Description

Please see important disclaimers at the end of the writeup.

LONG TALEN EQUITY

On or around May 17, Talen will emerge from bankruptcy and its equity will begin trading OTC. We think it’s a buy.

In this writeup we detail the assets, history, math, catalysts, and risks. Nuance abounds and we attempt to tackle most of it, but first we want to boil this down to a punchline. We like easy stuff and fortunately the math works without resorting to mental gymnastics. Three points:

1. Talen’s nuclear power plant, Susquehanna, provides 25-50% equity upside by itself;
2. Susquehanna is coveted by multiple strategics; and,
3. Nuclear Production Tax Credits (“PTCs”) are a game changer.

On point 1, nuclear power plants are rare because building them is costly, time consuming, complex, and exposed to NIMBY-ism. Moreover, nuclear power is valuable because it is ESG friendly[1], reliable, large-scale, and less exposed to input cost volatility. On the demand side, domestic power needs are up and to the right – you don’t need an AI chatbot to verify – and environmental issues remain front and center. Beyond logic, you can see the value of nukes in the Vistra acquisition of Energy Harbor as well as CEG’s multiple.

Susquehanna isn’t just any nuke. Susquehanna is the 6^th-largest nuke in the US with 2.5 GW capacity and cost $8 BN USD to build between 1973-1983 (recent examples of nuclear projects show higher costs; Google “Vogtle 3 and 4 cost” to see for yourself).  Thanks to scale and improved operations, Susquehanna is a top-quartile asset based on a low-$20’s cost-per-megawatt hour.

Applying ENGH’s 11x (implied nuclear multiple) to Susquehanna, we see $5.5 BN of value in Susquehanna alone. This compares to Plan EV of $4.5 BN ($2.5 BN equity cap) for the entire business.

On point 2, we urge readers to read CEG’s transcripts (no, seriously, anyone looking at TLN needs to do this). CEO Joe Dominguez’s commentary regarding nuclear M&A is jarring in its directness – there is no subtlety. Next, read the disclosures around the VST-ENGH transaction, which provides useful context around the strategic landscape and highlights a vision around creating a scaled-up low-carbon power company – “Vistra Vision”. Lastly, peruse Talen’s cleansing materials, where you will see that multiple bids and IOIs surfaced in the abbreviated bankruptcy go-shop.

We believe there is little doubt that interested parties are circling.

On point 3, Susquehanna has been a scarce and valuable asset for years, but the 10-year Nuclear PTCs that passed in 2022’s Inflation Reduction Act (“IRA”) are a game changer (we can’t emphasize this enough, what was a good pitch pre-PTC became an extraordinary one).

Nuclear PTCs provide an annual pricing floor ($44/MWH “PTC Floor” indexed to inflation), at a profitable level for Susquehanna, while preserving uncapped upside optionality. For a decade starting in 2024, Susquehanna will have input cost stability stapled to an asymmetric pricing skew. If you’re a nerd, you can NPV potential PTC cash flows and augment that with an estimate for the value of the embedded pricing call options, but that’s overkill. Common sense tells you government-insured downside protection – a subsidy – is valuable, especially when the equity has uncapped upside should power prices move above the PTC floor.

In addition to these three points, Talen also owns natural gas and coal power assets, digital infrastructure growth projects, and a litigation claim. All things considered, we get to 88% upside in our base case and believe this goes one of two ways. Either the company is bought in the near term or it up-lists to a major exchange in Q4’23.

Ultimately, keep this simple. How many ways can you play the obvious “nuclear renaissance” theme? Buy Talen equity and get a world-class nuke on the cheap.    

