TALEN ENERGY CORP ALLENTOWN, Pa., Aug. 4, 2016 /PRNewswire/ --
2016 Financial Results
(in millions) Three Months Six Months
Ended Ended
June 30,
2016 June 30, 2016
--------- -------------
Net Income (Loss) $(3) $148
Adjusted EBITDA 132 367
Cash from Operations 207
Adjusted Free Cash Flow 67
http://photos.prnewswire.com/prnvar/20150601/219745LOGO
2016 Guidance Ranges
-- Adjusted EBITDA projection affirmed at $655-$855 million; Adjusted Free
Cash Flow projection affirmed at $260-$460 million
Operating and Commercial Highlights
-- Merger transaction with affiliates of Riverstone Holdings LLC on
schedule, expected to close by the end of 2016
-- Natural gas co-firing projects for about 3,000 megawatts of coal-fired
capacity on schedule for expected completion in 2016 at Brunner Island
plant, 2018 at Montour plant
-- Consent decree in environmental litigation involving Colstrip plant
includes commitment to retire Units 1 and 2 no later than July 2022
Talen Energy Corporation (NYSE: TLN) reported this morning a Net Loss of $3 million for the three months ended June 30, 2016, compared with Net Income of $26 million for the three months ended June 30, 2015, and Adjusted EBITDA of $132 million, compared with $171 million for the three months ended June 30, 2015.
The Net Loss in the second quarter includes an after-tax, non-cash asset impairment charge of $122 million related to the proposed Bell Bend nuclear power plant project. Although the project's Combined Operating License Application remains on file, licensing and permitting activities are suspended, and Talen Energy has no plans to resume them.
For the six months ended June 30, 2016, Talen Energy reported Net Income of $148 million, compared with $122 million for the six months ended June 30, 2015, and Adjusted EBITDA of $367 million, compared with $408 million for the six months ended June 30, 2015.
"Our second quarter financial results reflect the unrelenting focus of Talen Energy employees on executing major projects designed to improve our resilience to low commodity prices, enhance the safe and reliable operation of our plants, and reduce corporate support costs even further," said Paul Farr, Talen Energy President and Chief Executive Officer.
The company is adding natural gas co-firing capability to about 3,000 megawatts of coal-fired generation in Pennsylvania that will enhance its operating flexibility by enabling those plants to use low-cost gas from nearby Marcellus shale. Co-firing at the Brunner Island plant is on schedule to be completed and in commercial operation by the end of 2016. In June, Talen Energy announced that it will proceed with natural gas co-firing capability at the Montour plant. Assuming timely receipt of necessary permits and regulatory approvals, completion is expected in the second quarter of 2018.
Affiliate Talen Montana is party to a settlement agreement in a lawsuit involving the Colstrip plant. The agreement, which was filed in July and is pending approval by a federal court, includes a commitment to retire Colstrip Units 1 and 2 no later than July 2022. Talen Montana owns 50 percent (307 megawatts) of those units.
Based on second quarter results, Talen Energy has affirmed 2016 guidance ranges for Adjusted EBITDA of $655-$855 million and for Adjusted Free Cash Flow of $260-$460 million.
On June 3, 2016, Talen Energy announced entry into a definitive merger agreement, executed on June 2, 2016, with affiliates of Riverstone Holdings LLC, a private investment firm. Filings have been made with the Nuclear Regulatory Commission, Federal Energy Regulatory Commission and other regulatory agencies. The parties have been granted early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is expected to close by the end of 2016, subject to receipt of stockholder and regulatory approvals and satisfaction of other customary closing conditions.
Review of Segment Results
Financial information presented in this news release for three and six months ended June 30, 2015 represents three and six months of legacy Talen Energy Supply results, consolidated with one month of RJS Power results, and does not include MACH Gen results because that acquisition occurred later in 2015.
