Q2 2024 Talen Energy Corp Earnings Call

August 13, 2024

Operator: by Welcome to Talen Energy Corporation's second quarter 2024 earnings. At this time, all are in the list and only. 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. You will then hear an automated message advising your hand is. To withdraw your question, please press star 11 again.

Unknown Executive: by Welcome to Talen Energy Corporation, 2nd Quarter, 2024, earnings call. At this time, all participants are in the list and 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 1-1 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

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 the listen-only mode. After the speaker's presentation, there will be a question and answer session.

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.

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

Operator: 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: I would like now to turn the conference over to Ellen Liu, Senior Director and 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.

Unknown Executive: 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 Mark 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.

Mark McFarland: Welcome to Talen Energy's 2nd quarter, 2024, conference call. Participating on today's call are Chief Executive Officer, Mark McFarland, and Chief Financial Officer, Terry 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.

Speaker Change: Participating on today's call are Chief Executive Officer Mac McFarland and Chief Financial Officer Terry Nutt. They are joined by other talent senior executives to address questions during the second part of today's call as necessary.

Unknown Executive: 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-GAAP financial measures.

Speaker Change: 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.

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.

Unknown Executive: 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.

Ellen Liu: 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-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. Great. Thank you, Ellen. Good morning, everyone, and thank you for joining us.

Mark 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.

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

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

Mark McFarland: Before we get into our earnings results and presentation, I would 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 assess 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 Birch'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.

Mark 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 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.

Mark 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.

Mark 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.

Mark 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.

Mark 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 in 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, 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.

Mark 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.

Mark 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.

Mark 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 cost, and much needed economic development.

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

Mark McFarland: 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 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. 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 $1 trillion by 2028.

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.

Mark McFarland: While these estimates seem large, the customer need is really large and 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; 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.

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

Unknown Executive: by Welcome to Talen Energy Corporation, 2nd quarter 2024 earnings call. At this time, all participants are in the list and 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 1-1 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.

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.

Mark McFarland: And you can reach a similar conclusion if you look at chip 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. The generators cannot do it alone, and the T&Ds 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.

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.

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

Mark 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.

Ellen Liu: Welcome to Talen Energy's 2nd quarter 2024 conference call. Participating on today's call are Chief Executive Officer Mark McFarland and Chief Financial Officer Terry Nutt. They are 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.

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

Mark McFarland: 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 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 ancillary jobs and investment creating. So we really should think about this as a $20 to $30 billion of economic development for every gigawatt of data center investment.

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.

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-gap financial measures. We have provided information reconciling our non-gap measures to the most directly comparable gap measures in our earnings release and the appendix of our presentation.

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.

Mark 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: 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. 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.

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.

Mark McFarland: 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.

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

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.

Mark 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-giggle watt 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.

Mark 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 recognized 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.

Mark McFarland: 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 just one gigawatt of the challenge. Many others will have to follow, and the next evolution will need to be balanced.

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. But we also recognized 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.

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

Mark McFarland: And the issue now sits at Birch 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.

Mark 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: 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.

Mark 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 deferral approve the file amendments once PGM responds to first 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.

Mark 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.

Mark McFarland: This rhetoric creates uncertainty which, if allowed to persist, chills investment in 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, 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.

Mark 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.

Mark 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.

Speaker Change: 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.

Mark McFarland: I would like to quickly mention our RMR proceeding to Brandon Wagner. After the recent PGM capacity auction results, people asked us if we are going to change course from the RMR process, said simply no; that is not how it works, and it is more complicated than that. 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 fur to try to reach and agree upon a 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.

Mark 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

Speaker Change: After the recent PJM capacity auction results, people...

Speaker Change: asked us if we're going to change course from the RMR process.

Speaker Change: 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.

Mark McFarland: 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.

Mark 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.

Mark 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. Starting with slide three, Talen had an active second quarter.

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

Mark 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 would 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. Thank you. Thank you.

Mark 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.

Mark 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 $1 trillion by 2028. And you can reach a similar conclusion if you look at chip 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: 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.

Mark 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 25-26 auction compared to $50 per megawatt day in the prior planning year. This equals $600 million in capacity revenues for the 25-26 planning year. AWS continues to make progress on its data center campus near SESQA Hannah. The local township recently granted AWS's zoning amendment that will allow the construction and operation of 960 megawatts of data centers.

Mark 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 auction, our fleet cleared 6.8 gigawatts of capacity at roughly $270 per megawatt day in the 2025-2026 auction 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 midpoint.

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 25-26 auction, compared to $50 per megawatt day in the prior planning year.

Mark 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-based growth for TND companies alike.

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

Speaker Change: Hello.

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 $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.

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.

Mark 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 ancillary 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.

Mark McFarland: And in Q3, we expect to receive the $300 million of sale proceeds currently in SESQA. General.

Mark McFarland: Additionally, we reached another strategic milestone by listing on the NASDAQ exchange on July 10, 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.

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.

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

Terry Nutt: I'll now turn the call over to Terry for further details. Thank you, Matt. 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 kilowatt hours of power, with an equivalent four-stattage factor of only two percent. 53 percent of that generation came from our carbon-free Susquehanna and the nuclear facility, with a successfully completed spring refueling outage in April. Importantly, our whole team worked 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.

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

Terry Nutt: Moving to slide four, let's take a look at our year-to-date operational and financial performance. Our fleet ran well during the period, generating over 16 terawatt hours of power with an equivalent force outage factor of only 2%. 53% of that generation came from our carbon-free Susquehanna nuclear facility, 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.

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

Mark 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 recognized 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.

Terry Nutt: Thank you, Matt, and good morning, everyone.

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

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

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

Terry Nutt: with successfully completed spring refueling outage in April.

Mark 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 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 first question and the commission has had time to fully review.

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

Terry Nutt: This is in line with or better than our peers, and we continue to emphasize safety as our first priority across. 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. We continue to prioritize capital returns and balance sheet decisions. Our net leverage is only 2.4 times, far below our 3.5 times target.

Terry Nutt: 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: 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. 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.

Terry Nutt: 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 discipline.

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

Mark 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: 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.

Terry Nutt: 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.

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.

Mark McFarland: I'd like to quickly mention our RMR proceeding to 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.

Terry Nutt: Without their hard-working commitment to excellence, none of this would be possible.

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

Terry Nutt: Turning now to the PJM capacity auction result on slide 5. 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 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 lever to PJM's capacity auction outcomes. 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 for reliable, despatchable, 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 the prior year, with PJM's reserve margin declining from 20% to 18.5%, focusing on calendar year impact. Talen will earn roughly $285 million more in capacity revenues in 2025 when compared to 2020. These results illustrate how Talen is the IPP most levered to PJM's capacity option output. These auction results are a strong indication of a tightening market.

