Talen Energy Corp.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 5 August 2026: press release. Guidance figures: 7 raised, 1 lowered, 2 kept. The quarter’s numbers.

Key takeaways

Adjusted EBITDA rose to $374 million: Adjusted EBITDA was $374 million against $90 million a year earlier, an increase of $284 million, mainly on higher energy and other revenues and capacity revenues net of fuel and energy purchases. Source
GAAP net loss on derivative losses: The company reported a GAAP net loss attributable to stockholders of $92 million, or $2.00 per diluted share, against net income of $72 million a year earlier. Derivative losses and higher interest expense were the main drivers. Source
Adjusted free cash flow $212 million: Adjusted Free Cash Flow was $212 million, against negative $78 million a year earlier. Higher revenues and lower income tax payments were partly offset by higher capital expenditures and cash interest. Source
2026 EBITDA and FCF ranges raised: Management raised 2026 Adjusted EBITDA and Adjusted Free Cash Flow ranges after the Cornerstone closing and year-to-date results. The ranges exclude Keystone from July 1, 2026. Source
Cornerstone adds 2.6 GW: The Cornerstone Acquisition, completed June 15, 2026, adds about 2.6 GW of efficient baseload and peaker generation and provides cash flow diversification, according to the release. Source
Over 10 GW cleared in PJM auction: Over 10 GW cleared in the 2028/2029 PJM Base Residual Auction at $325.00 per megawatt-day for the MAAC, PPL and RTO locational deliverability areas. Source
$4 billion notes funded Cornerstone: In April 2026, Talen Energy Supply issued $1.5 billion of 6.125% notes due 2031 and $2.5 billion of 6.375% notes due 2033. Proceeds funded Cornerstone and the redemption of $1.2 billion of 8.625% notes. Source
About 4 GW of development options: The company is progressing a pipeline of about 4 GW of land development and data center contracting options. Source

“With strong year-to-date results and closing of the Cornerstone Acquisition, we are raising our 2026 guidance as well as increasing the 2027 and 2028 outlooks”
Talen Chief Executive Officer Mac McFarland

Guidance

Area	Period	Figure	Against last quarter
Adjusted EBITDA Source	2026E	$2,025 million - $2,225 million	Raised from $1,750 million - $2,050 million
Adjusted Free Cash Flow Source	2026E	$1,200 million - $1,350 million	Raised from $980 million - $1,180 million
Net income (loss) Source	2026E	$1,010 million - $1,180 million	Raised from $875 million - $1,125 million
Capital expenditures, net Source	2026E	$(330) million - $(340) million	Raised from $(280) million - $(300) million
Depreciation, amortization and accretion Source	2026E	$445 million	Raised from $300 million
Interest and finance charge payments Source	2026E	$(460) million - $(480) million	Kept
Income taxes Source	2026E	$(10) million - $(20) million	Lowered from $(15) million - $(45) million
Pension contributions Source	2026E	$(25) million - $(35) million
Hedged share of expected generation Source	2026	approximately 85%	Kept
Hedged share of expected generation Source	2027	approximately 70%	Raised from approximately 65%
Hedged share of expected generation Source	2028	approximately 30%	Raised from approximately 20%

What changed from last quarter

Guidance raised: 2026 Adjusted EBITDA and Adjusted Free Cash Flow ranges raised. Management also said the 2027 and 2028 figures increased, without giving numbers. Source
New: Cornerstone Acquisition completed June 15, 2026, after being pending in the prior release. It adds about 2.6 GW of generation. Source
New: Guidance footnote changed: Keystone is excluded from July 1, 2026. The prior release excluded the Cornerstone Acquisition. Source
New: The $1.2 billion of 8.625% senior secured notes due 2030 were redeemed in full. The prior release said a portion of proceeds was used for the redemption. Source
New: Credit facilities upsized and extended during the quarter, and the term loan B-1 maturity moved to November 2032. The prior release described these as commitments. Source
New: Over 10 GW cleared in the 2028/2029 PJM Base Residual Auction. The prior release did not report this result. Source
New: Owned fleet stated at about 15.7 GW, up from 13.1 GW in the prior release. Indiana is now listed among the generation locations. Source
New: Pipeline of about 4 GW of land development and data center contracting options reported. The prior release gave no figure. Source