OVERVIEW:  TALEN ENERGY

History

On June 9, 2014, PPL Corp. announced that it planned to spin off its competitive energy business and combine it with PE firm Riverstone’s generation portfolio to create a new public entity called Talen Energy[2]. The company IPO’ed in 2015 and was taken private by Riverstone in late 2016. The take-private implied a $5.2 BN TEV[3] which corresponded to 7.3x forward EV/EBITDA at the time. Earnings remained solid for the first couple years, but then deteriorated due to depressed power prices, excess capacity, and unfavorable hedges. Over the past couple years, Talen struggled to juggle its levered balance sheet with the onerous capital requirements tied to hedging in a pre-PTC world. Ultimately, hedging-related working capital and liquidity issues led to a Chapter 11 filing in May 2022. After a relatively productive time in bankruptcy, Talen is re-emerging as an OTC-traded equity with a slimmed-down balance sheet (fully equitized unsecureds), a refreshed Board, and new executive leadership, and plans to uplist to a major exchange by year-end 2023.  

Assets

Talen owns and operates ~12.4 GW of thermal generation assets including nuclear, gas, and coal primarily across the PJM (84%) and ERCOT (13%) regions. Of total generation, nuclear is fully half (50%) and comes from a dual-unit power plant in Pennsylvania called Susquehanna. 35% is natural gas, 9% is coal (via minority interests), and 6% is planned retirement. Current plans call for Talen to be out of coal by the end of 2025, either through conversions, retirements, or divestitures. For the ESG-minded readers, we would highlight the fact that Talen is already substantively out of wholly-owned coal.

              In addition to the generation portfolio, Talen has invested north of $300 MM into digital infrastructure growth projects via Cumulus Digital Holdings. More specifically, there are currently two efforts, one centered on hyperscale datacenters and the other on crypto mining. We’ll get into details later, but these projects are more than PowerPoint decks. Data has already built its first data hall and the mining business is operational and should be doing well at current BTC prices.

              Finally, it’s worth noting that Talen is involved in a fraudulent conveyance litigation with PPL regarding a distribution taken from the proceeds of Talen Montana’s hydro-electric facilities in November 2014. Talen is seeking $1.2 BN in compensatory and punitive damages as Talen Montana was left unable to service its obligations. We think Talen could end up with north of $100 MM in a settlement.

              Regarding asset retirement obligations, Susquehanna has operating visibility until 2042 and will likely apply for and get an extension to 2062. The decommissioning trust is currently funded to the tune of $1.4 BN. With 20-40 years of compounding, we estimate this trust will be overfunded (depending on the achieved returns, this could become significant). As for other obligations, the main issues will be around the coal minority interests, but to tackle this we assume that all near-term free cash flow is used to satisfy these claims (i.e., we conservatively assume 0 net value for these assets).

Pro Forma Capital Structure

Talen has been in the market recently for bank funding (revolver and term loans) and bonds. On emergence, we see it like this:

Source: offering memorandums, internal estimates

For liquidity flexibility, Talen is emerging with a sizable $700 MM undrawn revolver with no LC sub-facility as well as a zero-net-debt Term Loan C / LC facility ($470 MM TL-C and $75 LCs; the TL-C use of proceeds is to sit in restricted cash and face LC counterparties). $1.78 BN of new debt is spread across a new TL-B ($580 MM) and secured notes ($1.2 BN). Lower Mount Bethel, a natural gas power plant in Pennsylvania, has a term loan against it ($281 MM) and some smaller old bonds complete the picture. $2.2 BN gross debt, $2.0 BN net. Note that it is important nobody excludes Restricted Cash given it is simply the TL-C proceeds sitting in a bank account. There is also $185mm of asset-level debt at Cumulus, which is non-recourse to the parent and therefore fair to exclude in the above capitalization snapshot.

For restricted payments, there is a $160 MM general basket and a $150 MM starter for a builder basket, totaling $310 MM RP capacity that can grow. Given modest capital expenditure needs beyond maintenance, excess free cash flow can be returned to shareholders in short order.

Current State of Play

              As noted, Talen expects to emerge with $2 BN net debt and Plan equity value of $2.5 BN on the back of a $1.4 BN rights offering and the full equitization of unsecured claims.