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

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

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

Mark 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.

Mac McFarland: 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 option outcomes.

Mark 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.

Terry Nutt: But I will caution that that is currently just one data set. The results also demonstrate the value proposition for reliable, dispatchable generation. 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 a challenge, meaning that building and bringing a new gas-fired plant online could take five years or longer. PJM's parameters for the 2026-2027 capacity auction will be available in late August, and the auction will be held in December.

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.

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

Terry Nutt: Reaction. Looking ahead to the next auction, we expect supply-sightness 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: 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.

Mark 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 midpoint. With respect to the recent PGM option, our fleet cleared 6.8 gigawatts of capacity at roughly $270 per megawatt day in the 2526 auction compared to $50 per megawatt day in the prior planning year.

Speaker Change: investment signals need to be persistent to spur long-term investments in 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 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.

Terry Nutt: While the following planning year auction will be in June of 2025. 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. Building on our solid financial performance in the first quarter, we achieved $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.

Terry Nutt: Now turning to financial results. For the second quarter of 2024, talent reported a justity 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 adjusted free cash flow year-to-date.

Terry Nutt: 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.

Mark McFarland: This equals $600 million in capacity revenues for the 2526 planning year. AWS continues to make progress on its data center campus near SESQA HANA. 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. General. 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: 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.

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.

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 periods of cash payments happen in the second and fourth quarters that further reduce cash flow, such as our semi-annual debt service payments. That said, the second quarter was strong for talent. 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.

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

Mark McFarland: General. 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: The second quarter and fourth quarter are shoulder periods when we typically don't earn as much and often schedule our maintenance averages.

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.

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

Mark McFarland: So please join us at our investor day and Newark on September 5th.

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

Terry Nutt: 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 four-stattage factor of only two percent. 53 percent of that generation came from our carbon-free Susquehanna nuclear facility, which successfully completed spring refueling outage in April.

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

Terry Nutt: 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: 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 of 2023.

Terry Nutt: 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 ranges. Our new Adjustity Beda range is 720 million to 780 million, with a midpoint that is 7% higher than prior guidance. And our new Adjusted Free Cash Flow ranges is 245 million to 285 million, with a midpoint 13% higher than before.

Speaker Change: Turning now to guidance on slide seven.

Terry Nutt: Importantly, our whole team works safely. With a year-to-date, total recordable 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 low year-to-date. We continue to prioritize capital returns and balance sheet discipline.

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 EVADAR range is 720 million to 780 million 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.

Terry Nutt: I'd also like to take a moment to highlight our hedging activity from this past quarter. On slide eight, there's a graph of average calendar year 2025 and 2026 sparks breads. Sparks breads 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 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 eight, there is a graph of average calendar year 2025 and 2026 SPARC. 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.

Terry Nutt: 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 results. The past couple of months were the busiest time of year for many of our operation team members.

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.

Terry Nutt: Turning the slide nine. 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 divided our 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 MOON. 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.

Terry Nutt: 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 to excellence, none of this would be possible.

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.

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

Terry Nutt: 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 PJM's capacity auction outcomes. These auction results are a strong indication of a tightening market. I will caution that it's currently just one data point. The results also demonstrate the value proposition for reliable Action. Looking ahead to the next auction, we expect supply-sightness 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: We also terminated over 90 million of other LCs, opening up even more capacity under our credit facilities.

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 by-backs through two large transactions. 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 at the highest and best use of our capital. We have over 100 million dollars 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: 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 through two large transactions.

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.

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

Terry Nutt: We will provide 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 for 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 have 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 the 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 Talen rang the opening bell and began trading on the NASDAQ.

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 plan online could take five years or longer.

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.

Terry Nutt: 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. 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. 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.

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.

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

Terry Nutt: Now turning to financial results. For the second quarter of 2024, Talen reported a justity bidah 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 bidah and $165 million of adjusted free cash flow year-to-date.

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.

Mark McFarland: With that, I'll hand the discussion back to Matt.

Mark McFarland: Great. Thanks, Terry.

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

Mark McFarland: I'd like to reiterate how proud we are of what we've been able to accomplish in 14, 15 months since we executed restructuring. But we're not done, and we hope to see you in 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, and update, as Terry mentioned, 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.

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 are shoulder periods when we typically don't earn as much and often schedule our maintenance options. 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. That said, the second quarter was strong for Talen.

Mark McFarland: 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 5. Importantly, 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. Following the investor day, we will be on the road in Boston, Los Angeles, Philadelphia, and New York, and we hope to see you there.

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.

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.

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.

Mark McFarland: 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. The first question will come from Michael Sullivan with Wolf Research. Your line is now open. Hey, good morning. Morning, Michael, how are you?

Unknown Executive: 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 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Michelle: 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 Research. Your line is now open.

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

Mark McFarland: Hey, good morning. Morning, Michael, how are you? Hey, Mac, do well, thanks.

Operator: Hey, Matt, doing well, thanks. Wanted to 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.

Terry Nutt: Turning now to guidance on slide 7. Based on our solid first half performance, we are raising our 2024 Adjusted EVIDA and adjusted free cash flow ranges. Our new Adjusted EVIDA 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.

Mark McFarland: Want to 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 work 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, Matt. 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?

Mark 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.

Terry Nutt: I'd also like to take a moment to highlight our hedging activity from this past quarter. On slide 8, there's a graph of average calendar year of 2025 and 2026 sparks breads. Sparks breads 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 sparks breads were higher, as detailed on the right-hand side of the slide.

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

Speaker Change: that we're optimistic that they'll approve the ISA as submitted.

Mark 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 on record there as they review the ISA. But to your second point, we were encouraged by for 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 will 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.

Speaker Change: 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.

Terry Nutt: Turning to slide 9. 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 devada ratio was only 2.4 times, well below our target.

Mark 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.

Speaker Change: But to your second point, we were encouraged by, for also bifurcating the larger, you know, co-locator.

Speaker Change: and filling the data center AI economy, as I call it, with power into a separate technical conference which we'll participate in.

Terry Nutt: We continue to actively engage with the rating agencies and currently maintain positive outlooks with both S&P and Moodies. 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: Our view is that we continue to move ahead with AWS.

Speaker Change: 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.

Mark McFarland: Hopefully, to the 480, we're optimistic that we get there.

Mark 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 powering the AI 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.

Mark 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 in 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 for that conversation. 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 consider continue to pursue the data deal as signed with AWS.

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

Speaker Change: 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.

