Talen Energy Corp

Results of Operations

The results of operations presented below should be reviewed in conjunction with the Interim Financial Statements, the Annual Financial Statements, and their respective notes. Our financial results for the three months ended June 30, 2024, the six months ended June 30, 2024, and for the period May 18 through June 30, 2023 are referred to as the “Successor” periods. Our financial results for the period April 1 through May 17, 2023 and for the period from January 1 through May 17, 2023 are referred to as the “Predecessor” periods. The operating results for the three and six months ended June 30, 2024 cannot be adequately compared with any of the previous periods reported in the Interim Financial Statements or Annual Financial Statements. Our results of operations as reported in the Interim Financial Statements are prepared in accordance with GAAP.

In the explanations below, “Energy and other revenues” and “Fuel and energy purchases” are evaluated collectively because the price for power is generally determined by the variable operating cost of the next marginal generator dispatched to meet demand. Energy revenues relate to sales to an ISO or RTO, sales under wholesale bilateral contracts or realized hedging activity, Bitcoin revenue and Nuclear PTC revenue. “Fuel and energy purchases” includes costs for fuel to generate electricity and settlements of financial and physical transactions related to fuel and energy purchases.

In addition, unrealized gains (losses) on derivatives instruments resulting from changes in fair value during the period and are presented separately as revenues within “Operating Revenues” and expenses within “Total Energy Expenses” in the Interim Financial Statements. We evaluate them collectively because they represent the changes in fair value of Talen’s economic hedging activities.

Results for the Three Months Ended June 30, 2024 (Successor), May 18 through June 30, 2023 (Successor), and January 1 through May 17, 2023 (Predecessor)

The following table and subsequent sections display the results of operations for the Successor and Predecessor periods:

Successor Period — Three Months Ended June 30, 2024

Net Income (Loss) Attributable to Stockholders totaled $454 million for the three months ended June 30, 2024 (Successor). Results were driven by:

•Capacity Revenues totaled $46 million. This primarily included earned capacity awards based on resource clearing prices received from the PJM Base Residual Auction for the 2024/2025 and 2023/2024 delivery periods.

•Energy and Other Revenues, net of Fuel and Energy Purchases totaled $204 million. This primarily consisted of: (i) $271 million in third-party wholesale electricity sales and ancillary revenues; (ii) $72 million in other revenue primarily related to Nautilus operations and Nuclear PTC; and (iii) $17 million in net realized gains from hedging activities. Such amounts were partially offset by $(155) million in fuel and purchased power costs.

•Unrealized Gain (Loss) on Derivative Instruments totaled $91 million gain, net. This consisted of: (i) unrealized gains incurred as a result of decreases in forward power prices; and (ii) unrealized gains from the reversal of positions previously recognized as mark-to-market liabilities which settled during the period.

•Nuclear Fuel Amortization totaled $(28) million. This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment. Activity also included $8 million of amortization on certain nuclear fuel contracts that were recognized at fair value at Emergence.

•Operation, Maintenance, and Development totaled $(164) million. This consisted of generation facility operating costs, including wages and benefits for employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies costs.

•Depreciation, Amortization and Accretion totaled $(75) million. This consisted of the periodic expense of long-lived property, plant and equipment and ARO accretion.

•Nuclear Decommissioning Trust Funds Gain (Loss), net, totaled $27 million. This consisted of realized gains and losses on debt and equity securities, unrealized gains on equity securities, dividends, and interest income on investments in the NDT. See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

•Interest Expense and Other Finance Charges totaled $(62) million. This primarily consisted of interest expense incurred on the Secured Notes and Term Loans.

•Gain (loss) on Sale of Assets, net totaled $561 million This is primarily related to the ERCOT Sale that closed in May 2024. See Note 17 in Notes to the Interim Financial Statements for additional information.

•Other Non-operating Income (Expense), net totaled $17 million. This is primarily related to interest income.

•Income Tax Benefit (Expense) totaled $(112) million. This primarily consisted of federal and state income taxes, effects of permanent nondeductible items, trust tax on the nuclear decommissioning trust income, and changes in the valuation allowance.

See “Successor Period - May 18 through June 30, 2023” within “Results for the Six Months Ended June 30, 2024 (Successor)” below for a discussion of the results of operations for the above period.

Predecessor Period — April 1 through May 17, 2023

Net Income (Loss) Attributable to Member totaled $431 million for the period April 1 through May 17, 2023. Results were driven by:

•Capacity Revenues totaled $42 million for the period and were primarily based on resource clearing prices received from the PJM Base Residual Auction for the 2022/2023 delivery period.

•Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $111 million. This consisted of: (i) $98 million in third-party wholesale electricity sales and ancillary revenues; (ii) $52 million in net realized gains from hedging activities; and (iii) $18 million in other revenue primarily related to Nautilus operations. Such amounts were partially offset by $(57) million in fuel and purchased power costs.

•Unrealized Gain (Loss) on Derivative Instruments totaled $(94) million. This consisted of: (i) unrealized losses incurred as a result of increases in forward power prices; coupled with (ii) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period.

•Nuclear Fuel Amortization totaled $(9) million. This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment.

•Operation, Maintenance, and Development totaled $(108) million. This consisted of generation facility operating costs, including wages and benefits for employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies costs.

•Depreciation, Amortization and Accretion totaled $(68) million. This consisted of the periodic expense of long-lived property, plant and equipment, and ARO accretion.

•Nuclear Decommissioning Trust Funds Gain (Loss), net, totaled $11 million. This consisted of realized gains on debt and equity securities, unrealized losses on equity securities, dividends, and interest income on investments in the NDT. See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

•Other Operating Income (Expense), net, totaled $(28) million, primarily due to fuel inventory net realizable value adjustment expense. See Note 6 in Notes to the Interim Financial Statements for additional information.

•Reorganization Income (Expense), net, totaled $838 million for the period, primarily due to the $1,459 million gain on debt discharge recognized upon Emergence, partially offset by a $460 million loss on revaluation adjustments. See Note 2 in Notes to the Interim Financial Statements for additional information.

•Interest Expense and Other Finance Charges totaled $(59) million. This primarily consisted of interest expense incurred on prepetition debt and certain LC fees.

•Gain (loss) on Sale of Assets, net, totaled $15 million. This is primarily due to non-recurring sales during the period. See Note 17 in Notes to the Interim Financial Statements for additional information.

•Income Tax Benefit (Expense) totaled $(198) million. This primarily consisted of federal and state income taxes, changes in the valuation allowance, and reorganization adjustments.

Results for the Six Months Ended June 30, 2024 (Successor), May 18 through June 30, 2023 (Successor), and January 1 through May 17, 2023 (Predecessor)

The following table and subsequent sections display the results of operations for the Successor and Predecessor periods:

Successor Period — Six Months Ended June 30, 2024

Net Income (Loss) Attributable to Stockholders totaled $748 million for the six months ended June 30, 2024. Results were driven by:

•Capacity Revenues totaled $91 million. This primarily included earned capacity awards based on resource clearing prices received from the PJM Base Residual Auction for the 2023/2024 and 2024/2025 delivery period.

•Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $626 million. This consisted of: (i) $600 million in third-party wholesale electricity sales and ancillary revenues; (ii) $150 million in other revenue primarily related to Nautilus operations and Nuclear PTC; and (iii) $182 million in net realized gains from hedging activities. Such amounts were partially offset by $(306) million in fuel and purchased power costs.

•Unrealized Gain (Loss) on Derivative Instruments totaled $(44) million loss, net. This consisted of: (i) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period; partially offset by (ii) unrealized gains incurred as a result of decreases in forward power prices.

•Nuclear Fuel Amortization totaled $(63) million. This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment. Activity also included $19 million of amortization on certain nuclear fuel contracts that were recognized at fair value at Emergence.

•Operation, Maintenance, and Development totaled $(318) million. This consisted of generation facility operating costs, including wages and benefits for employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies.

•Depreciation, Amortization and Accretion totaled $(150) million This consisted of the periodic expense of long-lived property, plant and equipment and ARO accretion.

•Nuclear Decommissioning Trust Funds Gain (Loss), net, totaled $102 million. This consisted of realized gains and losses on debt and equity securities, unrealized gains on equity securities, dividends, and interest income on investments in the NDT. See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

•Interest Expense and Other Finance Charges totaled $(121) million. This primarily consisted of interest expense incurred on the Secured Notes and Term Loans.

•Gain (Loss) on Sale of Assets, net totaled $885 million. This is primarily comprised of the $563 million gain from the ERCOT Sale that closed in May 2024 and the $324 million gain from the Cumulus Data Campus Sale that closed in March 2024. See Note 17 in Notes to the Interim Financial Statements for additional information.

•Other Non-operating Income (Expense), net, totaled $40 million. This is primarily due to interest income.

Net Income (Loss) Attributable to Stockholders totaled $29 million for the period from May 18 through June 30, 2023. Results were driven by:

•Capacity Revenues totaled $26 million and were primarily based on resource clearing prices received from the PJM Base Residual Auction for the 2023/2024 and 2022/2023 delivery periods.

•Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $131 million. This consisted of: (i) $136 million in third-party wholesale electricity sales and ancillary revenues; (ii) $16 million in net realized gains from hedging activities; and (iii) $15 million in other revenue primarily related to Nautilus operations. Such amounts were partially offset by $(36) million in fuel and purchased power costs.

•Unrealized Gain (Loss) on Derivative Instruments totaled $41 million gain, net. This consisted of unrealized gains incurred as a result of decreases in forward power prices.

•Nuclear Fuel Amortization totaled $(25) million. This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment. Activity also included $(14) million of amortization on certain nuclear fuel contracts that were recognized at fair value at Emergence.

•Operation, Maintenance, and Development totaled $(69) million. This consisted of generation facility operating costs, including wages and benefits for employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies costs.

•Depreciation, Amortization and Accretion totaled $(28) million. This consisted of the periodic expense of long-lived property, plant and equipment and ARO accretion.

•Nuclear Decommissioning Trust Funds Gain (Loss), net, totaled $39 million. This consisted of realized losses on debt and equity securities, unrealized gains on equity securities, dividends, and interest income on investments in the NDT. See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

•Interest Expense and Other Finance Charges totaled $(33) million. This primarily consisted of interest expense incurred on prepetition debt and certain LC fees.

•Other Non-operating Income (Expense), net, totaled $(11) million, primarily due to mark-to-market adjustments for warrants issued in 2023.

•Income Tax Benefit (Expense)totaled $(19) million. This primarily consisted of federal and state income taxes and trust tax on nuclear decommissioning trust income.

Predecessor Period — January 1 through May 17, 2023

Net Income (Loss) Attributable to Member totaled $479 million for the period from January 1 through May 17, 2023. Results were driven by:

•Capacity Revenues totaled $108 million for the period and were primarily based on resource clearing prices received from the PJM Base Residual Auction for the 2022/2023 delivery period. Capacity revenues were negatively impacted by $(13) million of net PJM capacity penalties related to Winter Storm Elliot.

•Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $866 million for the period and consisted of $637 million in net realized gains from hedging activities, coupled with $343 million in third-party wholesale electricity sales and ancillary revenues and $27 million in other revenue, partially offset by $(141) million in fuel and purchased power costs. Other revenues relate to operations of Nautilus that commenced operations in February 2023.

•Unrealized Gain (Loss) on Derivative Instruments totaled $(63) million loss, net. This consisted of (i) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period; partially offset by (ii) unrealized gains incurred as a result of decreases in forward power prices.

•Nuclear Fuel Amortization totaled $(33) million. This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment.

•Operation, Maintenance, and Development totaled $(285) million for the period. This consisted of generation facility operating costs, including salary and benefit costs, the costs of removal, repairs and maintenance that are not capitalized, contractor costs and certain materials and supplies.

•Depreciation, Amortization and Accretion totaled $(200) million for the period and consisted of depreciation of long-lived property, plant and equipment, intangibles and accretion related to AROs. The period was impacted by new depreciation rates related to a change in useful lives for the generation facilities.

•Impairments totaled $(381) million in the period and primarily consisted of the assessment of Brandon Shores asset group recoverability associated with a decision to deactivate Brandon Shores on June 1, 2025. See Note 8 in Notes to the Interim Financial Statements for additional information.

•Other Operating Income (Expense), net, totaled $(37) million for the period, reflecting fuel inventory net realizable value adjustment expense. See Note 6 in Notes to the Interim Financial Statements for additional information.

•Nuclear Decommissioning Trust Funds Gain (Loss), net, was $57 million for the period. This consisted of realized gains and losses on debt and equity securities, unrealized gains on equity securities, dividends and interest income on investments in the NDT. See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

•Interest Expense and Other Finance Charges totaled $(163) million for the period and primarily consisted of interest expense incurred on the Prepetition Secured Notes, Prepetition RCF, Prepetition TLB, LMBE-MC TLB and certain LC fees.

•Reorganization Income (Expense), net, totaled $799 million for the period, primarily due to the $1,459 million gain on debt discharge recognized upon Emergence partially offset by a $460 million loss on revaluation adjustments, $70 million in backstop commitment letters and $57 million in professional fees. See Note 2 in Notes to the Interim Financial Statements for additional information.

•Gain (loss) on Sale of Assets, net, totaled $50 million, primarily due to non-recurring sales during the period. See Note 17 in Notes to the Interim Financial Statements for additional information.

•Income Tax Benefit (Expense) totaled $(212) million for the period and was primarily related to federal/state income taxes, reorganization adjustments and changes in the valuation allowance. See Note 5 in Notes to the Interim Financial Statements for additional information.