persist. Years of low-energy margins and capacity prices led to a large exit of reliable legacy generation assets. And investment signals need to be persistent to spur long-term investments in new, dispatchable resources that have 30-year investment horizons. Furthermore, the supply chain for turbines, transformers, and other equipment in the global market presents challenges, meaning that building and bringing a new gas-powered plant online could take five years or longer.

Speaker Change: The results also demonstrate the value proposition for reliable dispatchable generation.

Speaker Change: Looking ahead to the next auction, we expect supply tightness to persist.

Speaker Change: Years of low energy margins and capacity prices led to a large exit of reliable legacy generation assets.

Speaker Change: investment signals need to be persistent to spur long-term investments and new dispatchable resources that have 30-year investment horizons.

Speaker Change: Furthermore, the supply chain for turbines, transformers, and other equipment in the global market presents challenges.

Speaker Change: Meaning that building and bringing a new gas-fired plant online could take five years or longer.

Terry Nutt: PJN's parameters for the 2026-2027 Capacity Auction will be available in late August, and the auction will be held in December, while the following planning year auction will be in June of 2024. Now turning to financial results, for the second quarter of 2024, Talen reported adjusted EBITDA of $87 million and an adjusted free cash flow use of $29 million.

Carrie Nutt: PJN's parameters for the 2026-2027 capacity auction will be available in late August, and the auction will be held in December, while the following planning your auction will be in June of 2025.

Speaker Change: PJM's parameters for the 2026-2027 Capacity Auction will be available in late August, and the auction will be held in December, while the following planning year auction will be in June of 2025.

Carrie Nutt: Now turning to financial results. For the second quarter of 2024, Talen reported a Justity Badaw of $87 million, and an adjusted free cash flow use of $29 million. Building on our solid financial performance in the first quarter resulted in $376 million of a Justity Badaw and $165 million of adjusted free cash flow year-to-date. As a reminder, our business is seasonal, and we make most of our money during the core winter and summer months. The second quarter and fourth quarter shoulder periods, when we typically don't earn as much, and often schedule our maintenance options. Additionally, certain periods of cash payments happen in the second and fourth quarters that further reduced cash flow, such as our semi-annual debt service payments.

Speaker Change: Now turning to financial results.

Speaker Change: For the second quarter of 2024, Talon reported adjusted EBITDA of $87 million and an adjusted free cash flow use of $29 million.

Terry Nutt: Building on our solid financial performance in the first quarter, we have $376 million of adjusted EBITDA and $165 million of adjusted free cash flow year-to-date. As a reminder, our business is seasonal, and we make most of our money during the core winter and summer months. The second quarter and fourth quarter are shoulder periods when we typically don't earn as much and often schedule our maintenance hours. Additionally, certain periodic cash payments happen in the second and fourth quarter that further reduce cash flow, such as our semi-annual debt service. That said, the second quarter was strong for talent. In PJM, second quarter weather was unseasonably warm, with Philadelphia experiencing its highest average cooling degree day total since 2014.

Speaker Change: Building on our solid financial performance in the first quarter resulted in $376 million of adjusted EBITDA and $165 million of adjusted free cash flow year to date.

Speaker Change: As a reminder, our business is seasonal and we make most of our money during the core winter and summer months.

Speaker Change: The second quarter and fourth quarter are shoulder periods when we typically don't earn as much and often schedule our maintenance outages.

Speaker Change: Additionally, certain periodic cash payments happen in the second and fourth quarter that further reduce cash flow, such as our semi-annual debt service payments.

Carrie Nutt: That said, the second quarter was strong for Talen. In PJN, second quarter weather was unseasonably warm, with Philadelphia experiencing its highest average cooling degree day total since 2014. Additionally, this quarter's average power demand in PJM was the highest second quarter demand seen in the last five years. In this market backdrop, our PJN ghastly demonstrated the value of dispatchable generation, producing approximately 1.5 more terawatt hours and 20 million more of generation margin than the same quarter of 2023.

Speaker Change: That said, the second quarter was strong for Townton.

Speaker Change: In PJM, second quarter weather was unseasonably warm, with Philadelphia experiencing its highest average cooling degree day total since 2014.

Terry Nutt: Additionally, this quarter's average power demand in PJM was the highest second-quarter demand seen in the last five years. In this market backdrop, our PJM gas fleet demonstrated the value of dispatchable generation, producing approximately 1.5 more terawatt hours and 20 million more generation margin than the same quarter in 2020. Turning now to guidance on slide seven, based on our solid first half performance, we are raising our 2024 Adjusted EBITDA and Adjusted Free Cash Flow Rate.

Speaker Change: Additionally, this quarter's average power demand in PJM was the highest second quarter demand seen in the last five years.

Speaker Change: In this market backdrop, our PJM gas fleet demonstrated the value of dispatchable generation, producing approximately 1.5 more terawatt hours and 20 million more of generation margin than the same quarter of 2023.

Carrie Nutt: Turning now to the guidance on slide seven, based on our solid first half performance, we are raising our 2024 adjusted EBITDA and adjusted free cash flow ranges. Our new Adjusted EBITDA range is 720 million to 780 million, with a midpoint that is 7% higher than prior guidance. And our new adjusted free cash flow range is 245 million to 285 million, with a midpoint 13% higher than before.

Terry Nutt: Our new Adjusted EBITDA range is $720 million to $780 million, with a midpoint that is 7% higher than prior guidance, and our new adjusted free cash flow range is $245 million to $285 million, with a midpoint 13% higher than before.

Speaker Change: Turning now to guidance on slide 7.

Speaker Change: Based on our solid first half performance, we are raising our 2024 adjusted EBITDA and adjusted free cash flow ranges.

Speaker Change: Our new adjusted EBITDA range is $720 million to $780 million.

Speaker Change: with a midpoint that is 7% higher than prior guidance.

Speaker Change: And our new Adjusted Free Cash Flow range is $245 million to $285 million, with the midpoint 13% higher than before.

Carrie Nutt: I'd also like to take a moment to highlight our hedging activity from this past quarter. On slide eight, there is a graph of the average calendar year 2025 and 2026 sparks breads. Sparks breads expanded considerably through mid-April before we tracing by the end of June. During this period, our commercial team successfully executed our hedging strategy and added hedges when sparks breads were higher, as detailed on the right-hand side of the slide.

Terry Nutt: I'd also like to take a moment to highlight our hedging activity from this past quarter. On slide 8, there is a graph of average calendar year 2025 and 2026 SPARKs. Spark spreads expanded considerably through mid-April before retracing by the end of June. During this period, our commercial team successfully executed our hedging strategy and added hedges when spark spreads were higher, as detailed on the right-hand side of the slide. Turning to slide nine.

Speaker Change: I'd also like to take a moment to highlight our hedging activity from this past quarter.

Speaker Change: On slide 8, there's a graph of average calendar year 2025 and 2026 spark spreads.

Speaker Change: Spark spreads expanded considerably through mid-April before retracing by the end of June.

Speaker Change: During this period, our commercial team successfully executed our hedging strategy and added hedges when spark spreads were higher, as detailed on the right-hand side of the slide.

Carrie Nutt: Turning to slide nine. We remain committed to maintaining net leverage below our three-and-a-half times target, along with ample liquidity. As of August 9, our forecasted net debt-dead bidai ratio was only 2.4 times, well below our target. We continue to actively engage with the rating agencies and currently maintain positive outlooks with both S&P and Moody's. In addition, we have over 1.1 billion of liquidity, including over 400 million of unrestricted cash. We've taken several actions since the end of the first quarter to optimize liquidity, including remarketing our municipal bonds, which allowed us to terminate $133 million of LCs that were backstopping them.

Terry Nutt: We remain committed to maintaining net leverage below our three and a half times target along with ample liquidity. As of August 9th, our forecasted net debt to EBITDA ratio was only 2.4 times, well below our target. We continue to actively engage with the rating agencies and currently maintain positive outlooks with both S&P and Moose. In addition, we have over $1.1 billion of liquidity, including over $400 million of unrestricted cash. We've taken several actions since the end of the first quarter to optimize liquidity, including remarketing our municipal bonds, which allowed us to terminate 133 million LCs that were backstopping.

Speaker Change: Turning to slide nine.

Speaker Change: We remain committed to maintaining net leverage below our three and a half times target, along with ample liquidity.

Speaker Change: As of August 9th, our forecasted net debt to EBITDA ratio was only 2.4 times, well below our target.

Speaker Change: We continue to actively engage with the rating agencies and currently maintain positive outlooks with both S&P and Moody's.

Speaker Change: In addition, we have over $1.1 billion of liquidity, including over $400 million of unrestricted cash.

Speaker Change: We've taken several actions since the end of the first quarter to optimize liquidity.

Speaker Change: including remarketing our municipal bonds, which allowed us to terminate 133 million of LCs that were backstopping them.

Carrie Nutt: We also terminated over 90 million of other LCs, opening up even more capacity under our credit facilities.

Speaker Change: We also terminated over 90 million of other LCs, opening up even more capacity under our credit facilities.

Carrie Nutt: Moving to slide 10, since the start of 2024, we have returned approximately 930 million dollars to shareholders by repurchasing roughly 8 million shares or 14% of our shares outstanding. We've executed most of these buybacks through two large transactions, and in June we repurchased approximately 5.3 million shares through a 612 million-dollar tender offer. And in July, we bought back roughly 2.4 million shares from our largest shareholder for $280 million. We continue to see purchasing our stock as the highest and best use of our capital. We have over $100 million of capacity remaining under the current share repurchase program and are working to refresh that capacity.

Terry Nutt: We also terminated over 90 million other LCs, opening up even more capacity under our credit. Moving on, since the start of 2024, we have returned approximately $930 million to shareholders by repurchasing roughly 8 million shares, or 14% of our shares outstanding. We've executed most of these buybacks through two large transactions. In June, we repurchased approximately 5.3 million shares through a $612 million tender offer.

Speaker Change: right

Speaker Change: Moving to slide 10, since the start of 2024, we have returned approximately $930 million to shareholders by repurchasing roughly 8 million shares, or 14% of our shares outstanding.

Speaker Change: We've executed most of these buybacks

Speaker Change: In June, we repurchased approximately 5.3 million shares through a $612 million tender offer.

Speaker Change: And in July, we bought back roughly 2.4 million shares from our largest shareholder for $280 million.

Speaker Change: We continue to see purchasing our stock as the highest and best use of our capital.

Speaker Change: We have over $100 million of capacity remaining under current share repurchase program and are working to refresh that capacity.

Carrie Nutt: We will provide a capital allocation update during our Investor Day at the start of September.

Speaker Change: We will provide a capital allocation update during our investor day at the start of September.

Carrie Nutt: Moving to slide 11, we achieved an important milestone on July 10th, when talent rang the opening bell and began trading on the NASDAQ. We believe uplifting to a national exchange has provided several positive impacts of our equity. It improved our trading liquidity and enables a larger universe of investors to access our stock. In fact, we've doubled our average daily trading volume compared to the three months prior to uplifting. We also had the opportunity to gain access to several equity indices, including potential eligibility for the Russell in mid 2025 and the S&P starting late next year.

Terry Nutt: And in July, we bought back roughly 2.4 million shares from our largest shareholder for $280 million. We continue to see purchasing our own stock as the highest and best use of our capital. We have over $100 million of capacity remaining under our current share repurchase program and are working to refresh that capacity. We will provide a capital allocation update during our investor day at the start of. Moving to slide 11, we achieved an important milestone on July 10, when Talent rang the opening bell and began trading on the We believe uplisting to a national exchange has provided several positive impacts for us and improved our trading liquidity and enabled a larger universe of investors to access.

Speaker Change: Moving to slide 11, we achieved an important milestone on July 10th, when talent rang the opening bell and began trading on the NASDAQ.

Speaker Change: We believe uplisting to a national exchange has provided several positive impacts for our equity.

Speaker Change: It improved our trading liquidity and enables a larger universe of investors to access our stock.