Mark 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.

Terry Nutt: 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. 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. In July, we bought back roughly 2.4 million shares from our largest shareholder for 280 million.

Speaker Change: 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 as signed with AWS.

Michael Sullivan: Okay, appreciate all the color there.

Mark McFarland: 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 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 that part of that's 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 do, and sensitivities around that.

Michael Sullivan: 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, we just look to the analyst day in September. I think you're going to give 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. That's our plan for the for the 26 outlook.

Speaker Change: Okay, I appreciate all the color there and then just, you know, looking ahead to.

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

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.

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

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

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

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 enabled the 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.

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.

Mark McFarland: That's our plan for the twenty-six outlook. And so that will include, there is a visible market for twenty-six that we'll cite 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 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.

Mark McFarland: And so that will include there is a visible market for 26 that will fight 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.

Speaker Change: 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.

Speaker Change: 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.

Mark McFarland: What I would point out, and again, we, and Terry mentioned this in his comment, is that as an IPP that is focused in PGM, primarily in PGM, 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.

Mark McFarland: What I would, you know, point out, and again, we, and Terry mentioned this in his comment, 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, want to say anything?

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

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

Mark McFarland: I'd like to reiterate how proud we are of what we've been able to accomplish in 14, 15 months since we existed 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 and update as Terry mentioned 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.

Speaker Change: 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 criticize Chief Commercial Officer once again?

Speaker Change: With respect to drivers of 26, 27, Chris, you want to Chris Maurice

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 out a forecast, 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, Michael, more on that to come. I hope that I provided some color around.

Christopher Morice: 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, absolutely putting on a forecast, right?

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: 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 that has.

Christopher Morice: I think the pricing graph drop remains constructive, given the tight supply and demand that the PGM 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, I hope that provided some color around it.

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.

Unknown Executive: 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.

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: Very helpful. Thanks. Thanks, Max.

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

Christopher Morice: Thanks, Chris.

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

Agnieszka Storozynski: The next question comes from Angie Storzenski with Seaport. Your line is open.

Speaker Change: Bye. Bye.

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

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

Agnieszka Storozynski: Thank you. So just going back to the co-ocation question. So there's been a lot of discussion, including with your utility partner about behind the meter versus in front of the meter co-locations. The sort of a planned operating risk that you assume under the current contract. And also seemingly, you know, no pushback every set there from hyposcalers towards, you know, bearing the traditional charges for transmission under in front of the meter contract.

Agnieszka Storozynski: 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 collocation, the sort of planned operating risk that you assume under the current contract and also, seemingly, no pushback from hyperscalers towards bearing those additional charges for transmission under the front of the meter contract. 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 co-locations of gas plants?

Angie Storazinski: 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 collocations.

Mark 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 work 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.

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.

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

Speaker Change: 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 co-locations of gas plants?

Agnieszka Storozynski: 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 CERC or any other level? Morning, Angie. How are you?

Speaker Change: 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 levels?

Mark McFarland: Morning, Angie.

Mark McFarland: How are you? Good question. And a lot, a lot to get into there, but I think if you 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.

Mark 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 on record there as they review the ISA. But to your second point, we were encouraged by for 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 will 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.

Mark McFarland: Good question, and there is a 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 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 in terms of 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,

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

Mark McFarland: 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 that 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. And it is an exciting time and opposed to challenges, but I think that it's also going to be a significant opportunity for generators to invest, TND companies to invest.

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 going to be required.

Mark McFarland: And so when I said balanced, I hope you heard we said 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. 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. But we've got to all get it right, and hopefully, we can do it in the right way, by which it increases reliability and lowers costs to customers, especially residential customers.

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

Mark McFarland: We've approved 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 so that we can all benefit in the economic development that power in 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 for that conversation 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 will in the third quarter release the 300 million dollars of escrow as we meet certain project milestones and we consider continue to pursue the data deal as signed with AWS.

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.

Mark McFarland: 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.

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.

Mark McFarland: And so that 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 yet.

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

Mark McFarland: 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. Well, 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.

Mark McFarland: Okay, appreciate all the color there and then just you know looking ahead to this next pjam auction any you know high level drivers that you all want to highlight and then also as it relates to that is we just look to the analyst day and September and I think you're going to get some 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.

Angie Storazinski: 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.

Mark McFarland: Will they rely on the grid? Because that's what we call front of the meter in shorthand? Yes, I can see where they will be connected and will maintain backup from there.

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.

Mark McFarland: I think that eventually, over the next five years or so, Terry mentioned supply chain issues and about the growing need to construct gas assets. I think, over time, 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. That can absolutely be held true. What I find 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 a sudden, they're looking at the opportunity, trying to figure out who gets what.

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.

Mark McFarland: 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. That can absolutely be.

Mark McFarland: So we'll like 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 fight. At that point in time when we provide that outlook with respect to power prices with respect the 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.

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

Mark McFarland: 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?

Mark 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 one follow-up to that topic. So... Would you actually expect, you know, different, i.e., 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 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

Mark McFarland: I think the opportunity is so big that we just need to all come together and say all solutions are on the table.

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.

Agnieszka Storozynski: Okay, and just want to do that topic. So, would you have to expect, you know, like different 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 would the off taker of the hyperscaler or any other company would just absorb this additional cost?

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

Mark McFarland: What I would, you know, point out, and, and again, we, and Terry mentioned this in his comment, 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 lever to the outcomes associated with this, which we think is a good spot to be currently with respect to drivers of 26, 27, Chris, you want to crit or freeze? Chief commercial officer wants to.

Speaker Change: Would you actually expect, you know, like different, i.e. lower economics for power companies under those in front of the meter deals versus behind the meter just because

Speaker Change: I mean, there's a higher transmission fee or would the offtake or the hyperscaler or any other tech company would just absorb this additional cost?

Mark McFarland: Well, and until the first one gets done, who knows 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.

Mark 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. 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.

Speaker Change: Well, until the 1st, 1 gets done, who knows what that what the model is. I mean, there's certain tariffs and and things that are structured that you have to comply with to do front of the meter. You know, we, we did a, a.

Mark McFarland: Yeah, look, coming off the heels of the 25, 26, 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 graph drop 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. Thanks, Chris.

Mark McFarland: 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, you know, each utility will have difference, and they all have their ISA. The PPL, who's the party to RSA and this agreement with PGM leading that way, has said that they have 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.

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.

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.

Mark 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 significant.