Results and growth drivers

Adjusted EBITDA rose to $374 million: Adjusted EBITDA was $374 million against $90 million a year earlier, an increase of $284 million, mainly on higher energy and other revenues and capacity revenues net of fuel and energy purchases. Source
GAAP net loss on derivative losses: The company reported a GAAP net loss attributable to stockholders of $92 million, or $2.00 per diluted share, against net income of $72 million a year earlier. Derivative losses and higher interest expense were the main drivers. Source
Adjusted free cash flow $212 million: Adjusted Free Cash Flow was $212 million, against negative $78 million a year earlier. Higher revenues and lower income tax payments were partly offset by higher capital expenditures and cash interest. Source
2026 EBITDA and FCF ranges raised: Management raised 2026 Adjusted EBITDA and Adjusted Free Cash Flow ranges after the Cornerstone closing and year-to-date results. The ranges exclude Keystone from July 1, 2026. Source
Six-month Adjusted EBITDA $847 million: For the six months, Adjusted EBITDA was $847 million against $290 million a year earlier, and Adjusted Free Cash Flow was $562 million against $9 million. Source

Generation and PJM capacity

Cornerstone adds 2.6 GW: The Cornerstone Acquisition, completed June 15, 2026, adds about 2.6 GW of efficient baseload and peaker generation and provides cash flow diversification, according to the release. Source
Over 10 GW cleared in PJM auction: Over 10 GW cleared in the 2028/2029 PJM Base Residual Auction at $325.00 per megawatt-day for the MAAC, PPL and RTO locational deliverability areas. Source
Generation and capacity factor higher: Total generation was 14.1 TWh against 7.3 TWh, and capacity factor was 47.6% against 31.8%. The release says acquired facilities are counted for the periods the company owned them. Source
Fleet about 15.7 GW including nuclear: The company said it owns and operates about 15.7 GW, including 2.2 GW of nuclear, in the Mid-Atlantic, Ohio, Indiana and Montana. The prior release stated 13.1 GW. Source

“We remain committed to our flywheel strategy, leveraging our advantaged portfolio of assets, building our development pipeline of powered land and new capacity”
Talen Chief Executive Officer Mac McFarland

Revenues, hedging and pricing

Capacity and energy revenues higher: Capacity revenues were $237 million against $88 million a year earlier. Energy and other revenues were $722 million against $366 million. Source
Hedge coverage up for 2027 and 2028: As of June 30, 2026, about 85% of 2026 expected generation was hedged, about 70% for 2027 (65% at March 31) and about 30% for 2028 (20% at March 31). Source
Unrealized derivative loss in revenue: Operating revenues included an unrealized derivative loss of $212 million, and operating revenues were $747 million for the quarter. Source

Costs and expenses

Interest expense more than tripled: Interest expense and other finance charges were $214 million against $62 million in the quarter. The release lists higher interest expense as a driver of the GAAP net loss. Source
Stock-based compensation up in G&A: General and administrative expense was $98 million, including stock-based compensation of $70 million, against $16 million a year earlier. Source
Maintenance and depreciation expense up: Operation, maintenance and development expense was $210 million against $192 million. Depreciation, amortization and accretion was $103 million against $70 million. Source

Capital, financing and liquidity

$4 billion notes funded Cornerstone: In April 2026, Talen Energy Supply issued $1.5 billion of 6.125% notes due 2031 and $2.5 billion of 6.375% notes due 2033. Proceeds funded Cornerstone and the redemption of $1.2 billion of 8.625% notes. Source
Credit facilities upsized and extended: The revolving credit facility rose to $1.35 billion from $900 million. The letter of credit facility rose to $1.5 billion and its maturity moved to December 2029. Source
Liquidity about $1.9 billion: As of July 31, 2026, available liquidity was about $1.9 billion, including $525 million of unrestricted cash. Management is focused on net leverage below its 3.5x target. Source
Cornerstone cash outlay $2.6 billion: The six-month cash flow statement shows $2,568 million of net cash for the Cornerstone Acquisition within investing activities. Source