Terry Nutt: In fact, we've doubled our average daily trading volume compared to the three months prior. We also had the opportunity to gain access to several equity markets, including potential eligibility for the Russell in mid-2025 and the S&P starting late next. With that, I'll hand the discussion back. Great. Thanks, Terry.

Speaker Change: In fact, we've doubled our average daily trading volume compared to three months prior to uplisting.

Speaker Change: We also had the opportunity to gain access to several equity indices, including potential eligibility for the Russell in mid-2025 and the S&P starting late next year.

Mack McFarland: With that, I'll hand a discussion back to Mac.

Matt McFarland: I'd like to reiterate how proud we are of what we've been able to accomplish in 14, 15 months since we exited the restructuring process, but we're not done, and we hope to see you at one of our upcoming events. We'll be hosting an Investor Day in New York, as Terry mentioned, on September 5th. Importantly, during that day, we will discuss our 25 guidance, our 26 outlook, an update, as Terry mentioned, on our capital allocation plan, as well as discuss long-term growth drivers of the business.

Mack McFarland: Great. Thanks, Terry.

Speaker Change: With that, I'll hand the discussion back to Matt.

Mack McFarland: I'd like to reiterate how proud we are of what we've been able to accomplish in 14, 15 months since we exited restructuring, but we're not done. We hope to see you in one of our upcoming events. We'll be hosting an Investor Day in Newark as Terry mentioned on September 5th. Importantly, during that day, we will discuss our 25 guidance, our 26 outlook, an update, as Terry mentioned, on our capital allocation plan, as well as discuss long-term growth drivers of the business. Following the investor day, we will be on the road in Boston, Los Angeles, Philadelphia, and New York, and hope to see you there.

Matt: Great. Thanks, Terry. I'd like to reiterate how proud we are of what we've been able to accomplish in 14-15 months since we exited restructuring. But we're not done, and we hope to see you at one of our upcoming events. We'll be hosting an Investor Day in New York as Terry mentioned on September 5th.

Speaker Change: Importantly, on that, during that day, we will discuss our 25 guidance, our 26 outlook, and update, as Terry mentioned, our capital allocation plan, as well as discuss long-term growth drivers of the business.

Matt McFarland: Following investor day, we will be on the road in Boston, Los Angeles, Philadelphia, and New York, and hope to see you there. We'll now open the line for questions and turn it back to Michelle, the operator. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. And the first question will come from Michael Sullivan with Wolf Research. Your line is now open. Hey, good morning. Morning, Michael. How are you?

Speaker Change: Following the investor day, we will be on the road in Boston, Los Angeles, Philadelphia, and New York and hope to see you there. We'll now open the line for questions and turn it back to Michelle, the operator.

Operator: We'll now open the line for questions and turn it back to Michelle, the operator. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Michael Sullivan: The first question will come from Michael Sullivan with Wolf Researcher. Your line is now open. Hey, good morning. Good morning, Michael. How are you? Hey, Mac. Doing well, thanks.

Michelle: The first question will come from Michael Sullivan with Wolfe Research. Your line is now open.

Operator: Hey Mac, how are you doing? Thanks. Why don't I just ask, you know, appreciate your comments on the pending FERC process. I guess, even if this does go your way, the 480 megawatts, how do you think about the other 480 megawatts that you ultimately have to get approval for, and then also your ability to do any other incremental data center deals in the backdrop of everything going on at FERC right now?

Michael Sullivan: Hey, good morning.

Mack McFarland: Why don't you just ask, you know, appreciate your comments on the pending for process. I guess even if this does go your way, the 480 megawatts, how do you think about the other 480 megawatts that you ultimately have to get approval for? And then also your ability to do any other incremental data center deals in the backdrop of everything going on at FERC right now. Yeah, appreciate the question, Michael. I mean, look, as I mentioned, we think that just to their first part for the first 480, we remain optimistic that once we fully answer first questions or PJM, in this case, with our help with BPL answers, that we're optimistic that they'll approve the ISA as submitted.

Michael Sullivan: Morning. Michael, how are you? Hey, Mac, doing well, thanks. Wanted to just ask, appreciate your comments on the pending FERC process.

Michael Sullivan: I guess, even if this does go your way, the 480 megawatts, how do you think about the other 480 megawatts that you'll ultimately have to get approval for, and then also your ability to do any other incremental data center deals in the backdrop of everything going on at FERC right now?

Matt McFarland: Appreciate the question, Michael. I mean, look, as I mentioned, we think that just for the first part of the first 40, we remain optimistic that once we fully answer the first questions or PJM, in this case, with our help with BPL answers, we're optimistic that they'll approve the ISA as submitted. We obviously were disappointed that we received a deficiency letter but perfectly understand the first need for additional time and clarification and wanting to build a fullsome record there as they review the ISA.

Michael Sullivan: Yeah.

Operator: Corporation, 2nd quarter, 2024 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. Two would draw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Michael Sullivan: Appreciate the question. Michael. I mean, look, as I mentioned, we think that just to their 1st part for the 1st, 40, we, we remain optimistic that once we fully answer 1st questions or in this case with our help with BPL answers.

Michael Sullivan: that we're optimistic that they'll approve the ISA as submitted.

Mack McFarland: We obviously were disappointed that we received the deficiency letter, but perfectly understand the first need for additional time and clarification and wanting to build a false and record there as they review the ISA. But to your second point, we were encouraged by FERC also bifurcating the larger co-locator and data centers filling the data center AI economy, as I call it, with power into a separate technical conference, which we'll participate in. Our view is that we continue to move ahead with AWS at the site under the current ISA of the 300 megawatts that will be approved, hopefully to the 480. We're optimistic that we get there.

Michael Sullivan: We obviously were disappointed that we received a deficiency letter, but perfectly understand the first need for additional time and clarification and wanting to build a fulsome record there as they review the ISA.

Ellen Liu: I would like now to turn the conference over to Ellen Liu, Senior Director, Investor Relations. Please go ahead. Thanks, Michelle.

Matt McFarland: But to your second point, we were encouraged by the idea of bifurcating the larger, you know, co-locator and data center, filling the data center AI economy, as I call it, with power into a separate technical conference, which we'll participate in. Our view is that we continue to move ahead with AWS at the site under the current ISA of the 300 megawatts that will be approved to, hopefully, 480. We're optimistic that we can get there.

Michael Sullivan: But to your second point, we were encouraged by FERC also bifurcating the larger co-locator and data center, filling the data center AI economy, as I call it, with power into a separate technical conference, which we'll participate in.

Ellen Liu: Welcome to Talen Energy's 2nd quarter, 2024 conference call. Participating on today's call are Chief Executive Officer Mack McFarland and Chief Financial Officer Carrie Nutt. They are joined by other Talen senior executives to address questions during the 2nd part of today's call as necessary. We issued our earnings release this morning along with the presentation, all of which can be found in the Investor Relations section of Talen's website, www.talenenergy.com. Today we are making some forward-looking statements based on current expectations and assumptions.

Michael Sullivan: Our view is, is that we continue to move ahead with AWS.

Michael Sullivan: at the site under the current ISA of the 300 megawatts that will be approved to hopefully to the 480. We're optimistic that we get there. And then I do think that we need as an industry, as I said in my opening remarks, to come together and to find a solution and to find one swiftly.

Mack McFarland: And then I do think that we need, as an industry, as I said in my opening remarks, to come together and define the solution and to find one swiftly so that we can all benefit in the economic development that power and the AI economy will bring. We think our deal does that. We think there's other types of deals that will do that, and we look forward to that conversation.

Matt McFarland: And then I do think that we need, as an industry, as I said in my opening remarks, to come together and to find a solution and to find one swiftly so that we can all benefit from the economic development that boosting the economy will bring. We think our deal does that. We think there are other types of deals that will do that. And we look forward to that conversation.

Ellen Liu: Actful results could differ due to risk factors and other considerations described in our financial disclosures and other SEC filing. Today's discussion also includes references to certain non-gavel financial measures. We have provided information reconciling our non-gavel measures to the most directly comparable gap measures in our earnings release and the appendix of our presentation.

Michael Sullivan: so that we can all benefit in the economic development that powering the AI economy will bring.

Michael Sullivan: We think our deal does that. We think there's other types of deals that will do that, and we look forward to that conversation.

Matt McFarland: As far as what we're doing, we just continue to move forward with the site. I mentioned that, you know, we were confident that we would release the 300 million dollars of escrow in the third quarter as we meet certain project milestones, and we can continue to pursue the data deal as signed with AWS. Okay, appreciate all the color there.

Mack McFarland: As far as what we're doing, we just continue to move forward with the site. I mentioned that, you know, we're confident that we will, in the third quarter, release the 300 million dollars of escrow as we meet certain project milestones and we continue to pursue the data deal as signed with AWS.

Michael Sullivan: As far as what we're doing, we just continue to move forward with the site. I mentioned that we're confident that we will, in the third quarter, release the $300 million of escrow as we meet certain project milestones, and we continue to pursue the data deal.

Mack McFarland: With that, I will now turn the call over to Matt. Great. Thank you, Ellen.

Mack McFarland: Okay, I appreciate all the color there. And then just looking ahead to this next PGM auction, any high-level drivers that you all want to highlight. And then also as a release to that is we just look to the Analyst Day in September, I think you're going to get some commentary on the 26 outlook. I guess, how do you get comfort out there just knowing part of that's going to be this upcoming option where results can be variable and you're still fairly open from edge. Yeah. So we'll, Michael, we'll give you the marks that go into that outlook so that you can do and sensitivities around that.

Mack McFarland: Good morning, everyone. And thank you for joining us. Before we get into our earnings results and presentation, I'd like to comment on the challenges and opportunities facing our industry as we meet the growing electrification needs of the AI economy. At Talen, we have come up with one creative cost-effective solution by co-locating a one-gigawatt AWS data center campus next door assessment plan, a nuclear plan. Everyone seems interested in our efforts, our colleagues in the IPP space, regulated utilities and RTOs.

Michael Sullivan: as signed with AWS.

Matt McFarland: And then, just looking ahead to this next PJM auction, any high-level drivers that you all want to highlight? And then, also, as it relates to that, as we just look to analyst day and... September, I think you're going to get some commentary on the 26th outlook. I guess, how do you get comfort out there just knowing?

Speaker Change: Okay, appreciate all the color there. And then just, you know, looking ahead to this next PJM auction, any, you know, high-level drivers that you all want to highlight? And then also as it relates to that, as we just look to the analyst day and, you know,

Speaker Change: September, I think you're going to get some commentary on the 26th outlook. I guess, how do you get comfort out there just knowing?

Matt McFarland: Part of that is going to be this upcoming option where results can be variable, and you're still fairly open from a hedge perspective. So, Michael, we'll give you the marks that go into that outlook so that you can see the risks and sensitivities around that. That's our plan for the, for the twenty-six outlook. And so that will include there is a visible market for twenty-six that will exist at that point in time when we provide that outlook with respect to power prices with respect to capacity.

Speaker Change: Part of that is going to be this upcoming option where results can be variable and you're still fairly open from a hedge perspective.

Mack McFarland: And the issue now sits at Burke's doorstep, where it plans to hold a technical conference on the broader issues this fall. In the investment community, our deal created excitement about increased demand and incremental value creation across the entire power sector attracting new investors. And I'll admit, it is one of the most exciting times I've seen in my power career. It will drive unprecedented change in our industry, change that will yield great opportunity.

Speaker Change: So, we'll Michael, we'll give you the marks that go into that outlook so that you can do and sensitivities around that. That's our plan for the, for the twenty six outlook.

Mack McFarland: That's our plan for the 26 Outlook. And so that will include there is a visible market for 26 that will site at that point in time when we provide that outlook with respect to power prices with respect to capacity. Obviously, that auction is not until December, and so we will know the outcome there, but we'll give you an underlying assumption. I would not say it's our forecast, but an underlying assumption and sensitivities relative to that. that. What I would, you know, point out, and, and again, we've, and Terry mentioned this in his comment, is that as an IPP that is focused in PJM, primarily in PJM, and is an IPP that does not have retail load, we are highly lever to the outcomes associated with this, which we think is a good spot to be currently.