Agnieszka Storozynski: The next question comes from Angie Storzenski with seaport. Your line has been. Thank you. So just going back to the the co location question. So there's been a lot of discussion, including with your utility partner about behind the meter versus in front of the meter co locations. The sort of a planned operating risk that you. You assume under the current contract. And also seemingly, you know, no pushback every separate from hyperscalers towards, you know, varying the additional charges for transmission under in front of the meter contract.

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 being able to support all or a balanced approach

Mark McFarland: 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 is significant 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 Pennsylvania and for that region. And my view is that that's plenty of opportunity for everyone to figure out how to solve it.

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

Mark McFarland: Economic Development Opportunity. If you look at the forecast that came 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 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. Okay, and then changing topics. So we saw some press reports about your coin business.

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

Agnieszka Storozynski: So my question is, how do you see those 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: 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.

Mark McFarland: Okay.

Mark McFarland: Just wondering if you can comment at all about the future of that business. What we've said is that we don't believe that it's 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.

Mark 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.

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

Mark McFarland: Good morning, Angie. How are you? Good question. And 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.

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.

Unknown Executive: Awesome.

Ian Zaffino: Thank you. And our next question comes from Ian Zafino with Oppenheimer. Your line is open.

Speaker Change: Awesome. Thank you.

Operator: Thank you. And our next question comes from Ian Zaffino with Oppenheimer. Your line is, I agree. Thank you very much. Good quarter.

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

Ian Zaffino: Hi, great. Thank you very much. What was it kind of. The poster. Thanks for all the guidance for all the color. Appreciate it.

Ian Zaffino: I agree. Thank you very much.

Mark McFarland: And so when I said balance that 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. I suppose this 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.

Ian Zaffino: Thanks for all the guidance and all the call. I appreciate it. 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 will be or where that settles and kind of all the steps to kind of get us to, Um, Yeah, 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.

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

Mark McFarland: Question of the on Brandon Shores and Wagner. You know, how are we thinking about the resolution that comes to that timing? Maybe, you know, there's an ask, but how do we think about what maybe the 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 what we think is an equitable solution. We hope to do that by the end of this year. That's our target. We've started the proceeding.

Ian Zaffino: The question will be on Brandon Shores and Wagner, you know, how are we thinking about

Speaker Change: 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 to that. Thanks.

Mark 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.

Speaker Change: 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

Ian Zaffino: 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. We don't tend to try to, ProgNASP, you know.

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 L. J. judge assigned and schedules are being worked through. 1 of the things in that, you know, just as a matter of principle, but.

Mark McFarland: There's been an ALJ judge assigned and schedules are being worked through.

Mark McFarland: One of the things, Ian, that, 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 prognostic, 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's 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.

Mark 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 that can absolutely be.

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.

Mark McFarland: Come to a conclusion as to what's going to happen there. So we'll let it be. But what we 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 end. 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

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.

Mark McFarland: 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.

Mark McFarland: And so, that's why we're looking to get this resolved before the year end.

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.

Ian Zaffino: Okay. Great. Thank you.

Ian Zaffino: 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 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 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 SPARC spreads have sort of bumped around since the start of the year.

Ian Zaffino: 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, spark spreads and, you know, how they kind of move versus, you know, what you were expecting.

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 PGM forward pricing, you know, spark spreads, and, you know, how they kind of move versus, you know, what you were expecting?

Mark 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 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.

Terry Nutt: Hey, Ian, 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.

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

Ian Zaffino: 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.

Speaker Change: 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 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.

Terry Nutt: Since we're a hundred percent 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 sparks. Okay.

Mark McFarland: You know, we, 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, you know, each utility will have difference and they all have their ISA. Okay, the PPL, who's the party to RSA and 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.

Speaker Change: So, really, there's not a massive sort of impact with respect to changes in sparks.

Craig Shear: Thank you very much. And our next question comes from Craig Shear with Twoie Brothers. Your line is open.

Speaker Change: Okay, thank you very much.

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

Craig Shear: Good morning. Thanks for taking the questions. Morning, Craig.

Craig Shear: 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 should 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 $50 a megawatt day, it was uneconomic to convert the unit from coal to oil.

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

Mark McFarland: And our question just to dig in a little further, how much could a perspective repowering with the best deployment be on those sites? 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 cannot 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.

Speaker Change: 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?

Mark McFarland: 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 for a balanced approach with a number of different working models is what's necessary. And in order to drive what I see a significant 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.

Speaker Change: no

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, uh,

Mark McFarland: 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.

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

Mark McFarland: We cannot continue to run the unit without some relief from 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 provided an ample return, we would look at repowering that unit to oil and could do so over the next three years.

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

Mark McFarland: Now, I think both of those can be resolved in order to maintain reliability under the right construct and in order to solve the transmission constraints until transmission can be built.

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

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.

Mark McFarland: 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 unit to oil and could do so over the next three years.

Mark McFarland: Okay, 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.

Mark 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, and kind of a bigger picture question, and I'm sure you're gonna 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.

Mark McFarland: We also have a couple in the queue, hundreds, 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: 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.

Mark McFarland: 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 with respect to coin. And that's all we have to say at this point in time. Awesome. Thank you.

Craig Shear: Thank you.

Craig Shear: 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? And much more long term stable recurring free cash flow story. Can you kind of provide some sense or color on that?

Ian Zaffino: And our next question comes from Ian Zafino with Oppenheimer. Your line is open. Hi, great. Thank you very much. What was it coming from? [inaudible] Thank you very much, to that. Thanks.

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.

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 pre-cash flow story?

Mark McFarland: Sure, Craig, let me, 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 mega lots that come off of Susquehanna. That provides us for, there's, you know, we can get into the debate about the RRA 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. But in addition to that, to your point, we have mega lots that have been contracted off that will eventually reach 960 mega lots through the AWS deal.

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

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.

Mark McFarland: Yeah, 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. That's our target. 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 that for us is that we don't talk about matters that are in front of her, just like we don't talk about matters that are in front of a judge.

Terry Nutt: Um, that that provides us for, uh, there's, you know, we can get into the debate about the, and whether continues, et cetera, 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, the administration, but.

Mark 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

Mark 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 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 or capacity payments over time. To your point, that said, we've also, you know, changed things since we emerged from bankruptcy. Now that we've got to clean up balance sheet and and have ample liquidity.

Mark McFarland: We don't tend to try to prognostic, you know, come to conclusion is 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 but in 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's 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.

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

Mark McFarland: And so that's why we're looking to get this resolved before the year end.

Speaker Change: Bye.

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

Mark McFarland: Okay, great, thank you.

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 sits somewhere in the middle? So they get a capacity payment, but they also provide option value.

Mark 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?

Mark McFarland: We've, 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.

Mark 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 will, over time, reprice. But obviously, it's contracted revenues with a double A credit on the other side of it.