Cash flow and shareholder returns

Operating cash flow $27 million: Six-month operating cash flow was $27 million against negative $65 million. The period includes a $495 million cash settlement of stock-based awards. Source
550,000 shares repurchased for $200 million: The company repurchased 550,000 shares in the second quarter for about $200 million. $1.7 billion remains under the share repurchase program through year end 2028. Source
Shares outstanding rose to 47.9 million: Shares issued and outstanding were 47,900,355 at June 30, 2026, against 45,687,828 at December 31, 2025. Source

Strategy and development pipeline

Flywheel strategy unchanged: The CEO said the company remains committed to its flywheel strategy, using its asset portfolio and development pipeline to pursue long-term contracts with large loads. Source
About 4 GW of development options: The company is progressing a pipeline of about 4 GW of land development and data center contracting options. Source
Data center power demand cited: The release says artificial intelligence data centers increasingly demand more reliable power, and that the company is positioned to serve this growing industry. Source

Coming up, as management said on 5 August 2026

Large-load contracts planned: Management said the flywheel strategy allows it to enter long-term contracts with large loads, with a variety of structures. Source
Pipeline progression continuing: The company said it is progressing the pipeline of about 4 GW of land development and data center contracting options, with no dates given. Source

Risks management discussed

External: About 30% of expected 2028 generation is hedged, so most of that volume is not hedged at June 30, 2026. Source

Earlier plans management reported on

Not stated: The prior release expected closing early in the second half of 2026. The current release reports completion on June 15, 2026.
Not stated: The prior release reaffirmed 2026 guidance until the Cornerstone closing. The current release raises it after the closing.
Not stated: Management stated a continued commitment to the flywheel strategy, with no status reported against milestones. Source
Not stated: Management said it is focused on maintaining net leverage below a 3.5x target. The release gives no current leverage figure. Source

Other quarters

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.

As filed with the SEC

Open the filing on EDGAR

Talen Energy Reports Second Quarter 2026 Results, Raises 2026 Guidance

Earnings Release Highlights

Second quarter GAAP Net Income (Loss) Attributable to Stockholders of $(92) million.
Second quarter Adjusted EBITDA of $374 million and Adjusted Free Cash Flow of $212 million.
Completed the acquisition of the Waterford Energy Center, Darby Generating Station, and the Lawrenceburg Power Plant (collectively, the “Cornerstone Acquisition”) in June 2026.
Raising 2026 Adjusted EBITDA and Adjusted Free Cash Flow guidance ranges to $2,025 million - $2,225 million and $1,200 million - $1,350 million, respectively.
Repurchased 550,000 shares of common stock for approximately $200 million under our Share Repurchase Program (“SRP”), with $1.7 billion of capacity remaining through December 2028.
Cleared over 10 gigawatts (“GW”) in the 2028/2029 PJM Base Residual Auction at $325.00 per megawatt-day (“MWd”) for the MAAC, PPL, and RTO locational deliverability areas.
Progressing pipeline of approximately 4 GW of land development and data center contracting options.

HOUSTON, August 5, 2026 - Talen Energy Corporation (“Talen,” “TEC”, the “Company,” “we,” or “our”) (NASDAQ: TLN), a leading independent power producer, today reported its second quarter 2026 financial results and other highlights.

“Today we are reporting Talen’s second quarter results, earning $374 million of Adjusted EBITDA and $212 million of Adjusted Free Cash Flow. With strong year-to-date results and closing of the Cornerstone Acquisition, we are raising our 2026 guidance as well as increasing the 2027 and 2028 outlooks,” said Talen Chief Executive Officer Mac McFarland. He continued, “We remain committed to our flywheel strategy, leveraging our advantaged portfolio of assets, building our development pipeline of powered land and new capacity all of which allows us to enter into long-term contracts with large loads with a variety of structures.”

Operating Results (Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of Dollars Unless Otherwise Stated)		2026		2025		2026		2025
GAAP Net Income (Loss) Attributable to Stockholders	$(92)		$72		$(29)		$(63)
Adjusted EBITDA	374		90		847			290
Adjusted Free Cash Flow	212		(78)		562			9
Total Generation (TWh)	14.1		7.3		29.7		17.0
Capacity Factor		47.6%		31.8%		51.3%		37.1%

(a)Total generation is net of station use consumption, where applicable. Volumes associated with acquired and sold generation facilities are presented for the periods in which Talen owned the facilities.