Large holders include Rubric, Nuveen, Monarch and Citadel[4]. Nuveen’s involvement warrants attention, given they are the largest holder of Vistra Vision (15%) and will want to see Vision separate from Vistra’s other assets (“Tradition”) as soon as possible. To do this, Vision needs additional scale to stand on its own and to help pay down debt at Tradition[5].

Mark (“Mac”) McFarland is the new CEO, having just left his role as CEO of California Resources (“CRC”). Before CRC, Mac held CEO roles for GenOn and Luminant (a subsidiary of Energy Future Holdings – now known as Vistra Energy). Mac is a known and respected commodity in this industry and has strategically vital connectivity into all key players. We spoke with him and found him to be credible and rational. Furthermore, we believe he is incentivized to do what’s best for shareholders (this is our assumption, we lack detail, but can make inferences from his comp structure as the CEO of CRC).

A reconstituted Board has been put together led by Chairman Stephen Schaefer, an industry veteran dating back to 1993 who sits on the Boards of GenOn, Texgen Power, Just Energy, and Alpine Summit Energy Partners. Mr. Schaefer was a partner at Riverstone from 2004-2015 (the same firm that took over Talen) and obviously knows these assets well.

Go-Forward Timeline

              The debt financing kicked off April 20^th with Citi, Goldman Sachs, and RBC acting as lead arrangers. The equity rights offering is happening now (May) and has been reduced to $1.4 BN from its original $1.55 BN. In a matter of days, Talen should begin publicly trading over the counter (“OTC”).

              After this initial flurry of activity, the next steps are path dependent. In our view, M&A activity could happen at any time once this bankruptcy process is officially behind the company. Absent a deal, we believe the company will pursue a CleanCo / LegacyCo separation and look to up-list the CleanCo entity on a major exchange. This effort will require months of legal and financial work, so we figure Q4’23 is a decent guess.

Plan Math

              The Plan TEV is $4.5 BN. This writeup assumes the stock begins trading flat to this Plan value.

              The appropriate reference level of adjusted EBITDA is trickier than usual and requires a bit of explanation. A relatively recent power spike led to an outsized hedging gain that drove Talen’s estimated EBITDA for 2023E to something like $1.1 BN. 2024 is noisy due to a non-recurring loss of $86mm from pre-petition hedging activities – so the Company has appropriately guided EBITDA lower. But based on the forward curve, EBITDA could track toward the mid-$700s in 2026 and beyond. And beyond the model-able financials, the 2023 bump is a feature, not a bug, and could certainly repeat every few years. And with PTCs in Talen’s back pocket, there is no offsetting downside risk – only upside gravy.

              The important numbers appear to be $1.1 BN (a “spike” year) and $750 MM (a normal year consistent with out-year prices). We feel most comfortable using the $750 MM as a normalized level. On this basis, the create is 6.0x EBITDA.

              We also want to flag the tax assets tied to net operating losses of $1.5 BN[6]. The EV/EBITDA valuation doesn’t capture this asset, and in fairness it is unclear how the NOLs would survive a CoC outcome, but you can at least see the value of the tax shield in the lack of cash taxes paid.

If you put it together, “6x EBITDA” doesn’t really do this justice since we get a PTC buffer eliminating downside earnings volatility and a tax asset enhancing FCF conversion. In our approach, we don’t add a line item for this NOL to the SOTP, but it would be stupid to ignore it. We allow it to fall into the general “upside” bucket.

With a somewhat disjointed collection of assets, we find a sum-of-the-parts approach warranted. The bulk of the value is the nuke, but we think it would be a mistake to sleep on the rest. Though you can get more granular, to keep it simple we reduced it to four pieces:

Source: internal estimates and calculations

NUCLEAR ENERGY

US Nuclear Industry

              At the end of 2021, there were 93 reactors at 55 power plants in 28 states combining for generation capacity of 95 GW[7]. This is down from a peak capacity of 102 GW (in 2012) due to 11 few reactors in service. However, annual generation from nuclear power actually increased from 2013-2019 due to plant upgrades and high utilization rates. Overall, nuclear power has maintained a ~20% share of US electricity generation for many years:

Source: https://www.eia.gov/energyexplained/electricity/electricity-in-the-us-generation-capacity-and-sales.php

Nuclear Production Tax Credits (“PTCs”)

              The Inflation Reduction Act was signed into law on August 16^th, 2022 and included 10-year nuclear PTCs. For those of us involved with Talen at the time, this was a home-run outcome; leading up to the IRA, most observers thought the odds of nuclear PTCs being written into law were sub-50%. Not only that, but the details (numbers of years, price levels) were better than we dreamed of.