Terry Nutt: 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, spark spreads and you know, how they kind of move versus, you know, what you were expecting. Hey, Ian, 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.

Speaker Change: 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.

Mark 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 two point four times net leverage. 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: that over time will reprice, but obviously it's contracted revenues with a AA credit on the other side of it. That provides for, you know, Terry mentioned that we're right now, to what, 2.4 times net leverage.

Mark McFarland: That provides for, you know, Terry mentioned that we're right now at 2.4 times net leverage. 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 creates, 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 Max's comments, right? When you think about Susquehanna, it makes up half of our generation on an annual basis.

Terry Nutt: Since we're a hundred percent 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 and sparks. Okay, thank you very much.

Terry Nutt: 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. So.

Mark McFarland: So 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.

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

Craig Shear: And our next question comes from Craig Shear with Tooe Brothers. Your line is open. Good morning. Thanks for taking the questions. Good morning, Craig.

Speaker Change: 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. Thank you.

Mark McFarland: But it will take time.

Terry Nutt: And 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. I think the other dynamic that that's really interesting right now is, 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.

Mark McFarland: On the end, our, our, our 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 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 megawatt day, it was uneconomic to convert to the unit from coal to oil.

Craig Shear: But it'll take time. Yeah. 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 on on annual basis. And so getting contracted cash flows with the high.

Terry Nutt: And so getting, you know, contracted cash flows with a 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, given the scheduling challenges around the capacity auctions and PJM, we're now in a spot whereby at the same time next year, we're going to have capacity auction clears for 26 and 27 and for 27 and 28.

Speaker Change: 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

Speaker Change: Just sort of unfortunately given the

Mark McFarland: We cannot continue to run the unit without some relief of some permit issues as well as an arrangement with the Eurica past June of next year. Now, I think both of those can be resolved in order to maintain reliability under the right construct and 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 unit to oil and could do so over the next three years.

Speaker Change: scheduling challenges around the capacity auctions and PJM, we're now in a spot whereby 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'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 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: 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, you know, give more certainty around how you think about, you know, the equity at the end of the day. So, a good question and a good point on.

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

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.

Thomas Meric: Thank you.

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

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 to the business look going forward. And we'll continue to sort of build off of that. This comes from Thomas Merrick with Janie Montgomery. 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.

Thomas Meric: 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.

Mark 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 free cash flow story. Could you kind of provide some sense or color on that? Sure, Craig, let me, let me start and then have Terry jump in.

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.

Mark McFarland: Curious on co-location deals for new build assets and just how the PGM 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. 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.

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.

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

Operator: 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. Price Outlook, what hyperscalers are looking at for co-location deals, whether they're existing or potentially new buildings in the future. Well, I think, good morning, Thomas.

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

Thomas Merrick: 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 hours a day, seven days a week. It looks a lot more like a manufacturing process than it does like a commercial building.

Mark 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 mega lots that come off of Susquehanna. That provides us for, 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 mega lots that have been contracted off that will eventually reach 960 mega lots through the AWS deal.

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

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

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.

Mark McFarland: If the buildout is necessary for what I would consider industrial load. I consider data centers to look like industrial load because it's 24/7 and 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 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 increased decreased reserve margins, increased capacity pricing, heat rates, and sparks have gone up.

Speaker Change: 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.

Mark 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 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 or capacity payments over time to your point that said we've also, you know, changed things since we emerged from bankruptcy.

Mark 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 increased, decreased reserve margins, increased capacity pricing, heat rates, and sparks have gone up, ultimate power, just underlying power prices have gone up on the four curves.

Speaker Change: And so...

Speaker Change: 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 an increase.

Mark 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.

Speaker Change: Decreased reserve margins, increased capacity pricing, heat rates and sparks have gone up. Ultimate power, just underlying power prices have gone up in the forward curves. They've come back down some recently, but ultimately it will drive those increases. Now.

Mark McFarland: Ultimate power just underlying power prices have gone up in the four curves. They've come back down some recently, but ultimately you 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 has an energy component that hedges the energy for these loads and allows 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.

Mark McFarland: They've come back down some recently, but ultimately, it will drive those increases. 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: What I think you'll see in the future is that generation will get built and it'll be built to serve.

Speaker Change: 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

Mark 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 because 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.

Mark 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 two point four times net leverage. 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.

Speaker Change: You know.

Speaker Change: new generation to get built with an underlying revenue stream, as we just talked about with Craig on having this contracted revenue stream. I think that's highly possible. I think that.

Mark McFarland: I think that the challenge will be is being able to get 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 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. They just don't lend themselves to having the portfolio effect, the credit support, the rest of it.

Speaker Change: 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.

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

Mark 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. So 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 and 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 on annual basis and 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.

Mark McFarland: So we think we're uniquely positioned to do 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.

Mark McFarland: 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 have it 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: and 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.

Mark 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. I would now like to turn the call back to Mark McFarland for closing remarks.

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 fundamental pricing go up in the market. I think you're going to see a combination of a bunch of different ways to solve this going forward.

Mark McFarland: I think the other dynamic that that's really interesting right now is 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 which should also solidify value and you know give 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 flow to the business look going forward and we'll continue to sort of build off of that.

Thomas Meric: Thanks, that's it for me. I should have no further questions in the queue.

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

Mark McFarland: I would now like to turn the call back to McFarland for closing remarks.

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

Mark McFarland: Thank you.

Mark McFarland: Well, great. Thanks, Michelle, and thanks everyone for joining us in your questions today. We appreciate your continued support of Talen.

Mark McFarland: Well, great. Thanks, Michelle. And thanks, everyone, for joining us with 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.

Mack 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.

Unknown Executive: 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.

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

Unknown Executive: This concludes today's conference call. Thank you for participating.

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

Unknown Executive: You may now disconnect. .

Operator: [music] Thank you for watching! Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, [music] I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry, and Mark McFarland. Thank you. [inaudible] Music Music Music Music Music Music Music Music Music Music

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

Mark McFarland: Thanks for taking the time and for the questions and appreciate the opportunity for the investor day in a couple weeks in New York. I'm curious on 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 build into the future. Good morning, Thomas. I think Terry mentioned it during his remarks that it's one data point.

Mark McFarland: 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 seven.

Speaker Change: ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶

Mark McFarland: 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 where 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 decrease reserve margins, increased capacity pricing, heat rates and sparks have gone up.

Speaker Change: Thank you for watching!

Mark McFarland: Ultimately, just underlying power prices have gone up in the four curves. They've come back down some recently, but ultimately, you will 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 with an underlying revenue stream as we just talked about with Craig on sort of having this contracted revenue stream.