(in millions) Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Operating
Income
(Loss)
East $152 $147 $544 $378
West (52) (20) (80) (21)
Other (b) (52) (92) (105) (144)
---
Total $48 $35 $359 $213
=== === ==== ====
EBITDA (a)
East $253 $233 $745 $548
West (42) (16) (56) (17)
Other (b) (48) (92) (100) (144)
Total $163 $125 $589 $387
==== ==== ==== ====
Adjusted
EBITDA (a)
East $165 $214 $441 $486
West (20) (1) (30) 4
Other (b) (13) (42) (44) (82)
Total $132 $171 $367 $408
==== ==== ==== ====
(a) EBITDA and Adjusted EBITDA are
non-U.S. GAAP financial
measures used by management, in
addition to Operating Income,
to evaluate Talen Energy's
business on an ongoing basis.
For the definitions of EBITDA
and Adjusted EBITDA, a detailed
itemization of adjustments, and
a reconciliation of EBITDA and
Adjusted EBITDA to Operating
Income (Loss), see the tables
at the end of this news
release. Management does not
allocate interest expense and
income taxes on a segment level
and therefore uses Operating
Income (Loss) as the most
directly comparable U.S. GAAP
measure.
(b) General and administrative
expenses are not allocated to
each segment and are included
in the "Other" category.
East Segment
The East segment includes operations in PJM, New York ISO and ISO New England.
In the second quarter of 2016, Operating Income increased by $5 million compared with the second quarter of 2015 primarily due to the gain on the sale of the Holtwood and Lake Wallenpaupack hydroelectric plants, partially offset by the impairment charge related to the Bell Bend project, unrealized losses from economic hedging activities and factors that affected Adjusted EBITDA, which are described in the next paragraph.
In the second quarter of 2016, Adjusted EBITDA decreased by $49 million compared with the second quarter of 2015 primarily due to lower margins and higher operation and maintenance costs. The decrease in margins was primarily due to lost energy and capacity revenues from assets sold in 2016 and lower nuclear availability, spark spreads and other portfolio margins, partially offset by higher margins from assets acquired during 2015. The increase in operation and maintenance costs was primarily due to additional costs associated with assets acquired during 2015.
For the first six months of 2016, Operating Income increased by $166 million compared with the first six months of 2015, primarily due to the gain on assets sold during 2016, partially offset by the impairment charge related to the Bell Bend project, unrealized losses from economic hedging activities and factors that affected Adjusted EBITDA, which are described in the next paragraph.
For the first six months of 2016, Adjusted EBITDA decreased by $45 million compared with the first six months of 2015 primarily due to higher operation and maintenance costs, partially offset by higher margins. Operation and maintenance costs increased primarily due to additional costs associated with assets acquired during 2015. Margins increased primarily due to additional margins from assets acquired during 2015, and higher capacity prices and other portfolio margins, partially offset by lost energy and capacity revenues from assets sold during 2016, and lower realized energy prices, nuclear availability and spark spreads.
West Segment
The West segment includes operations in the ERCOT and WECC markets in Texas, Montana and Arizona.
In the second quarter of 2016, Operating Income decreased by $32 million and Adjusted EBITDA decreased by $19 million compared with the second quarter of 2015, primarily due to additional operation and maintenance costs associated with assets acquired during 2015 and lower margins. Margins decreased primarily due to lower realized energy prices and generation in Montana, partially offset by higher margins from assets acquired during 2015.
For the first six months of 2016, Operating Income decreased by $59 million and Adjusted EBITDA decreased by $34 million compared with the first six months of 2015, primarily due to additional operation and maintenance costs associated with assets acquired during 2015 and lower margins. Margins decreased primarily due to lower realized energy prices and generation in Montana, partially offset by higher margins from assets acquired during 2015.
Other
The "Other" category includes general and administrative expenses not allocated to a segment.
For the second quarter of 2016, the $40 million improvement in Operating Income and the $29 million improvement in Adjusted EBITDA compared with the second quarter of 2015 are primarily due to lower corporate expenses following the spinoff from PPL Corporation.
For the first six months of 2016, the $39 million improvement in Operating Income and the $38 million improvement in Adjusted EBITDA compared with the first six months of 2015 are primarily due to lower corporate expenses following the spinoff from PPL Corporation.