Speaker Change: And so, uh, that will include, uh, there is a visible market for 26 that we'll cite at that point in time when we provide that outlook with respect to.

Matt McFarland: Obviously, that option is not until December, and so we won't know the outcome there, but we'll give you an underlying assumption. I would not say it's our forecast but an underlying assumption and sensitivities relative to that. What I would, you know, point out, and again, Terry mentioned this in his comments, is that as an IPP that is focused on PJM, primarily in PJM, and as an IPP that does not have retail load, we are highly levered to the outcomes associated with this, which we think is a good spot to be currently. With respect to drivers of 2627, Chris, you want to, Chris Maurice, Chief Commercial Officer, do you want to say anything?

Speaker Change: Power prices with respect to capacity obviously that auction is not until December and so we won't know the outcome there, but we'll give you an underlying assumption. I would not say it's our forecast, but an underlying assumption and sensitivities relative to that.

Mack McFarland: The focus has now turned to the question, how will the value creation get shared across companies? The recent high PGM capacity auction prices coupled with this new demand have caused people to discuss the repeal of deregulation, RTOs coming apart, state separating from PGM and to engage in other comments and distracting discussions. These ideas are misguided and missed the point that PGM has been a highly successful competitive market. Keeping prices relatively low and providing reliable electricity and bringing to market nearly 60 gigawatts of new build capacity in the past two decades.

Speaker Change: What I would point out, and again, Terry mentioned this in his comments.

Terry: is that as an IPP that is focused in PJM, primarily in PJM, and as an IPP that does not have retail load, we are highly levered to the outcomes associated with this, which we think is a good spot to be currently.

Christopher Morice: With respect to drivers of 26, 27, Chris, you want to Chris Morice, Chief Commercial Officer, want to say? Yeah, look, coming off the heels of the 25, 26, it's clear, and the compressed timelines for the December auction. Fundamentally, there's not a lot that can change supply and demand-wise prior to getting to December. So again, absolutely putting on a forecast, right? I think the pricing backdrop remains constructive, given the tight supply and demand that PJM has. And we'll get the parameters next week. At the end of August, for the capacity auction. So, like a more on that to come.

Chris Maurice: With respect to drivers of 26, 27, Chris, you want to, Chris Maurice, Chief Commercial Officer, want to say anything? Yeah, look, coming off the heels of the 25, 26 clear, and the compressed timelines for the December auction.

Chris Maurice: Yeah, look, coming off the heels of the 2526 clear and the compressed timelines for the December auction, fundamentally, there's not a lot that can change supply and demand wise prior to getting to December. So, again, absent of putting on a forecast, right? I think the pricing backdrop remains constructive, given the tight supply and demand that PJM has. And we'll get the parameters next week at the end of August for the capacity option. So, Michael, more on that to come. I hope that provided some color around.

Mack McFarland: This rhetoric creates uncertainty which, if allowed to persist, chills investment and job creation at a moment in time when we all have an exciting new demand to serve. They also miss the point that the opportunity here is so large that regulated companies, TND companies and generators will all participate in the value creation and in fact are all necessary for the solution. I typically agree with the saying, where you stand depends on where you sit.

Chris Maurice: Fundamentally, there's not a lot that can change supply and demand wise prior to getting to December. So again, absent of putting on a forecast, right? I think the pricing backdrop remains constructive given the type supply and demand that that has.

Chris Maurice: And we'll get the parameters next week at the end of August for the capacity option. So, Michael, more on that to come. I hope that provided some color around it.

Michael Sullivan: I hope that provided some color around it. Very helpful. Thanks. Thanks, Chris.

Operator: Very helpful. Thanks. Thanks, Mike. The next question comes from Angie Storazinski with Seaport. Your line is open.

Agnieszka Storozynski: The next question comes from Angie Storzenski with Seaport. Your line is open. Thank you. So just going back to the the co-ocation question. So there's been a lot of discussion, including with your utility partner, about behind the meter versus in some of the media co-ocations, the sort of planned operating risk that's used. You assume under the current contract, and also seemingly, you know, no pushback, at least separately from hyperscalers towards, you know, bearing the additional charges for transmission under in front of the meter contract.

Michael Sullivan: Very helpful. Thanks, Mac. Thanks, Chris.

Operator: Thank you. So, just going back to the collocation question, there's been a lot of discussion, including with your utility partner, about behind the meter versus in front of the meter collocation, the sort of planned operating risk that you assume under the current contract, and also seemingly no pushback, at least hypothetically, from hyperscalers towards bearing those additional charges for transmission in front of the meter. My question is, how do you see those two structures going forward as you try to potentially contract the second unit and maybe look at co-locations of gas plants, and would you be open to potentially changing the current deal structure to in front of the meter, again, just to discourage any future pushback at FERC or any other level? Morning, Angie. How are you?

Mack McFarland: However, I think at this time we all sit in the same place. As I see it, it is a win-win for everyone if we can get it right. The IPPs, TNDs, as well as the customers in the region we serve, who will benefit from increased reliability, lower cost and much needed economic development.

Michael Sullivan: Yeah.

Speaker Change: The next question comes from Angie Storazinski with Seaport. Your line is open.

Angie Storazinski: Thank you. So, just going back to the collocation question, so there's been a lot of discussion, including with your utility partner, about behind the meter versus in front of the meter collocations.

Mack McFarland: This is an opportunity for us as an industry to lead. Everyone is talking about 15 gigawatts of backlog here, 5 gigawatts of backlog there and so on with respected data centers. While these estimates seem large, the customer need is really large and a matter of win and to some extent where but not if. How will we as an industry rise to the occasion to meet the challenge of electrifying the future? You've heard me discuss it before.

Speaker Change: the sort of planned operating risk that you assume under the current contract.

Speaker Change: And also, seemingly, you know, no pushback, at least hypothetically, from hyperscalers towards, you know, bearing those additional charges for transmission under, in front of the meter.

Mack McFarland: So my question is, how do you see those two structures going forward as you try to potentially contract the second unit and maybe look at locations of gas plans. And would you be open to potentially, you know, changing the current deal structure to, to in front of the meter again, just to discourage any future pushback at Circle, any other levels.

Speaker Change: contract.

Speaker Change: My question is, how do you see those two structures going forward as you try to potentially contract the second unit and maybe look at co-locations of gas plants?

Mack McFarland: The big four hyper-scalers have a 2024 CAPEX budget of nearly $250 billion and those estimates have been rising. And they're on a pace to spend over a trillion dollars by 2028. And you can reach a similar conclusion if you look at SHIFT maker production forecasts. Electrifying that growth in data center demand will challenge the industry to deploy capital for new generation and transmission enhancements in the billions of dollars for every gigawatt of data center capacity when the existing capacity on the grid is insufficient.

Speaker Change: and would you be open to potentially, you know, changing the current deal structure to in front of the meter, again, just to discourage any future pushback at FERC or any other levels?

Mack McFarland: Good morning, Angie. How are you? Good question. And a lot, lot to get into there. But I think if we go back to my opening remarks, what I see in front of us as an industry, and I can, you know, bring it back down to our deal. So, as you requested, but what I see as a challenge, which is an opportunity for the industry, is significantly large in terms of the investment that's going to be required in terms of the range of alternatives and solutions that are going to be required. And so when I said balance, I hope you heard. We say, in front of the meter, behind the meter, and all sorts of new types of models that will be developed in order to serve this growing demand.

Matt McFarland: Good question, and there is a lot to get into there, but I think we should go back to my opening remarks. What I see in front of us as an industry, and I can, you know, bring it back down to our deal. As you requested, but what I see as a challenge, which is an opportunity for the industry, is significantly large in terms of the investment that's going to be required and the range of alternatives and solutions that are going to be required.

Angie Storazinski: Morning, Angie.

Angie Storazinski: How are you? Good question. And a lot, lot to get into there, but I think if we go back to my opening remarks,

Mack McFarland: The generators cannot do it alone and the TNDs cannot do it alone. One forecast of data center growth total 60 gigawatts of capacity by the end of this decade nationally with nearly 15 gigawatts of that being in PGM. That means we as an industry will need to deploy hundreds of billions of dollars to meet this need. This will mean an opportunity for generation developers and significant rate base growth for TND companies alike.

Angie Storazinski: What I see in front of us as an industry, and I can bring it back down to our deal.

Angie Storazinski: As you requested, but what I see as a challenge, which is an opportunity for the industry.

Angie Storazinski: is significantly large in terms of the investment that's going to be required, in terms of the range of alternatives and solutions that are gonna be required.

Matt McFarland: And so, when I said balance, I hope you heard us say front of the meter behind the meter and all sorts of new types of models that will be developed in order to serve this growing demand.

Angie Storazinski: And so when I said balanced, I hope you heard we say front of the meter, behind the meter, and all sorts of new types of models that will be developed in order to

Mack McFarland: If we can bring these solutions to the customers and meet the needs of the AI economy, we can help drive economic development for the states we operate in. For every gigawatt of data centers built direct investment is roughly $10 billion and the total economic impact is a multiple of two to three times that when you add the end salary jobs and investment created. So we really should think about this as a 20 to $30 billion of economic development for every gigawatt of data center investment. This is a big economic opportunity for those who get it right housing schools services jobs.

Matt McFarland: It is an exciting time, and it poses challenges, but I think that it's also going to be a significant opportunity for generators to invest and companies to invest. But we've got to all get it right, and hopefully, we can do it in the right way, which increases reliability and lowers costs to customers. Residential customers, and so everybody bears their fair cost, which is what I've said. I think with respect to our current deal, my view is that we like our current deal. We think that going forward, will there be front of the meter deals associated with gas units? Yes, possibly. We haven't seen 1 get done yet.

Mack McFarland: It is an exciting time. It opposes challenges, but I think that it's also going to be a significant opportunity for generators to invest TND companies to invest. But we've got to all get it right. And hopefully that we can do it in the right way by which it increases reliability and lowers cost to customers, residential customers. And so that, and everybody bears their fair cost, which is what I've said. I think with respect to our current deal, my view is that we like our current deal. We think that going forward, will there be front of the meter deals associated with gas units?

Angie Storazinski: to serve this growing demand. It is an exciting time and it poses challenges, but I think that it's also going to be a significant opportunity for generators to invest, T&D companies to invest.

Mack McFarland: It's no wonder the labor leaders I talk to are highly supportive and I am optimistic we can get it right.

Angie Storazinski: But we've got to all get it right and hopefully that we can do it in the right way by which it increases reliability and lowers cost to customers.

Angie Storazinski: Residential customers and so that and everybody bears their fair cost which is what I've said I think with respect to our current deal my view is that we like our current deal

Mack McFarland: Yes, possibly. We haven't seen one get done. Will they rely on the grid because that's what we're calling front of the meter of shorthand. Yes, I could see where they will be connected and will maintain backup from there. I think that eventually, over the next five years or so, Terry mentioned about supply chain issues and about the growing need to construct gas assets. I think over time that that could be a model by which new gas assets get built, which is that they're built and contracted long term through hyperscalers for capacity and then rely on the grid for backup.

Angie Storazinski: We think that going forward, will there be front of the meter deals associated with gas units? Yes, possibly.

Matt McFarland: Will they rely on the grid? Because that's what we're calling front of the meter in shorthand. Yes, I can see where they will be connected and will maintain backup from there. I think that, eventually, over the next 5 years or so, Terry mentioned supply chain issues and about the growing need to construct gas assets. I think over time that that could be a model by which new gas assets get built, which is that they're built and contracted long term through hyper scalers for capacity and then rely on the grid for backup. That can absolutely be held true. What I find it somewhat interesting is that we've had one, you know, and I mentioned this one capacity clear, right? And then one, one deal.

