Talen Energy Stock Rallies More than 10% - What’s Driving The Optimism?

Talen Energy said it is acquiring PJM natural gas assets from Energy Capital Partners for about $3.45 billion.

• Talen said it will add approximately 2.6 gigawatts of natural gas generation capacity to Talen’s portfolio.
• The transaction is expected to provide immediate and significant adjusted free cash flow per share accretion in excess of 15% annually through 2030.
• The acquisition of natural gas assets signals Talen’s focus on the booming data center market.

Talen Energy stock rallied on Thursday after it said it will acquire Pennsylvania-New Jersey-Maryland Interconnection (PJM) natural gas assets from Energy Capital Partners. 

It said it will add approximately 2.6 gigawatts of natural gas generation capacity to Talen’s portfolio through the acquisition of the Waterford Energy Center and Darby Generating Station in Ohio and the Lawrenceburg Power Plant in Indiana. 

Deal Details

The acquisition price is $3.45 billion and consists of approximately $2.55 billion in cash and approximately $900 million in Talen stock.

The transaction is expected to provide immediate and significant adjusted free cash flow per share accretion in excess of 15% annually through 2030. Additionally, these assets are expected to achieve an approximately 85% unlevered free cash flow conversion rate before recognition of any tax benefits, the company said. 

“When this transaction is complete, Talen will have approximately doubled its expected annual generation output within two years, meaningfully diversified our fleet, and materially increased our free cash flow per share,” said Terry Nutt, Talen President.

Talen expects to issue new debt to fund the cash portion of the purchase price.

Expand Into Data Center

The acquisition of natural gas assets signals Talen’s focus on the booming data center market.

Talen said the addition of the facilities to Talen’s portfolio enhances Talen’s ability to offer reliable, scalable, grid-supported, and regionally diverse low-carbon capacity to hyperscale data centers and large commercial off-takers, the company said. 

The expansion of operations in Ohio allows Talen to serve a growing, top-tier data center market, it added. 

How Did Stocktwits Users React?

Retail sentiment around TLN trended in ‘bullish’ territory amid ‘extremely high’ message volume. 

One user said that the stock is pushing to the $450 price mark within the next few weeks.

https://stocktwits.com/COYOTEofWS/message/641919176

Shares of Talen Energy have risen 80% over the past 12 months.