Mark McFarland: 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, 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.

Mark McFarland: That is 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. 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.

Mark McFarland: 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 overall sort of fundamental pricing go up into market. So I think you're going to see a combination of a bunch of different ways to solve this going forward.

Speaker Change: Thanks for watching!

Speaker Change: [inaudible]

Speaker Change: oh

Speaker Change: [music]

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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 miss 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. 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, 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." 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 cost, and much needed economic development.

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 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. 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 $1 trillion by 2028.

Unknown Executive: Thank you for me. I have no further questions in the queue.

And you can reach a similar conclusion if you look at chip maker production forecasts. Electropying 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. The generators cannot do it alone, and the T&Ds 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.

Mark McFarland: 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.

Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect. Michael Sullivan, Ian Zaffino, Agnieszka Storozynski Michael Sullivan, Ian Zaffino, Agnieszka Storozynski, Michael Sullivan, Ian Zaffino, Michael Sullivan, Ian Zaffino, Michael Sullivan, Ian Zaffino, Agnieszka Storozynski, Michael Sullivan, Ian Zaffino, Agnieszka Storozynski, Michael Sullivan, Ian Zaffino, Michael Sullivan, Ian Zaffino, Agnieszka Storozynski, .

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 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 ancillary 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.

Unknown Executive: . Michael Sullivan, Ian Zaffino, Agnieszka Storozynski, Mark McFarland, Ladies and gentlemen, thank you for standing by. Welcome to Talen Energy Corporation's second quarter, 2024 earnings call.

Ellen Liu: 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 1-1 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 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 and investor relations.

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. 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 recognized that it is not the only solution. Our behind the meter direct connect solution is just one innovative way to solve, but one gig go out of the challenge.

Ellen Liu: Please go ahead. Thanks, Michelle. Welcome to Talen Energy's second quarter, 2024 conference call. Participating on today's call are Chief Executive Officer, Mark McFarland and Chief Financial Officer, Terry Nutt. They are 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.calonenergy.com.

Ellen Liu: Today, we are making some forward-looking statements based on current expectations and assumptions. 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.

Mark 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. 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.

Mark McFarland: 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. And I'll admit it is one of the most exciting times I've seen in my power career.

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 create a solution can be developed. 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.

Mark McFarland: 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 miss the point that PGM has been a highly successful competitive market.

While our ISA has been the subject of much debate, we remain optimistic that FERC will approve the file amendments once PGM responds to the first question and the Commission has had time to fully review. 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 US.

Mark 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, T&D companies and generators will all participate in the value creation and in fact are all necessary for the solution.

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 long as we are paid a fair rate, we are committed to the RMR process and are working with stakeholders and settlement discussions before FERC to try to reach and agree upon a 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.

Mark McFarland: I typically agree with the saying, where you stand depends on where you sit. 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 cost, and much needed economic development. This is an opportunity for us as an industry to lead.

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.

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 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.

Mark McFarland: Everyone's 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 when and to some extent where, but not if. How will we as an industry rise for 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.

Mark McFarland: And you can reach a similar conclusion if you look at chip maker production forecasts. Electropying 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. The generators cannot do it alone and the T&Ds cannot do it alone. One forecasted data center growth total 60 gigawatts of capacity by the end of this decade nationally with nearly 15 gigawatts of that being in PGM.

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 25-26 auction compared to $50 per megawatt day in the prior planning year. This equals $600 million in capacity revenues for the 25-26 planning year. AWS continues to make progress on its data center campus near SESQA Hannah. The local township recently granted AWS's zoning amendment that will allow the construction and operation of 960 megawatts of data centers.

Mark McFarland: 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 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-cillary jobs and investment created.

And in Q3, we expect to receive $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 are more opportunities for value creation to come, especially in the current market backdrop.

Mark McFarland: 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. It's no wonder the labor leaders I talk to are highly supportive and I am optimistic we can get it right. Turning to our specific deal with AWS. When we announced our deal, we did not kid ourselves.

So please join us at our Investor Day in Newark on September 5th.

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

Thank you, Matt. 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 carawatt hours of power with an equivalent four-status factor of only 2%. 53% of that generation came from our carbon-free SESQA Hannah nuclear facility, which 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.

Mark McFarland: We knew we had a solution, one that was quick to market, cost effective and reliable. But we also recognized that it is not the only solution. Our behind the meter direct connect solution is just one innovative way to solve but one giga lot 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 create a solution can be developed.

Mark 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.

We leverage our strong operational foundation and commercial strategy to earn $376 million of adjustity with off and $165 million of adjusted free cash low 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.

Mark McFarland: While our ISA has been the subject of much debate, we remain optimistic that FERC will approve the file amendments once PGM responds to first question and the commission has had time to fully review. 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.

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 hardworking commitment to X1, none of this would be possible.

Mark McFarland: I'd like to quickly mention our RMR proceedings of 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 and settlement discussions before FERC to try to reach and agree upon rate that will allow us to stay online.

Turning now to the PJM Capacity Auction result on slide 5. 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 impacts, talent will earn roughly $285 million more in capacity revenues in 2025 when compared to 2020.

IV. These results illustrate how Talen is the IPP most lever to PJM's capacity auction outcomes. 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 for reliable, dispatchable generation. 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. An investment signal needs 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.

Mark 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.

Mark 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 25-26 auction compared to $50 per megawatt day in the prior planning year.

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 your auction will be in June of 2025.

Now turning to financial results. For the second quarter of 2024, talent reported a justity bidat 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 adjusted EBITDA and $165 million of adjusted free cash flow year-to-date.

Mark McFarland: This equals $600 and $1,000,000 in capacity revenues for the 25-26 planning year. AWS continues to make progress on its data center, campus, and your sesquahana. 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 10, 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.

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 schedule our maintenance options. Additionally, certain periodic 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 talent. In PJM, 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.

Terry Nutt: So please join us at our investor day in Newark on September 5. 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 four-status factor of only 2%. 53% of that generation came from our carbon-free Susquehanna nuclear facility, which successfully completed spring refueling outage in April.

In this market backdrop, our PJM 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.

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 ranges. Our new adjustity bidat 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: 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. 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. 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.

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 spark.

Spritz. Spark Spritz 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 Spritz were higher, as detailed on the right-hand side of the slide.

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 ones, none of this would be possible.