Mack McFarland: Turning to our specific deal with AWS. When we announced our deal we did not kid ourselves we knew we had a solution one that was quick to market cost effective and reliable. But we also recognize that it is not the only solution. Our behind the meter direct connect solution is just one innovative way to solve but one gigawatt of the challenge. Many others will have to follow and the next evolution will need to be balanced. Balanced in its form of supply for customers behind the meter front of the meter and whatever creative solution can be developed. Balanced in terms of the appropriate cost sharing protecting residential rates and maintaining grid reliability.

Angie Storazinski: We haven't seen one get done

Angie Storazinski: Will they rely on the grid? Because that's what we're calling front of the meter at shorthand. Yes, I could see where they will be connected and will maintain backup from there. I think that eventually over the next.

Angie Storazinski: five years or so, Terry mentioned about supply chain issues and about the growing need to construct gas assets. I think over time that that could be a model by which new gas assets get built, which is that they're built and contracted long term.

Mack McFarland: That can absolutely be. Beheld Truth. What I find it somewhat interesting is that we've had one, you know, and I mentioned this one capacity clear, right? And then one, one deal. And all of us, all of a sudden, are looking at the opportunity to try to figure out who gets what?

Terry: through hyperscalers for capacity and then rely on the grid for backup, that can absolutely be

Matt McFarland: And all of us, all of a sudden, are looking at the opportunity, trying to figure out who gets what. I think the opportunity is so big that we just need to all come together and say that all solutions are on the table. Okay. And just one follow-up to that topic. Would you actually expect different, i.e., lower economics for power companies under those in front of the meter deals versus behind the meter just because there's a higher transmission fee? Or would the offtaker or the hyperscaler or any other tech company just absorb this additional cost? Well, until the first one gets done, who knows what the model is.

Speaker Change: be held true. What I find it somewhat interesting is is that we've had one you know and I mentioned this one capacity clear right and then one one deal

Mack McFarland: Our one deal brings hundreds of jobs and tens of billions of dollars of economic development to the state of Pennsylvania, and importantly for us, the Greater Burwick Area. Our one deal matters because data centers form in multi-site clusters, so we hope that proving one working model in Pennsylvania is a sign of good things to come for further build out. While our ISA has been the subject of much debate, we remain optimistic that FERC will approve the file amendments once PGM responds to FERC's question and the commission has had time to fully review.

Mack McFarland: I think the opportunity is so big that we just need to all come together and say all solutions are on the table. Okay, and just want to do that topic.

Speaker Change: And all of us, all of a sudden, are looking at the opportunity, trying to figure out who gets what. I think the opportunity is so big that we just need to all come together and say all solutions are on the table.

Mack McFarland: So, would you actually expect, you know, like different IE lower economics for power companies under those in front of the meter deals versus behind the meter just because, I mean, there's a higher transmission fee or with the off taker, the hyperscaler, any other company would just absorb this additional cost? Well, and until the first one gets done, who knows what the, what the model is? I mean, there's certain tariffs and things that are structured that you have to comply with to do front of the meter. You know, we did a unique or novel, you know, solution, a creative solution to do behind the meter, front of the meter is going to have to meet the tariffs and it'll be, I think, a negotiated outcome on really an ISU by ISU, right?

Speaker Change: Okay, and just one follow-up to that topic.

Speaker Change: Would you actually expect different, i.e., lower economics for power companies under those in front of the meter deals versus behind the meter just because there's a higher transmission fee? Or would the off-taker, the hyperscaler, or any other tech company would just absorb this additional cost? Thank you. Thank you.

Mack McFarland: We look forward to participating in the technical conference this fall, and I am confident that as an industry we can meet the challenges in front of us, see the opportunity to power the AI economy and do it swiftly so that we can bring about the economic benefits and investment capital to PGM, Pennsylvania, and the entire U.S.

Matt McFarland: I mean, there's certain tariffs and things that are structured that you have to comply with to do front of the meter. You know, we did a, a, unique or novel, you know, solution, a creative solution to do behind the meter. The front of the meter is going to have to meet the tariffs, and it'll be, I think, a negotiated outcome on really an ISU by ISU, right? Like, you know, each utility will have a different, and they all have their ISA.

Mack McFarland: I'd like to quickly mention our RMR proceedings at Brandon Wagner. After the recent PGM capacity auction results, people asked us if we're going to change course from the RMR process, said simply no, that's not how it works and it's more complicated than that. So as long as we are paid a fair rate, we are committed to the RMR process and are working with stakeholders in settlement discussions before FERC to try to reach an agreed upon rate that will allow us to stay online.

Speaker Change: a unique or novel solution, a creative solution to do behind the meter. Front of the meter is going to have to meet the terrorists, and it'll be, I think, a negotiated outcome.

Mack McFarland: Like it, you know, each utility will have difference, and they all have their ISA. The PPL, who's the party to RSA in this agreement with PJM leading that way, has said that they have are behind the meter solution and they have front of the meter solutions. And I think it's going to take a combination of all of those by which to fill the demand. And I think that, as an industry, being able to support all or a balanced approach with a number of different working models is what's necessary in order to drive what I see as a significant economic development opportunity.

Speaker Change: on really an ISU by ISU, right? Like, you know, each utility will have difference and they all have their ISA. The PPL, who's the party to our ISA in this agreement, with PJM leading that way, has said that they have...

Matt McFarland: The PPL, who's the party to our ISA in this agreement with PJM leading that way, has said that they have, are behind the meter solutions, and they have front of the meter solutions. And I think it's going to take a combination of all of those to fill the demand. And I think that as an industry, being able to support all for a balanced approach with a number of different working models is what's necessary in order to drive what I see as a significant economic development opportunity. If you look at the forecasts that come out of PPL, where we have a lot of our generation, there's five gigawatts that is being discussed there.

Mack McFarland: That said, we are willing to consider repowering the site and potentially adding batteries under the right circumstances. This could make sense and could potentially eliminate costly transmission upgrades. We look forward to continuing the process and finding a solution, as I said, with all stakeholders.

Speaker Change: behind the meter solution and they have front of the meter solutions and I think it's going to take a combination of all of those by which to fill the demand and I think that as an industry

Speaker Change: being able to support all for a balanced approach.

Mack McFarland: I look forward to your questions on these important matters and will now turn to our key highlights for this earnings call. So starting with slide three, Talon has had an active second quarter. I'd like to highlight several of our achievements. One overarching theme is the increasingly visible impact of rising power demand through higher prices in both energy and capacity markets. In the second quarter, our fleet ran well during periods of unusually high temperatures and demand in PGM, enabling us to capture healthy generation margin.

Speaker Change: with a number of different working models is what's necessary in order to drive what I see as significant.

Mack McFarland: If you look at the forecast that come out of PPL or where we have a lot of our generation, there's five gigawatts that is being discussed there. That if you use the numbers that I was talking about is 100 to 150 million dollars of economic development for Pennsylvania and for that region. And my view is that that's plenty of opportunity for everyone to figure out how to solve it. Okay.

Speaker Change: economic development opportunity. If you look at the forecast that come out of PPL, where we have a lot of our generation, there's five gigawatts that is being discussed there. That, if you use the numbers that I was talking about, is 100 to 150 million dollars of economic development for

Matt McFarland: That, if you use the numbers that I was talking about, is $100 to $150 million of economic development for Pennsylvania and for that region. And my view is that that's plenty of opportunity for everyone to figure out how to solve it. Okay, and then changing topics.

Speaker Change: Pennsylvania and for that region and my view is is that that's plenty of opportunity for everyone to figure out how to solve it.

Mack McFarland: And then changing topics. So we saw some press reports about your coin business. Just wondering if that you can comment at all about the future of that business. What we've said is we don't believe that it's not a strategic asset for us, and we're looking at what are the alternatives with respect to coin. And that's all we have to say at this point in time.

Matt McFarland: So we saw some press reports about your coin business. Just wondering if you could comment at all about the future of that business. What we've said is we don't believe that it's not a strategic asset for us and we're looking at what are the alternatives with respect to coins and that's all we have to say at this point in time.

Mack McFarland: As our gas fleet ran significantly more than it did in Q2 of last year, demonstrating the value of dispatchable generation in a rising power market. Given our solid first half performance, we are raising our 2024 adjusted EBITDA and adjusted free cash flow guidance ranges and the representative midpoints. With respect to the recent PGM option, our fleet cleared 6.8 gigawatts of capacity at roughly $270 per megawatt day in the 2526 option compared to $50 per megawatt day in the prior planning year.

Speaker Change: Okay. And then changing topics, so we saw some press reports about your coin business. I'm just wondering if you can comment at all about the future of that business.

Speaker Change: so

Speaker Change: What we've said is we don't believe that it's a it's not a strategic asset for us and we're looking at what are the alternatives with respect to coin and that's all we have to say at this point in time.

Agnieszka Storozynski: Awesome. Thank you.

Ian Zafino: And our next question comes from Ian Zafino with Oppenheimer. Your line is open. Hi, great. Thank you very much. What were the comments? Thanks for all the guidance for all the color. Appreciate it.

Operator: And our next question comes from Ian Zafino with Oppenheimer. Your line is, I agree. Thank you very much. Good quarter. Thanks for all the guidance and all the color.

Speaker Change: Awesome. Thank you.

Mack McFarland: This equals $600 million in capacity revenues for the 2526 planning year. AWS continues to make progress on its data center campus near Susquehanna. The local township recently granted AWS's zoning amendment that will allow the construction and operation of 960 megawatts of data centers. And in Q3, we expect to receive the $300 million of sale proceeds currently in escrow. Additionally, we reached another strategic milestone by listing on the NASDAQ Exchange on July 10th, which in turn improved the trading liquidity of our equity, enabled greater access for more investors and made us eligible for major indices. We are proud of the value that we have unlocked and believe there's more opportunities for value creation to come, especially in the current market backdrop.

Speaker Change: And our next question comes from Ian Zaffino with Oppenheimer. Your line is open.

Ian Zaffino: I agree, thank you very much.

Ian Zaffino: Good quarter. Thanks for all the guidance and all the color. I appreciate it.

Operator: I appreciate it. The question will be on Brandon Shores and Wagner, you know, how are we thinking about the resolution when it comes to that, timing, maybe, you know, I know there's an ask, but how do we think about what maybe the EBITDA impact could be or where that settles and kind of all the steps to kind of get us there. Thanks. Yeah, so, first of all, with respect to Brandon and Wagner, we said we'd participate with all stakeholders to come up with what we think is an equitable solution.

Mack McFarland: Question of the on Brandon Shores and Wagner. You know, how are we thinking about the resolution when it comes to that timing, maybe, you know, there's an ask, but how do we think about what maybe the EBITDA impact of the or where that settles and kind of all the steps to kind of get us. to that. Thanks. So, first of all, with respect to Brandon and Wagner, we said we'll participate with all stakeholders to come to, you know, what we think is an equitable solution. We hope to do that by the end of this year.

Ian Zaffino: [inaudible]

Ian Zaffino: The question will be on Brandon Shores and Wagner. How are we thinking about the resolution when it comes to that, timing, maybe, I know there's an ask, but how do we think about what maybe the EBITDA impact will be or where that settles and kind of all the steps to kind of get us to that. Thanks. Thank you.

Ian Zaffino: Yeah, so

Speaker Change: 1st of all.

Speaker Change: With respect to Brandon and Wagner, we said we'll participate with all stakeholders to come to, you know, what we think is an equitable solution.

Terry Nutt: So please join us at our investor day in New Work on September 5th.

Mack McFarland: That's our target. We've started the proceeding. There's, you know, just as a matter of principle that for us is that we don't talk about matters that are in front of FERP, just like we don't talk about matters that are in front of a judge. We don't tend to try to cognize the, you know, come to conclusion is what's going to happen there. So, we'll let it be. But what we said is we're looking for a solution for all stakeholders by the end of this year. And we think that that's important because these are assets that, if they're going to be run for the next three years, there are certain aspects, physical constraints and things of that nature with respect to the operations of the plant, labor, you know, maintenance, things of that nature that need to be decided upon.

