Attached files
| file | filename |
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| 8-K - 8-K - Talen Energy Corp | tln1152015_8k.htm |
Contacts: Media Relations - George Lewis, 610-774-4687
Investor Relations - Andy Ludwig, 610-774-3389
Talen Energy Reports Third Quarter 2015 Results; Raises 2015 Guidance
2015 Financial Results
• | Adjusted EBITDA of $357 million for the three months ended September 30 |
• | Adjusted EBITDA of $765 million for the nine months ended September 30 |
• | Adjusted Free Cash Flow of $439 million for the nine months ended September 30 |
2015 and 2016 Financial Outlook
• | Raised and narrowed full-year 2015 guidance ranges for Adjusted EBITDA to $1,050-$1,100 million and for Adjusted Free Cash Flow to $375-$425 million1 |
• | Updated full-year 2016 midpoint projections for Adjusted EBITDA and Adjusted Free Cash Flow to $845 million and $260 million respectively, reflecting announced asset sales2 |
Operating and Commercial Highlights
• | Completed acquisition of MACH Gen, LLC, adding 2,500 megawatts of efficient natural gas-fired generation in key markets |
• | Completed sale of renewable energy business |
• | Announced agreement for sale of Ironwood combined-cycle natural gas-fired plant for $654 million ($929/kilowatt) |
• | Announced agreement for sale of Holtwood and Lake Wallenpaupack hydroelectric plants for a total of $860 million ($2,945/kilowatt) |
• | Announced agreement for sale of C.P. Crane coal-fired plant in Maryland |
• | Increased expected 2015 synergies to $135 million |
ALLENTOWN, Pa. (Nov. 5, 2015) -Talen Energy Corporation (NYSE: TLN) reported this morning third quarter 2015 Adjusted EBITDA of $357 million, compared with $247 million in the third quarter of 2014, and reported a Net Loss of $401 million, compared with Net Income of $101 million for the third quarter of 2014.
For the first nine months of 2015, Adjusted EBITDA was $765 million, compared with $605 million in the first nine months of 2014, and the company reported a Net Loss of $279 million, compared with Net Income of $48 million for the first nine months of 2014.
Net Losses in the third quarter and first nine months of 2015 reflect previously announced non-cash goodwill and other asset impairment charges of $522 million after tax.
1 Adjusted EBITDA and Adjusted Free Cash Flow ranges reflect results of RJS operations for all of 2015, including the five months prior to acquisition, and have not been adjusted to reflect the acquisition of MACH Gen, LLC, or the sale of Talen Renewable Energy.
2 The update removes contributions to Adjusted EBITDA and Adjusted Free Cash Flow from assets for which Talen Energy has announced agreements for sale.
“Excluding the non-cash impairment charges, our third-quarter results reflect superior execution in our operations and business strategy. Our plants continued their excellent performance, providing efficient and reliable power throughout the summer," said Paul Farr, President and Chief Executive Officer of Talen Energy.
"We are on track to achieve $135 million in synergies this year, outperforming our previous 2015 target of $115 million," he said. "We also completed the first significant acquisition in our growth strategy, adding 2,500 megawatts of high-quality natural gas assets from MACH Gen to our fleet at an attractive price, and we expect to realize excellent value upon closing of the announced divestitures of the Ironwood, Holtwood and Lake Wallenpaupack plants.”
Based on third quarter results, Talen Energy has increased and narrowed its full-year 2015 guidance ranges for Adjusted EBITDA and Adjusted Free Cash Flow. The guidance range for Adjusted EBITDA is $1,050 million to $1,100 million. The previous range was $935 million to $1,085 million. The guidance range for Adjusted Free Cash Flow is $375 million to $425 million. The previous range was $265 million to $415 million.
In addition, Talen Energy updated full-year 2016 midpoint projections for Adjusted EBITDA and Adjusted Free Cash Flow to $845 million and $260 million respectively. These updates exclude contributions to Adjusted EBITDA and Adjusted Free Cash Flow from assets for which Talen Energy has announced agreements to sell.
Review of Segment Results
Financial information for the first nine months of 2015 represents nine months of legacy Talen Energy Supply results consolidated with four months of RJS results. The financial information presented for the third quarter and first nine months of 2014 represents only legacy Talen Energy Supply results.
