Talen Energy (NASDAQ:TLN) executives struck an optimistic tone on the company’s fourth-quarter 2025 earnings call, pointing to strong year-end performance, early 2026 strength during winter weather, and what they described as a durable long-term opportunity to supply power for growing data center demand.
Management said the company is reaffirming its 2026 guidance ranges, which do not include any contribution from the pending Cornerstone acquisition that the company expects to close this summer.
2025 closeout: acquisitions, contracting, and strong operating performance
President Terry Nutt recapped 2025 strategic activity around the company’s “Talen Flywheel” strategy. He highlighted a revised and expanded Amazon agreement executed in June that moved to a front-of-the-meter structure and increased volumes to 1.9 gigawatts in total. Nutt also pointed to the July announcement and late-November closing of the Freedom and Guernsey acquisitions, which added roughly 2.8 gigawatts of combined-cycle gas turbines and expanded Talen’s footprint in Ohio.
Nutt said Talen continued balance sheet discipline with a stated ability to reduce net leverage below 3.5x by the end of 2026, while also increasing the share repurchase program to $2 billion through 2028.
Financial results: adjusted EBITDA and free cash flow exceeded guidance
Chief Financial Officer Cole Muller reported full-year 2025 adjusted EBITDA of $1.035 billion and adjusted free cash flow of $524 million. He said results exceeded the high end of the company’s revised guidance ranges issued in the prior quarter, primarily due to the closing of the Freedom and Guernsey acquisitions in November 2025.
Muller also reported more than $2 billion of liquidity, including $1.2 billion of cash and full availability under a $900 million revolving credit facility. He cautioned that net leverage in 2025 was not meaningful due to the timing mismatch between including acquisition financing in net debt but only receiving about five weeks of EBITDA contribution from the acquired assets.
On operations, Muller said safety remained the top priority. He reported a recordable incident rate of 0.55, which he said was below the industry average. The fleet posted a 4.7% equivalent forced outage factor and generated approximately 40 terawatt-hours, about 10% more than 2024, driven by more dispatch opportunities across the fossil fleet.
Muller attributed improved 2025 financial performance versus 2024 to higher capacity prices and reliability must-run (RMR) revenues beginning in June 2025, an ongoing ramp in “AWS revenues,” five weeks of Freedom and Guernsey operations, and higher power prices net of hedges. Offsetting items included the Susquehanna Unit Two extended outage last spring and Susquehanna not receiving the production tax credit (PTC) in 2025.
For the fourth quarter alone, Muller reported adjusted EBITDA of $382 million and adjusted free cash flow of $292 million, noting that Q4 free cash flow exceeded the total for all of 2024.
2026 outlook: guidance reaffirmed; Cornerstone excluded
Muller reaffirmed 2026 guidance for adjusted EBITDA of $1.75 billion to $2.05 billion and adjusted free cash flow of $980 million to $1.18 billion, consistent with prior guidance and excluding the pending Cornerstone transaction. He said it was early in the year and the company does not adjust guidance “halfway through the first quarter.”
On balance sheet metrics, Muller said that as of Feb. 20, using current net debt and the midpoint of 2026 EBITDA guidance, net leverage was 3.0x. He added that upon closing Cornerstone, the company still expects to maintain the ability to achieve below 3.5x net leverage on a go-forward basis by year-end 2026.
Management also discussed how the Cornerstone acquisition is expected to affect per-share cash generation. Muller said Talen anticipates Cornerstone will create “more than $4” in incremental annual impact on adjusted free cash flow per share upon closing, with potential upside if the deal closes earlier in 2026.
Data center demand, PJM policy, and contracting: “long arc” remains intact
McFarland repeatedly emphasized what he called the “long arc” of powering AI and data centers, arguing that short-term uncertainty should not be confused with the longer-term trajectory of load growth and the opportunity for independent power producers. He said 2025 was a “year of option development,” while 2026 will be a “year of rationalization,” as some projects advance and others are delayed or do not proceed.
Nutt said management continues to view demand fundamentals as constructive and pointed to PJM and utility commentary on load growth. He referenced PJM peak load forecasts that—after recent modifications to add rigor around proposed large loads—show PPL zone increasing peak load by over 70% over the next five years and AEP zone increasing by over 30% in the same period. Nutt also cited AEP’s report of 4 gigawatts of contracted load growth in PJM in 2026 and PPL’s expectation of 10 gigawatts of signed agreements by the end of the first quarter of 2026.
In Q&A, McFarland said contract discussions across Talen’s fleet and pipeline “have not slowed down,” despite uncertainty around a proposed PJM “reliability backstop procurement” (RBP), previously discussed as a backstop auction concept. He described the RBP as a potential “relief valve” for resource adequacy and said Talen is engaging with policymakers at the state, federal, and RTO level, while also supporting an extension of the current floor and cap in PJM’s Base Residual Auction to allow time for longer-term market reforms.
When asked about large-load contracting amid policy uncertainty, McFarland said the company continues to see activity and does not believe data center development is slowing. He also told investors that Talen would not discuss its development pipeline in detail going forward, citing commercial sensitivity and the desire to avoid speculation.
Executives also addressed contracting structures, including fuel risk. Muller said structures can vary by counterparty and that Talen has explored multiple approaches, including arrangements that could shift commodity risk. McFarland added that in his view, counterparties often prefer the party best positioned to manage commodity risk to do so, and he said Talen is set up to manage gas-related risks as part of a broader contracting service offering.
Separately, on hedging, management reiterated a “pragmatic, not programmatic” approach. Nutt said higher PJM spark spreads during the fourth quarter allowed the commercial team to add hedges for 2026 and 2027 when opportunities emerged, while executives indicated they intend to remain opportunistic as volatility develops.
About Talen Energy (NASDAQ:TLN)
Talen Energy Inc is an independent power producer that develops and operates a diversified portfolio of thermal and renewable generation facilities across the United States. The company supplies wholesale electricity and related services to utilities, large industrial customers, and power marketers, participating actively in regional markets such as PJM Interconnection and the Electric Reliability Council of Texas (ERCOT). Talen’s asset base comprises a mix of natural gas-fired, coal-fired and nuclear generation, supplemented by battery storage and other flexible resources designed to support the evolving needs of the grid.
Established in December 2015 through the combination of the competitive generation businesses previously held by two major utility groups, Talen Energy was structured as a standalone, publicly traded entity on the NASDAQ stock exchange (TLN).