Operator: We hope to do that by the end of this year. That's our target there. We've started the proceeding. There's been an ALJ judge assigned, and schedules are being worked through. One of the things Ian that, you know, just as a matter of principle for us is that we don't talk about matters that are in front of FERC just like we don't talk about matters that are in front of a judge.

Terry Nutt: I'll now turn the call over to Terry for further details. Thank you, Matt, and good morning, everyone. Moving to slide 4, let's take a look at our year-to-date operational and financial results. Our fleet ran well during the period generating over 16 kilowatt hours of power with an equivalent 4-stattage factor of only 2%. 53% of that generation came from our carbon-free, Susquehanna nuclear facility, with successfully completed spring refueling outage in April. Importantly, our whole team works safely.

Speaker Change: We hope to do that by the end of this year. That's our, our target there. We've started the proceeding. There's been an judge assigned and schedules are being worked through. 1 of the things he, and that, you know, just as a matter of principle, but for.

Speaker Change: for us is that we don't talk about matters that are in front of FERC just like we don't talk about matters that are in front of a judge. We don't tend to try to...

Matt McFarland: We don't tend to try to... prognosise, you know, come to conclusions as to what's going to happen there. So we'll let it be. But what we've said is that we're looking for a solution for all stakeholders by the end of this year. And we think that that's important because these are assets that if they're going to be run for the next three years, there are certain aspects, physical constraints, and things of that nature with respect to the operations of the plant, labor, you know, maintenance, things of that nature that need to be decided upon. And so that's why we're looking to get this resolved before the year ends. Okay, great. Thank you.

Speaker Change: prognostic you know come to conclusion as to what's going to happen there so we'll let it be but what we said is is we're looking for a solution for all stakeholders by the end of this

Terry Nutt: With the year-to-date, total reportable incident rate of only 0.3, this is in line with, or better than our peers, and we continue to emphasize safety as our first priority across the fleet. We leverage our strong operational foundation and commercial strategy to earn $376 million of adjustity with off and $165 million of adjusted free cash flow year-to-date. We continue to prioritize capital returns and balance sheet discipline. Our net leverage is only 2.4 times far below our 3.5 times target, and we currently have over 1.1 billion of liquidity thanks to cash generated from operations.

Speaker Change: year. And we think that that's important because these are assets that if they're going to be run for the next three years, there's certain aspects, physical constraints and things of that nature with respect to the operations of the plant, labor.

Ian Zafino: And so, that's why we're looking to get this resolved before the year end. Okay, great. Thank you.

Speaker Change: maintenance, things of that nature that need to be decided upon. That's why we're looking to get this resolved before the year end.

Operator: And then on the guidance, can you maybe just talk about, you know, what I guess your expectations are for PGM forward pricing, you know, the spark spread, and you know, how they kind of move versus, you know, what Hey, Ian, it's Terry. So, with respect to our guidance, what we're using is a view of forward prices here at the end of July. If I go back to the slide earlier in the deck, you can see that SPARC spreads have sort of bumped around since the start of the year.

Ian Zafino: And then on the guidance, can you maybe just talk about, you know, what I guess your expectations are for PJM forward pricing, you know, spark spreads, and you know, how they kind of move versus, you know, what you were conducting.

Speaker Change: Okay, great. Thank you. And then, on the guidance, can you maybe just talk about, you know, what I guess your expectations are for PCM forward pricing, you know, spark spreads, and, you know, how they kind of move versus, you know, what you were expecting?

Terry Nutt: Hey, and it's Terry. So, with respect to our guidance, what we're using is the view of forward prices here at the end of July. If I go back to the slide earlier in the deck, you can see that spark spreads have sort of bumped around since the start of the year. Since we're a 100% hedge for the balance of the year, we really don't have, you know, really too much sensitivity with respect to how 2024 will move. So, really, there's not a massive sort of impact with respect to changes in Spark.

Terry Nutt: This gives us capital allocation flexibility and enables us to focus on shareholder returns. I'd like to take this opportunity to recognize and thank our employees across the company who have worked safely to deliver impressive operation results. The past couple of months were the busiest time of year for many of our operation team members. As they successfully navigated, our spring-outage schedule across the fleet. These team members are key to our overall performance as they operate, maintain, and improve our generation fleet and other assets. Without their hard-working commitment text once, none of this would be possible.

Speaker Change: Hey, and it's Terry. So with respect to our guidance, what we're using is is a view of forward prices here at the end of a July

Speaker Change: If I go back to the slide earlier in the deck, you can see that spark spread to...

Operator: Since we're 100% hedged for the balance of the year, we really don't have, you know, really too much sensitivity with respect to how 2024 will move. So, really, there's not a massive sort of impact with respect to changes in SPARC. Okay, thank you very much. And our next question comes from Craig Shear with Tui Brothers. Your line is open. Good morning.

Terry: That's sort of bumped around since the start of the year, since we're 100% hedged for the balance of the year.

Terry: We really don't have, you know, really too much sensitivity with respect to how.

Terry: 2024 will move. So, really, there's not a massive sort of impact with respect to changes in sparks.

Ian Zafino: Okay, thank you very much.

Craig Shear: And our next question comes from Craig Shear with Twoie Brothers. Your line is open. Good morning. Thanks for taking the questions. Good morning, Craig. And our, our, our question just to dig in a little further.

Speaker Change: Okay, thank you very much.

Terry Nutt: Turning now to the PGM capacity option result on slide 5. As Mack mentioned earlier, the 2025-2026 option cleared at significantly higher prices than prior years, with PGM's reserve margin declining from 20% to 18.5%. Focusing on calendar year impacts, talent will earn roughly $285 million more in capacity revenues in 2025 when compared to 2024. These results illustrate how talent is the IPP most levered to PGM capacity option outcomes.

Speaker Change: And our next question comes from Craig Shear with Tui Brothers. Your line is open.

Operator: Thanks for taking the question. Good morning, Craig. On Ian's RMR question, just to dig in a little further, how much could a prospective repowering with the best deployment be on those sites? I don't think we've put a number out on what it would take to do that. It's more a matter of time. So if you look at it back when the capacity markets were clearing at $50 a megawatt day, it was uneconomic to convert the unit from coal to oil. We cannot continue to run the unit.

Craig Shear: Good morning, thanks for taking the questions.

Craig Shear: Morning, Craig.

Speaker Change: On Ian's RMR question, just to dig in a little further, how much could a prospective repowering with the best deployment be on those sites?

Craig Shear: How much could a prospective repowering with the best deployment be on, on those sites? I don't, I don't think we put a number out on what it would take to do that. It's more a matter of time. So, if you look at it back when the capacity markets were clearing in that $50 a megawatt day, it was uneconomic to convert to the unit from coal to oil. We can not continue to run the unit without some relief of some permit issues, as well as an arrangement with the year above past June of next year. Now, I think both of those can be resolved in order to maintain reliability under the right construct in order to solve the transmission constraints until transmission can be built.

Speaker Change: I don't think we put a number out on what it would take it to do that. It's more a matter of time. So, if you look at it back when the, the, the.

Terry Nutt: These option results are a strong indication of a tightening market, but I will caution that it's currently just one data point. The results also demonstrate the value proposition for reliable, dispatchable, generous. Foundation. Looking ahead to the next auction, we expect supply tightness to persist. Years of low-energy margins and capacity prices led to a large exit of reliable legacy generation assets. And investment signals need to be persistent to spur long-term investments in new, dispatchable resources that have 30-year investment horizons.

Speaker Change: Capacity markets were clearing in that $50 a megawatt day. It was uneconomic to convert to the unit from coal to oil. We cannot continue to run the unit.

Matt McFarland: Without some relief on some permit issues as well as an arrangement with Sierra Club past June of next year. Now, I think both of those can be resolved in order to maintain reliability under the right construct in order to solve the transmission constraints until transmission can be built. But if there's a way by which we could repower the units under a construct that provides an ample return, we would look at repowering that unit to oil and could do so over the next 3 years.

Speaker Change: Without some relief of some permit issues as well as an arrangement with Sierra Club passed

Speaker Change: June of next year. Now, I think both of those can be resolved in order to maintain reliability under the right construct.

Mack McFarland: What if there's a way by which we could repower the units under a construct that provided an ample return? We would look at repowering that, that unit to oil and could do so over the next three years. We also have a couple in the queue, a hundred meg, several hundreds of megawatts of batteries deployed across Wagner and Brandon that could also be put in. And if those are a more economic solution to the customers in the region, we would look at doing that.

Speaker Change: uh, in order to solve the transmission constraints until transmission can be built. But if there's a way by which we could repower the units under a construct that provided an ample return, we would look at repowering that- that unit to oil and could do so over the- the next three years.

Terry Nutt: Furthermore, the supply chain for turbines, transformers, and other equipment in the global market presents challenges, meaning that building and bringing a new gas-powered plant online could take five years or longer.

Matt McFarland: We also have a couple in the queue, several hundreds of megawatts of batteries deployed across Wagner and Brandon that could also be put in. And if those are a more economical solution to the customers in the region, we would look at doing that. Thank you.

Speaker Change: We also have a couple in the queue, several hundreds of megawatts of batteries deployed across Wagner and Brandon that could also be put in. And if those are a more economic solution to the customers in the region, we would look at doing that.

Terry Nutt: PJN's parameters for the 2026-2027 capacity auction will be available in late August, and the auction will be held in December, while the following planning your auction will be in June of 2025.

Craig Shear: Thank you. And kind of a bigger picture question. I'm sure you're going to address this in more detail at the Analyst Day.

Matt McFarland: And kind of a bigger picture question, and I'm sure you're going to address this in more detail at the analyst day, but one of the ultimate valuation questions is, is this really a volatile commodity spark spread story, or is this a systemically shifting capacity market, PPA, RMR agreement, much more long-term stable, recurring free cash flow story? Can you kind of provide some sense or color on that? Sure, Craig, let me start and then have Terry jump in.

Terry Nutt: Now turning to financial results. For the second quarter of 2024, Talen reported a Justity Badaw of $87 million, and an adjusted free cash flow use of $29 million. Building on our solid financial performance in the first quarter resulted in $376 million of a Justity Badaw and $165 million of adjusted free cash flow year-to-date.

Speaker Change: Thank you and

Speaker Change: Kind of a bigger picture question, and I'm sure you're going to address this in more detail at the analyst day.

Mack McFarland: But one of the ultimate valuation questions is, is this really a volatile commodity sparks spread story, or is this a systemically shifting capacity market PPA RMR agreement? Much more long-term stable recurring pre-cashable story. Could you kind of provide some sense or color on that? Sure, Craig. Let me start, and then have Terry jump in. But if you look at where we are, and obviously we've got the production tax credit, let's start there with downside with respect to the megawatts that come off of Susquehanna. That provides us forward. There's, you know, we can get into the debate about the RRA and whether it continues, et cetera, or all portions of the continue.

Speaker Change: But one of the ultimate valuation questions is,

Speaker Change: Is this really a volatile commodity spark spread story, or is this a systemically shifting capacity market PPA, RMR agreement, much more long-term, stable, recurring free cash flow story?

Terry Nutt: As a reminder, our business is seasonal, and we make most of our money during the core winter and summer months. The second quarter and fourth quarter shoulder periods, when we typically don't earn as much, and often schedule our maintenance options. Additionally, certain period of cash payments happen in the second and fourth quarter that further reduced cash flow, such as our semi-annual debt service payments. That said, the second quarter was strong for Talen.

Speaker Change: Can you kind of provide some sense or color on that?

Matt McFarland: But if you look at where we are, and obviously we've got the production tax credit, let's start there with the downside with respect to the megawatts that come off of Susquehanna. That provides a floor. There's, you know, we can get into the debate about the IRA and whether it continues, et cetera, or all portions of it continue. But right now, that provides downside protection. And we think that that will continue in the future, no matter what the administration.