Adjusted Free Cash Flow
(in millions) Six Months Ended
----------------
June 30, June 30,
2016 2015
--------- ---------
Cash from Operations $207 $355
Adjusted Free Cash Flow (a) 67 137
(a) Adjusted Free Cash Flow is a
non-U.S. GAAP financial
measure used by management in
addition to Cash from
Operations. For the definition
of Adjusted Free Cash Flow, a
detailed itemization of
adjustments and a
reconciliation of Adjusted
Free Cash Flow to Cash from
Operations, see the tables at
the end of this news release.
Liquidity and Capital
Resources
(in millions) June 30, 2016 December 31,
2015
------------- ------------
Cash and cash equivalents $1,091 $141
Short-term debt (a) 350 608
(a) December 31, 2015 includes
$108 million, which at
June 30, 2015 is
classified as "Long-term
debt" on the Balance
Sheet based on Talen
Energy's intent to
refinance on a long-term
basis.
The decrease in short-term debt was primarily due to the use of proceeds from assets sold in 2016 to repay $600 million of outstanding borrowings under Talen Energy's revolving credit facilities, partially offset by a drawdown on the revolving credit facility to repay $350 million in debt that matured in May 2016.
Net cash provided by (used in) operating, investing and financing activities for the six months ended June 30, and the changes between periods were as follows.
(in millions) 2016 2015 Change - Cash
---- ---- -------------
Operating
activities $207 $355 $(148)
Investing
activities 1,290 (127) 1,417
Financing
activities (547) (228) (319)
2016 Financial Outlook
Talen Energy affirmed 2016 guidance ranges for Adjusted EBITDA and Adjusted Free Cash Flow. The forecast for Adjusted EBITDA is $655-$855 million. The forecast for Adjusted Free Cash Flow is $260-$460 million.
For a detailed itemization of adjustments and reconciliations of Adjusted EBITDA to Operating Income (Loss) and Adjusted Free Cash Flow to Cash from Operations, see the tables at the end of the news release.
Conference Call and Webcast
Talen Energy management will discuss these results during a conference call and webcast on August 4, 2016, beginning at 8 a.m. Eastern time. The phone number to join the conference call is 1-888-317-6003. Participants from outside of the United States should call 1-412-317-6061. The entry number to join the call is 4143588.
The webcast, in audio format with slides of the presentation, will be accessible on the Investors & Media section of the company's website. A replay will be available on the website for those who are unable to listen live.
The Investors & Media section of the company's website contains a significant amount of information about Talen Energy, including financial and other information for investors. Talen Energy encourages investors to visit its website periodically to view new and updated information.
About Talen Energy
Talen Energy is one of the largest competitive energy and power generation companies in the United States. Our diverse generating fleet operates in well-developed, structured wholesale power markets. To learn more about us, visit www.talenenergy.com.
Important Information for Investors and Stockholders
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The proposed acquisition of Talen Energy (the "Merger") by affiliates of Riverstone Holdings LLC ("Riverstone") will be submitted to the stockholders of Talen Energy for their consideration. On July 1, 2016, Talen Energy filed with the Securities and Exchange Commission ("SEC") a preliminary proxy statement in connection with the Merger. When completed, a definitive proxy statement and a form of proxy will be filed with the SEC and mailed to Talen Energy stockholders. Talen Energy also plans to file other documents with the SEC regarding the Merger. Investors and security holders of Talen Energy are urged to read the proxy statement and other relevant documents that will be filed with the SEC carefully and in their entirety when they become available because they will contain important information about the Merger. Investors and stockholders will be able to obtain free copies of the proxy statement and other documents containing important information about Talen Energy and Riverstone, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by Talen Energy will be available free of charge on Talen Energy's website at www.talenenergy.com under the Investors & Media section or by contacting Talen Energy's Investor Relations Department at (610) 774-3389. Talen Energy and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Talen Energy in connection with the Merger. Information about the directors and executive officers of Talen Energy is set forth in its proxy statement for its 2016 annual meeting of stockholders, which was filed with the SEC on April 12, 2016. This document may be obtained free of charge from the sources indicated above. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC when they become available.
