Talen narrows EBITDA and cash flow guidance for 2020, outlines transition away from coal

Talen Energy Supply tightened EBITDA and free cash flow guidance for full-year 2020 as a part of its third-quarter earnings report, according to three sources familiar with the situation. Management also said the company intends to eliminate its exposure to coal by 2025, said the sources and an additional source.  

The Riverstone-backed power company expects 2020 EBITDA to fall between USD 540m and USD 600m, compared to previous expectations of USD 520m-USD 620m, the sources said. Free cash flow is now guided at USD 80m-USD 140m from prior guidance of USD 40m-USD 120m.  

Talen plans to transition out of existing coal holdings and into renewable energy sources such as battery storage and solar, the sources said. Sources added that the company could finance the transition via green bonds or through a partnership or joint venture.  

The earnings report, which came out earlier this month, shows USD 174m of adjusted EBITDA, compared to USD 213m last year, the sources and one additional source said. The company raked in USD 526m of revenue for the quarter, up from USD 428m last year, two of the sources said.  

Talen generated USD 63m of free cash flow in 3Q20, three of the sources said.  

As of 30 September, liquidity totaled USD 809m, through USD 265m of cash, USD 690m of revolver availability and USD 146m of letters of credit. During the quarter, the company bought back USD 125m of municipal debt, one of the sources added.  

On a consolidated basis, the company generated USD 532m of LTM adjusted EBITDA, bringing leverage to 7.25x through USD 3.859bn of total debt, two of the sources said.  

Talen’s USD 610m 10.5% senior guaranteed notes due 2025 traded Wednesday (25 November) at 75.98 to yield 17.83%, compared to trades at 69.5 to yield 20.234% on 2 November, according to MarketAxess. Its USD 550m 6.5% senior unsecured notes due 2025 last traded at 64.5 to yield 18.365% on 16 November, up slightly from trades at 63.496 on 6 November before the earnings report, according to MarketAxess.  

Its USD 750m 7.25% senior secured notes due 2027 ticked up slightly to trade at 105.25 on 24 November for a 5.563% yield, from 102.25 before the earnings report.  

Talen did not respond to a request for comment. 

2020 Debtwire

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