Speaker Change: Sure, Craig. Let me start and then have Terry jump in. But if you look at where we are, and obviously, we've got the production tax credit. Let's start there with downside with respect to the megawatts that come off of Susquehanna.

Terry: Um, that that provides a floor. Uh, there's, you know, we can get into the debate about the, and whether continues, et cetera, all portions of it continue. But right now that provides downside protection and we think that that will continue in the future. No matter what the, the administration, but.

Terry Nutt: In PJN, second quarter weather was unseasonably warm, with Philadelphia experiencing its highest average cooling degree day total since 2014. Additionally, this quarter's average power demand in PJM was the highest second quarter demand seen in the last five years. In this market backdrop, our PJN ghastly demonstrated the value of dispatchable generation, producing approximately 1.5 more terawatt hours, and 20 million more of generation margin than the same quarter of 2023.

Mack McFarland: But right now that provides downside protection, and we think that that will continue in the future, no matter what the administration. But in addition to that, to your point, we have megawatts that have been contracted off that will eventually reach 960 megawatts through the AWS deal. We've often said that we're looking for creative solutions for adding to that at the Susquehanna site and looking at other sites by which we would then have contracted revenue streams. And so, to your point, I think that leads us down the path where a lot of our revenue, okay, and a lot of our margin is going to come through either contracted energy or capacity payments over time, to your point.

Matt McFarland: But in addition to that, to your point, we have megawatts that have been contracted up that will eventually reach 960 megawatts through the AWS deal. We've often said that we're looking for creative solutions for adding to that at the Susquehanna site and looking at other sites by which we would then have contracted revenue streams. And so, to your point, I think that leads us down the path where a lot of our revenue, okay, and a lot of our margin is going to come through either contracted energy or capacity payments over time.

Speaker Change: In addition to that, to your point, we have megawatts that have been contracted up that will eventually reach 960 megawatts through the AWS deal. We've often said that we're looking for creative solutions for the future. Thank you. Thank you.

Speaker Change: adding to that at the Susquehanna site and looking at other sites by which we would then have contracted.

Terry Nutt: Turning now to the guidance on slide seven, based on our solid first half performance, we are raising our 2024 Adjusted EBITDA and adjusted free cash flow ranges. Our new Adjusted EBITDA range is 720 million to 780 million, with a midpoint that is 7% higher than prior guidance.

Speaker Change: Thank you.

Speaker Change: Revenue streams and so they to your point. I think that leads us down the path where a lot of our revenue Okay, and a lot of our margin is going to come through either contracted energy

Mack McFarland: That said, we've also, you know, changed things since we emerged from bankruptcy. Now that we've got to clean up the balance sheet and have ample liquidity. Chris and the team have been employing, I'll call it more strategic hedging of looking, how do we capture the extrinsic value associated with the gas assets that sits somewhere in the middle so they get a capacity payment, but they also provide option value that we've been able to capture like we did in the first half of this year. So I think it's a combination of all of those, but when you look at it going forward in the future, one of the things that we like about our portfolio is that we're anchored by Susquehanna with fixed price contracts out there.

Chris Maurice: or capacity payments over time, to your point. That said, we've also changed things since we emerged from bankruptcy. Now that we've got a cleaned up balance sheet and have ample liquidity, Chris and the team have been employing, I'll call it more strategic hedging of looking, how do we capture the extrinsic value associated with the gas assets that sit somewhere in the middle? So they get a capacity payment, but they also provide option value.

Matt McFarland: That said, we've also, you know, changed things since we emerged from bankruptcy. Now that we've got a cleaned up balance sheet and have ample liquidity, Chris and the team have been employing, I'll call it more strategic hedging of looking, how do we capture the extrinsic value associated with the gas asset that sits somewhere in the middle?

Terry Nutt: And our new adjusted free cash flow range is 245 million to 285 million, with a midpoint 13% higher than before.

Matt McFarland: So they get a capacity payment, but they also provide option value that we've been able to capture like we did in the first half of this year. So I think it's a combination of all of those, but when you look at it going forward into the future, one of the things that we like about our portfolio is that we're anchored by Susquehanna with fixed price contracts out there. That, over time, will reprice, but obviously, it's contracted revenues with double-a credit on the other side of it that provides for, you know, Terry mentioned that we're right now at what two point two point four two point four times net leverage.

Terry Nutt: I'd also like to take a moment to highlight our hedging activity from this past quarter. On slide eight, there is a graph of the average calendar year 2025 and 2026 sparks breads. Sparks breads expanded considerably through mid-April before we tracing by the end of June.

Speaker Change: that we've been able to capture like we did in the first half of this year. I think it's a combination of all of those, but when you look at it going forward into the future, one of the things that we like about our portfolio is that we're anchored by Susquehanna with fixed price contracts out there.

Terry Nutt: During this period, our commercial team successfully executed our hedging strategy and added hedges when sparks breads were higher as detailed on the right hand side of the slide.

Mack McFarland: That over time will reprice, but obviously it's contracted revenues with a double A credit on the other side of it. That provides for, you know, Terry mentioned that we're right now to what, two point two point four times net leverage. Think of it in the future that that's just going to create incremental capacity and even more secure revenue. So either we should have a lower cost of capital or we have ample room to be to increase leverage, all of which create. I'll call it increased flexibility about how we see the future. So we like where we are, but I think your general sort of thesis that you had is accurate.

Terry: that over time will reprice but obviously it's contracted revenues with a double-a credit on the other side of it that provides for you know Terry mentioned that we're right now to what two point two point four two point four times net leverage

Terry Nutt: Turning to slide nine. We remain committed to maintaining net leverage below our three-and-a-half times target, along with ample liquidity. As of August 9, our forecasted net debt-dead bidai ratio was only 2.4 times, well below our target.

Matt McFarland: Think of it in the future that that's just going to create incremental debt capacity and even more secure revenue. So either we should have a lower cost of capital, or we have ample room to be to increase leverage, all of which create, I'll call it, increased flexibility about how we see the future. We like where we are, but I think your general, sort of thesis that you had is accurate, where we are headed towards where we have more contracted revenues and capacity revenues than energy on the margin. But it'll take time. Yeah. And Craig, maybe just to add a couple of things to Mac's comments. Right. When you think about Susquehanna, it makes up half of our generation on an annual basis.

Speaker Change: Think of it in the future that that's just going to create incremental debt capacity and even more secure revenue. So either we should have a lower cost of capital or we have ample room to be to increase leverage, all of which create, I'll call it increased flexibility about how do we see the future.

Terry Nutt: We continue to actively engage with the rating agencies and currently maintain positive outlooks with both S&P and Moody's. In addition, we have over 1.1 billion of liquidity, including over 400 million of unrestricted cash. We've taken several actions since the end of the first quarter to optimize liquidity, including remarketing our municipal bonds, which allowed us to terminate 133 million of LCs that were backstopping them. We also terminated over 90 million of other LCs, opening up even more capacity under our credit facilities.

Speaker Change: We like where we are, but I think your general.

Mack McFarland: We are headed towards where we have more contracted revenues and capacity revenues than energy on the margin. But it'll take time.

Speaker Change: sort of thesis that you had is accurate where we are headed towards where we have more contracted revenues and capacity revenues than energy on the margin.

Terry Nutt: Craig, maybe just add a couple of things to Max's comment. Right. When you think about Susquehanna, it makes up half of our generation on an annual basis. So getting, you know, contracted cash flows with the high high-grade credit counterparties is obviously, you know, very supportive evaluation, especially for a transaction that we have that spans multiple years.

Craig Shear: But it'll take time and Craig, maybe just add a couple of things to Max comments. Right? When you think about Susquehanna, it makes up half of our generation on an annual basis. And so getting contracted cash flows with a high.

Terry Nutt: And so getting, you know, contracted cash flows with a high, high-grade credit counterparty is obviously, you know, very supportive of valuation, especially for a transaction that we have that spans multiple years. I think the other dynamic that's really interesting right now is just sort of unfortunately, given the scheduling challenges around the capacity auctions and PJM, we're now in a spot whereby by the same time next year, we're going to have capacity auction clears for 26 and 27, and for 27 and 28.

Terry Nutt: Moving to slide 10, since the start of 2024, we have returned approximately 930 million dollars to shareholders by repurchasing roughly 8 million shares or 14% of our shares outstanding. We've executed most of these buybacks through two large transactions, and June we repurchased approximately 5.3 million shares through a 612 million-dollar tender offer. And in July, we bought back roughly 2.4 million shares from our largest shareholder for $280 million.

Craig Shear: High-grade credit counterparty is obviously, you know, very supportive of valuation, especially for a transaction that we have that spans multiple years. I think the other dynamic that's really interesting right now is

Terry Nutt: I think the other dynamic that that's really interesting right now is just sort of, unfortunately, given the scheduling challenges around the capacity auctions and PJM. We're now in a spot by, we're by the same, this same time next year, we're going to have capacity auction clears for 26 and 27 and for 27 and 28. And so you're going to have more clarity on the capacity revenue stream across the entire fleet through, through part of 2028, which should also solidify value and, you know, give more certainty on around how you think about, you know, the equity at the end of the day.

Speaker Change: Just sort of unfortunately, given the.

Speaker Change: scheduling challenges around the capacity auctions and PJM, we're now in a spot where by the same time next year, we're going to have capacity auction clears for 26 and 27 and for 27 and 28.

Terry Nutt: We continue to see purchasing our stock as the highest and best use of our capital. We have over $100 million of capacity remaining under current share repurchase program and are working to refresh that capacity. We will provide a capital allocation update during our investor day at the start of September.

Terry Nutt: And so you're going to have more clarity on the capacity revenue stream across the entire fleet through part of 2028, which should also solidify value and, you know, give more certainty around how you think about, you know, the equity at the end of the day. So good question and good point on sort of where the contracted cash flows for the business look going forward. And we'll continue to sort of build off of that. And our next question comes from Thomas Merrick with Janie Montgomery. Your line is now open.

Speaker Change: And so you're going to have more clarity on the capacity revenue stream across the entire fleet through part of 2028.

Speaker Change: which should also solidify value and give more certainty around how you think about the equity at the end of the day.

Terry Nutt: So good question and good point on sort of where the contracted cash flows to the business look going forward, and we'll continue to sort of build off of that. Thank you.

Terry Nutt: Moving to slide 11, we achieved an important milestone on July 10th, when talent rang the opening bill and began trading on the NASDAQ. We believe uplifting to a national exchange has provided several positive impact of our equity. It improved our trading liquidity and enables a larger universe of investors to access our stock.

Speaker Change: So, uh, good question and, um, and good point on, um,

Speaker Change: sort of where the contracted cash flows to the business look going forward, and we'll continue to sort of build off of that.

Terry Nutt: In fact, we've doubled our average daily trading volume compared to the three months prior to uplifting. We also had the opportunity to gain access to several equity indices, including potential eligibility for the Russell in mid 2025 and the S&P starting late next year.

Thomas Merrick: And our next question comes from Thomas Merrick with Janie Montgomery. Your line is now open. Good morning team.

Speaker Change: Great, thank you.

Speaker Change: And our next question comes from Thomas Merrick with Janie Montgomery. Your line is now open.

Operator: Good morning, team. Thanks for taking the time and for the questions, and appreciate the opportunity for the investor day in a couple weeks in New York. Curious about co-location deals for new build assets and just how the PJM auction potentially changed the price outlook hyperscalers are looking at for co-location deals, whether they're existing or potentially new built into the future. Well, I think, good morning, Thomas.

Thomas Merrick: Thanks for taking the time and for the questions, and appreciate the opportunity for the investor day in a couple of weeks in New York. Curious on co-location deals for new build assets and just how the PJM auction potentially changed the price outlook, hyper scalers are looking at for co-location deals, whether they're existing or potentially new build into the future. Well, I think good morning, Thomas. I think Terry mentioned it during his remarks that it's one data point. That said, you know, one of the things that this demand will drive over time is the need for increased supply.