Forward-Looking Information
Statements contained in this presentation, including statements with respect to future earnings, EBITDA, Adjusted EBITDA or Adjusted Free Cash Flow results, cash flows, tax attributes, financing, regulation, closing of the Merger, completion of co-firing projects and litigation settlements are "forward-looking statements" within the meaning of the federal securities laws. These statements often include such words as "believe," "expect," "anticipate," "intend," "plan," "estimate," "target," "project," "forecast," "seek," "will," "may," "should," "could," "would" or similar expressions. Although Talen Energy believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results discussed in the statements. Among the important factors that could cause actual results to differ materially from the forward-looking statements are: failure to complete the Merger as a result of the failure to obtain necessary stockholder or regulatory approvals or otherwise; the payment by Talen Energy of a termination fee if the Merger Agreement is terminated in certain circumstances; the loss of key customers and suppliers resulting from any uncertainties associated with the Merger; the negative impact on Talen Energy's business and the market price for Talen Energy's common stock should the Merger not be consummated; ability to secure final approval of the Colstrip settlement agreement from the federal court; adverse economic conditions; changes in commodity prices and related costs; the effectiveness of Talen Energy's risk management techniques, including hedging; accounting interpretations and requirements that may impact reported results; operational, price and credit risks in the wholesale and retail electricity markets; Talen Energy's ability to forecast the actual load needed to perform full-requirements sales contracts; weather conditions affecting generation, customer energy use and operating costs and revenues; disruptions in fuel supply; circumstances that may impact the levels of coal inventory that are held; the performance of transmission facilities and any changes in the structure and operation of, or the pricing limitations imposed by, the RTOs and ISOs that operate those facilities; blackouts due to disruptions in neighboring interconnected systems; competition; federal and state legislation and regulation; costs of complying with environmental and related worker health and safety laws and regulations; the impacts of climate change; the availability and cost of emission allowances; changes in legislative and regulatory policy; security and safety risks associated with nuclear generation; Talen Energy's level of indebtedness; the terms and conditions of debt instruments that may restrict Talen Energy's ability to operate its business; the performance of Talen Energy's subsidiaries and affiliates, on which its cash flow and ability to meet its debt obligations largely depend; the risks inherent with variable rate indebtedness; disruption in financial markets; Talen Energy's ability to access capital markets; acquisition or divestiture activities, and Talen Energy's ability to realize expected synergies and other benefits from such business transactions, including in connection with the completed MACH Gen acquisition; changes in technology; any failure of Talen Energy's facilities to operate as planned, including in connection with scheduled and unscheduled outages; Talen Energy's ability to optimize its competitive power generation operations and the costs associated with any capital expenditures, including the Brunner Island and Montour dual-fuel projects; significant increases in operation and maintenance expenses; the loss of key personnel, the ability to hire and retain qualified employees and the impact of collective labor bargaining negotiations; war, armed conflicts or terrorist attacks, including cyber-based attacks; risks associated with federal and state tax laws and regulations; any determination that the transaction that formed Talen Energy does not qualify as a tax-free distribution under the Internal Revenue Code; Talen Energy's ability to successfully integrate the RJS Power businesses and to achieve anticipated synergies and cost savings as a result of the spinoff transaction and combination with RJS Power; costs of complying with reporting requirements as a newly public company and any related risks of deficiencies in disclosure controls and internal control over financial reporting as a standalone entity; and the ability of affiliates of Riverstone to exercise influence over matters requiring Board of Directors and/or stockholder approval. Any such forward-looking statements should be considered in light of such important factors and in conjunction with Talen Energy's Form 10-K for the year ended December 31, 2015, and its other reports on file with the SEC.
Definition of Non-U.S. GAAP Financial Measures
In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying earnings release contains non-U.S. GAAP financial measures EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow, which we use as measures of our performance.
EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted for certain non-cash and other items that management believes are not indicative of ongoing operations, including, but not limited to, unrealized gains and losses on derivative contracts, stock-based compensation expense, asset retirement obligation accretion (net of gains or losses on retirements), gains and losses on securities in the nuclear decommissioning trust fund, impairments, gains or losses on sales, dispositions or retirements of assets, debt extinguishments, and transition, transaction and restructuring costs.