(in millions) | Three Months Ended | Nine Months Ended | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Operating Income (Loss) | |||||||||||||||
East | $ | (230 | ) | $ | 242 | $ | 132 | $ | 307 | ||||||
West | 24 | — | 18 | — | |||||||||||
Other(2) | (40 | ) | (53 | ) | (184 | ) | (181 | ) | |||||||
Total | $ | (246 | ) | $ | 189 | $ | (34 | ) | $ | 126 | |||||
EBITDA(1) | |||||||||||||||
East | $ | (245 | ) | $ | 327 | $ | 289 | $ | 554 | ||||||
West | 34 | — | 31 | — | |||||||||||
Other(2) | (39 | ) | (54 | ) | (183 | ) | (180 | ) | |||||||
Total | $ | (250 | ) | $ | 273 | $ | 137 | $ | 374 | ||||||
Adjusted EBITDA(1) | |||||||||||||||
East | $ | 337 | $ | 290 | $ | 825 | $ | 740 | |||||||
West | 43 | — | 45 | — | |||||||||||
Other(2) | (23 | ) | (43 | ) | (105 | ) | (135 | ) | |||||||
Total | $ | 357 | $ | 247 | $ | 765 | $ | 605 | |||||||
(1) EBITDA and Adjusted EBITDA are non-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 GAAP measure.
(2) General and administrative expenses are not allocated to each segment and are included in the "Other" category.
East Segment
The East segment includes operations primarily within PJM Interconnection, as well as continuing operations of legacy Talen Energy Supply assets in Montana.
The quarter-over-quarter increase of $47 million in Adjusted EBITDA was primarily due to higher margins driven by the addition of the RJS operations, higher capacity prices, higher nuclear availability, lower average fuel prices, and improved spark spreads, partially offset by gains realized in 2014 on certain commodity positions and lower realized energy prices.
The year-to-date increase of $85 million in Adjusted EBITDA was primarily due to higher margins driven by the addition of the RJS operations, higher realized energy prices, higher nuclear availability, and improved spark spreads, partially offset by lower capacity prices, gains realized in 2014 on certain commodity positions, the net effect of unusual market and weather volatility in the first quarter of 2014, and lower volumes on full-requirements sales contracts.
The quarter-over-quarter decrease in Operating Income (Loss) of $472 million and the year-to-date decrease in Operating Income of $175 million were primarily due to non-cash goodwill and other asset impairment charges, which were recorded in the third quarter of 2015.
West Segment
The West segment includes operations within the ERCOT market in Texas.
The segment's Operating Income for the third quarter of 2015 was $24 million. Adjusted EBITDA for the third quarter of 2015 was $43 million.
The segment's Operating Income for the four months since acquisition on June 1, 2015, was $18 million. Adjusted EBITDA for the period since acquisition was $45 million.
The Texas assets were acquired June 1, 2015, so there is no comparable data to report for the third quarter and the first nine months of 2014.
Other
The "Other" category includes general and administrative expenses not allocated to a segment.
The quarter-over-quarter improvement of $20 million in Adjusted EBITDA and year-to-date improvement of $30 million in Adjusted EBITDA for Other is primarily due to lower corporate expenses.
Adjusted Free Cash Flow
Adjusted Free Cash Flow for the first nine months of 2015 represents nine months of legacy Talen Energy Supply results consolidated with four months of RJS results. Adjusted Free Cash Flow for the first nine months of 2014 represents only legacy Talen Energy Supply results.
(in millions) | Nine Months Ended | |||||||
September 30, 2015 | September 30, 2014 | |||||||
Cash from Operations | $ | 731 | $ | 465 | ||||
Adjusted Free Cash Flow(1) | $ | 439 | $ | 202 | ||||
(1) Adjusted Free Cash Flow is a non-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) | September 30, 2015 | December 31, 2014 | |||||||
Cash and cash equivalents | $ | 648 | $ | 352 | |||||
Short-term debt | — | 630 | |||||||
Net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30, and the changes between periods were as follows.
(in millions) | 2015 | 2014 | Change - Cash | |||||||||
Operating activities | $ | 731 | $ | 465 | $ | 266 | ||||||
Investing activities | (173 | ) | (344 | ) | 171 | |||||||
Financing activities | (262 | ) | (166 | ) | (96 | ) | ||||||
2015 and 2016 Financial Outlook
Talen Energy is increasing and narrowing its full-year 2015 guidance for Adjusted EBITDA to a range of $1,050 million to $1,100 million, and for Adjusted Free Cash Flow to a range of $375 million to $425 million. Both include results for RJS for the five months of 2015 prior to acquisition, but have not been adjusted to reflect the acquisition of MACH Gen, LLC, or the sale of Talen Renewable Energy.
For a detailed itemization of adjustments and reconciliations of Adjusted EBITDA to Operating Income (Loss) and Adjusted Free Cash Flow to Cash Flow from Operations, see the tables at the end of the news release.
The company also updated the midpoint of full-year 2016 Adjusted EBITDA and Adjusted Free Cash Flow projections to $845 million and $260 million respectively. The 2016 update removes contributions to Adjusted EBITDA and Adjusted Free Cash Flow from assets for which Talen Energy has announced agreements to sell. The guidance also reflects planned uses of asset sale proceeds to retire pre-payable and maturing debt.
Conference Call and Webcast
Talen Energy management will discuss these results during a conference call and webcast on Thursday, Nov. 5, 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 6975840.
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.
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 and corporate strategy are "forward-looking statements" within the meaning of the federal securities laws. Although Talen Energy Corporation 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: market demand and prices for energy, capacity and fuel; weather conditions affecting customer energy usage and operating costs; competition in power markets; the effect of any business or industry restructuring; the profitability and liquidity of Talen Energy Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of generating plants and other facilities; unanticipated difficulties or delays in our ability to successfully integrate the RJS businesses and to achieve anticipated synergies and cost savings as a result of the spinoff transaction and combination with RJS Power; delays in and/or additional costs to complete the proposed sales of the Ironwood, Holtwood, Lake Wallenpaupack and C.P. Crane plants and/or the Brunner Island dual-fuel project; unforeseen difficulties in successfully integrating the MACH Gen power facilities into Talen Energy's portfolio and/or in successfully executing efforts to optimize and/or monetize the value of the Harquahala plant; unexpected costs or liabilities associated with the MACH Gen power facilities; the length of scheduled and unscheduled outages at our generating plants; environmental conditions and requirements and the related costs of compliance, including environmental capital expenditures and emission allowance and other expenses; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures; asset or business acquisitions and dispositions; receipt of necessary governmental permits or approvals; levels of indebtedness; capital market conditions and decisions regarding capital structure; the impact of state, federal or foreign investigations applicable to Talen Energy Corporation and its subsidiaries; the outcome of litigation against Talen Energy Corporation and its subsidiaries; stock price performance; the market prices of equity securities and the impact on pension income and resultant cash funding requirements for defined benefit pension plans; the securities and credit ratings of Talen Energy Corporation and its subsidiaries; political, regulatory or economic conditions in states, regions or countries where Talen Energy Corporation or its subsidiaries conduct business, including any potential effects of threatened or actual terrorism or war or other hostilities; foreign exchange rates; new state, federal or foreign legislation, including new tax legislation; changes in earnings estimates or buy/sell recommendations by analysts; volatility in market demand and prices for energy, capacity, transmission services, emission allowances and RECs; competition in retail and wholesale power and natural gas markets; and the
commitments and liabilities of Talen Energy Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such important factors and in conjunction with Talen Energy Corporation's prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on Nov. 3, 2015 and its other reports on file with the Securities and Exchange Commission.
Definition of Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying earnings release contains non-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, 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, shareholders, 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 GAAP. We believe that Adjusted Free Cash Flow, although a non-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) | |||||||
September 30, | December 31, | ||||||
2015 | 2014 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 648 | $ | 352 | |||
Restricted cash and cash equivalents | 67 | 176 | |||||
Accounts receivable (less reserve: 2015, $1; 2014, $2) | 297 | 289 | |||||
Accounts receivable from affiliates | — | 36 | |||||
Unbilled revenues | 125 | 218 | |||||
Fuel, materials and supplies | 468 | 455 | |||||
Prepayments | 52 | 70 | |||||
Deferred income taxes | 114 | 8 | |||||
Price risk management assets | 576 | 1,079 | |||||
Assets of discontinued operations | 266 | — | |||||
Other current assets | 9 | 18 | |||||
Investments | 938 | 980 | |||||
Property, Plant and Equipment | 14,139 | 12,235 | |||||
Less: accumulated depreciation | 6,479 | 6,242 | |||||
Property, plant and equipment, net | 7,660 | 5,993 | |||||
Construction work in progress | 411 | 443 | |||||
Total Property, Plant and Equipment, net | 8,071 | 6,436 | |||||
Goodwill | — | 72 | |||||
Other intangibles | 309 | 257 | |||||
Price risk management assets | 226 | 239 | |||||
Other noncurrent assets | 88 | 75 | |||||
Total Assets | $ | 12,254 | $ | 10,760 | |||
Liabilities and Equity | |||||||
Short-term debt | $ | — | $ | 630 | |||
Long-term debt due within one year | 654 | 535 | |||||
Accounts payable | 278 | 361 | |||||
Accounts payable to affiliates | — | 50 | |||||
Liabilities of discontinued operations | 5 | — | |||||
Other current liabilities | 911 | 1,314 | |||||
Long-term Debt | 3,376 | 1,683 | |||||
Deferred income taxes and investment tax credits | 1,585 | 1,250 | |||||
Price risk management liabilities - noncurrent | 178 | 193 | |||||
Accrued pension obligations | 253 | 299 | |||||
Asset retirement obligations | 472 | 415 | |||||
Other deferred credits and noncurrent liabilities | 140 | 123 | |||||
Predecessor Member's Equity (a) | — | 3,930 | |||||
Common Stock and additional paid-in capital | 4,719 | — | |||||
Earnings reinvested | (311 | ) | — | ||||
Accumulated other comprehensive income (loss) | (6 | ) | (23 | ) | |||
Total Liabilities and Equity | $ | 12,254 | $ | 10,760 | |||
(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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Operating Revenues | |||||||||||||||
Wholesale energy | $ | 986 | $ | 1,109 | $ | 2,181 | $ | 203 | |||||||
Wholesale energy to affiliate | — | 20 | 14 | 68 | |||||||||||
Retail energy | 277 | 283 | 831 | 913 | |||||||||||
Energy-related businesses | 156 | 189 | 404 | 469 | |||||||||||
Total Operating Revenues | 1,419 | 1,601 | 3,430 | 1,653 | |||||||||||
Operating Expenses | |||||||||||||||
Operation | |||||||||||||||
Fuel | 394 | 212 | 945 | 953 | |||||||||||
Energy purchases | 298 | 708 | 588 | (893 | ) | ||||||||||
Other operation and maintenance | 228 | 232 | 759 | 746 | |||||||||||
Impairments | 479 | — | 479 | — | |||||||||||
Depreciation | 95 | 74 | 259 | 225 | |||||||||||
Taxes, other than income | 19 | 14 | 49 | 45 | |||||||||||
Energy-related businesses | 152 | 172 | 385 | 451 | |||||||||||
Total Operating Expenses | 1,665 | 1,412 | 3,464 | 1,527 | |||||||||||
Operating Income (Loss) | (246 | ) | 189 | (34 | ) | 126 | |||||||||
Other Income (Expense) - net | 1 | 10 | 11 | 23 | |||||||||||
Interest Expense | 55 | 31 | 146 | 95 | |||||||||||
Income (Loss) from Continuing Operations Before Income Taxes | (300 | ) | 168 | (169 | ) | 54 | |||||||||
Income Taxes | 39 | 74 | 49 | 16 | |||||||||||
Income (Loss) from Continuing Operations After Income Taxes | (339 | ) | 94 | (218 | ) | 38 | |||||||||
Income (Loss) from Discontinued Operations (net of income taxes) | (62 | ) | 7 | (61 | ) | 10 | |||||||||
Net Income (Loss) | $ | (401 | ) | $ | 101 | $ | (279 | ) | $ | 48 | |||||
Earnings Per Share of Common Stock: | |||||||||||||||
Basic: | |||||||||||||||
Income (Loss) from continuing operations after income taxes | $ | (2.64 | ) | $ | 1.13 | $ | (2.10 | ) | $ | 0.45 | |||||
Income (Loss) from discontinued operations (net of income taxes) | (0.48 | ) | 0.08 | (0.59 | ) | 0.12 | |||||||||
Net Income (Loss) | $ | (3.12 | ) | $ | 1.21 | $ | (2.69 | ) | $ | 0.57 | |||||
Diluted: | |||||||||||||||
Income (Loss) from continuing operations | $ | (2.64 | ) | $ | 1.13 | $ | (2.10 | ) | $ | 0.45 | |||||
Income (Loss) from discontinued operations (net of income taxes) | (0.48 | ) | 0.08 | (0.59 | ) | 0.12 | |||||||||
Net Income (Loss) | $ | (3.12 | ) | $ | 1.21 | $ | (2.69 | ) | $ | 0.57 | |||||
Weighted-Average Shares of Common Stock Outstanding (in thousands) | |||||||||||||||
Basic | 128,509 | 83,524 | 103,627 | 83,524 | |||||||||||
Diluted | 128,509 | 83,524 | 103,627 | 83,524 | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Talen Energy Corporation and Subsidiaries | |||||||
(Unaudited) | |||||||
(Millions of Dollars) | |||||||
Nine Months Ended | |||||||
September 30, | |||||||
2015 | 2014 | ||||||
Cash Flows from Operating Activities | |||||||
Net income (loss) | $ | (279 | ) | $ | 48 | ||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | 259 | 242 | |||||
Amortization | 137 | 117 | |||||
Defined benefit plans - expense | 35 | 34 | |||||
Deferred income taxes and investment tax credits | (30 | ) | (150 | ) | |||
Impairment of assets | 592 | 20 | |||||
Unrealized (gains) losses on derivatives, and other hedging activities | (80 | ) | 216 | ||||
Other | 76 | 19 | |||||
Change in current assets and current liabilities | |||||||
Accounts receivable | 64 | (1 | ) | ||||
Accounts payable | (148 | ) | (45 | ) | |||
Unbilled revenues | 93 | 41 | |||||
Fuel, materials and supplies | 58 | (67 | ) | ||||
Prepayments | 23 | 5 | |||||
Counterparty collateral | 76 | (18 | ) | ||||
Price risk management assets and liabilities | (9 | ) | (34 | ) | |||
Taxes payable | (23 | ) | 70 | ||||
Other | (32 | ) | (14 | ) | |||
Other operating activities | |||||||
Defined benefit plans - funding | (74 | ) | (32 | ) | |||
Other assets | 1 | (2 | ) | ||||
Other liabilities | (8 | ) | 16 | ||||
Net cash provided by operating activities | 731 | 465 | |||||
Cash Flows from Investing Activities | |||||||
Expenditures for property, plant and equipment | (252 | ) | (276 | ) | |||
Expenditures for intangible assets | (35 | ) | (38 | ) | |||
Purchases of nuclear plant decommissioning trust investments | (154 | ) | (124 | ) | |||
Proceeds from the sale of nuclear plant decommissioning trust investments | 143 | 112 | |||||
Proceeds from the receipt of grants | — | 164 | |||||
Net (increase) decrease in restricted cash and cash equivalents | 110 | (199 | ) | ||||
Other investing activities | 15 | 17 | |||||
Net cash provided by (used in) investing activities | (173 | ) | (344 | ) | |||
Cash Flows from Financing Activities | |||||||
Issuance of long-term debt | 600 | — | |||||
Retirement of long-term debt | (33 | ) | (308 | ) | |||
Contributions from member | 82 | 730 | |||||
Distributions to member | (214 | ) | (1,178 | ) | |||
Net increase (decrease) in short-term debt | (667 | ) | 590 | ||||
Other financing activities | (30 | ) | — | ||||
Net cash provided by (used in) financing activities | (262 | ) | (166 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents | 296 | (45 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 352 | 239 | |||||
Cash and Cash Equivalents at End of Period | $ | 648 | $ | 194 | |||
TALEN ENERGY CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
Regulation G Reconciliations | |||||||||||||||||||||||||||||||
Adjusted EBITDA | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(Millions of Dollars) | |||||||||||||||||||||||||||||||
Three Months | |||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
East | West | Other | Total | East | West | Other | Total | ||||||||||||||||||||||||
Net income (loss) | $ | (401 | ) | $ | 101 | ||||||||||||||||||||||||||
(Income) loss from discontinued operations (net of tax) | 62 | (7 | ) | ||||||||||||||||||||||||||||
Interest expense | 55 | 31 | |||||||||||||||||||||||||||||
Income taxes | 39 | 74 | |||||||||||||||||||||||||||||
Other (income) expense - net | (1 | ) | (10 | ) | |||||||||||||||||||||||||||
Operating income (loss) | $ | (230 | ) | $ | 24 | $ | (40 | ) | $ | (246 | ) | $ | 242 | $ | — | $ | (53 | ) | $ | 189 | |||||||||||
Depreciation | 84 | 10 | 1 | 95 | 74 | — | — | 74 | |||||||||||||||||||||||
Other income (expense) - net | 1 | — | — | 1 | 11 | — | (1 | ) | 10 | ||||||||||||||||||||||
Sapphire EBITDA (a) | (100 | ) | — | — | (100 | ) | — | — | — | — | |||||||||||||||||||||
EBITDA | $ | (245 | ) | $ | 34 | $ | (39 | ) | $ | (250 | ) | $ | 327 | $ | — | $ | (54 | ) | $ | 273 | |||||||||||
Unrealized (gain) loss on derivative contracts (b) | (59 | ) | 9 | — | (50 | ) | (26 | ) | — | — | (26 | ) | |||||||||||||||||||
Stock-based compensation expense (c) | — | — | 1 | 1 | — | — | 3 | 3 | |||||||||||||||||||||||
(Gain) loss from NDT funds | (1 | ) | — | — | (1 | ) | (10 | ) | — | — | (10 | ) | |||||||||||||||||||
ARO accretion | 8 | — | — | 8 | 8 | — | — | 8 | |||||||||||||||||||||||
Coal contract adjustment (d) | 41 | — | — | 41 | — | — | — | — | |||||||||||||||||||||||
Impairments (e) | 588 | — | — | 588 | — | — | — | — | |||||||||||||||||||||||
Mechanical subsidiary revenue adjustment (f) | — | — | — | — | (14 | ) | — | — | (14 | ) | |||||||||||||||||||||
TSA costs | — | — | 14 | 14 | — | — | — | — | |||||||||||||||||||||||
Separation benefits (g) | — | — | — | — | — | — | 8 | 8 | |||||||||||||||||||||||
RJS transaction costs | — | — | 1 | 1 | — | — | — | — | |||||||||||||||||||||||
Other (l) | 5 | — | — | 5 | 5 | — | — | 5 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 337 | $ | 43 | $ | (23 | ) | $ | 357 | $ | 290 | $ | — | $ | (43 | ) | $ | 247 | |||||||||||||
Nine Months | |||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
East | West | Other | Total | East | West | Other | Total | ||||||||||||||||||||||||
Net income (loss) | $ | (279 | ) | $ | 48 | ||||||||||||||||||||||||||
(Income) loss from discontinued operations (net of tax) | 61 | (10 | ) | ||||||||||||||||||||||||||||
Interest expense | 146 | 95 | |||||||||||||||||||||||||||||
Income taxes | 49 | 16 | |||||||||||||||||||||||||||||
Other (income) expense - net | (11 | ) | (23 | ) | |||||||||||||||||||||||||||
Operating income (loss) | $ | 132 | $ | 18 | $ | (184 | ) | $ | (34 | ) | $ | 307 | $ | — | $ | (181 | ) | $ | 126 | ||||||||||||
Depreciation | 244 | 13 | 2 | 259 | 225 | — | — | 225 | |||||||||||||||||||||||
Other income (expense) - net | 12 | — | (1 | ) | 11 | 22 | — | 1 | 23 | ||||||||||||||||||||||
Sapphire EBITDA (a) | (99 | ) | — | — | (99 | ) | — | — | — | — | |||||||||||||||||||||
EBITDA | $ | 289 | $ | 31 | $ | (183 | ) | $ | 137 | $ | 554 | $ | — | $ | (180 | ) | $ | 374 | |||||||||||||
Unrealized (gain) loss on derivative contracts (b) | (117 | ) | 14 | — | (103 | ) | 192 | — | — | 192 | |||||||||||||||||||||
Stock-based compensation expense (c) | — | — | 41 | 41 | — | — | 15 | 15 | |||||||||||||||||||||||
(Gain) loss from NDT funds | (11 | ) | — | — | (11 | ) | (21 | ) | — | — | (21 | ) | |||||||||||||||||||
ARO accretion | 25 | — | — | 25 | 23 | — | — | 23 | |||||||||||||||||||||||
Coal contract adjustment (d) | 41 | — | — | 41 | — | — | — | — | |||||||||||||||||||||||
Impairments (e) | 588 | — | — | 588 | — | — | — | — | |||||||||||||||||||||||
Mechanical subsidiary revenue adjustment (f) | — | — | — | — | (17 | ) | — | — | (17 | ) | |||||||||||||||||||||
TSA costs | — | — | 19 | 19 | — | — | — | — | |||||||||||||||||||||||
Separation benefits (g) | — | — | 2 | 2 | — | — | 30 | 30 | |||||||||||||||||||||||
Corette closure costs (h) | 4 | — | — | 4 | — | — | — | — | |||||||||||||||||||||||
Terminated derivative contracts (i) | (13 | ) | — | — | (13 | ) | — | — | — | — | |||||||||||||||||||||
Revenue adjustment (j) | 7 | — | — | 7 | — | — | — | — | |||||||||||||||||||||||
RJS transaction costs | — | — | 6 | 6 | — | — | — | — | |||||||||||||||||||||||
Restructuring costs (k) | — | — | 10 | 10 | — | — | — | — | |||||||||||||||||||||||
Other (l) | 12 | — | — | 12 | 9 | — | — | 9 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 825 | $ | 45 | $ | (105 | ) | $ | 765 | $ | 740 | $ | — | $ | (135 | ) | $ | 605 | |||||||||||||
(a) | Sapphire has been classified as discontinued operations since its June 1, 2015 acquisition. This includes an impairment recorded during the three and nine months ended September 30, 2015. |
(b) | Represents unrealized gains (losses) on derivatives. Amounts have been adjusted for option premiums of $5 million and $14 million for the three and nine months ended September 30, 2015 and $2 million and $6 million for the same periods in 2014. |
(c) | For periods prior to June 2015, represents the portion of PPL's stock-based compensation cost allocable to Talen Energy. Amounts for the 2014 periods were cash settled with a former affiliate. |
(d) | To mitigate the risk of oversupply, Talen Energy incurred pre-tax charges of $41 million for the three and nine months ended September 30, 2015 to reduce its 2015-2018 contracted coal deliveries. |
(e) | Includes charges for goodwill and certain long lived assets. |
(f) | In 2014, Talen Energy recorded $14 million and $17 million for the three and nine month periods to "Energy-related businesses" revenues on the 2014 Statement of Income related to prior periods and the timing of revenue recognition for a mechanical contracting and engineering subsidiary. |
(g) | In June 2014, Talen Energy Supply's largest IBEW local ratified a new three-year labor agreement. In connection with the new agreement, estimated bargaining unit one-time voluntary retirement benefits were recorded. In addition, the three and nine month periods in 2014 include separation costs related to the spinoff transaction. |
(h) | Operations were suspended and the Corette plant was retired in March 2015. |
(i) | Represents net realized gains on certain derivative contracts that were early-terminated due to the spinoff transaction. |
(j) | Relates 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. |
(k) | Costs related to the spinoff transaction, including FERC-required mitigation plan expenses and legal and professional fees. |
(l) | All periods include OCI amortization on non-active derivative positions and the 2015 periods include an asset write-off. |
TALEN ENERGY CORPORATION AND SUBSIDIARIES | ||||||||
Regulation G Reconciliations | ||||||||
Adjusted Free Cash Flow | ||||||||
(Unaudited) | ||||||||
(Millions of Dollars) | ||||||||
Nine Months Ended September 30, | ||||||||
2015 | 2014 | |||||||
Cash from Operations | $ | 731 | $ | 465 | ||||
Capital Expenditures, excluding growth | (265 | ) | (299 | ) | ||||
Counterparty collateral paid (received) | (76 | ) | 18 | |||||
Adjusted Free Cash Flow, including other adjustments | 390 | 184 | ||||||
Cash adjustments (after tax): | ||||||||
Coal contract adjustment | 25 | — | ||||||
Transition Services Agreement costs | 11 | — | ||||||
Separation benefits | 1 | 18 | ||||||
Corette closure costs (a) | 2 | — | ||||||
RJS transaction costs | 4 | — | ||||||
Restructuring costs (b) | 6 | — | ||||||
Adjusted Free Cash Flow | $ | 439 | $ | 202 | ||||
(a) | Operations were suspended and the Corette plant was retired in March 2015. |
(b) | Costs related to the spinoff transaction, including FERC-required mitigation plan expenses and legal and professional fees. |
TALEN ENERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||||
Regulation G Reconciliations | ||||||||||||||||
Adjusted EBITDA Projections | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Millions of Dollars) | ||||||||||||||||
Low - 2015E (a) | Midpoint - 2015E (a) | High - 2015E (a) | Midpoint 2016E - Adjusted for Anticipated Sales (b) | |||||||||||||
Net Income (Loss) | $ | (388 | ) | $ | (373 | ) | $ | (358 | ) | $ | 77 | |||||
Income Taxes | (37 | ) | (27 | ) | (17 | ) | 41 | |||||||||
Interest Expense | 363 | 363 | 363 | 225 | ||||||||||||
Depreciation and Amortization | 401 | 401 | 401 | 409 | ||||||||||||
EBITDA | 339 | 364 | 389 | 752 | ||||||||||||
Non-Cash Compensation | 45 | 45 | 45 | 21 | ||||||||||||
Asset Retirement Obligation | 34 | 34 | 34 | 37 | ||||||||||||
MTM losses (gains) | (101 | ) | (101 | ) | (101 | ) | — | |||||||||
Nuclear decommissioning trust losses (gains) | (12 | ) | (12 | ) | (12 | ) | (10 | ) | ||||||||
Impairments | 588 | 588 | 588 | |||||||||||||
Adjusted EBITDA, including other adjustments | 893 | 918 | 943 | 800 | ||||||||||||
Other Adjustments: | ||||||||||||||||
Transition Services Agreement costs and allocations (c) | 66 | 66 | 66 | 45 | ||||||||||||
Other (d) | 91 | 91 | 91 | — | ||||||||||||
Adjusted EBITDA | $ | 1,050 | $ | 1,075 | $ | 1,100 | $ | 845 | ||||||||
(a) | 2015 forecasted amounts include twelve months of performance from RJS, including the five-month period prior to acquisition and an adjustment for PPL allocations not expected to continue in future periods, and have not been adjusted to reflect the acquisition of MACH Gen, LLC or the sale of Talen Renewable Energy. |
(b) | 2016 forecasted amounts have been adjusted to reflect the acquisition of MACH Gen, LLC and to remove the operations associated with the sales of Talen Renewable Energy and the Ironwood, Holtwood, Lake Wallenpaupack and C.P. Crane plants. Does not include the impact of the sales transaction gain or loss or related tax effects. |
(c) | Low, midpoint and high 2015 amounts include $33 million of allocations from PPL and $33 million of TSA costs that are not expected to continue in future periods. |
(d) | Restructuring costs that are not expected to continue in future periods. |
TALEN ENERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||||
Regulation G Reconciliations | ||||||||||||||||
Adjusted Free Cash Flow Projections | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Millions of Dollars) | ||||||||||||||||
Low - 2015E (a) | Midpoint - 2015E (a) | High - 2015E (a) | Midpoint 2016E - Adjusted for Anticipated Sales (b) | |||||||||||||
Cash from Operations | $ | 870 | $ | 885 | $ | 900 | $ | 698 | ||||||||
Capital Expenditures, excluding growth | (500 | ) | (490 | ) | (480 | ) | (465 | ) | ||||||||
Counterparty collateral paid (received) | (76 | ) | (76 | ) | (76 | ) | — | |||||||||
Adjusted Free Cash Flow, including other adjustments | 294 | 319 | 344 | 233 | ||||||||||||
Cash adjustments (after tax): | ||||||||||||||||
Transition Services Agreement costs and allocations (c) | 39 | 39 | 39 | 27 | ||||||||||||
Other (d) | 42 | 42 | 42 | — | ||||||||||||
Adjusted Free Cash Flow (e) | $ | 375 | $ | 400 | $ | 425 | $ | 260 | ||||||||
(a) | 2015 forecasted amounts include twelve months of performance from RJS, including the five-month period prior to acquisition and an adjustment for PPL allocations not expected to continue in future periods, and have not been adjusted to reflect the acquisition of MACH Gen, LLC or the sale of Talen Renewable Energy. |
(b) | 2016 forecasted amounts have been adjusted to reflect the acquisition of MACH Gen, LLC and to remove the operations associated with the sales of Talen Renewable Energy and the Ironwood, Holtwood, Lake Wallenpaupack and C.P. Crane plants. Does not include the impact of the sales transaction proceeds or related gain or loss and tax effects. |
(c) | Low, midpoint and high 2015 amounts include $20 million of allocations from PPL and $19 million of TSA costs that are not expected to continue in future periods. |
(d) | Restructuring and certain other costs that are not expected to continue in future periods. |
(e) | Does not include growth capital expenditures of $38 million in 2015 and $84 million in 2016. |