Turning the slide 9, 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 of the Dow 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 undersurited 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: Turning now to the PJM capacity auction result upon slide five. As Mack mentioned earlier, the 2025-2026 auction cleared that significantly higher prices than prior years, with PJM's reserve margin declining from 20 percent to 18.5 percent. Focusing on calendar year impacts, talent will earn roughly $285 million more in capacity revenues in 2025 when compared to 2020. IV. These results illustrate how Talen is the IPP most lever to PGM capacity auction outcomes. These auction results are a strong indication of a tightening market, but I will caution that it's currently just one data point.

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

Moving the slides in, 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. 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 dollars of capacity remaining under the current share repurchase program and are working to refresh that capacity.

Terry Nutt: The results also demonstrate the value proposition for reliable dispatchable generation. 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 plan online could take five years or longer. PGM'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.

We will provide a capital allocation update during our Investor Day at the start of September. 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 for our equity and 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: Now, it's turning to financial results. For the second quarter of 2024, Talen reported a justity 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 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.

Terry Nutt: Additionally, certain periodic cash payments happen in the second fourth quarter that further reduce cash flow, such as our semi-annual debt service payments. That said, the second quarter was strong for Talen. In PGM, 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 PGM was the highest second quarter demand seen in the last five years. In this market backdrop, our PGM 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.

With that, I'll hand the discussion back to 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 existed restructuring, but we're not done. And 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, on 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 or the business.

Thomas. Following the investor day, we will be on the road in Boston, Los Angeles, Philadelphia, and New York, and hope to see you there.

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

Hey, good morning. Good morning. Michael, how are you? Hey, Mack, doing well, thanks.

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

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 40, 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.

Terry Nutt: I'd also like to take a moment to highlight our hedging activity from this past quarter. On slide eight, there's a graph of the average calendar year 2025 and 2026 sparks. Sparks Brids 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 Brids were higher as detailed on the right-hand side of the slide.

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.

Terry Nutt: Turning the slide 9, 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-to-evada 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 back-stopping them. We also terminated over 90 million of other LCs, opening up even more capacity under our credit facilities.

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 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. I mentioned that 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.

Terry Nutt: Moving the slides in, 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 largest transactions. In June, we repurchased approximately 5.3 million shares through a $612 million 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 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.

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, as we just look to the Analyst Day in September, and I think you're going to get some commentary on the 26th outlook. I guess, how do you get comfort out there just knowing part of that's going to be this upcoming auction, where results can be variable and we're still fairly open from edge. Yeah, I did. So, we'll, Michael, we'll give you the marks that go into that outlook so that you can do and sensitivities around that.

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 for 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.

That's our plan for the 26 Outlook. And so, that will include; there is a visible market for 26 that we'll cite 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 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, we've, and Terry mentioned this in his comment, is that as an IPP that is focused in PGM, primarily in PGM, and it's 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.

Mark McFarland: With that, I'll hand the discussion back to 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 existed restructuring. But we're not done and 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, on that during during that day, we will discuss our 25 guidance, our 26 outlook.

With respect to drivers of 26, 27, Chris, you want to critical race, chief commercial officer will say? Yeah, look, coming off the heels of the 25, 26, 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 draft remains constructive, given the tight supply and demand that the PGM has.

Mark McFarland: And update, as Terry mentioned, our capital allocation plan as well as discuss long-term growth drivers of the business. Following the investor date, we will be on the road in Boston, Los Angeles, Philadelphia, New York and hope to see you there.

And we'll get the parameters next week at the end of August for the capacity auction.

Unknown Executive: 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.

So, like a more on that to come, I hope that provided some color around it. Very helpful. Thanks. Thanks for that.

Thanks, Chris.

The next question comes from ANG Storzenski with Seaport. Your line has been.

Michael Sullivan: The first question will come from Michael Sullivan with Wolf Research. Your line is now open. Hey, good morning. Morning, Michael. How are you? Hey, Mac, doing well. Thanks. Why don't you just ask, you know, appreciate your comments on depending 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 work right now.

Thank you.

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, the sort of planned operating risk that you assume under the current contract, and also seemingly, you know, no pushback every seaport agree from hyperscalers towards, you know, bearing the additional charges for transmission under in front of the meter contract. 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 collocations of gas plans? 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, circle, any other levels.

Michael Sullivan: Yeah. Appreciate the question, Michael. I mean, look, as I mentioned, we think that just to their first part for the first 40, 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 ISF. [inaudible] So 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.

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 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 as 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, 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 further meter deals associated with gas units? Yes, possibly. We haven't seen one get done. Will they rely on the grid because that's what we're calling for, 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, you know, 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 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.

Michael Sullivan: And so that will include there is a visible market for 26 that we'll cite at that point in time when we provide that outlook with respect to power prices with respect the 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. What I would, you know, point out and, and again, we and Terry mentioned this in his comment is that as an IPP that is focused in PJM primarily in PJM.

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.

Okay, and just once all up to 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 of the hyperscaler and the other company would just absorb this additional cost.

Michael Sullivan: And it's 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 with respect to drivers of 2627. Chris, you want to. Chris Maurice, Chief Commercial Officer, one thing. 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.

Well, and until the first one gets done, who knows what that with 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, like a, you know, each utility will have difference, and they all have their ISA. The PPL, who's the party to ISA and this agreement with PJM leading that way, has said that they have 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.

Michael Sullivan: So again, absolutely putting on a forecast, right? I think the pricing graph drop 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. I hope that provided some color around it. Very helpful. Thanks. Thanks, Chris.

Agnieszka Storozynski: The next question comes from Angie Storzenski with seaport. Your line has been. 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 a planned operating risk that you assume under the current contract. And also seemingly, you know, no pushback every step there. From hyperscalers towards, you know, bearing the additional charges for transmission under in front of the meter contract.

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 a significant economic development opportunity 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.

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 co-ocations 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. Morning, Angie. How are you? Good question. And a lot, lot to get into there.

Okay, and then changing topics, so we saw some press reports about your coin business. Just wondering if 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.

Agnieszka Storozynski: 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 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 are going to be required.

Awesome.

Thank you.

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

Hi, great. Thank you very much.

What was the point? Thanks for all the guidance and all the color. Appreciate it. 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 impact of the or where that settles. And kind of all the steps to kind of get us to that.

Agnieszka Storozynski: And so when I said balance, 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 serve this growing demand. It is an exciting time and opposed to challenges, but I think that it's also going to be a significant opportunity for generators to invest in the companies to invest, but we've got to all get it right.

Thanks. Yeah, 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. That's our target there. We've started the proceeding. There's been an LJ judge assigned, and schedules are being worked through.

Agnieszka Storozynski: 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 further meter deals associated with gas units? Yes, possibly. We haven't seen one get done.