EBITDA and Adjusted EBITDA are not intended to represent cash flows from operations or net income (loss) as defined by U.S. GAAP as indicators of operating performance and are not necessarily comparable to similarly-titled measures reported by other companies. We believe EBITDA and Adjusted EBITDA are useful to investors and other users of our financial statements in evaluating our operating performance because they provide additional tools to compare business performance across companies and across periods. We believe that EBITDA is widely used by investors to measure a company's operating performance without regard to such items as interest expense, income taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, we believe that investors commonly adjust EBITDA information to eliminate the effect of restructuring and other expenses, which vary widely from company to company and impair comparability. We adjust for these and other items, as our management believes that these items would distort their ability to efficiently view and assess our core operating trends. In summary, our management uses EBITDA and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as measures for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our Board of Directors, stockholders, creditors, analysts and investors concerning our financial performance.
Adjusted Free Cash Flow represents Cash from Operations less capital expenditures, excluding growth-related capital expenditures, adjusted for changes in counterparty collateral and further adjusted for after-tax transaction and restructuring costs, and certain other after-tax cash items that management believes are not indicative of ongoing operations. Adjusted Free Cash Flow should not be considered an alternative to Cash from Operations, which is determined in accordance with U.S. GAAP. We believe that Adjusted Free Cash Flow, although a non-U.S. GAAP measure, is an important measure to both management and investors as an indicator of the company's ability to sustain operations without additional outside financing beyond the requirement to fund maturing debt obligations. These measures are not necessarily comparable to similarly-titled measures reported by other companies as they may be calculated differently.
TALEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (a)
Condensed Consolidated Balance Sheets (Unaudited)
(Unaudited)
(Millions of Dollars)
June 30, December 31,
2016 2015
---- ----
Assets
Cash and cash
equivalents $1,091 $141
Restricted
cash and
cash
equivalents 53 106
Accounts
receivable
(less
reserve:
2016, $1;
2015, $1) 273 267
Unbilled
revenues 136 160
Fuel,
materials
and supplies 482 508
Prepayments 57 52
Price risk
management
assets 429 562
Assets held
for sale - 954
Other current
assets 14 12
Investments 1,002 976
Property,
Plant and
Equipment 14,605 14,462
Less:
accumulated
depreciation 6,533 6,411
----- -----
Property,
plant and
equipment,
net 8,072 8,051
Construction
work in
progress 492 536
--- ---
Total
Property,
Plant and
Equipment,
net 8,564 8,587
----- -----
Other
intangibles 105 310
Price risk
management
assets 153 131
Other
noncurrent
assets 44 43
---
Total Assets $12,403 $12,809
======= =======
Liabilities and Equity
Short-term
debt $350 $608
Long-term
debt due
within one
year 5 399
Accounts
payable 262 291
Liabilities
held for
sale - 33
Other current
liabilities 865 757
Long-term
Debt 3,896 3,787
Deferred
income taxes
and
investment
tax credits 1,470 1,602
Price risk
management
liabilities
-noncurrent 127 108
Accrued
pension
obligations 352 340
Asset
retirement
obligations 501 490
Other
deferred
credits and
noncurrent
liabilities 110 91
Common Stock
and
additional
paid-in
capital 4,707 4,702
Accumulated
deficit (225) (373)
Accumulated
other
comprehensive
income
(loss) (17) (26)
---
Total
Liabilities
and Equity $12,403 $12,809
======= =======
(a) The Financial Statements in this news release have been condensed and summarized for the purposes of presentation. Please refer to Talen Energy Corporation's periodic filings with the Securities and Exchange Commission for full Financial Statements, including note disclosures and certain defined terms used herein.