              The zero-emission nuclear production credit provides up to $15/MWh when gross receipts drop to $25/MWh (calculated on an annual basis), yielding a $40/MWh floor level. In addition, there are built-in inflation escalators and other wrinkles that raise this floor a few dollars higher than that. Importantly, when we look back at decades of data, we see that gross receipts (price + capacity payments) have traded in excess of this $25 lower bound with the exception of 2020 (and even then, it was ~$22-ish, which would almost get us back to $40 with credits; we doubt the circumstances around Covid will repeat).

Susquehanna – Talen’s Crown Jewel

              The recent Term Loan Investor Presentation lays out some of the key facts:

Source: Talen Energy April 2023 Term Loan Investor Presentation

As you can see, Susquehanna is a dual-unit 2.5 GW nuclear plant in Pennsylvania, owned 90% / 10% by Talen and Allegheny Electric. It has two decades of remaining regulator-approved life and will likely apply for another 20-year extension. Due to its scale and a focus on operational excellence, it ranks highly in terms of cost performance. Of note, Constellation (“CEG”) owns a sister plant called Limerick that is located 100 miles away in Pennsylvania. The two plants were built at about the same time, with very similar designs, using General Electric BWR-4s (boiling water reactors). We have heard that management at CEG loves Susquehanna and believes there are substantial cost synergies from consolidation, both at Susquehanna itself and in unpacking the structural cost savings made at Susquehanna since 2016 and rolling that out across all of CEG’s fleet.

This now gets to the crux of our pitch. We believe Susquehanna is worth more than $5 BN alone (call it “something with a 5 in front”). We are cognizant of our not-insignificant bias here, but we think the facts and logic back it up. Consider:

• In a hastily executed 45-day go-shop in the middle of a bankruptcy process, which we believe was designed for requisite legal cover (to make sure there was no superior option to the plan brought by unsecured holders), bids for $4.5 BN and $4.8 BN surfaced along with many other indications of interest (Cleansing Materials, 4/21/23),
• As recent history demonstrates, Talen is positioned to capture significant (e.g., greater than $500mm) excess free cash flow during episodic power spikes,
• PTCs ensure consistent profitability and reduce working capital (hedging) requirements,
• Vistra’s deal for Energy Harbor implied ~11x for ENGH’s (inferior) nuclear assets, and
• Susquehanna produces healthy free cash flow, which on a standalone basis should be discounted at a low cost of capital given the Congress-enacted downside protection mechanism, thereby yielding a robust DCF valuation.

Source: internal estimates

POWER ASSETS

Besides Susquehanna, Talen has a portfolio of generating assets:

Source: internal estimates

              The asset-level transaction comps are noisy, even when you isolate the region. In PJM, transactions have occurred between $100-700/kW – obviously a wide range – and in ERCOT the data is even wider at $350-1250/kW (median ~$500). We consulted with bankers and consultants to derive a scientific approach to portfolio valuation, but the fact is that it’s messy and imprecise. We believe this is all upside to Talen equity, so we have opted to be conservative. We assigned no value to all coal or sub-scale natural gas assets in the portfolio, choosing to wave away free cash flow potential by offsetting that with retirement/environmental liabilities. (Our best guess is that this proves conservative and could be a source of modest upside if Mac executes smart deals). For ERCOT, we used a 50%+ discount to median for the larger assets and for PJM most of the value comes from Lower Mount Bethel. For LMB, it’s worth flagging that it’s a high-quality asset with debt trading near-par and our valuation merely covers the debt (which is included in our cap stack).  Again, nothing heroic.

              Potential regulatory reform could bolster Talen’s non-nuclear asset values. ERCOT is noteworthy given the Texas legislature runs through May 29^th and a topic for consideration is the creation of a Performance Credit Mechanism (“PCM”), which would direct incremental tax dollars toward providers of dispatchable power. The Chairman of the Public Utility Commission, Peter Lake, has championed the idea: “We have to make sure we have adequate power when it’s really hot, when it’s really cold, when the wind’s not blowing and the sun’s not shining.”[8] In a world of extreme weather, there is value to standby power capacity. If this passes, Talen benefits directly. We have assumed nothing in our model and left this as yet another source of upside.

              In sum, we conservatively derive $919 MM in value. We included $281 MM of LMB debt in our TEV math, so this equates to $638 MM of equity value.

OTHER ASSETS

              Other sources of value include Cumulus Data, Cumulus Coin, PPL Litigation, and potential “pink hydrogen” projects.

The first two opportunities, Cumulus Data and Coin (aka Nautilus), stem from growth investments made around digital infrastructure. The original idea was that because cheap, large-scale, reliable power is particularly useful for datacenters and crypto mining, it would be smart to build infrastructure for on-site operations and sign up long-term PPA’s (power purchase agreements). Susquehanna has a 1200-acre land bank, so there is room to co-locate and eliminate transmission and distribution costs. Even if you have to run wire for a stretch, the cost savings from sourcing power at a nuke still create interesting opportunities. In all, more than $300 MM was invested in these initiatives. Digital is 77% owned by Talen (23% Riverstone) and owns all of Data and 75% of Coin/Nautilus Cryptomine:

              On the datacenter side, the first data center (Data Center 1) was completed in December 2022 and the campus is being energized for up to 300 MW now. Data halls 1 and 2 are slated for operational readiness by Q3 2023. On the Coin side, the effort should involve around 60K miners in total and is already actively mining. There is a $175 MM Orion debt facility on Digital (now $185 MM with PIK’ing interest), but refinancing opportunities could present themselves as mining continues and if/when the data business signs a significant PPA with a legitimate customer.

              If you use TeraWulf implied valuation math, you can derive a couple hundred million in equity upside at Coin. And if Data signs a PPA, you can likewise point to value creation. However, we are value investors who simply don’t underwrite to growth or potential (sorry!). We therefore value this entire “part” in our SOTP at cost. We think it is fair to underwrite “they have not lit money on fire” because a) BTC has rallied and Coin is actively mining, and b) on the back of AI/chatGPT and Q1 mega-cap tech earnings, we think a low total-cost-of-ownership hyperscale datacenter opportunity will find a partner for a PPA with an NPV > 0.

              In addition to Digital, Talen is involved in a litigation with PPL seeking $1.2 BN in damages. We won’t go into detail here, but a settlement with the UCC indicated that the lesser of $11 MM or 10% of any settlement would go to the UCC. The logical read is that someone, for some reason, thought there was a rough equivalence between $11 MM and 10% of a settlement, which implies around $110 MM as a baseline (or $99 MM net of the $11 MM that would be paid to the UCC). If it turns out to be higher, the UCC payout remains $11 MM, so equity holders would get the upside.

M&A, M&A, M&A

              The two most logical acquirers are Constellation (“CEG”) and Vistra (“VST”).

Constellation

CEG is a $30 BN TEV carbon-free power generation business focused on nuclear and renewables. It clearly and vocally wants to be a consolidator of nuclear assets, but in recent months struck out on Talen and Energy Harbor. As shown earlier, CEG has a sister plant, Limerick, and knows Susquehanna well. On its Q2’22 earnings call, CEO Joe Dominguez said, “We’re focused on acquiring assets…and if you see a nuclear plant transacting, I think it’s fair to guess that Constellation is going to be involved.” On the Q4’22 call, he said, “Big criteria for us around dual unit sites as opposed to single unit sites.” Hmm.

Vistra

              Vistra created a new entity, Vistra Vision, as a “leading zero-carbon generation and retail platform.”[9] With the acquisition of Energy Harbor, VST became the #2 player in the nuclear generation market in the US:

              Vistra clearly wants to scale up its footprint to compete with CEG and most analysts agree that the job is not nearly done. Nothing would advance the cause faster, in our view, than acquiring Susquehanna. What’s more, because Vistra has a legacy portfolio away from Vistra Vision, and because it operates in Texas (ERCOT), it is well positioned to optimize the non-nuclear assets. And recall that Luminant is a subsidiary of Vistra – the same Luminant that Mac used to lead as CEO.

Vistra – Energy Harbor

              There are two clear points to make when looking at the recent (3/9/23) purchase announcement of Energy Harbor by Vistra.

1. 1. The deal appears to imply 11x for core nuclear assets.
   2. ENGH’s nukes are inferior to Susquehanna.

On the math, shown below, it is worth flagging that the deal is not a simple structure and we had to make some assumptions. We think we are directionally right. On the question of relative asset quality, in all our discussions with industry experts we could not find a single dissenting view.

If you combine 1+2, the conclusion is that 11x is a floor multiple for Susquehanna.

Other Buyers

              Public Service Enterprise Group (“PEG”) is a utility in the Northeast and Mid-Atlantic regions with a decent-sized nuclear fleet. PEG has been reviewing its options with respect to its nuclear assets; the company is keenly aware of the enhanced value of nukes post-PTCs and is sensitive to tax leakage (we have heard a sale is a non-starter for this reason). Given potential nuclear value in the $5 BN range, getting to a 50-50 entity via Reverse Morris Trust with Susquehanna could be in the cards.

Besides PEG, Calpine, LS Power, and other private entities could show up with credible stories around building cleaner and large next-gen power companies. Though these narratives are unlikely to be as obvious as CEG, VST, or even PEG, we believe it is a near-certainty that all these entities have had ample time to contemplate how Talen might fit. We don’t think it’s lost on the market that Talen is emerging and reasonable approaches will not be ignored.

SUM-OF-THE-PARTS

              Putting it together, here are our up/base/down SOTP valuations:

Source: internal estimates

              In the upside case, we apply a 1-turn premium to ENGH for Susquehanna, apply less draconian discounts to the fossil portfolio, value Cumulus with some equity gains, and give a higher settlement from the outstanding PPL litigation. In our base case, we reduce Susquehanna to be in-line with ENGH, revert to our conservative fossil asset assumptions, value Cumulus at cost, and take a lower PPL settlement. In our down case, we reduce everything further, using a 2-turn discount to ENGH, nearly cutting Fossil in half (on top of the base case discounts), marking Cumulus at 30% below cost, and assuming a bagel from the PPL litigation. Even in this scenario, TEV is greater than $5 BN and equity stands to gain 25%.

              Clearly, though, we only sensitized for a movement in the multiple and left EBITDA static. We believe this is fair given PTCs, the historical reliability of Susquehanna, and the multi-year fuel sourcing arrangements. It goes without saying that our math is out the window if a tail event occurs and EBITDA is materially impaired at Susquehanna.  

              A final note: we like SOTP stories as long as there is a path toward simplification. That is absolutely true in the case of Talen. In the coming months or years, we expect the company to either trade in whole or in parts. We don’t think the current mix of assets makes sense in today’s world and if nothing has changed in two years we will have been definitively wrong.

RISKS

              We might be wrong. We make mistakes all the time. Big picture, we could have made math mistakes, made faulty logical inferences, or failed to anticipate risks. Plus, we may have done great work and turn out to be unlucky. So please consider this fair warning.

              More than a CYA catch-all disclaimer, we want to highlight several specific areas of potential concern. We have also given our rebuttal, but it is up to every investor to judge the risk/reward tradeoff:

Risk (1): Don’t nukes and coal plants entail environmental liabilities/risks?