One of the things, Ian, that, you know, just as a matter of principle, that for us is that we don't talk about matters that are in front of work, just like we don't talk about matters that are in front of a judge. We don't tend to try to prognostic, 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's certain aspects, physical constraints, and things of that nature with respect to the operations of the plant labor.

Agnieszka Storozynski: Well, they rely on the grid because that's what we're calling for 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, you know, 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 that can absolutely be held true.

Agnieszka Storozynski: 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. Okay, and just once all up to 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.

Or, 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.

Okay, great. Thank you.

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, sparks reds. 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, since we're 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 sparks.

Agnieszka Storozynski: Well, and until the first one gets done, who knows what that with 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. We did a unique or novel 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 each utility will have difference in they all have their ISA.

Thanks. Okay, thank you very much.

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.

Agnieszka Storozynski: The PPL, who's the party to RSA and 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.

And our, our, our, our question just to dig in a little further.

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 cannot continue to run the unit without some relief of some permit issues, as well as an arrangement with the era of past June of next year. Now I think both of those can be resolved in order to maintain reliability under the right construct.

Agnieszka Storozynski: 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.

And in order to solve the transmission can change 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 unit to oil and could do so over the next three years.

Mark McFarland: Okay, and then changing topics, so we saw some press reports about your coin business. Just wondering if 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.

We also have a couple in the queue, a hundred mega 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.

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-tashable story? Could you kind of provide some sense or color on that?

Ian Zaffino: And our next question comes from Ian Zaffino with Oppenheimer, your line is open. Hi, great. Thank you very much. What was the point of... Good voter. Thanks for all the guidance and all the color. I appreciate it. Question of the... I'm 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 could be or where that settles, and kind of all the steps to kind of get us to that.

Sure. Let me, 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 for, there's, you know, we can get into the debate about the RRA 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. 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.

Ian Zaffino: Thanks. Yeah, so first of all, with respect to Brandon and Wagner, we said we'll participate with all stakeholders to come to what we think is an equitable solution. We hope to do that by the end of this year. That's our target. 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 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'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 then have contracted 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 or capacity payments over time, to your point.

Ian Zaffino: We don't tend to try to prognostic, 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. And so that's why we're looking to get this resolved before the year end. Okay, great, thank you.

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, and, and have ample liquidity. And 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.

Terry Nutt: And then on the guidance, can you maybe just talk about, you know, what I guess your expectations are for PJ and forward pricing, you know, sparks reds. And how they kind of move versus, you know, what you were expecting. Hey, and it's Terry. So with respect to our guidance, what we're using is, 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 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.

That overtime will reprise, 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. 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. So we like where we are, but I think your general sort of thesis that you had is accurate.

Craig Shear: So really, there's not a massive sort of impact with respect to changes in sparks, and our next question comes from Craig Shear with Toei 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. 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, to do that.

We are headed towards where we have more contracted revenues and capacity revenues than energy on the margin.

But it'll take time.

And 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. And so getting, you know, contracted cash flows with a high, high grade credit counterparties is obviously, you know, very supportive evaluation, especially for trans, a transaction that we have that spans multiple years.

Craig Shear: It's more a matter of time. So if you look at it back when the, 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 cannot continue to run the unit without some relief of some permit issues as well as an arrangement with the era of past June of next year. Now I think both of those can be resolved in order to maintain reliability under the right construct.

I think the other dynamic that that's really interesting right now is, 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 part of 2028, which should also solidify value and give more certainty on around how you think about, you know, the equity at the end of the day.

Craig Shear: And in order to solve the transmission can change 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 next three years. We also have a couple in the queue, a hundred mega 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. Thank you and kind of a bigger picture question.

So good question and good point on sort of where the contracted cash flow to the business looks going forward. And we'll continue to sort of build off that.

Right. Thank you.

And our next question comes from Thomas Merrick with Janie Montgomery.

Your line is now open. Good morning, team. Thanks for taking the time into the questions and appreciate the opportunity for the investor day in a couple weeks in New York.

Mark McFarland: 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 cash flow story? Can you kind of provide some sense or color on that? Sure. 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.

I'm curious on 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 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. 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.

Mark McFarland: That provides us for there's, you know, we can get into the debate about the RRA and whether 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, 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.

Protected from that, if the buildout 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 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 increased, 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.

Mark 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 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 or capacity payments over time to your point. That said, we've also, you know, changed things since we emerged from bankruptcy.

Mark McFarland: Now that we've got to clean up balance sheet and have ample liquidity. And 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.

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 will 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 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. 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, you lever that asset, you hedge it with puts, gas puts typically, or power, just ultimate power purchase agreement sales.

Mark McFarland: 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, that overtime 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.

Mark McFarland: 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. We all call it increased flexibility about how do we see the future. So we like where we are, but I think you're general sort of thesis that you had is accurate.

They just 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. And it's pretty exciting, but I do think it's being a combination of all.

Mark McFarland: 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 add a couple of things to max comment. Right. When you think about Susquehanna, it makes up half of our generation on on annual basis. And so getting, you know, contracted cash flows with a high, high grade credit counterparties is obviously, you know, very supportive evaluation, especially for trans a transaction that we have that that spans multiple years.

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 into market. So I think you're going to see a combination of a bunch of different ways to solve this going forward.

Mark McFarland: I think the other dynamic that that's really interesting right now is 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 which should also solidify value and 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 that. Right.

Thanks, that's it for me. I have no further questions in the queue.

I would now like to turn the call back to Mac McFarlane for closing remarks.

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 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.

Mark McFarland: Thank you. And our next question comes from Thomas Merrick with Janie Montgomery. Your line is now open. Good morning, team. Thanks for taking the time into the questions and appreciate the opportunity for the investor day in a couple weeks in New York. I'm curious on 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 build into the future.

Mark McFarland: 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 for protecting from that, if the build out is necessary for what I would consider industrial load.

Mark McFarland: 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 the system and build generation, both of those things.

Mark McFarland: And that's what you're seeing reflected in the market when the market tightens you see increased. Decrease reserve margins, increased capacity pricing, heat rates and sparks have gone up. Ultimate power, just underlying power prices have gone up in the forecast. 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 is that generation will get built and it will 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 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.

Mark McFarland: I think that's highly possible. I think that the challenge will be is being able to get the balance sheet and the rest of it right with respect to these entities because a lot of SBV 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. They just don't lend themselves to having the portfolio effect, the credit support, the rest of it.

Mark McFarland: 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 have it 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.

Mark McFarland: 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.

Unknown Executive: I have no further questions in the queue. I would now like to turn the call back to Mac McFarlane for closing remarks. 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 on challenges and opportunities facing the industry, we look forward to seeing you on September 5th. Have a great day.

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

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