TALEN ENERGY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Millions of Dollars, Except Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Operating Revenues
Wholesale energy $389 $561 $1,189 $1,237
Retail energy 189 243 448 554
Energy-related businesses 119 144 233 248
--- --- --- ---
Total Operating Revenues 697 948 1,870 2,039
--- --- ----- -----
Operating Expenses
Operation
Fuel and energy purchases 347 382 838 897
Operation and maintenance 277 306 559 528
(Gain) loss on sale (423) - (563) -
Impairments 213 - 213 -
Depreciation 109 87 218 164
Taxes, other than income 11 5 22 8
Energy-related businesses 115 133 224 229
--- --- --- ---
Total Operating Expenses 649 913 1,511 1,826
--- --- ----- -----
Operating Income (Loss) 48 35 359 213
Other Income (Expense) - net 6 3 12 10
Interest Expense 60 55 120 91
--- --- --- ---
Income (Loss) Before Income Taxes (6) (17) 251 132
Income Taxes (3) (43) 103 10
--- --- --- ---
Income (Loss) After Income Taxes (3) 26 148 122
Net Income (Loss) $(3) $26 $148 $122
=== === ==== ====
Earnings Per Share of Common Stock:
Basic $(0.02) $0.26 $1.15 $1.34
Diluted $(0.02) $0.26 $1.14 $1.34
Weighted-Average Shares of Common Stock Outstanding (in thousands)
Basic 128,527 98,354 128,526 90,980
Diluted 128,527 98,376 129,475 91,002
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Talen Energy Corporation and Subsidiaries
(Unaudited)
(Millions of
Dollars)
Six Months Ended
June 30,
--------
2016 2015
---- ----
Cash Flows from
Operating
Activities
Net income (loss) $148 $122
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities
Pre-tax gain from
the sale of
certain
generation
facilities (595) -
Depreciation 218 164
Amortization 93 93
Defined benefit
plans -expense 23 23
Deferred income
taxes and
investment tax
credits (142) (46)
Impairment of
assets 214 6
Unrealized (gains)
losses on
derivatives, and
other hedging
activities 83 (40)
Other 17 38
Change in current
assets and
current
liabilities
Accounts
receivable (18) 50
Accounts payable (28) (135)
Unbilled revenues 24 80
Fuel, materials
and supplies 23 33
Prepayments (5) 37
Counterparty
collateral (57) 36
Taxes payable 212 (2)
Other (10) (33)
Other operating
activities
Defined benefit
plans -funding - (74)
Other assets 3 2
Other liabilities 4 1
--- ---
Net cash provided
by operating
activities 207 355
--- ---
Cash Flows from
Investing
Activities
Expenditures for
property, plant
and equipment (268) (179)
Proceeds from the
sale of certain
generation
facilities 1,525 -
Expenditures for
intangible assets (29) (19)
Purchases of
nuclear plant
decommissioning
trust investments (101) (108)
Proceeds from the
sale of nuclear
plant
decommissioning
trust investments 92 100
Net (increase)
decrease in
restricted cash
and cash
equivalents 53 67
Other investing
activities 18 12
--- ---
Net cash provided
by (used in)
investing
activities 1,290 (127)
----- ----
Cash Flows from
Financing
Activities
Issuance of long-
term debt - 600
Retirement of
long-term debt (394) (2)
Contributions from
member - 82
Distributions to
predecessor
member - (214)
Net increase
(decrease) in
short-term debt (150) (668)
Borrowing on long-
term revolving
credit facility - -
Other financing
activities (3) (26)
--- ---
Net cash provided
by (used in)
financing
activities (547) (228)
---- ----
Net Increase
(Decrease) in
Cash and Cash
Equivalents 950 -
Cash and Cash
Equivalents at
Beginning of
Period 141 352
--- ---
Cash and Cash
Equivalents at
End of Period $1,091 $352
====== ====
TALEN ENERGY CORPORATION AND SUBSIDIARIES
Regulation G Reconciliations
Adjusted EBITDA
(Unaudited)
(Millions of Dollars)
Three Months Ended June 30,
---------------------------
2016 2015
---- ----