For the quarter ended June 30, 2026, Talen reported GAAP Net Income (Loss) Attributable to Stockholders of $(92) million, Adjusted EBITDA of $374 million, and Adjusted Free Cash Flow of $212 million. Compared with the quarter ended June 30, 2025:

GAAP Net Income (Loss) Attributable to Stockholders decreased by $(164) million primarily due to unrealized losses on derivative instruments and increases in interest expense which offset increases in capacity revenues and energy and other revenues, net of fuel and energy purchases.
Adjusted EBITDA increased by $284 million primarily due to increases in energy and other revenues and capacity revenues, net of fuel and energy purchases.
Adjusted Free Cash Flow increased by $290 million primarily due to increases in capacity revenues and energy and other revenues, net of fuel and energy purchases, and lower income tax payments, which were partially offset by higher capital expenditures and cash interest payments.

See “Non-GAAP Financial Measures” for details and reconciliations of GAAP to non-GAAP financial measures.

Raising 2026 Guidance

(Millions of Dollars)	2026E
Adjusted EBITDA	$2,025 - $2,225
Adjusted Free Cash Flow	$1,200 - $1,350

(a)Excludes Keystone as of July 1, 2026.

Cornerstone Acquisition

On June 15, 2026, the Company completed the Cornerstone Acquisition, which increases Talen’s generation by approximately 2.6 GW and provides efficient baseload and peaker generation and cash flow diversification.

Share Repurchases

Since the start of 2024, we have repurchased approximately 15 million shares of TEC common stock for a total of approximately $2.3 billion, with $1.7 billion remaining under our SRP through year end 2028. During the second quarter 2026, we repurchased 550,000 shares of TEC common stock for approximately $200 million. All share repurchase amounts exclude transaction costs.

Financing Transactions

In April 2026, Talen subsidiary, Talen Energy Supply, LLC (“TES”) issued in private placement transactions not involving a public offering: (i) $1.5 billion in aggregate principal amount of 6.125% senior unsecured notes due 2031; and (ii) $2.5 billion in aggregate principal amount of 6.375% senior unsecured notes due 2033. The net proceeds from the issuance and sale of the unsecured notes due 2031 and 2033 were used to (i) fund the Cornerstone Acquisition; and (ii) redeem in full $1.2 billion of outstanding 8.625% senior secured notes due 2030.

Additionally, during the second quarter 2026, TES (i) upsized its Revolving Credit Facility (“RCF”), (including its revolving LC capacity) from $900 million to $1.35 billion; (ii) upsized its existing $1.1 billion Letter of Credit Facility (“LCF”) to $1.5 billion and extended its maturity from December 2027 to December 2029; and (iii) repriced the RCF, TLB-1, and TLB-2, and extended the TLB-1 maturity from May 2030 to November 2032.

Balance Sheet and Liquidity

We are focused on maintaining net leverage below our target of 3.5x net debt-to-Adjusted EBITDA. As of July 31, 2026, Talen had ample total available liquidity of approximately $1.9 billion, comprised of $525 million of unrestricted cash and $1.4 billion of available capacity under the RCF.

Update on Hedging Activities

As of June 30, 2026, including the impact of the Nuclear Production Tax Credit, we had hedged approximately 85% of our expected generation volumes for 2026, approximately 70% for 2027 and approximately 30% for 2028. Talen’s hedging program is a key component of our comprehensive risk policy and supports the objective of increasing cash flow stability while maintaining upside optionality.

Earnings Call

Talen will hold an earnings call on Wednesday, August 5, 2026, at 4:30 p.m. ET (3:30 p.m. CT). To listen to the earnings call, please register in advance for the webcast here. For participants joining the call via phone, please register here prior to the start time to receive dial-in information. For those unable to participate in the live event, a digital replay will be archived for approximately one year and available on the Events page of Talen’s Investor Relations website linked here.

