Talen Energy discloses expected loss from Winter Storm Uri; 4Q EBITDA rebounds on capacity pricing

Talen Energy Supply revealed in yesterday’s earnings release that it expects a USD 60m – USD 90m loss from the impact of February’s Winter Storm Uri, according to two sources familiar with the company. The massive storm, which brought record low temperatures, ice and snow, had a particularly devasting effect on Texas.  

The Riverstone-backed power company estimates roughly 10% of its portfolio’s capacity contains exposure to the storm, the sources added.  

Excluding the storm’s impacts, Talen is guiding USD 500m-600m of adjusted EBITDA in 2021 and minimal to USD 80m of free cash flow, the sources said.  

On the earnings front, the company generated USD 576m for adjusted EBITDA in 2020, compared to USD 647m in 2019, driven by volatile capacity pricing, the sources said. The company also generated USD 119m of adjusted EBITDA in 4Q20, compared to USD 75m in 4Q19, as pricing improved in the back half of the year, they added 

The company had signaled that 2020 would be a low point for capacity pricing before hitting a recovery in 2021, one of the sources said.  

For the year, the company booked USD 145m of free cash flow, they said.  

For the fiscal-year ended 31 December, Talen is 6.9x levered through USD 3.971bn of total debt and USD 576m of adjusted EBITDA.  

Subsequent to year-end, the company provided updated liquidity metrics. As of February, the company held USD 948m of liquidity through USD 915m of cash and USD 33m of revolver availability. During 1Q21, the company monetized some of its PJM capacity and brought in USD 370m of cash.  

Talen plans to transition out of existing coal holdings by 2025 and into renewable energy sources such as battery storage and solar, as reported. The company could finance the transition via green bonds or through a partnership or joint venture.   

The company plans to hold an ESG Investor Day on 19 May, discussing its plans to adopt a no coal strategy.  

Talen’s bonds weakened over the last week after S&P placed the company on CreditWatch due to a potential USD 50m-USD 100m impact from the winter storm anticipated by the ratings agency.  

The USD 543m 6.5% senior unsecured notes due 2025 softened to 83.5 to yield 11.874% on 4 March after the S&P report from trades at 88 to yield 10.003%, according to MarketAxess. The notes recovered slightly over the last week to the 84.75 context before dipping to the 82.5/83 context today.  

Messages left with Talen were not returned.

2021 Debtwire

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