East West Other Total East West Other Total
Net income (loss) $(3) $26
Interest expense 60 55
Income taxes (3) (43)
Other (income) expense - net (6) (3)
Operating income (loss) $152 $(52) $(52) $48 $147 $(20) $(92) $35
Depreciation 97 11 1 109 82 4 1 87
Other income (expense) - net 4 (1) 3 6 4 - (1) 3
EBITDA $253 $(42) $(48) $163 $233 $(16) $(92) $125
Margins: -
Unrealized (gain) loss on derivative contracts (a) 137 13 - 150 (22) 15 - (7)
Terminated derivative contracts (b) - - - - (13) - - (13)
Revenue adjustment (c) - - - - 7 - - 7
Other (d) 2 - - 2 1 - - 1
Operation and maintenance:
Stock-based compensation expense (e) - - 3 3 - - 31 31
ARO accretion, net 6 - - 6 9 - - 9
Impairments (f) 204 9 - 213 - - - -
(Gain) loss on dispositions (g) (423) - - (423) - - - -
TSA costs - - 11 11 - - 5 5
Separation benefits - - 9 9 - - 2 2
Transaction and restructuring costs (i) - - 12 12 - - 12 12
Other (5) - - (5) 3 - - 3
Other income (expense):
(Gain) loss from NDT funds (9) - - (9) (4) - - (4)
Adjusted EBITDA $165 $(20) $(13) $132 $214 $(1) $(42) $171
==== ==== ==== ==== ==== === ==== ====
Six Months Ended June 30,
-------------------------
2016 2015
---- ----
East West Other Total East West Other Total
Net income (loss) $148 $122
Interest expense 120 91
Income taxes 103 10
Other (income) expense - net (12) (10)
Operating income (loss) $544 $(80) $(105) $359 $378 $(21) $(144) $213
Depreciation 192 24 2 218 159 4 1 164
Other income (expense) - net 9 - 3 12 11 - (1) 10
EBITDA $745 $(56) $(100) $589 $548 $(17) $(144) $387
Margins: -
Unrealized (gain) loss on derivative contracts (a) 56 12 - 68 (70) 17 - (53)
Terminated derivative contracts (b) - - - - (13) - - (13)
Revenue adjustment (c) - - - - 7 - - 7
Other (d) 5 - - 5 4 - - 4
Operation and maintenance:
Stock-based compensation expense (e) - - 8 8 - - 40 40
ARO accretion, net 15 1 - 16 17 - - 17
Impairments (f) 204 9 - 213 - - - -
(Gain) loss on dispositions (g) (563) - - (563) - - - -
TSA costs - - 24 24 - - 5 5
Separation benefits - - 9 9 - - 2 2
Corette closure costs (h) - - - - - 4 - 4
Transaction and restructuring costs (i) - - 15 15 - - 15 15
Legal contingency (j) - 4 - 4 - - - -
Other (8) - - (8) 3 - - 3
Other income (expense):
(Gain) loss from NDT funds (13) - - (13) (10) - - (10)
Adjusted EBITDA $441 $(30) $(44) $367 $486 $4 $(82) $408
==== ==== ==== ==== ==== === ==== ====
(a) Represents unrealized (gains)
losses on derivatives. Amounts
have been adjusted for
insignificant option premiums for
the three months ended June 30,
2016 and 2015, and $6 million and
$9 million for the six months
ended June 30, 2016 and 2015.
(b) Represents net realized gains on
certain derivative contracts that
were terminated due to the spinoff
transaction.
(c) Related to a prior period revenue
adjustment for the receipt of
revenue under a transmission
operating agreement with Talen
Energy Supply's former affiliate,
PPL Electric Utilities
Corporation.
(d) Includes OCI amortization on non-
active derivative positions.
(e) For the periods prior to June 2015,
represents the portion of PPL's
stock-based compensation cost
allocable to Talen Energy.
(f) Relates to Bell Bend Combined
Operating License Application
costs and Harquahala plant
impairments.
(g) Relates to Ironwood, Holtwood, Lake
Wallenpaupack and C.P. Crane
sales.
(h) Operations were suspended and the
Corette plant was retired in March
2015.
(i) Costs related to the spinoff
transaction, including expenses
associated with FERC-required
mitigation and legal and
professional fees. Also includes
transaction costs related to the
proposed merger with Riverstone
affiliates that was announced in
June 2016.
(j) Contingency relates to the
termination of a gas supply
contract.