About Talen

Talen Energy (NASDAQ: TLN) is a leading independent power producer and energy infrastructure company dedicated to powering the future. We own and operate approximately 15.7 GW of power infrastructure in the United States, including 2.2 GW of nuclear power and a significant dispatchable fossil fleet. We produce and sell electricity, capacity, and ancillary services into wholesale U.S. power markets, with our generation fleet located in the Mid-Atlantic, Ohio, Indiana, and Montana. Our team is committed to generating power safely and reliably and delivering the most value per megawatt produced. Talen is also powering the digital infrastructure revolution. We are well-positioned to serve this growing industry, as artificial intelligence data centers increasingly demand more reliable power. Talen is headquartered in Houston, Texas. For more information, visit https://www.talenenergy.com/.

Forward-Looking Statements

Forward-looking statements notice

This communication contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this communication, or incorporated by reference into this communication, are forward-looking statements. Throughout this communication, we have attempted to identify forward-looking statements by using words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "forecasts," "goal," "intend," "may," "plan," "potential," "predict," "project," "seek," "should," "will," or other forms of these words or similar words or expressions or the negative thereof, although not all forward-looking statements contain these terms. Forward-looking statements address future events and conditions concerning, among other things, the integration of and anticipated benefits from the recent Cornerstone acquisition and the Freedom and Guernsey acquisitions, capital expenditures, earnings, litigation, regulatory matters, hedging, liquidity and capital resources, accounting matters, expectations, beliefs, plans, objectives, goals, strategies, future events or performance, shareholder returns and underlying assumptions.

Forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this communication. All of our forward-looking statements include assumptions underlying or relating to such statements that may cause actual results to differ materially from expectations and are subject to numerous factors that present considerable risks and uncertainties.

TALEN ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of Dollars, except share data)		2026		2025		2026		2025
Energy and other revenues	$722		$366		$1,756		$948
Capacity revenues	237		88		444		137
Unrealized gain (loss) on derivative instruments	(212)		176		(324)		(65)
Operating Revenues	747		630		1,876		1,020
Fuel and energy purchases	(357)		(150)		(920)		(418)
Nuclear fuel amortization	(22)		(18)		(46)		(44)
Unrealized gain (loss) on derivative instruments	1		(84)		(41)		(25)
Energy Expenses	(378)		(252)		(1,007)		(487)
Operating Expenses
Operation, maintenance and development	(210)		(192)		(375)		(338)
General and administrative (Includes stock-based compensation of $(70), $(16), $(69) and $(27))	(98)		(41)		(122)		(75)
Depreciation, amortization and accretion	(103)		(70)		(195)		(144)
Other operating income (expense), net	(30)		(9)		(39)		(16)
Operating Income (Loss)	(72)		66		138		(40)
Nuclear decommissioning trust funds gain (loss), net	134		80		112		68
Interest expense and other finance charges	(214)		(62)		(333)		(136)
Other non-operating income (expense), net	23		13		35		18
Income (Loss) Before Income Taxes	(129)		97		(48)		(90)
Income tax benefit (expense)	37		(25)		19		27
Net Income (Loss) Attributable to Stockholders	$(92)		$72		$(29)		$(63)
Per Common Share
Net Income (Loss) Attributable to Stockholders - Basic	$(2.00)		$1.58		$(0.63)		$(1.38)
Net Income (Loss) Attributable to Stockholders - Diluted	$(2.00)		$1.50		$(0.63)		$(1.38)
Weighted-Average Number of Common Shares Outstanding - Basic (in thousands)	45,904		45,554		45,759		45,699
Weighted-Average Number of Common Shares Outstanding - Diluted (in thousands)	45,904		47,905		45,759		45,699

TALEN ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Millions of Dollars, except share data)	June 30, 2026	December 31, 2025
Assets
Cash and cash equivalents	$231	$689
Restricted cash and cash equivalents	7	63
Accounts receivable	294	196
Inventory, net	298	278
Derivative instruments	131	56
Other current assets	67	67
Total current assets	1,028	1,349
Property, plant and equipment, net	11,928	7,546
Nuclear decommissioning trust funds	1,997	1,900
Derivative instruments	9	4
Other noncurrent assets	106	106
Total Assets	$15,068	$10,905
Liabilities and Equity
Long-term debt, due within one year	$29	$29
Accrued interest	167	60
Accounts payable and other accrued liabilities	347	281
Derivative instruments	573	101
Stock-based compensation liabilities	6	501
Other current liabilities	194	78
Total current liabilities	1,316	1,050
Long-term debt	9,543	6,782
Derivative instruments	150	67
Postretirement benefit obligations	214	229
Asset retirement obligations and accrued environmental costs	497	494
Deferred income taxes	904	486
Acquired contract liabilities	769	662
Other noncurrent liabilities	36	42
Total Liabilities	$13,429	$9,812
Commitments and Contingencies
Stockholders' Equity
Common stock ($0.001 par value, 350,000,000 shares authorized)	$ -	$ -
Additional paid-in capital	2,533	1,709
Accumulated retained earnings (deficit)	(905)	(612)
Accumulated other comprehensive income (loss)	(12)	(4)
Total Stockholders' Equity	1,616	1,093
Noncontrolling interests	23	-
Total Equity	1,639	1,093
Total Liabilities and Stockholders' Equity	$15,068	$10,905