Thomas Merrick: Good morning team. Thanks for taking the time and for the questions and you appreciate the opportunity for the Investor Day in a couple weeks in New York.

Thomas Merrick: Curious on co-location deals for new build assets and just how the PJM auction potentially changed the price outlook hyperscalers are looking at.

Mack McFarland: With that, I'll hand a discussion back to Mac. Great. Thanks, Terry.

Mack McFarland: I'd like to reiterate how proud we are of what we've been able to accomplish in 14, 15 months since we exited restructuring, but we're not done. We hope to see you in one of our upcoming events. We'll be hosting an investor day in Newark as Terry mentioned on September 5th. Importantly, during that day, we will discuss our 25 guidance, our 26 outlook, an update as Terry mentioned on our capital allocation plan, as well as discuss long-term growth drivers of the business. Following the investor day, we will be on the road in Boston, Los Angeles, Philadelphia, and New York and hope to see you there.

Speaker Change: for co-location deals, whether they're existing or potentially new buildings in the future.

Speaker Change: Well, I think, uh, good morning, Thomas.

Speaker Change: I think Terry mentioned it during his remarks that it's one data point.

Matt McFarland: I think Terry mentioned it during his remarks that it's one data point. That said, you know, one of the things that this demand will drive over time is the need for increased supply. But that need for increased supply needs to be balanced with making sure that the appropriate cost sharing is done and that residential rates are protected from that if, you know, the build out is necessary for what I would consider industrial load. I consider data centers to look like industrial load because it's 24-7. It looks a lot more like a manufacturing process than it does like a commercial build.

Speaker Change: That said, you know, one of the things that this demand will drive over time is the need for increased supply.

Mack McFarland: But that need for increased supply needs to be balanced with making sure that the appropriate cost sharing is done and that residential rates are protected from that. If you know the build-out is necessary for what I would consider industrial load, I consider data centers to look like industrial load because it's 24-7. It looks a lot more like a manufacturing process than it does a commercial building. And so I think that what that will lend itself to is that people have a view that there will be inflationary costs or there will be costs to build out transmission, which is going to increase the cost on a system and build generation. Both of those things.

Speaker Change: But that need for increased supply needs to be balanced with making sure that the appropriate cost sharing is done and that residential rates are.

Operator: We'll now open the line for questions and turn it back to Michelle, the operator. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Michael Sullivan: The first question will come from Michael Sullivan with Wolf Researcher. Your line is now open. Hey, good morning. Good morning, Michael. How are you? Hey, Mac, doing well, thanks. Why don't you just ask, you know, appreciate your comments on the pending for process.

Matt McFarland: And so, I think that what that will lend itself to is that people have a view that there will be inflationary costs or there will be costs to build out transmission, which is going to increase the cost on the system and build generation, both of those things. And that's what you're seeing reflected in the market. When the market tightens, you see decreased reserve margins, increased capacity pricing, heat rates, and sparks have gone up, ultimate power, just underlying power prices have gone up in the four curves.

Speaker Change: I think that what that will lend itself to is that people have a view that there will be inflationary

Speaker Change: costs, or there will be costs to build out transmission, which is going to increase the cost on the system, and build generation, both of those things. And that's what you're seeing reflected in the market. When the market tightens, you see an increased

Mack McFarland: I guess even if this does go your way, the 480 megawatts, how do you think about the other 480 megawatts that you ultimately have to get approval for? And then also your ability to do any other incremental data center deals in the backdrop of everything going on at FERC right now. Yeah, appreciate the question, Michael. I mean, look, as I mentioned, we think that just to their first part for the first 480, we remain optimistic that once we fully answer first questions or PJM, in this case, with our help with BPL answers, that we're optimistic that they'll approve the ISA as submitted.

And that's what you're seeing reflected in the market. When the market tightens, you see increased decreased reserve margins, increased capacity pricing, heat rates, and sparks have gone up. But ultimately, we'll drive those increases. Now, what I think you'll see in the future is that generation will get built and it'll be built to serve specific loads under PPAs, whether that's front of the meter, but has an energy component that hedges the energy for these loads and allows, you know, new generation to get built with an underlying revenue stream as we just talked about with Craig on sort of having this contracted revenue stream. I think that's highly possible.

Speaker Change: Decrease reserve margins, increase capacity pricing.

Matt McFarland: They've come back down some recently, but ultimately, it will drive those increases now. What I think you'll see in the future is that generation will get built, and it'll be built to serve specific loads under PPAs, whether that's front of the meter, but it has an energy component that hedges the energy for these loads and allows, you know, new generation to get built with an underlying revenue stream, as we just talked about with Craig about sort of having this contracted revenue stream.

Speaker Change: Heat rates and sparks have gone up. Ultimate power, just underlying power prices have gone up in the four curves. They've come back down some recently, but ultimately, it will drive those increases. Now.

Speaker Change: What I think you'll see in the future is that generation will get built and it'll be built to serve specific loads under PPAs, whether that's front of the meter, but has an energy component that hedges the energy for these loads and allows

Mack McFarland: We obviously were disappointed that we received the deficiency letter, but perfectly understand the first need for additional time and clarification and wanting to build a false and record there as they review the ISA. But to your second point, we were encouraged by FERC also bifurcating the larger co-locator and data centers filling the data center AI economy as I call it with power into a separate technical conference, which we'll participate in. Our view is that we continue to move ahead with AWS at the site under the current ISA of the 300 megawatts that will be approved hopefully to the 480, we're optimistic that we get there.

Speaker Change: You know.

Speaker Change: new generation to get built.

Matt McFarland: I think that's highly possible. I think that the challenge will be being able to get the, you know, the balance sheet and the rest of it right with respect to these entities. A lot of the SPV type, which is the old build of CCGTs, where you have a single asset, you lever that asset, you hedge it with puts, gas puts, typically, or power, just ultimate power purchase agreement sales. These don't lend themselves to having the portfolio effect, the credit support, and the rest of it.

Speaker Change: with an underlying revenue stream, as we just talked about with Craig on sort of having this contracted revenue stream. I think that's highly possible. I think that the challenge will be is being able to get the, you know, the balance sheet and the rest of it, right? With respect to these entities, because a lot of.

I think that the challenge will be is being able to get the, you know, the balance sheet and the rest of it right with respect to these entities because a lot of, you know, SBV type, which is the old build of CCGT's where you have a single asset. That you lever that asset, you hedge it with puts, gas puts typically, or power just ultimate power purchase agreement sales. There's don't lend themselves to having the portfolio effect, the credit support, the rest of it. So we think we're uniquely positioned in that because we have a portfolio, we have a balance sheet, we can participate in that.

Speaker Change: you know, SBV type, which is the old build of CCGTs, where you have a single asset, you lever that asset, you hedge it with puts.

Speaker Change: gas puts, typically, or power, just ultimate power purchase agreement sales.

Matt McFarland: So we think we're uniquely positioned for that because we have a portfolio, we have a balance sheet, and we can participate in that. And it's pretty exciting, but I do think it should be a combination of all of them. I think you're going to see that the capacity prices are going to start to show tightness, which they haven't for a long period of time.

Speaker Change: Those don't lend themselves to having the portfolio effect, the credit support, the rest of it. So we think we're uniquely positioned in that because we have a portfolio, we have a balance sheet, we can participate in that.

Mack McFarland: And then I do think that we need as an industry, as I said in my opening remarks, to come together and define the solution and to find one swiftly so that we can all benefit in the economic development that power and the AI economy will bring. We think our deal does that. We think there's other types of deals that will do that and we look forward to that conversation. As far as what we're doing, we just continue to move forward with the site.

And it's pretty exciting, but I do think it's being a combination of all. I think you're going to see that the capacity prices are going to start to show tightness. They haven't for a long period of time. Energy markets have been in the dull terms as well, with the exception of a few weather-driven events. So very temporal pricing, but you're seeing the overall sort of fundamental pricing go up in the market. So I think you're going to see a combination of a bunch of different ways to solve this going forward.

Speaker Change: It's pretty exciting, but I do think it should be a combination of all. I think you're going to see that the capacity prices are going to start to show tightness. They haven't for a long period of time.

Matt McFarland: Energy markets have been in the doldrums as well, with the exception of a few weather-driven events, so very temporal pricing. But you're seeing the overall sort of fundamental pricing go up in the market. So I think you're going to see a combination of a bunch of different ways to solve this going forward. Thanks, that's it for me. I have no further questions in the queue.

Speaker Change: Energy markets have been in the doldrums as well, with the exception of a few weather-driven events, so very temporal pricing, but you're seeing the overall.

Mack McFarland: I mentioned that, you know, we're confident that we will in the third quarter release the 300 million dollars of escrow as we meet certain project milestones and we continue to pursue the data deal as signed with AWS. Okay, I appreciate all the color there.

Mack McFarland: And then just looking ahead to this next PGM auction, any high level drivers that you all want to highlight. And then also as a release to that is we just look to the analyst day and September, I think you're going to get some commentary on the 26 outlook. I guess, how do you get comfort out there just knowing part of that's going to be this upcoming option where results can be variable and you're still fairly open from from edge.

Speaker Change: Thanks, that's it for me.

Operator: I would now like to turn the call back to Mac McFarland for closing remarks. Well, great. Thanks, Michelle. And thanks everyone for joining us in your questions today. We appreciate your continued support of Talen and as we continue to focus on challenges and opportunities facing the industry. We look forward to seeing you on September 5th. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: I show no further questions in the queue. I would now like to turn the call back to Mac McFarland for closing remarks.

Mack McFarland: Yeah. So we'll, Michael, we'll give you the marks that go into that outlook so that you can do and sensitivities around that. That's our plan for the 26 outlook. And so that will include there is a visible market for 26 that will site at that point in time when we provide that outlook with respect to power prices with respect to capacity. Obviously, that auction is not until December and so we will know the outcome there, but we'll give you an underlying assumption.

Thank you for joining us today. We appreciate your continued support of Talen, and as we continue to focus on challenges and opportunities facing the industry, we look forward to seeing you on September 5th. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect.

Mac McFarland: Well, great. Thanks Michelle. And thanks everyone for joining us in your questions today. We appreciate your continued support of talent. And as we continue to focus.

Speaker Change: on challenges and opportunities facing the industry. We look forward to seeing you on September 5th. Have a great day.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

Mack McFarland: I would not say it's our forecast, but an underlying assumption and sensitivities relative to that, that. What I would, you know, point out, and, and again, we've, and Terry mentioned this in his comment, is that as an IPP that is focused in PJM, primarily in PJM, and is an IPP that does not have retail load, we are highly lever to the outcomes associated with this, which we think is a good spot to be currently.

Christopher Morice: With respect to drivers of 26, 27, Chris, you want to Chris Morice, Chief Commercial Officer, want to say? Yeah, look, coming off the heels of the 25, 26, it's clear, and the compressed timelines for the December auction. Fundamentally, there's not a lot that can change supply and demand-wise prior to getting to December.

Christopher Morice: So again, absolutely putting on a forecast, right? I think the, the pricing backdrop remains constructive, given the tight supply and demand that PJM has. And we'll get the parameters next week. At the end of August, for, for the capacity auction. So, like a more on that to come. I hope that provided some color around it. Very helpful. Thanks.

Christopher Morice: Thanks, Chris.

Agnieszka Storozynski: The next question comes from Angie Storzenski with seaport.

Agnieszka Storozynski: Your line is open. Thank you. So just going back to the the co-ocation question. So there's been a lot of discussion, including with your utility partner, about behind the meter versus in some of the media co-ocations, the sort of planned operating risk that's used. You assume under the current contract, and also seemingly, you know, no pushback, at least separately from hyperscalers towards, you know, bearing the additional charges for transmission under in front of the meter contract.

Agnieszka Storozynski: So my question is, how do you see those two structures going forward as you try to potentially contract the second unit and maybe look at locations of gas plans. And would you be open to potentially, you know, changing the current deal structure to, to in front of the meter again, just to discourage any future pushback at circle, any other levels.

