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 September 30, 2024, the nine months ended September 30, 2024, and for the period May 18 through September 30, 2023 are referred to as the “Successor” periods. Our financial results for the period from January 1 through May 17, 2023 are referred to as the “Predecessor” period. The operating results for the nine months ended September 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 derivative instruments resulting from changes in fair value during the period 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 September 30, 2024 (Successor) and the Three Months Ended September 30, 2023 (Successor)

The following table and subsequent section display the results of operations:

Successor Periods — Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Net Income (Loss) Attributable to Stockholders increased by $245 million, primarily driven by the factors discussed below.

•Operating Revenues, net of Energy Expenses. $145 million favorable increase due to the following:

Energy and Other Revenues, net of Fuel and Energy Purchases.$(64) million unfavorable decrease. This is primarily driven by (i) $(198) million decrease in realized energy margin from electric generation and ancillary revenue due to the ERCOT Sale in April 2024 and lower generation at Susquehanna, partially offset by higher realized prices at Susquehanna and PJM fossil plants; (ii) $73 million favorable increase in hedge results; and (iii) $71 million favorable increase in Nuclear PTC revenue.

Unrealized Gain (Loss) on Derivative Instruments, net.$186 million favorable increase. This is primarily driven by (i) $130 million of favorable increase in positions existing in both the third quarters 2024 and 2023 resulting from lower forward power prices; (ii) $35 million favorable increase due to lower unrealized losses on new trades executed in the third quarter 2024 as compared to trades executed in the third quarter 2023; and (iii) $32 million unrealized gain from the reversal of positions previously recognized as mark-to-market liabilities which settled during the period.

•Nuclear Decommissioning Trust Funds Gain (Loss), net. $91 million favorable increase. This is primarily driven by an increase in unrealized gains on equity securities in 2024 as a result of investment returns and a decline in interest rates during the third quarter 2024. Investment return volatility resulted in losses in the comparative 2023 period. See Notes 7 and 12 in Notes to the Interim Financial Statements for additional information.

•Other Non-operating Income (Expense), net. $27 million favorable increase. This is primarily related to a decrease in pension litigation settlement charges recognized in 2023 and an increase in interest income in 2024. See Note 10 in Notes to the Interim Financial Statements for additional information on the pension litigation settlement.

•Income Tax Benefit (Expense). $(27) million unfavorable increase. This is driven by an increase to federal and state tax expense due to change in pre-tax book income, increase in unfavorable permanent differences, increase in production tax credits benefit, increase in NDT net tax expense, and decrease to valuation allowance expense.

Results for the Nine Months Ended September 30, 2024 (Successor), May 18 through September 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 — Nine Months Ended September 30, 2024

Net Income (Loss) Attributable to Stockholders totaled $916 million for the nine months ended September 30, 2024. Results were driven by:

•Capacity Revenues totaled $141 million. This primarily included earned capacity awards based on resource clearing prices received from the PJM BRA for the 2023/2024 and 2024/2025 delivery periods.

•Energy and Other Revenues, net of Fuel and Energy Purchases totaled $909 million. This consisted of: (i) $989 million in third-party wholesale electricity sales and ancillary revenues; (ii) $242 million in other revenue primarily related to Nuclear PTC and Bitcoin revenue; and (iii) $182 million in net realized gains from hedging activities. Such amounts were partially offset by $(504) million in fuel and purchased power costs.

•Unrealized Gain (Loss) on Derivative Instruments totaled $58 million gain, net. This consisted of: (i) unrealized gains incurred as a result of decreases in forward power prices; partially offset by (ii) unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period.

•Nuclear Fuel Amortization totaled $(93) million. This consisted of the periodic expense of nuclear fuel costs capitalized as property, plant and equipment. Activity also included $27 million of amortization on certain nuclear fuel contracts that were recognized at fair value at Emergence.

•Operation, Maintenance, and Development totaled $(445) 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 $(225) 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 $169 million. This consisted of unrealized gains on equity securities, realized gains and losses on debt and 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 $(187) 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 $564 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 $60 million. This is primarily due to interest income.

•Income Tax Benefit (Expense) totaled $(192) million. This primarily consists of federal and state income taxes, effects of permanent items, trust tax on income from the NDT, changes in valuation allowance, and excluded production tax credit income.

Successor Period — May 18 through September 30, 2023

Net Income (Loss) totaled $(48) million for the period of May 18 through September 30, 2023 (Successor). Results were driven by:

•Capacity Revenues totaled $70 million for the period, which were primarily based on resource clearing prices received from the PJM BRA for the 2023/2024 delivery period.

•Energy and Other Revenues, net of Fuel and Energy Purchases, totaled $478 million for the period and consisted of $729 million in third-party wholesale electricity sales and ancillary revenues, coupled with $44 million in other revenue; partially offset by $(240) million in fuel and purchased power costs and $(55) million in net realized losses from hedging activities. Other revenues relate to operations of Nautilus that commenced in February 2023.

•Unrealized Gain (Loss) on Derivative Instruments totaled $(43) million of net losses for the period, which was comprised of unrealized losses incurred as a result of increases in forward power prices, partially offset by unrealized losses from the reversal of positions previously recognized as mark-to-market assets which settled during the period.

•Nuclear Fuel Amortization totaled $(72) million for the period and was related to the amortization of nuclear fuel costs that were previously capitalized to property, plant and equipment. Activity in this period included $38 million of additional amortization related to certain nuclear contracts as a result of fair value adjustments.

•Operation, Maintenance, and Development totaled $(209) million for the period. This consists of generation facility operating costs, including salary and benefit costs for generation-facility employees, the costs of removal, repairs and maintenance that are not capitalized, contractor costs, and certain materials and supplies.

•Depreciation, Amortization and Accretion totaled $(94) million for the period. This consists of depreciation of long-lived property, plant and equipment and accretion related to AROs. The period includes the effect of fair value adjustments made to property, plant and equipment and AROs upon Emergence.

•Interest Expense and Other Finance Charges totaled $(101) million for the period and primarily consisted of interest expense incurred on the Secured Notes, Term Loans, Cumulus Digital TLF, and LMBE-MC TLB.

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 BRA for the 2022/2023 delivery period. Capacity revenues were negatively impacted by $(13) million of net PJM capacity penalties related to Winter Storm Elliott.

•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 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, primarily consisting of non-cash charges for fuel inventory net realizable value adjustments. 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, and 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.