TALEN ENERGY CORPORATION AND SUBSIDIARIES
Regulation G Reconciliations
Adjusted Free Cash Flow
(Unaudited)
(Millions of Dollars)
Six Months Ended June 30,
-------------------------
2016 2015
Cash from Operations $207 $355
Capital Expenditures,
excluding growth (a) (235) (197)
Counterparty
collateral paid
(received) 57 (36)
--- ---
Adjusted Free Cash
Flow, including other
adjustments 29 122
--- ---
Cash adjustments:
Transition Services
Agreement costs 23 5
Legal settlement (b) 3 -
Separation benefits 3 2
Corette closure costs
(c) - 4
Transaction and
restructuring costs
(d) 35 15
Taxes on above
adjustments (e) (26) (11)
Adjusted Free Cash
Flow $67 $137
=== ====
(a) Includes expenditures related
to intangible assets.
(b) Contingency relates to the
termination of a gas supply
contract.
(c) Operations were suspended and
the Corette plant was retired
in March 2015.
(d) Costs related to the spinoff
transaction, including FERC-
required mitigation plan
expenses and legal and
professional fees. Also
includes transaction costs
related to the proposed merger
with Riverstone affiliates
that was announced in June
2016.
(e) Assumed a marginal tax rate of
40%.
TALEN ENERGY CORPORATION AND SUBSIDIARIES
Regulation G Reconciliations
Adjusted EBITDA Projections
(Unaudited)
(Millions of Dollars)
Low - 2016E Midpoint -
2016E High - 2016E
----------- ----------- ------------
Net Income (Loss) $107 $167 $227
Income Taxes 72 112 152
Interest Expense 240 240 240
Depreciation and Amortization 424 424 424
EBITDA 843 943 1,043
--- --- -----
Stock-based compensation 12 12 12
Asset retirement obligation, net 35 35 35
Unrealized (gains) losses on
derivative contracts (a) 68 68 68
Nuclear decommissioning trust
losses (gains) (18) (18) (18)
(Gain) loss on sale (b) (563) (563) (563)
Asset impairments (c) 213 213 213
Transition Services Agreement costs
and other adjustments (d) 65 65 65
Adjusted EBITDA $655 $755 $855
==== ==== ====
(a) Represents unrealized (gains)
losses on derivatives. Amounts
have been adjusted for
insignificant option premiums.
(b) Relates to Ironwood, Holtwood, Lake
Wallenpaupack and C.P. Crane
sales.
(c) Relates to Bell Bend Combined
Operating License Application
costs and Harquahala plant
impairments.
(d) Other includes: (i) costs related
to the spinoff transaction,
including FERC-required
mitigation plan expenses and legal
and professional fees; (ii)
separation benefits related to
workforce reductions; and (iii)
costs related to the proposed
merger with Riverstone affiliates
that was announced in June 2016.
TALEN ENERGY CORPORATION AND SUBSIDIARIES
Regulation G Reconciliations
Adjusted Free Cash Flow Projections
(Unaudited)
(Millions of Dollars)
Low - 2016E Midpoint -
2016E High - 2016E
----------- ----------- ------------
Cash from Operations (a) $321 $401 $481
Capital Expenditures,
excluding growth (b) (467) (447) (427)
Counterparty collateral paid
(received) 57 57 57
Transition Services
Agreement costs 41 41 41
Legal settlement (c) 3 3 3
Separation benefits 3 3 3
Transaction and
restructuring costs (d) 35 35 35
Taxes on above adjustments
(e) (33) (33) (33)
Taxes on mitigated asset
sales (f) 300 300 300
Adjusted Free Cash Flow $260 $360 $460
==== ==== ====
(a) Excludes taxes paid on gains
generated from the mitigated
asset sales.
(b) Includes expenditures related
to intangible assets.
(c) Contingency relates to the
termination of a gas supply
contract.
(d) Costs related to the spinoff
transaction, including FERC-
required mitigation plan
expenses and legal and
professional fees. Also
includes costs related to the
proposed merger with
Riverstone affiliates that was
announced in June 2016.
(e) Assumed a marginal tax rate of
40%.
(f) Estimated taxes associated with
asset sales included in Cash
from Operations.
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Contacts:
Media Relations - George Lewis, 610-774-4687
Investor Relations - Andy Ludwig, 610-774-3389
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/talen-energy-reports-second-quarter-2016-results-300308950.html
SOURCE Talen Energy Corporation