Mack McFarland: Good morning, Angie. How are you? Good question. And a lot, lot to get into there. But I think if we go back to my opening remarks, what I see in front of us as an industry and I can, you know, bring it back down to our deal. So as you requested, but what I see as a challenge, which is an opportunity for the industry is significantly large in terms of the investment that's going to be required in terms of the range of alternatives and solutions that are going to be required.

Mack McFarland: And so when I said balance, I hope you heard, we say, in front of the meter, behind the meter and all sorts of new types of models that will be developed in order to, to serve this growing demand. It is an exciting time. It opposes challenges, but I think that it's also going to be a significant opportunity for generators to invest TND companies to invest. But we've got to all get it right.

Mack McFarland: And hopefully that we can do it in the right way by which it increases reliability and lowers cost to customers, residential customers. And so that and everybody bears their fair cost, which is what I've said, I think with respect to our current deal, my view is that we like our current deal. We think that going forward, will there be front of the meter deals associated with gas units? Yes, possibly. We haven't seen one get done.

Mack McFarland: Will they rely on the grid because that's what we're calling front of the meter of shorthand. Yes, I could see where they will be connected and will maintain backup from there. I think that eventually over the next five years or so, Terry mentioned about supply chain issues and about the growing need to construct gas assets. I think over time that that could be a model by which new gas assets get built, which is that they're built and contracted long term through hyperscalers for capacity and then rely on the grid for backup.

Mack McFarland: That can absolutely be. Beheld Truth. What I find it somewhat interesting is that we've had one, you know, and I mentioned this one capacity clear, right? And then one, one deal. And all of us, all of a sudden, are looking at the opportunity to try to figure out who gets what? I think the opportunity is so big that we just need to all come together and say all solutions are on the table.

Mack McFarland: Okay, and just want to do that topic. So, would you actually expect, you know, like different IE lower economics for power companies under those in front of the meter deals versus behind the meter just because, I mean, there's a higher transmission fee or with the off taker, the hyperscaler, any other company would just absorb this additional cost? Well, and until the first one gets done, who knows what the, what the model is?

Mack McFarland: I mean, there's certain tariffs and things that are structured that you have to comply with to do front of the meter. You know, we did a unique or novel, you know, solution, a creative solution to do behind the meter, front of the meter is going to have to meet the tariffs and it'll be, I think, a negotiated outcome on really an ISU by ISU, right? Like it, you know, each utility will have difference and they all have their ISA.

Mack McFarland: The PPL, who's the party to RSA in this agreement with PJM leading that way has said that they have are behind the meter solution and they have front of the meter solutions. And I think it's going to take a combination of all of those by which to fill the demand. And I think that as an industry being able to support all or a balanced approach with a number of different working models is what's necessary in order to drive what I see a significant economic development opportunity.

Mack McFarland: If you look at the forecast that come out of PPL or where we have a lot of our generation, there's five gigawatts that is being discussed there. That if you use the numbers that I was talking about is 100 to 150 million dollars of economic development for Pennsylvania and for that region. And my view is is that that's plenty of opportunity for everyone to figure out how to solve it. Okay.

Mack McFarland: And then changing topics. So we saw some press reports about your coin business. Just wondering if that you can comment at all about the future of that business. What we've said is we don't believe that it's not a strategic asset for us and we're looking at what are the alternatives with respect to coin. And that's all we have to say at this point in time. Awesome. Thank you.

Ian Zaffino: And our next question comes from Ian Zafino with Oppenheimer. Your line is open. Hi, great. Thank you very much. What were the comments? Thanks for all the guidance for all the color. Appreciate it. Question of the on Brandon shores and Wagner.

Mack McFarland: You know, how are we thinking about the resolution when it comes to that timing, maybe, you know, there's an ask, but how do we think about what maybe the EBITDA impact of the or where that settles and kind of all the steps to kind of get us, to that. Thanks. So, first of all, with respect to Brandon and Wagner, we said we'll participate with all stakeholders to come to, you know, what we think is an equitable solution.

Mack McFarland: We hope to do that by the end of this year. That's our target. We've started the proceeding. There's you know, just as a matter of principle that for us is that we don't talk about matters that are in front of FERP, just like we don't talk about matters that are in front of a judge. We don't tend to try to cognize the, you know, come to conclusion is what's going to happen there.

Mack McFarland: So, we'll let it be. But what we said is we're looking for a solution for all stakeholders by the end of this year. And we think that that's important because these are assets that if they're going to be run for the next three years, there are certain aspects, physical constraints and things of that nature with respect to the operations of the plant, labor, you know, maintenance, things of that nature that need to be decided upon. And so, that's why we're looking to get this resolved before the year end.

Ian Zaffino: Okay, great. Thank you.

Terry Nutt: And then on the guidance, can you maybe just talk about, you know, what I guess your expectations are for PJM forward pricing, you know, Spark spreads, and you know, how they kind of move versus, you know, what you were conducting. Hey, and it's Terry. So, with respect to our guidance, what we're using is the view of forward prices here at the end of July. If I go back to the slide earlier in the deck, you can see that Spark spreads have sort of bumped around since the start of the year.

Terry Nutt: Since we're a 100% hedge for the balance of the year, we really don't have, you know, really too much sensitivity with respect to how 2024 will move. So, really, there's not a massive sort of impact with respect to changes in Spark. Okay, thank you very much.

Craig Shere: And our next question comes from Craig Shear with Twoie Brothers. Your line is open. Good morning. Thanks for taking the questions. Good morning, Craig. And our, our, our question just to dig in a little further.

Mack McFarland: How much could a prospective repowering with the best deployment be on, on those sites? I don't, I don't think we put a number out on what it would take to do that. It's more a matter of time. So, if you look at it back when the, the capacity markets were clearing in that $50 a megawatt day, it was uneconomic to convert to the unit from coal to oil. We can not continue to run the unit without some relief of some permit issues as well as an arrangement with the year above past June of next year. Now, I think both of those can be resolved in order to maintain reliability under the right construct in order to solve the transmission constraints until transmission can be built.

Mack McFarland: What if there's a way by which we could repower the units under a construct that provided an ample return? We would look at repowering that, that unit to oil and could do so over the, the next three years. We also have a couple in the queue, a hundred meg, several hundreds of megawatts of batteries deployed across Wagner and Brandon that could also be put in. And if those are a more economic solution to the customers in the region, we would look at doing that.

Mack McFarland: Thank you. And kind of a bigger picture question. I'm sure you're going to address this in more detail at the analyst day. But one of the ultimate valuation questions is, is this really a volatile commodity sparks spread story, or is this a systemically shifting capacity market PPA RMR agreement? Much more long-term stable recurring pre-cashable story. Could you kind of provide some sense or color on that? Sure, Craig. Let me start and then have Terry jump in.

Mack McFarland: But if you look at where we are, and obviously we've got the production tax credit, let's start there with downside with respect to the megawatts that come off of Susquehanna. That provides us forward. There's, you know, we can get into the debate about the RRA and whether it continues, et cetera, or all portions of the continue. But right now that provides downside protection, and we think that that will continue in the future, no matter what the administration, but in addition to that to your point, we have megawatts that have been contracted off that will eventually reach 960 megawatts through the AWS deal.

Mack McFarland: We've often said that we're looking for creative solutions for adding to that at the Susquehanna site and looking at other sites by which we would then have contracted revenue streams. And so to your point, I think that leads us down the path where a lot of our revenue, okay, and a lot of our margin is going to come through either contracted energy or capacity payments over time to your point. That said, we've also, you know, changed things since we emerged from bankruptcy.

Mack McFarland: Now that we've got to clean up balance sheet and have ample liquidity. Chris and the team have been employing, I'll call it more strategic hedging of looking, how do we capture the extrinsic value associated with the gas assets that sits somewhere in the middle so they get a capacity payment, but they also provide option value that we've been able to capture like we did in the first half of this year. So I think it's a combination of all of those, but when you look at it going forward in the future, one of the things that we like about our portfolio is that we're anchored by Susquehanna with fixed price contracts out there.

Mack McFarland: That over time will reprice, but obviously it's contracted revenues with a double a credit on the other side of it. That provides for, you know, Terry mentioned that we're right now to what two point two point four times net leverage. Think of it in the future that that's just going to create incremental capacity and even more secure revenue. So either we should have a lower cost of capital or we have ample room to be to increase leverage all of which create.

Mack McFarland: I'll call it increased flexibility about how do we see the future. So we like where we are, but I think your general sort of thesis that you had is accurate. We are headed towards where we have more contracted revenues and capacity revenues than energy on the margin.

Terry Nutt: But it'll take time. Craig, maybe just add a couple of things to max comment. Right. When you think about Susquehanna, it makes up half of our generation on an annual basis. So getting, you know, contracted cash flows with the high high grade credit counterparties is obviously, you know, very supportive evaluation, especially for a transaction that we have that spans multiple years. I think the other dynamic that that's really interesting right now is just sort of unfortunately given the scheduling challenges around the capacity auctions and PJM.

Terry Nutt: We're now in a spot by, we're by the same, this same time next year, we're going to have capacity auction clears for 26 and 27 and for 27 and 28. And so you're going to have more clarity on the capacity revenue stream across the entire fleet through, through part of 2028, which should also solidify value and, you know, give more certainty on around how you think about, you know, the equity at the end of the day. So good question and good point on sort of where the contracted cash flows to the business look going forward and we'll continue to sort of build off of that.

Craig Shere: Thank you.

Thomas Merrick: And our next question comes from Thomas Merrick with Janie Montgomery. Your line is now open. Good morning team. Thanks for taking the time and for the questions and appreciate the opportunity for the investor day in a couple of weeks in New York. Curious on co-location deals for new build assets and just how the PJM auction potentially changed the price outlook, hyper scalers are looking at for co-location deals, whether they're existing or potentially new build into the future.

Thomas Merrick: Well, I think good morning, Thomas. I think Terry mentioned it during his remarks that it's one data point. That said, you know, one of the things that this demand will drive over time is the need for increased supply. But that need for increased supply needs to be balanced with making sure that the appropriate cost sharing is done and that residential rates are protected from that. If you know the build out is necessary for what I would consider industrial load, I consider data centers to look like industrial load because it's 24-7.

Thomas Merrick: It looks a lot more like a manufacturing process than it does a commercial building. And so I think that what that will lend itself to is that people have a view that there will be inflationary costs or there will be costs to build out transmission, which is going to increase the cost on a system and build generation both of those things. And that's what you're seeing reflected in the market when the market tightens, you see increased decreased reserve margins, increased capacity pricing, heat rates and sparks have gone up.

Thomas Merrick: But ultimately, we'll drive those increases. Now, what I think you'll see in the future is is that generation will get built and it'll be built to serve specific loads under PPAs, whether that's front of the meter, but has an energy component that hedges the energy for these loads and allows you know, new generation to get built with an underlying revenue stream as we just talked about with Craig on sort of having this contracted revenue stream, I think that's highly possible.

Thomas Merrick: I think that the challenge will be is being able to get the, you know, the balance sheet and the rest of it right with respect to these entities because a lot of, you know, SBV type, which is the old build of CCGT's where you have a single asset. That you lever that asset, you hedge it with with puts gas puts typically or power just ultimate power purchase agreement sales. There's don't lend themselves to having the portfolio effect, the credit support, the rest of it.

Thomas Merrick: So we think we're uniquely positioned in that because we have a portfolio, we have a balance sheet, we can participate in that. And it's pretty exciting, but I do think it's being a combination of all I think you're going to see that the capacity prices are going to start to show tightness. They haven't for a long period of time. Energy markets have been in the dull terms as well with the exception of a few weather driven events.

Thomas Merrick: So very temporal pricing, but you're seeing the overall sort of fundamental pricing go up in the market. So I think you're going to see a combination of a bunch of different ways to solve this going forward.

Mack McFarland: Thank you for joining us today. We appreciate your continued support of Talen and as we continue to focus on challenges and opportunities facing the industry, we look forward to seeing you on September 5th. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect.