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DATE

Thursday, February 26, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Mac McFarland
  • Chief Financial Officer — Cole Muller
  • Chief Commercial Officer — Christopher E. Morice
  • Chief Strategy Officer — Terry L. Nutt

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TAKEAWAYS

  • Adjusted EBITDA -- $1,035,000,000 reported, exceeding the high end of revised guidance due to Freedom and Guernsey acquisitions closed in November.
  • Adjusted Free Cash Flow -- $524,000,000 for the year; Q4 adjusted free cash flow of $292,000,000 alone surpassed full-year 2024 levels.
  • 2026 Guidance -- Reaffirmed adjusted EBITDA range of $1,750,000,000 to $2,050,000,000 and adjusted free cash flow range of $980,000,000 to $1,180,000,000, excluding potential Cornerstone acquisition impact.
  • Share Repurchase Program -- Total authorization increased to $2,000,000,000 through 2028, cited as a key tool for shareholder returns.
  • Net Leverage Ratio -- Current ratio of 3.0x based on net debt and 2026 EBITDA guidance midpoint; management targets maintaining net leverage below 3.5x post-Cornerstone acquisition.
  • Liquidity Position -- Over $2,000,000,000 available, consisting of $1,200,000,000 in cash and full access to a $900,000,000 revolving credit facility.
  • Generation Output and Operations -- Approximately 40 TWh generated in 2025, reflecting a 10% increase primarily from higher fossil fleet dispatch; forced outage rate at 4.7% and recordable incident rate at 0.55, both better than industry average.
  • New Contracting Activity -- Amazon 2.0 PPA upsized to 1.9 GW, moved to a front-of-the-meter structure, and progressing in ramp; cash flow supports future contracting strategy.
  • Acquisition Strategy -- Freedom and Guernsey plants added ~2.8 GW of efficient CCGT capacity; pending acquisition of Cornerstone Generation assets in Ohio and Indiana expected to add further diversification and large-load contracting potential.
  • Market Fundamentals -- PJM PPL zone forecasted to see over 70% peak load growth and AEP zone over 30% in five years; data center demand in Ohio, Pennsylvania, and Indiana highlighted as significant market driver.
  • Spark Spread Trends and Hedging -- PJM spark spreads for 2026 to 2028 increased by over 15% from July to year-end 2025, prompting additional hedging activity for outer periods.
  • Contracting Pipeline and Flexibility -- Management confirms ongoing development of a pipeline with both organic and inorganic assets; public communication on project specifics intentionally limited to avoid commercial risks and speculation.
  • Operational and Regulatory Developments -- Reliability backstop procurement (RBP) in PJM cited as a key initiative; advocacy for extension of PJM capacity market price collars continues.

SUMMARY

Management emphasized continued execution of Talen’s flywheel strategy, leveraging the transition from merchant to contracted infrastructure assets to enhance cash flow durability and potential returns. Executives indicated the incremental annual impact of Cornerstone, once closed, will exceed $4 per share in adjusted free cash flow, with upward potential beginning in 2026 as closing may occur midyear. Talen is underwriting recent and pending acquisitions on a merchant basis to position the fleet for optionality in future offtake agreements as market conditions evolve. The company highlighted constructive multi-year load growth outlooks in PJM operating zones, aligning with sustained hyperscale and data center demand. Management reinforced its disciplined and dynamic approach to capital allocation, including commitment to opportunistic hedging, balance sheet flexibility, and “high-teens” returns on capital deployment.

  • Management stated, “our adjusted free cash flow in Q4 2025 alone was higher than all of 2024,” underscoring accelerated profitability momentum.
  • Executives noted total AWS PPA ramp and additional large-scale PPA agreements offer incremental uplift to base cash flows as part of the long-term contracting lever.
  • On the large-scale load forecast, executives referenced PPL expecting 10 GW in agreements by end of 2026, offering visibility into the regional demand build-out.
  • Terry L. Nutt said, “we underwrite acquisitions on a merchant basis, using current forward market energy and capacity prices combined with more normalized views in the out years.”
  • The company confirmed targeted net leverage below 3.5x remains the threshold for both future M&A and strategic financial management following Cornerstone closing.

INDUSTRY GLOSSARY

  • RBP (Reliability Backstop Procurement): A one-time PJM market mechanism for securing resource adequacy, formerly called RBA, that may facilitate contract certainty and support for capacity pricing reforms.
  • CCGT (Combined Cycle Gas Turbine): Gas-fired generation technology combining gas and steam turbines to maximize efficiency, used in Talen’s generation portfolio.
  • PPA (Power Purchase Agreement): Long-term contract to sell energy, capacity, or ancillary services to a counterparty, supporting revenue certainty for generation developers.
  • PPL Zone: Specific regional transmission zone in PJM covering PPL Electric Utilities territory, a focal market for Talen’s operations and data center activity.
  • AEP Zone: Geographic region in PJM managed by American Electric Power, referenced for measuring and forecasting regional load growth.
  • Spark Spread: The margin between electricity prices and the variable cost of natural gas generation, central to merchant plant economics and hedging.
  • ESA (Electric Service Agreement): Take-or-pay contract for dedicated electric service, often preceding PPA negotiations in large-scale load developments.

Full Conference Call Transcript

Mac McFarland: Great. Thanks, Sergio, and welcome, everyone, to today's call. As always, we appreciate your ongoing interest in Talen and participation in our calls. We closed out the full year 2025 with strong results in Q4, adding the Freedom and Guernsey assets and operating well during the early winter in December. And 2026 is starting off the same with overall strong performance by the fleet and the commercial teams during the cold winter months. And I would mention that PJM and other operators also performed well, maintaining grid reliability during some of the highest day-after-day loads we have seen.

We saw a fair amount of elevated prices and volatility, and all in all, 2026 is off to a good start and we are reaffirming our 2026 guidance range. Just recall that range does not include the recently announced Cornerstone acquisition that we anticipate closing this summer. As I reflect back on 2025, we said it was going to be an exciting year, and it was across the IPP space, and at Talen we accomplished a lot. We signed the reliability must-run agreements. We signed a revamped and doubled front-of-the-meter PPA with Amazon at Susquehanna.

We signed and closed Freedom and Guernsey, and we delivered on the basics of being an IPP, which is safely, reliably, and profitably delivering megawatts to the grid. Thanks to all the Talen employees that make this possible. Looking forward to 2026, we are optimistic about the continued long arc of the powering AI thesis and Talen's position in it. I have been saying 2025 was a year of option development and 2026 will be the year of rationalization.

In 2025, as everyone in the space was racing to develop options for data center development and the associated power, a bow wave of expectations built across the industry for deals and more deals, whether they were virtual purchase power agreements or behind-the-meter developments. Investors were anticipating the next big thing and the next big announcement. To some, 2025 fell short; for others, they grasp this long arc and believe things will rationalize themselves out. Some projects will simply not make it and others will. Some will be delayed and will need to be rationalized in 2027. But overall, we believe the long arc remains unchanged.

As the CEO of Anthropic wrote in his recent essay, and I quote, every few months public sentiment either becomes convinced that AI is hitting a wall or becomes excited about some new breakthrough that will fundamentally change the game. But the truth is that behind the volatility and public speculation, there has been a smooth, unyielding increase in AI's cognitive capabilities. Again, that is a quote from the CEO of Anthropic. From my perspective, you could replace AI in that quote with IPPs, or replace AI with Talen itself, and the quote would keep its same meaning and is what I mean when I say the long arc.

Our capabilities to power data centers and AI have had a smooth, unyielding increase. That said, there has been a lot of near-term noise that can be conflated with the rational long arc view. Reliability backstop auction, overbuild, resource adequacy, regulated new build, behind-the-meter, front-of-the-meter, local zoning. They are each relevant in their own sense, interrelated in some sense, and when taken altogether, culminate in a vastness of noise—noise that can be misunderstood or, worse yet, turned into something that it is not. But when taken in reality, they do not change the long arc, and we remain committed to our Talen flywheel strategy.

For investors, please know that we manage to this long arc and seek to maximize long-term value creation and not to short-term events. We do not over-rotate. Nothing has changed our fundamental view that data centers are coming at a rapid pace. We have the ability to contract with these entities across our fleet. We are building a further diversified fleet to support those contracts and we are building capabilities to contribute to the addition of new build. With respect to Montour, what is our plan B? That is and remains the question asked by many. I see this situation analogous to the ISA denial and the questions after the FERC decision about our initial plans at Susquehanna.

But what did we do? We stayed flexible. We retooled and ultimately pivoted to a better commercial solution. We remain confident that we can do the same in this instance too. Short-term hurdles do not define long-term success; how you respond to them does, and so therefore, we press on. Of course, Montour is just one opportunity we have in our pipeline, albeit the most well known, and that is likely my fault for talking about it too much. We have numerous other organic and inorganic sites we are developing across the PJM footprint to further implement the Talen flywheel. This includes both powered land opportunities as well as new build opportunities.

I know many of you will want to dig into this pipeline of opportunities, but before you ask about them, let me say this: We will not discuss them at any level of detail, and we no longer plan to discuss development in the public forum and repeat the frenzied speculation that ensued around one decision by Montour County Commissioners. But you can be rest assured knowing that we are working the pipeline every day and have options at our disposal.

On the regulatory front, we are engaging with policymakers at both the state, federal, and RTO level to bring about the Reliability Backstop Procurement, or RBP, formerly the RBA, in PJM that provides for a one-time solution to resource adequacy, which will minimize the cost on the system and allows time for real capacity market reform. And that is what our broad-based coalition of generators, hyperscalers, and utilities recently proposed at a PJM workshop. We look forward to continuing the dialogue on this critical policy development, and in the meantime, we support the extension of the current floor and cap of the base residual auction in order to provide time to make these longer-term reforms.

Before I turn the call over to Terry, let me conclude with this. Our strategy and therefore our investment thesis is based on real assets on the ground today that can support data center build out. Doing so, we are creating infrastructure assets out of what were previously merchant generation assets subject to commodity prices. And that in turn is driving lower capital cost and higher returns for our investors. While we have room to run on this current portfolio, we are also set up for the future.

In the future, we can augment our current assets with contracted new build and future inorganic powered land sites—something that we started last year, by the way—creating a pipeline of opportunities as I previously described. And we have dedicated part of our management team to go after this opportunity, with the recent management changes announced last December. This is a durable and tangible model built on today's reality, but with an eye towards future growth. We look forward to your questions. I will now turn the call over to Terry.

Terry L. Nutt: Thank you, Mac, and good afternoon, everyone. Moving to Slide 3 for a quick review of our strategic activity in 2025. During the year, we introduced the Talen flywheel, a repeatable value creation strategy that leverages our reliable, scalable generation assets and commercial capabilities to deliver durable free cash flow per share growth for our shareholders. As part of this strategy, we executed on the contracting component of the flywheel through the Amazon 2.0 PPA that was executed in June, which moved the transaction to a front-of-the-meter arrangement and upsized the volumes to 1.9 gigawatts in total. Transactions such as this will provide cash flows to support other parts of our overall strategy.

In July, we executed on the acquisition component of our strategy by announcing the purchase of the Freedom and Guernsey plant, adding approximately 2.8 gigawatts of efficient CCGTs, including a significant foundational position in Ohio, and subsequently brought those assets into the portfolio in late November. Throughout the year, we focused on continuing our balance sheet discipline with the ability to reduce our net leverage to below 3.5x by 2026, while also maintaining a clear focus on our shareholders by increasing our share repurchase program to $2,000,000,000 through 2028.

In 2026, we will continue this path of maximizing value with a focus on creating the most adjusted free cash flow per share while selectively exploring inorganic and organic opportunities that support the Talen flywheel. Turning to Slide 4, we continue to grow the Talen fleet through acquisitions. As previously mentioned, we expanded our presence in Pennsylvania through the acquisition of Freedom and expanded our footprint into Western PJM with the acquisition of Guernsey. Shortly after closing those transactions, we entered into an agreement to acquire the three Cornerstone Generation assets located in Ohio and Indiana. Western PJM has significant data center tailwinds and accessibility to reliable, low-cost natural gas from the Marcellus and Utica shales.

And Ohio is an active data center hub that continues to grow. Additionally, these acquisitions diversify Talen's generation portfolio by adding high-capacity-factor assets that have high free cash flow conversion rates. The assets will also enhance Talen's large-load contracting opportunities. As a reminder, we underwrite acquisitions on a merchant basis, using current forward market energy and capacity prices combined with more normalized views in the out years. Executing offtake agreements on these assets creates additional upside potential. Turning to Slide 5. The driving factors behind large load growth and overall power demand fundamentals continue to remain constructive.

One of the largest driving forces is the significant amount of capital that is being deployed by the most well-capitalized technology firms in the world. Recent CapEx forecasts from the largest hyperscalers show significant increases in spending in 2026 and beyond, including over $650,000,000,000 of estimated spend in this year alone. We see the resulting growth of data center capacity from that spend showing up in several states where we have or plan to have solid generation positions, including Pennsylvania, Ohio, and Indiana. A deeper dive into the fundamentals through the most recent PJM peak load forecast for the primary regions that we operate in provides a view of the expected load growth over the next several years.

This forecast, even after the recent modifications to put more rigor around proposed large loads, shows PPL zone increasing peak load by over 70% in the next five years, while AEP zone increases by over 30% in the same period. Earlier this month, AEP reported contracted load growth of 4 gigawatts in PJM in 2026, largely driven by load growth in Ohio. Approximately 90% of AEP's reported 15 gigawatts of incremental load growth through 2030 is supported by executed take-or-pay electric service agreements. Meanwhile, PPL also reported significant growth in its territory and expects to have 10 gigawatts of signed agreements by the end of 2026. What does this all mean for Talen? Two primary results.

First, demand growth means higher run times for our existing generation fleet, especially our intermediate dispatch and peaking units. Second, increased demand will drive more attractive economics for spark spreads and potential offtake agreements. Moving to Slide 6 and to follow up on what Mac mentioned earlier, nothing has changed in the outlook for basic market fundamentals. Talen's underlying value proposition remains the same and still points up and to the right. PJM capacity markets have been reflective of these tightening fundamentals as well, with the last two base residual capacity auctions clearing up the price gap.

This trend is expected to continue in PJM with the support of the governors and other stakeholders, which has indicated it intends to seek an extension of the price collar for two additional base residual auctions. In relation to energy and spark spreads, we have seen appreciation in the forward curves for 2026 to 2028 from July to the end of the year, with growth in spark spreads in PJM increasing over 15% during that period. Turning to Slide 7, I would like to provide a brief update on our hedging activity this past quarter. As a reminder, we have a pragmatic, non-programmatic hedging strategy.

Our strategy is focused on maintaining appropriate risk tolerances and financial discipline to support cash flow stability, while also leaving room to capture upside when opportunities arise. This gives our team the flexibility to add hedges during higher pricing periods, as detailed on the right-hand side. As you can see from the graph and the table on the slide, spark spreads for the PJM market for 2026 to 2028 experienced upward movements during the fourth quarter, which allowed our commercial team to layer in additional hedges for 2026 and 2027 as the opportunities presented themselves. I will now turn the call over to Cole to discuss our financial and operating performance.

Cole Muller: Terry, and good afternoon, everyone. As Mac mentioned earlier, for the year ended 2025, we are reporting $1,035,000,000 of adjusted EBITDA and $524,000,000 of adjusted free cash flow. These results exceed the high end of our revised guidance ranges issued last quarter, primarily due to the closing of Freedom and Guernsey acquisitions in November 2025. We have more than $2,000,000,000 of liquidity available, including $1,200,000,000 of cash and full availability of our $900,000,000 revolving credit facility. Given that our net debt includes Freedom and Guernsey financing and only five weeks of EBITDA contribution, our net leverage ratio using actual 2025 EBITDA is like comparing apples and oranges and therefore is not a meaningful metric for 2025.

Turning to our operational metrics, safety remains our top priority across the fleet. Our team worked safely during a busy year. Our recordable incident rate was 0.55, which continues to be below the industry average. Our fleet ran well with a 4.7% equivalent forced outage factor, and we generated approximately 40 terawatt-hours, about 10% more than in 2024. This was driven by a significant increase in dispatch opportunities across our fossil fleet, driving higher generation and energy margin. Turning to Slide 9.

Our full year 2025 financial results were significantly higher than 2024 due to a number of factors: higher capacity prices and RMR revenues that began in June 2025, the continued ramp of AWS revenues as the campus continues to progress, five weeks of Freedom and Guernsey operations, as well as higher power prices net of hedges. Our results were partially offset by the impacts from the Susquehanna Unit 2 extended outage last spring, and Susquehanna also not receiving the PTC in 2025. During the fourth quarter, we generated adjusted EBITDA of $382,000,000 and adjusted free cash flow of $292,000,000.

Note that our adjusted free cash flow in Q4 2025 alone was higher than all of 2024, demonstrating the free cash flow growth of the business—growth that we expect will continue as we move forward into 2026 and beyond. Speaking of 2026, on Slide 10 we are reaffirming the previously announced 2026 guidance ranges. Our adjusted EBITDA range is $1,750,000,000 to $2,050,000,000 and our adjusted free cash flow range is $980,000,000 to $1,180,000,000. All of this remains consistent with our Investor Day guidance and does not include any contribution from the pending Cornerstone acquisition.

As Mac mentioned earlier, while our fleet ran well during the recent winter weather, it is still early in the year and it is not our practice to make any adjustments halfway through the first quarter. Slide 11 may look familiar to those who listened last month when we announced the Cornerstone transaction. We project continued free cash flow per share growth, with our 2026 forecast more than double our 2025 actual results. Further, we anticipate the Cornerstone acquisition to create more than $4 in incremental annual impact on adjusted free cash flow per share upon closing.

While we illustrate this impact beginning in 2027, there is room for upside in 2026 as we anticipate closing the transaction as soon as this summer. And our base free cash flow per share continues to move higher, supported by increasingly contracted cash flows from our long-term AWS PPA ramp. We continue to see additional upside through the four growth levers we outlined at our Investor Day last September, with the uplift potential to further build on our increasing free cash flow per share. We illustrate this impact on the slide, noting that we are already executing on these levers, as demonstrated through the Cornerstone acquisition.

We are focused on building our track record of delivering on opportunities that create additional growth in the coming quarters and years. We remain committed to returning capital to our shareholders through our previously announced $2,000,000,000 share repurchase program and further data center contracting opportunities, including support for the AWS ramp and potential acceleration opportunities established in the existing PPA. And we are always evaluating accretive M&A opportunities. We will continue to maintain capital discipline and focus on the most accretive levers that meaningfully increase free cash flow per share available to investors, while seeking compelling growth opportunities through the Talen flywheel. Now to Slide 12.

Our balance sheet strength is a strategic asset that gives us the flexibility to execute the flywheel and grow our free cash flow per share. We remain committed to maintaining sufficient liquidity and keeping our long-term net leverage ratio below our stated target of 3.5x. As of February 20, net leverage ratio using our current net debt level and 2026 EBITDA guidance midpoint is 3.0x. Upon closing the Cornerstone transaction, we expect to maintain the ability to achieve below 3.5x net leverage on a go-forward basis by year-end 2026. I will turn it back to Mac.

Mac McFarland: All right. Thanks, Cole. With that, Michelle, why do you not open the line for questions?

Operator: To ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Again, we ask that you please limit to one question and one follow-up. Our first question will come from David Keith Arcaro with Morgan Stanley. Your line is open.

David Keith Arcaro: Oh, hi. Thanks so much for taking my question. Maybe if I could ask for a little bit more color around how you are thinking about the backstop auction. And just generally, with some of the policy uncertainty in PJM, how are your contract negotiations and discussions progressing? Is there still interest? And is it still possible to successfully reach contracts while some of this uncertainty is going on in PJM?

Mac McFarland: Yeah. Hey, David. It is Mac. I will start and then anybody else can jump in. Look, first of all, with respect to the RBA, which is now being couched as the RVP as a procurement more than an auction, at least in our view, because we think it should be done as pay-as-bid, and that is the distinction that is being made there. And I think that is how it is starting to be referred to even at PJM.

But look, I think that when you implement the concept of the backstop, it is to come in and use the existing tariff by which to procure and to fill a resource adequacy need for the out years, which would therefore relieve some of the tightness, if you will, in the market. But, again, if it is done at the same levels of whatever the load projections are, it would not change the outcome. That is our view on that. So it is there to provide the supply to maintain the reserve margin. Because, you know, the last auction would have cleared over $500 if it had not been for the $330 cap that was imposed on that.

But that backstop procurement, in our mind, actually provides a relief valve and therefore allows for contracts to continue to go forward. And it was one of the tenets of the NEDC's statement that came out—the National Energy Dominance Council—and that group, when they put that forth, said that it, in addition to it being one time and limited and then there should be longer-term capacity reforms and then return to the—the outcome, but it should allow for continuation of existing contracts. And I think that by gaining more certainty as we work our way through the process, that obviously continues to support that.

And so as a practical matter, we view that as a relief valve to doing existing contracts. And as far as existing contracts and the discussions that are on there, across the fleet and across our pipeline of opportunities, those have not slowed down. I think that the regulatory uncertainty—who pays for this and how it gets paid for and how it gets allocated and how it gets procured and all of that—will work its way through, but data centers are coming. And they are not slowing down.

And any time you talk to or hear any of the analyst calls, whether it be from the chip manufacturers, the hyperscalers themselves, they continue to talk about the race for creating data centers on the ground, powering them today, powering them in 2028, and then soon 2029 will become the new 2028. And so I think that as we progress through that, it just further aids in the ability to continue those discussions. So we do not see any slowdown to it, and we think that the RVP will ultimately increase the level of those discussions.

David Keith Arcaro: Got it. Yeah. Thanks. I appreciate that color. And then maybe when it comes to the procurement, do you have upgrades or new builds that you think might be opportunities to bid in to the procurement?

Mac McFarland: We are working on a set of opportunities in the new build front. We do think that uprates should count, if you are asking that. If you are asking specifically, we have uprates—most of the uprates that we had at Susquehanna were put in about ten years ago, so there is not a lot that goes there that you may hear from other producers. But there are opportunities we have been working on, thinking across the spectrum of the form of generation—whether it be batteries, CTs, or CCGTs—and developing those opportunities. And, look, with a 15-year contract at the right price, you can make the math work there.

So, obviously, we are gearing that up, and once the rules are more defined, we would look to see how we can participate.

David Keith Arcaro: Okay. Perfect. Thank you.

Operator: Thank you. And our next question will come from Agnieszka Storozynski with Seaport. Your line is open.

Agnieszka Storozynski: How are you? So I am just trying to link the comments that we are hearing from PPL and AEP to your generation contracting. So, for example, the comment that you quoted yourself in the slides that PPL expects 10 gigs of load under ESAs by the end of the first quarter, which sounds like one more month. How does that relate to, you know, you being the largest generation company in the PPL zone and signing generation contracts to back this 10 gigs of load?

Mac McFarland: Well, I mean, first, we do not have that list, just to be specific. I mean, PPL does. So what is in that list specifically, you would have to talk to them. But I do think that is a very supporting point to the question that was just asked, that this is not slowing down, and that if PPL is signing up the ESAs now—signing up PSAs—that you do not necessarily need to procure your energy and capacity, but what you are doing is making a commitment to pay for the network upgrades and the rest of it. That to me is just a—you know, that is a—highly positive sign that supports that nothing is slowing down.

Now, we do not have what the list is, but obviously, you know, we are working a pipeline of opportunities ourselves to participate on that front going forward. So, yeah—Look, Angie, the ESA point, that is the first step. I mean, without an ESA, data centers are not going to contract—under a PPA, right? So I think that is just a good kind of leading indicator of PPAs coming. And just to be really clear, we obviously have announced—two gigawatts, roughly—of tangible PPA in that zone. So, I mean—again, leave it to PPL to—break down their count, but, you know, that is two of the 10 right there.

Agnieszka Storozynski: Okay. Okay. I mean, we are waiting. I see that you are aware. So maybe now about—

Mac McFarland: Hey, Angie. I would just further add that, you know, we have a model that we are doing with hyperscalers, but there are other people that develop that are just—I will call them co-locators, which are your typical data center people—which is build and connect data centers and then lease those out. And that is where energy and capacity typically can be just—or in the old paradigm—was a pass-through.

Agnieszka Storozynski: Okay.

Mac McFarland: So, to Cole's point, you get the ESA first, even in our model, and then get the energy and capacity. But in some models, it just takes from the grid and is energy as a pass-through. So it takes the lessee—the person that is signing the lease—signing up for the lease, to decide to contract for energy and capacity there. But again, hyperscalers and the like and the development model we have is powered land, get the energy and capacity, and then you put all that together and you have what we did at Susquehanna.

Agnieszka Storozynski: Okay. So my other question is about Slide 11, and I know it is the same slide that you had in your Analyst Day presentation. So two things. One is the upside potential to the free cash flow per share you are showing for 2028. So is this that there is no potential upside to, say, 2027? So that is number one. And number two is, as you show us the new 1 gig of data center PPA and then accelerated Susquehanna contract, by $4.80. Is it just that metric—$4.80 here and 1 gig there? Is it just, you know, like a measurement, or is it that this is basically what you would expect to happen as potential upside?

So is it basically the cap of, again, additional data center PPAs and additional ramp under Susquehanna contract by 2028?

Mac McFarland: Yes. Let me just provide some context on the slide overall, Angie, to answer your question, then Cole can take the $480,000,000. But when we did this slide at Investor Day, we ended with the 2028 outlook, and so we were showing levers that could be pulled that would further increase free cash flow per share out there. Now, the timing of them—they were all done off of a 2028. Now, the timing of them—if you look—we pulled Cornerstone forward into 2027 and probably can pull some of it into 2026 with the expected close here. So there is even more upside there to this guidance.

But we were just showing it like, if you looked at 2028 as the terminal year that we were showing, we wanted to show that there are more levers to pull to create more value as we see the implementation of the flywheel. One of those was the—and this is all without any repurchase built into it. And that is why we put the pluses at the top of this, where it says $4+ or $31.10+ or $31.40+ at the top of the bars, but none of this is with share repurchases, right? And so we outlined that. We put the accretive M&A. We pulled that forward.

Why do we not talk about the $4.80, and then maybe I can hit the last one on the chart?

Cole Muller: Yeah. Look. The $4.80 and the one gigawatt—those were just to be representative so folks can make their own assumptions and scale, right? So by 2028, the contract, as we have disclosed before, gets only up to the first 480 megawatts. We just put out—what it would take to get to the $9.60. We could have gone out all the way to 1,920. We do not think that was necessarily helpful. We wanted to show the impact of every 480. And then on the new data center PPA—we set a standard one gigawatt. Is it—more potentially, and you could scale from there?

But I think it is also an important point as to why that was the new one gigawatt data center. If you think about it, Angie, and you think about the ramp that is going on at Susquehanna—as Cole just described—any new data center PPA, and this maybe is going to feed into perhaps a little bit more of a discussion—I said we will not discuss Montour, but maybe we will unpack it a little bit for you—but the one gigawatt data center PPA is really more than likely a post-2028, because when you think about when you have got to build data centers like what is going on at Susquehanna, there would be a ramp rate.

And so that is why we show that out there on 2028. That one is probably the least likely to be pulled forward early, because even if there was a signed contract today on the so-called Montour deal or some other virtual PPA across our pipelines of opportunity, the delivery of those megawatts is not going to be 2028, and this is something that I find very interesting—going back to the Montour—whether Montour happens today or happens six months from now, it really is irrelevant to when—the—megawatts would flow under that type of arrangement, because they are not going to be delivered until 2028 and they are going to ramp up from there more than likely.

So this is why I said there was a lot of short-term discussion and sort of frenzied outcome around the County Commission vote. But when you look at it in the delivery of the megawatts, we are still on that long arc as I described. The long arc has not changed. It was a short-term hurdle. Now, would we rather the Commission vote the other way? Absolutely. No doubt. But we are commercial, and we are going to figure that out. And we have a number of other opportunities in the pipeline that avail themselves to do the same thing.

And so that is what we are looking at—adding another gigawatt data center contract—but the delivery will not start until 2028. It is almost irrelevant when it is signed in 2026.

Agnieszka Storozynski: Can I ask just one follow-up on that one?

Mac McFarland: Sure.

Agnieszka Storozynski: Why is it at all linked to that Montour site? Because, you know, again, just assuming that it is potentially with AWS, I mean, AWS has other sites in the PPL zone, and you have, as you said, existing assets in the PPL zone. Your Susquehanna 2.0 contract supplies those other sites that are already the data center sites that are being developed. So why could not I have a PPA that serves some of those other sites that are being developed and, as such, the impact on the 2028 EBITDA would actually be likely?

Mac McFarland: Excellent point, and you are making our point for us, which is that it is a virtual PPA. And I am going to come back and answer your question specifically. But if you go to the Susquehanna, when we moved it to the front of the meter, remember we said one of the attributes of that transaction was that we are obligated to deliver anywhere in Pennsylvania. So that—goes back to this 480 acceleration. If there are other data centers, they can take under that contract early, but then they are going to have—if they build more than the 1,920—they are going to have to add more megawatts in the back. That is Amazon. That is just Amazon.

There are others out there other than just Amazon. But with respect to your question about does it need to be linked to Montour, not necessarily. Does a 1,000 megawatt or 1,200 megawatt or 960 megawatt—whatever the right number is, here we just used one gig—does that contract need to tie specifically to a site? Not necessarily, because, again, it is about the delivery point. But when you think about it, if you are a data center developer—whether it is Amazon, whether it is anybody else—you need to have sites with line of sight to be able to construct the data center by which to direct the megawatts to. So—while they are somewhat interrelated, they are not necessarily discretely intertwined.

They can be, but they do not have to be.

Agnieszka Storozynski: Okay. Understood. Thank you.

Operator: Thank you. And our next question will come from Michael P. Sullivan with Wolfe. Your line is open.

Michael P. Sullivan: Hey. Hey, guys. How are you?

Mac McFarland: Good. How are you?

Terry L. Nutt: Yeah. Doing well. Thanks.

Michael P. Sullivan: Wanted to maybe just unpack a little more of some of the cross currents within Pennsylvania, I guess, in light of latest commentary from Governor Shapiro and then with all the PPL load coming to the fore here. I guess where does existing generation versus new generation fit in? Can it all be served with the excess transmission capacity, and when do we need to start thinking about new build and how that ties to the political kind of rhetoric?

Mac McFarland: Yeah. I think the political rhetoric is focused on affordability, focused on resource adequacy, and again, we think the RVP is the way to solve that. And it does provide a relief valve. I think that in any of the proposals, it contemplates that there is a carve-out for existing contracts with respect to cost allocation. That is one of the things that has been talked about—like, when you go procure, and the NEDC used $15,000,000,000 as the number, how do you allocate that? But it would not be allocated to new loads if they had an existing contract. That is somewhat standard across the different coalitions—our coalition, other coalitions—there is an exemption for existing contracts.

So, again, it allows us to continue. It is yet to be seen how that allocation and the rest of that RVP will pan out. But in the meantime, again, I go back to nothing is stopping. And so people are in the process of lining things up and trying to figure out where they go from here with respect to the RBP. But let me turn it over to Cole and see if he has got anything to add here.

Cole Muller: Yeah. All I would say, Michael, is I think everyone would agree that—data centers are coming. And that the loads are going to continue to increase and ramp up in 2027, 2028, and 2029 and continue from there. I do not know too many—too much new gen that can actually serve that load. So—we are, you know, continuing to focus on conversations around existing gen. Obviously, at some point, new generation—needs to come online. Those decisions need to be made soon. Obviously, the RVP is one angle—bilateral contracts are another angle.

And as I think we have said fairly consistently, we think over time we will start to shift to kind of hybrid models where—there is existing gen—powering the first three to five-year build out of these data centers across—Pennsylvania, Ohio, Indiana, and so forth. And then eventually—backed by a second—either upscaling of a PPA or a second PPA—that enables new generation to kind of fill the gap from there.

Mac McFarland: New generation—it is either bring your own power or new generation that is procuring through the RVP. So that is why this is all still going on. But you wane off of the existing and you come onto the new. And it is whether it comes through the RVP or whether people bring their own power—that is yet to be determined. But I think to Cole's point, that is where you are going to see things head.

Terry L. Nutt: And, Michael, maybe to add to those comments, obviously the PJM discussions that are taking place around the RVP—specifically to Governor Shapiro—his team is engaged in that. They are involved in the discussions. They have heard the proposals from the different coalition groups. They are an active participant. I think, generally, you know, obviously the concept is going to get additional gen procured as it moves forward. And so I think they are supportive of that. And so, you know, they remain active and remain engaged and they are right in the mix, just with all the other stakeholders.

Michael P. Sullivan: Okay. Great. And then I just wanted to ask on—you mentioned I know you do not want to get into individual opportunities, but just within your pipeline, the organic opportunities, the inorganic powered land—maybe just more color on how you weigh those—economics, speed. Presumably, you have a lot of land already, but maybe just the value prop of the inorganic powered land angle.

Mac McFarland: Yeah. Look, Michael, it is a great question, and it is something that, you know, in a perfect world, if we are just talking to investors, it is something we would be excited to talk about. But every time we do, we are running a commercial trade in our face or we are creating an expectation about a certain outcome. And so that is why I made those opening remarks. It is not because there is not a frenzy level of activity going on here at Talen. There is. And it is around our existing sites, and it is around sites that are not existing that other people have, that want to work with us to do things.

But we are not going to get into the specifics of those and how we are doing it because, one, it is commercially sensitive, and two, it creates these expectations. And so, look, we created those expectations around Montour—our fault, no doubt about it. But we will figure that out. There are plan Bs. But there are other opportunities in our pipeline to give us more of this. I mean, if we had done—if Montour had gone—let us just kind of provide the hypothetical. If Montour had gone and there had been a deal announced on that, everybody would say, what is your next deal?

Well, it is not as though we are getting one deal done and then focusing on the next deal. We are working on multiple fronts all the time. And what we realized is that there was just this sort of concentration on one outcome there, which really is not going to define that long arc that I was trying to describe—that long arc that is constantly growing, that long arc that is constantly growing with AI capabilities, and also our commercial abilities to get these things done. Our commercial abilities to build new build, our commercial abilities to contract new build, our commercial abilities to contract existing—as Cole just mentioned—or a hybrid of the two.

And so we are working on sort of all of the above. We are working on getting prepared for bidding into the RVP if we can find the right pricing mechanisms and if the world works out the way that we think it should with respect to the RVP. We are going to contribute to all of that. And it just becomes, you know, where do we allocate things? But we did get ourselves, quite frankly, caught in a little bit of this binary view that Montour was going to define what Talen is going to be.

And we are just not going to get down that—not because of that one issue, but because also it impedes our ability to develop other things. And we are just steering away from that going forward. So it probably does not satisfy your question, but unfortunately, that is the path we are going down.

Michael P. Sullivan: Okay. No. I appreciate it. Thank you very much.

Operator: Thank you. And our next question is going to come from Jeremy Bryan Tonet with J.P. Morgan Securities. Your line is open.

Jeremy Bryan Tonet: Hi. Good afternoon.

Mac McFarland: Hey, Jeremy.

Jeremy Bryan Tonet: Just wanted to build, I guess, on some of your comments right here. And, you know, if the hyperscalers head to D.C. next week, just wondering what do you see could be possible coming out of this—when they have these discussions of bringing their own generation—what does this mean in Talen's view, and how do you think this could impact market architecture?

Mac McFarland: Yeah. Hey, Jeremy. Mac. I will go first here. We do not know what they are going to commit to. There has been speculation as to what they are going to commit to. I think what you have seen is a commitment publicly by all of them to pay their fair share. The definition of what is fair share is interesting. You know, from my perspective, and we have said this in many a forum, you do not—PJM is an RTO that is based off of not this concept that the next incremental megawatt of load pays for the next incremental megawatt of generation. It has never been that case.

You have states that are deficit in generation that have paid for transmission and are using it. They have LSEs that are incredibly short. We happen to be in an LSE that is long in Pennsylvania and PPL, and long transmission that has the ability to absorb these things. So it is all going to get around to the definition of what are they committing to in terms of what is fair share or pay for it. And that definition—I do not know what they are going to commit to, Jeremy.

Jeremy Bryan Tonet: Got it. Fair enough there. We will see what happens. And just wondering if we could pivot the conversation more towards, I guess, contracting as it relates to gas contracting—maybe the evolution of those discussions over time—and any comments you might be able to provide around hyperscaler appetite around absorbing the gas risk, or could there be fixed capacity plus heat rate type of arrangements? Just wondering how those conversations have evolved over time and where you see them going.

Cole Muller: Hey, Jeremy. It is Cole. Look. I think we have talked about this a few times. I think that—not to be flimsy—but the answer depends on the counterparty, right? So some hyperscalers may have more appetite to take on the cost variability of gas and some less. So you mentioned a couple of different variations of contracting. I think it is suffice to say we have explored a lot of different structures, internally and with counterparties. And I think there are a number of different avenues to ultimately contract and protect ourselves in any scenario. And we have a commercial desk that Chris leads that can also manage that position.

And if we contracted in that manner, we would obviously have a different premium structure in the PPA to accommodate that aspect.

Mac McFarland: I would just add on that Cole is exactly right. It is going to be dependent on what somebody wants. But if I was advising somebody who is buying this, I would say that you want somebody who manages the commodity risk to take the commodity risk, and to pay for somebody to do that unless you are going to warehouse that risk yourself.

And we are set up to do that, and that is what we have talked about—being able to provide credit support to be able to do that, to be able to manage the gas risk, to be able to manage the physical gas delivery to our plants, and the rest of it—even if it is just financial—manage that financial risk associated with the gas. And so that is the service that we are trying to provide—that full sweep. Now, to Cole's point, people can pick and choose across that, but that would be what we would advise.

Jeremy Bryan Tonet: Got it. That makes sense. Thank you.

Operator: Thank you. And our next question is going to come from Nicholas Joseph Campanella with Barclays. Your line is open.

Nicholas Joseph Campanella: Hey. Good afternoon. Thanks for taking my questions. Hope you can hear me. A lot of good answers in the commentary, but I just wanted to follow up on how you guys are really trying to frame what is going on around RBA, Ratepayer Protection Pledge—some of the comments that you responded to Michael. Do you still feel that you have the ability to sign gas with incumbent generation in a front-of-the-meter framework? And just trying to understand if you are really just trying to say that this would only now come with additionality and the new builds commitment. Maybe you can just kind of clarify very clearly the expectations there.

Mac McFarland: Let me be very clear. Yes. We think you can continue to contract with the existing—it is yes. Do we think that there will be some form that may include new build in the future? Yes. I mean, I am not trying to be flippant about it. It is just that the answer is yes. We believe that there is the capacity to do so. We believe that there is a desire and appetite to do so, and we are working on—it.

Nicholas Joseph Campanella: And then just—I know that in, you know, Montour hearing specifically, it was brought up by Amazon that this would not be kind of an additionality deal and that they talked about the current state of the supply chain. I am cognizant that some of your peers on their calls have been kind of talking about that they may have new build gas and utilizing turbines or bridge power that others have procured or do not have a spot for.

So maybe could you just kind of talk to your existing EPC relationships would be or your ability to maybe do something either internal via a partnership or inorganic to secure the supply chain further to kind of be able to deliver on that.

Mac McFarland: Sure. Happy to do so. And—just so you understand, I was just trying to be clear that we think there is the ability to do so. I was not trying to be sharp-edged there. But with respect to turbines and EPC relationships and the rest of it, our view—and the reason why we have built up and invested in these existing assets—is very much to the point which we think that there is still the capability to use existing assets to contract. There is a lot of data centers that are out there right now that are looking at whether they contract for a longer period of time—existing ones, right?

You saw that in a recent PPA announcement with existing data center load. I think that when it comes to new build, and there is a fair amount of discussion around new build, we view new build very simply. New build is going to require either winning in the RVP and having a 15-year contract that allows for taking the merchant risk of the capacity off, thereby allowing financing, or new build is going to require a contract. And so if you have either one of those—okay, and a slight difference with the RVP versus—you know, sort of bring-your-own-power or new build generation, as Cole described in the hybrid—you are going to need the offtake agreement.

It is the offtake agreement that defines this, in our opinion, not necessarily the turbine orders or the EPC. And the first group that has an offtake agreement will find all sorts of people that want to invest in it, all sorts of turbines that want to be part of it, and all sorts of EPC providers that will want to be part of it, because it is a live project once you have—either that contract—or the RVP award. So hopefully that answers the question. I think that—I hear your point. We have relationships with those. We put Dale in the Chief Asset Development Officer role specifically to focus on technology, costing, EPC work, etcetera. That is very important.

But it is the offtake that is most important.

Nicholas Joseph Campanella: Thank you for those thoughts. I really appreciate it. Thank you.

Operator: Thank you. And our next question will come from Nick Amicucci with Evercore. Your line is open.

Nick Amicucci: Hey, guys. Mac, I am not going to ask you if you think that you could sign contracts currently. But I did want to ask on—just as we kind of think about the hedge book kind of looking through 2027—still a lot of upside optionality there. How should we expect that to continue to creep up over time? Or are we going to be comfortable kind of leaving that open just given that the forward curves still are not fully reflective of kind of the tightness?

Mac McFarland: Hey. Thanks, Craig. I am going to get our Chief Commercial Officer to jump in here. But, look, I think in macro—and then, Chris, fill in the spots—we saw an opportunity in December, as Terry walked through in his opening remarks, when prices went up to take some 2027 off the table, or to lock it in through the hedges. We do that not necessarily—as we said, it is pragmatic, not programmatic. We do not, like, set limits, like by this date we have got to be this hedged.

And so when we look at it, we have been saying this for quarters—that we have not seen necessarily the forward market responding—but we saw the forward market responded, and we legged into that. Now, I cannot tell you—we see this, and we are sitting here today, and sparks have moved up since our Investor Day presentation. They moved up dramatically versus it at some point, and they came back down. They are moving all over the place. The good news is the general direction is up and to the right, and we believe that is consistent with our fundamental view, but we do not feel the need necessarily to go out and hedge.

So it is hard to answer your question specifically, but let me throw that over to Chris.

Christopher E. Morice: Yeah. You said it. I think we have been leaning in previous quarters on our intentional length in some of the outer periods, waiting for these instances of volatility—seemingly happening with more frequency. And so, as happened with this winter, as we expect to continue to happen through the year, the tightening supply and demand will provide real-time opportunities for us to continue to lay off hedges. So we have stated targets. We have ranges. We have been on the lower end of those intentionally so, and we will continue to add to those as the market presents us with compelling opportunities.

Mac McFarland: Yeah. I think that is an important part, which is, you know, when we came out of—this is kind of a trip down memory lane here—but when we came out of 60% to 80% and 40% to 60% prompts and prompt-plus-one—and those are guidelines—Chris manages the position. We have discussions with Terry. The risk management—Cole, Chris—get together. We talk about this. But when you are managing a big book, you cannot just, like, eventually get to 2027 long 10,000 megawatts. And, you know, that is what we are starting to become with the addition of Cornerstone, with the addition of Freedom and Guernsey.

So you have to take some of these opportunities to leg in some, but then it is not like a forced take—it is take it off. We can decide how we want to tilt the book based off of our fundamental view.

Terry L. Nutt: Yeah. And, Nick, maybe to add to that too, as we get more and more—contracted margin, the overall—portfolio, right, when we think about the—support to the cash flows that we need—to be able to make our P&I payments, be able to make sure that we take care of the basic needs. But as we get more and more of the contracted margin from the AWS deal, hedging becomes a little bit more opportunistic. So we will continue to have that view as we move forward. And I think that is a benefit that we really like.

Nick Amicucci: Yep. No. Makes sense. Thanks, guys. And, Cole, just really quickly, just on kind of a cleanup question, I guess, with regards to the Cornerstone—now, obviously, it is going to depend on the timing of the closing of the acquisition—but is it fair to kind of take that $500,000,000 in EBITDA and just kind of allocate that from the closing date across 2026? Or is there some growth embedded in there in 2027?

Cole Muller: Look. I think that is a good run-rate number. So pick your assumption on a close date, and I think 12 months forward from there, it is a good round number.

Nick Amicucci: Perfect.

Terry L. Nutt: And if you wanted to get just a tad more precise, you have got to think about, you know, there is more value in July, August, December—winter time frame—to the process. But good round number.

Nick Amicucci: Yeah. Well, you guys know I am not that precise. So fine.

Terry L. Nutt: Thanks, Nick.

Operator: Thank you. And the next question is going to come from Craig Shere with Tuohy Brothers. Your line is open.

Craig Shere: Good afternoon, and thanks for squeezing me in. You know, a year ago, we talked about new build. I think that was not really a part of the discussion at Talen. And—now it sounds like this is at least something, you know, quite plausible—that we might have something by year-end, especially through the auction. And I am wondering how you are thinking about capital and balance sheet management decisions over the next two, three quarters, given the fact you might have some—you know, obviously, you would only do it if you are incentivized—but you might be incentivized towards some chunky new build. How do you think about—maybe being—would you be less aggressive with the balance sheet?

Or if opportunities arise with the shares down or an acquisition, you are not going to change what you have done the last year or year and a half.

Terry L. Nutt: Hey, Craig, it is Terry. Maybe one little sort of nuance to your comment. We have always said—and this really dovetails with Mac's comment a few minutes ago—we have always said if we have got the right certainty, whether it is—through an offtake agreement—or a very clear sort of underwriting case with an offtaker, we would be more than happy to do new build, right? I think we have always had that as one of the talking points we have talked about. You know, that being said, I think the RBA potentially gives you that clarity, right?

If we end up in a procurement process where you can get a 15-year commitment, that is what you need to underwrite and effectively finance the new build of an asset. That is a challenge that this market has had for the past several years. It is not the question of whether or not you can build something; it is whether or not you can finance— in PJM in particular. Now, back to your second part of that question, we are always balancing and looking for the highest and best use of our capital—whether that is buying the shares back, whether that is doing M&A, whether that is doing new build—we are always looking at high-teens returns.

We want to make sure that we stay disciplined in doing that. And so that is why you have seen us toggle through—I mean, even for the last several years—we have toggled through a number of those different strategies, and each time we are looking at returns that are significantly high. I mean, just to give you two or three of those examples: we have done a significant amount of share repurchase over the last two and a half years—I mean, we bought back over $2,000,000,000 worth of stock, close to 24% of the total float of the business at an average price of $149 a share.

Those were really good strategic moves and a great use of our balance sheet and our capital. Take a look at the Freedom and Guernsey transaction—greater than 40% accretive free cash flow per share growth from those acquisitions. We are always going to direct the capital and the use of our balance sheet to whatever the highest returns are. And we talk about it all the time. We sit around the table and, as we think about what is the best use for that marginal dollar, we are going through that entire list—very similar to the list that is on Slide 11—of how we think about growing the business and growing the free cash flow.

Craig Shere: I was just going to throw another twist in there. Because you have got the buybacks, you have got the acquisitions, and you have got kind of the new build organic growth, which—it seems like maybe there is more clarity—potential clarity—where that could be more real and incentivized by the end of this year than previously. But then you have got this whole discussion that has been brought up in this call—about managing—fuel/commodity risks on long-term gas-fired PPAs—and that requires balance sheet capacity as well, especially if you are—you know, if you are cash flowing really hard—it does not matter what you do to your balance sheet in two, three years. You are going to be dry, right?

But if you sign a PPA where you are delivering next year, maybe you need that capacity. And I am just thinking that between the new build, between managing the fuel risk, maybe there is more to think about with the balance sheet today than there was a year ago.

Mac McFarland: Look, Craig, I think it is a—good question. And let me just—when you frame this question, you said a year ago you were not thinking about new build. I think a year ago we said we would consider new build. We were thinking about it, but it is like a 2030–2032 time frame issue. Well, we are another year down, and, you know, 2029 is the new 2028 when it comes to data center power, and, you know, we are closer to that, and then the RVP has put this in further light.

I think that it really is dependent upon what structure you go after, because depending upon what the PPAs look like—with respect to the RVP, for example—you own the energy and it just goes into the book like Chris. It is really you are receiving a capacity payment, is how you think about bidding in there, which covers your cost, and that allows for the financing. That could be actually in a project finance structure, which we have not done. So it may require less balance sheet than you actually think in that system. If we are doing PPAs at a longer term and it requires credit support, we work through that.

We think about is there the ability to post an LC, do things first-lien, etcetera. So there is not an easy answer to your question—I get it. But I think what we have always said is that this is why we toggle things. We have the SRP. We have the net leverage of 3.5x. We have shown the ability to toggle back and forth between those—as Terry said—do share repurchase when we need to, push up the balance sheet with a clear view to bring it back down within space in order to do M&A. And so it really depends on when we get there and what the opportunity looks like.

But I think we would just view that as how do we toggle the different aspects that we have in order to make things work if the right returns are there with the right contract. So I think we are about out of time. Do we have—

Terry L. Nutt: Two more?

Mac McFarland: What do you think? That is fine. Okay. Yeah. We are past time. So I think we are going to end there. I apologize. I know there are a couple in the queue that we did not get to, and we are happy to take follow-up questions. Sergio and the rest of us here appreciate everybody's interest in Talen, and have a good evening.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.