(a)47,900,355 and 45,687,828 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively.

TALEN ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
(Millions of Dollars)		2026		2025
Operating Activities
Net Income (Loss)	$(29)		$(63)
Non-cash reconciliation adjustments:
Unrealized (gains) losses on derivative instruments	352		103
Depreciation, amortization and accretion	158		141
Nuclear decommissioning trust funds (gain) loss, net (excluding interest and fees)	(85)		(44)
Nuclear fuel amortization	46		44
Deferred income taxes	(34)		(66)
Stock-based compensation	69		27
Other	35		7
Changes in assets and liabilities:
Accounts receivable	(59)		(103)
Inventory, net	10		78
Other assets	14		15
Accounts payable and accrued liabilities	20		(57)
Accrued interest	107		12
Collateral received (posted), net	(35)		(58)
Cash settlement of stock-based awards	(495)		-
Other liabilities	(47)		(101)
Net cash provided by (used in) operating activities	27		(65)
Investing Activities
Property, plant and equipment expenditures	(181)		(51)
Nuclear fuel expenditures	(66)		(50)
Nuclear decommissioning trust funds investment purchases	(195)		(1,201)
Nuclear decommissioning trust funds investment sale proceeds	173		1,186
Cornerstone Acquisition, net	(2,568)		-
Other	13		2
Net cash provided by (used in) investing activities	(2,824)		(114)
Financing Activities
Debt issuances	4,000		-
Debt repayments	(1,215)		(9)
Deferred financing costs	(58)		(9)
Revolving credit facility borrowings	500		75
Revolving credit facility repayments	(500)		(5)
Share repurchases	(298)		(103)
Tax payments related to net-settled stock-based awards	(140)		-
Other	(6)		-
Net cash provided by (used in) financing activities	2,283		(51)
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents	(514)		(230)
Beginning of period cash and cash equivalents and restricted cash and cash equivalents	752		365
End of period cash and cash equivalents and restricted cash and cash equivalents	$238		$135

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted Free Cash Flow, which we use as measures of our performance and liquidity, are not financial measures prepared under GAAP. Non-GAAP financial measures do not have definitions under GAAP and may be defined and calculated differently by, and not be comparable to, similarly titled measures used by other companies. Non-GAAP measures are not intended to replace the most comparable GAAP measures as indicators of performance. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Management cautions readers not to place undue reliance on the following non-GAAP financial measures, but to also consider them along with their most directly comparable GAAP financial measures. Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP.

Adjusted EBITDA

We use Adjusted EBITDA to: (i) assist in comparing operating performance and readily view operating trends on a consistent basis from period to period without certain items that may distort financial results; (ii) plan and forecast overall expectations and evaluate actual results against such expectations; (iii) communicate with our Board of Directors, shareholders, creditors, analysts, and the broader financial community concerning our financial performance; (iv) set performance metrics for our annual short-term incentive compensation; and (v) assess compliance with our indebtedness.

Adjusted EBITDA is computed as net income (loss) adjusted, among other things, for certain: (i) nonrecurring charges; (ii) non-recurring gains; (iii) non-cash and other items; (iv) unusual market events; (v) any depreciation, amortization, or accretion; (vi) mark-to-market gains or losses; (vii) gains and losses on the nuclear facility decommissioning trust (“NDT”); (viii) gains and losses on asset sales, dispositions, and asset retirement; (ix) impairments, obsolescence, and net realizable value charges; (x) interest expense; (xi) income taxes; (xii) legal settlements, liquidated damages, and contractual terminations; (xiii) development expenses; (xiv) noncontrolling interests, except where otherwise noted; and (xv) other adjustments. Such adjustments are computed consistently with the provisions of our indebtedness to the extent that they can be derived from the financial records of the business.