Answer: Talen’s decommissioning trust is likely overfunded and the plan is to be out of coal by year-end 2025.

Risk (2): Wasn’t the process during bankruptcy unsuccessful and doesn’t SOTP realization depend on M&A?

Answer: the 45-day Go Shop was not designed for success (and somehow still produced bids). Talen remains a known and coveted asset for strategics given public peer commentary and broader appreciation for PTC implications. However, it is always possible CEG chokes on the required price and VST needs more time for ENGH integration. That’s a risk.

Risk (3): Won’t earnings be impacted by input inflation and hedging costs?

Answer: Talen benefits from long-term supply contracts with several counterparties, hedging needs are reduced with PTCs eliminating downside variability, and PTCs have inflation escalators.

Risk (4): Can management operate a complex portfolio while running a process?

Answer: New CEO Mac McFarland is an experienced executive, will be properly incentivized, and is supported by a board that is hand-picked by a tight group of blue-chip investors. 

Risk (5): Don’t reorg equities trade poorly due to technicals, illiquidity and investor skepticism?

Answer: Absolutely a possibility. However, the rights offering forced weak hands out before emergence. We think the scarcity of this asset, along with potential catalysts (M&A, separation and up-listing), should play well with value and special sits funds. Painful trading should give way to opportunistic buyers, and a mgmt. team focused on capital allocation is likely to take advantage of the $310mm restricted payments capacity upon emergence.

Risk (6): What about the near-term drop in EBITDA? 

Answer: near-term noise driven by legacy hedging (2023 gain, 2024 loss). These are quintessential “non-recurring items” because the hedging program will be reduced post PTCs.

Current Investment. Our clients currently have a significant long position in the position mentioned in this writeup. Therefore, we and our clients will benefit if Talen’s stock price increases.  We may buy, sell or sell short the securities at any time without notice to anyone. No representation is being made with respect to whether such investment would be profitable.

Not Investment Advice. The information in this presentation is not an offer to sell or the solicitation of any offer to buy any securities. This information is not investment advice, and no one should rely on the information contained in this presentation to make any investment decision.

Statements of Opinion, No Duty to Update. This document expresses our opinions with respect to Talen as of the date specified, which opinions are based upon, without limitation, research and inferences and deductions through our due diligence and analytical processes. To our knowledge, the information contained herein is current as of the date of this document, and has been obtained from sources that we believe to be reliable. However, such information is presented “as is,” without warranty of any kind, whether express or implied. The presentation contains and is based on information (including information from third party sources) that we believe to be correct, but it has not verified that information and does not represent that such information is accurate or complete. We make no representation, express or implied, as to the accuracy, timeliness or completeness of any such information or with regard to the results to be obtained from its use.  The delivery of this document does not imply that the information contained herein is accurate or complete at any time subsequent to the date of this document. We make no continuing obligation to revise or update anything in this document for any reason or to notify you if any information contained herein has changed or is not accurate or complete. We accept no responsibility, and shall not be liable, for any loss arising from or related to anything in this document, any use hereof or any reliance hereon. We prepared this presentation. It was not compiled, reviewed or audited by any independent party.

All statements herein are our opinions and are not statements of fact. Further, all such opinions, estimates and projections are speculative and based on current beliefs and assumptions that are subject to change at any time and for any reason without notice. You should expect that some or all such beliefs and assumptions will not materialize or will differ materially and adversely from any expressed or implied. Use of our research is at your own risk.  We are not responsible for any trading or other losses that you believe may have been caused by your reliance on this document (or any information contained herein).

Forward-looking Statements. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various assumptions, risks and uncertainties, actual events, results or the actual performance of Talen may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained in this document may be relied upon as a guarantee, promise, assurance or a representation as to the future.

Catalyst

Emergence
Potential sale of company or Susquehanna
Potential market reform in ERCOT ("PCM") or PJM
Potential monetization at Cumulus (crypto)
Potential PPA at Cumulus (datacenters)
Uplisting to main exchange (if no M&A)