Executive Summary

Q2 2025 was operationally mixed: GAAP net income was $72M with diluted EPS $1.50, Adjusted EBITDA $90M and Adjusted FCF use of $(78)M; management reaffirmed full-year 2025 guidance despite an extended Susquehanna refueling outage that weighed on cash flow .
Versus S&P Global consensus for Q2: revenue modestly missed ($454M actual vs $462.8M est.) and on S&P’s “Primary EPS” basis results missed (-$1.08 actual vs -$0.18 est.; limited 2-estimate coverage). Note that S&P’s “Primary EPS” is not directly comparable to TLN’s reported diluted EPS due to methodology differences; see Estimates Context for details. Values retrieved from S&P Global.*
Strategic catalysts advanced: AWS PPA expanded to up to 1,920 MW through 2042 reducing market risk; two baseload PJM CCGT acquisitions (Freedom/Guernsey) announced for $3.5B net (6.7x 2026 EV/EBITDA) with >40% FCF/share accretion expected in 2026; and 6,702 MW cleared in the 2026/27 PJM BRA at $329.17/MWd (~$805M capacity revenue) .
Balance sheet/liquidity and hedging provide visibility: ~$861M liquidity (as of Aug 4), net leverage ~2.7x on 2025E midpoint; ~100% 2025, 66% 2026, 33% 2027 generation hedged (incl. Nuclear PTC) .

What Went Well and What Went Wrong

What Went Well
- Expanded AWS relationship to provide up to 1,920 MW “front‑of‑the‑meter” power through 2042, materially lowering market risk; management emphasized this “long‑term transaction will significantly decrease Talen’s market risk” .
- Announced strategic acquisition of Freedom and Guernsey CCGTs at 6.7x 2026 EV/EBITDA; expected to be “immediately accretive to free cash flow per share by over 40% in 2026” and over 50% through 2029 .
- Robust PJM capacity outcome: cleared 6,702 MW at $329.17/MWd in the 2026/27 BRA (~$805M capacity revenue), supporting forward cash flow visibility .
- Quote: “We expanded our relationship with Amazon to 1.9 GWs and announced the strategic acquisition of Freedom and Guernsey… expected to unlock material value on day one.” – CEO Mac McFarland .
What Went Wrong
- Extended Susquehanna refueling outage increased O&M and capex, driving Q2 Adjusted FCF to $(78)M and pressuring EBITDA sequentially; management explicitly tied weaker cash flow to the outage .
- Safety and nuclear mix deterioration YoY: OSHA TRIR 0.7 (vs 0.2), carbon‑free generation 41% (vs 49%), and total generation down to 7.3 TWh (vs 8.2 TWh) .
- Modest top‑line underperformance vs consensus on revenue; S&P “Primary EPS” also missed (limited coverage) highlighting comparability noise between Street EPS basis and reported diluted EPS . Values retrieved from S&P Global.*

Financial Results

Financial statements (GAAP revenue views): “Revenue (ex-derivatives)” aligns with Street; “Operating Revenues” includes unrealized derivative gains/losses.

Metric ($USD Millions, except per-share)	Q1 2025	Q2 2025
Capacity Revenues	$49	$88
Energy & Other Revenues	$582	$366
Revenue (ex-derivatives)	$631	$454
Unrealized Gain (Loss) on Derivatives	$(241)	$176
Operating Revenues (GAAP)	$390	$630
Diluted EPS	$(2.94)	$1.50

Non‑GAAP profitability and cash flow trend:

Metric ($USD Millions)	Q4 2024	Q1 2025	Q2 2025
Adjusted EBITDA	$164	$200	$90
Adjusted Free Cash Flow	$21	$87	$(78)

Revenue composition and derivative impacts:

Revenue Mix ($USD Millions)	Q1 2025	Q2 2025
Capacity Revenues	$49	$88
Energy & Other	$582	$366
Unrealized Derivative Gain/(Loss)	$(241)	$176
Operating Revenues (GAAP)	$390	$630

Key KPIs:

KPI	Q1 2025	Q2 2025
Total Generation (TWh)	9.7	7.3
Carbon‑Free Generation (%)	46%	41%
OSHA TRIR	0.4	0.7
Fleet EFOF	1.2%	2.3%

Consensus vs actual (Q2 2025 only; S&P Global basis and coverage shown):

Metric	Consensus	Actual	Surprise
Revenue ($M)	$462.8* (4 est.)	$454	$(8.8)
Primary EPS ($)	$(0.18)* (2 est.)	$(1.08)*	$(0.90)
EBITDA ($M)	$94.3*	$90 (Adj. EBITDA)	$(4.3)

Values marked with * retrieved from S&P Global. EPS basis per S&P (“Primary EPS”) is not directly comparable to TLN’s reported diluted EPS; see Estimates Context.

Guidance Changes

Metric	Period	Previous Guidance (Q1 2025)	Current Guidance (Q2 2025)	Change
Adjusted EBITDA	FY 2025	$975 – $1,125M	$975 – $1,125M	Maintained
Adjusted Free Cash Flow	FY 2025	$450 – $540M	$450 – $540M	Maintained
Capital Expenditures, net	FY 2025	$(190) – $(210)M	$(195) – $(205)M	Narrowed
Interest & Finance Payments	FY 2025	$(210) – $(220)M	$(220) – $(230)M	Raised
Income Taxes	FY 2025	$(70) – $(80)M	$(40) – $(60)M	Lowered
Pension Contributions	FY 2025	$(55) – $(75)M	$(70) – $(90)M	Raised

Earnings Call Themes & Trends

Note: Q2 2025 earnings call transcript could not be retrieved due to a source error; current-period commentary reflects the earnings press release and related Q2 press materials.

Topic	Q4 2024 (prior-2)	Q1 2025 (prior-1)	Q2 2025 (current)	Trend
AI / Data Center Power	Executing AWS PPA; ramp to 300 MW within approved ISA; strong conviction on AI-driven load -	Electrified campus; receiving revenues; pursuing solutions beyond 300 MW; active pipeline across fleet - -	Expanded AWS PPA up to 1,920 MW through 2042; exploring SMRs and uprates	Accelerating scale and diversification
Regulatory / FERC / PJM	Advocating clarity on co-location rules; support for capacity market stability (cap/floor)	Expect constructive PJM auctions; confidence in 2026 outlook; Fifth Circuit appeal on ISA denial progressing -	Reaffirmed; added 2026/27 BRA result; RMR in effect from June	Positive momentum and clarity
Capacity Market	Anticipated uplift in 2025/26 auctions; RPM reform needed	Expect “extremely constructive” auction outcomes; fundamentals tight	Cleared 6,702 MW at $329.17/MWd for 2026/27	Tight markets validated
Hedging / Visibility	High hedge levels; PTC provides floor	Increased 2026/27 hedges into strength; 2025 margins largely bracketed	~100% 2025, 66% 2026, 33% 2027 hedged incl. PTC	Stronger visibility
Asset Operations	Record reliability/safety in 2024; RMR for Brandon Shores/Wagner through 2029 -	Susquehanna U2 outage extended for incremental efficiency (payback ~1.5 yrs) -	Q2 results reflected extended outage; generation mix shifted	Near-term headwind, long-term efficiency gain

Management Commentary

“We expanded our relationship with Amazon to 1.9 gigawatts… and announced the strategic acquisition of Freedom and Guernsey… expected to unlock material value on day one.” – Mac McFarland, CEO .
“We are reaffirming 2025 guidance. Please join us at our Investor Update on September 9 where we will discuss our 2026 guidance and 2027/2028 outlook.” – Mac McFarland .
On AWS PPA expansion: “At the full contract quantity… up to 1,920 MWs… through 2042… This long-term transaction will significantly decrease Talen’s market risk and minimize its reliance on the Federal nuclear production tax credit.” .
On Freedom/Guernsey: “The net purchase price reflects… 6.7x 2026 EV/EBITDA… immediately accretive to free cash flow per share by over 40% in 2026, and over 50% from 2027 through 2029.” .

Q&A Highlights

Note: The Q2 2025 earnings call transcript was not accessible; below are prevailing Q&A themes from Q1 that remained relevant into Q2 given management’s reiterated messages.

Front‑of‑the‑meter structures and reliability: management emphasized portfolio-backed solutions for hyperscalers and differences between nuclear vs. gas constructs, with TLN positioned to warehouse/manage commodity risk for appropriate returns -.
Regulatory path on co‑location and alternatives: confidence in swift resolution with FERC/PJM; dual‑track approach (commercial solutions plus legal process) to expand beyond 300 MW .
Capacity market outlook: tight fundamentals; collar steepness; potential variability from wind/DR participation, but constructive setup overall .
Capital allocation: buybacks remain first priority; opportunities must clear FCF/share return benchmarks .

Estimates Context

Street coverage remains thin (2 EPS estimates; 4 revenue estimates). On S&P’s basis, Q2 revenue modestly missed ($454M actual vs $462.8M est.) while Primary EPS missed (-$1.08 actual vs -$0.18 est.). Values retrieved from S&P Global.*
EPS comparability: TLN’s reported diluted EPS was $1.50, supported by unrealized derivative gains and NDT gains (e.g., $176M unrealized gains and $80M NDT gains in Q2), which can drive GAAP variability; S&P’s “Primary EPS” methodology differs and is not directly comparable to diluted EPS, contributing to apparent divergence .
EBITDA lens: company-reported Adjusted EBITDA was $90M vs S&P EBITDA consensus of $94.3M.* Given definitional differences across providers, we anchor “actual” on company’s Adjusted EBITDA reconciliations .

Key Takeaways for Investors

Near-term optics clouded by the Susquehanna outage, but 2025 guidance reaffirmation and Q3/Q4 capacity/RMR uplift support 2H weighting to EBITDA/FCF .
Structural de‑risking advanced: AWS PPA expansion to 1.92 GW through 2042 reduces market exposure and underpins long-duration cash flows .
Portfolio scale/optionality improving: Freedom/Guernsey add efficient PJM baseload at attractive 6.7x 2026 EV/EBITDA with >40% FCF/share accretion in 2026; closing targeted Q4 2025 .
Capacity tailwinds validated: 6,702 MW cleared at $329.17/MWd in 2026/27 BRA (~$805M revenue), bolstering 2026 cash flow visibility .
Hedging and PTC provide downside protection; net leverage ~2.7x on 2025E midpoint with ~$861M liquidity supports capital deployment flexibility .
Watch regulatory cadence (FERC/PJM co‑location, RMR approvals) and September Investor Update (2026 guidance, 2027/28 outlook) for catalysts .
Risk monitor: outage execution, acquisition financing/close, and continued definition mismatches in Street EPS vs reported diluted EPS may drive headline volatility .

Additional references and supporting materials

Q2 2025 8‑K and Exhibit 99.1 (full financials, guidance, liquidity/hedging, AWS PPA, acquisitions) -.
Q2 2025 press release (mirrors Exhibit 99.1 highlights) -.
PJM BRA result press release (2026/27, $329.17/MWd) .
Freedom/Guernsey acquisition press release -.
Q1 2025 8‑K and call transcript (trend comps, outage, capital allocation) - -.
FY 2024 8‑K and Q4 2024 call (baseline, capacity/regulatory stance) - -.

Footnote: Values marked with * are retrieved from S&P Global (consensus and S&P “Primary EPS”/“Revenue” frames) and may differ from TLN’s reported GAAP/Non‑GAAP presentations due to methodology.

Talen Energy Corp (TLN)·Q2 2025 Earnings Summary