Additionally, we believe investors commonly adjust net income (loss) information to eliminate the effect of nonrecurring restructuring expenses and other non-cash charges, which can vary widely from company to company and from period to period and impair comparability. We believe Adjusted EBITDA is useful to investors and other users of our financial statements to evaluate our operating performance because it provides an additional tool to compare business performance across companies and between periods. Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to such items described above. These adjustments can vary substantially from company to company and period to period depending upon accounting policies, book value of assets, capital structure, and the method by which assets were acquired.

Adjusted Free Cash Flow

Adjusted Free Cash Flow is utilized by our chief operating decision makers to evaluate cash flow activities. Adjusted Free Cash Flow is computed as Adjusted EBITDA reduced by capital expenditures (including nuclear fuel but excluding development, growth, and (or) conversion capital expenditures), cash payments for interest and finance charges, cash payments for income taxes (excluding income taxes paid from the NDT, taxes paid or deductions taken as a result of strategic asset sales, and benefits of the Nuclear PTC utilized to reduce income taxes paid), and pension contributions.

We believe Adjusted Free Cash Flow is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to determine a company’s ability to meet future obligations and to compare business performance across companies and across periods. Adjusted Free Cash Flow is widely used by investors to measure a company’s levered cash flow without regard to items such as ARO settlements; nonrecurring development, growth and conversion expenditures; and cash proceeds or payments for the sale or purchase of assets, which can vary substantially from company to company and from period to period depending upon accounting methods, book value of assets, capital structure, and the method by which assets were acquired.

Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation

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

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of Dollars)		2026		2025		2026		2025
Net Income (Loss)	$(92)		$72		$(29)		$(63)
Adjustments
Interest expense and other finance charges	214		62		333		136
Income tax (benefit) expense	(37)		25		(19)		(27)
Depreciation, amortization and accretion	88		67		151		137
Nuclear fuel amortization	22		18		46		44
Unrealized (gain) loss on commodity derivative contracts	211		(92)		365		90
Nuclear decommissioning trust funds (gain) loss, net	(134)		(80)		(112)		(68)
Stock-based and other long-term incentive compensation expense	71		18		73		31
Acquisition and divestiture activities	28		(3)		37		4
Other	3		3		2		6
Total Adjusted EBITDA	$374		$90		$847		$290
Capital expenditures, net	(56)		(35)		(123)		(99)
Interest and finance charge payments	(102)		(84)		(154)		(107)
Income taxes	2		(42)		6		(51)
Pension contributions	(6)		(7)		(14)		(24)
Total Adjusted Free Cash Flow	$212		$(78)		$562		$9

(a)Includes the periodic amortization of fair value adjustments associated with acquired fuel supply contract liabilities and intangible assets.

(b)Includes the non-recurring: (i) advisory fees associated with completed acquisitions and divestitures; (ii) remaining settlements on contracts of divested assets and (iii) non-recurring finance fees charged to the Consolidated Statement of Operations associated with acquisition financing fee arrangements.

Adjusted EBITDA / Adjusted Free Cash Flow Reconciliation: 2026 Guidance

	2026E
(Millions of Dollars)	Low	High
Net Income (Loss)	$1,010	$1,180
Adjustments
Interest expense and other finance charges	460	480
Income tax (benefit) expense	10	20
Depreciation, amortization and accretion	445	445
Nuclear fuel amortization	100	100
Adjusted EBITDA	$2,025	$2,225
Capital expenditures, net	$(330)	$(340)
Interest and finance charge payments	(460)	(480)
Income taxes	(10)	(20)
Pension contributions	(25)	(35)
Adjusted Free Cash Flow	$1,200	$1,350

Note: Figures are rounded to the nearest $5 million.

(a)Excludes Keystone as of July 1, 2026.

Contacts
Sergio Castro
Vice President & Treasurer
InvestorRelations@talenenergy.com
Taryne Williams
Director, Corporate Communications
Taryne.Williams@talenenergy.com