S&P turns Talen Energy view to positive

S&P said it revised its outlook for Talen Energy Supply LLC to positive from stable and affirmed the B+ issuer rating and the BB ratings on its senior secured term loan B, senior secured notes, senior secured term loan C, and senior secured revolving credit facility. The 1 recovery rating on the senior secured debt, which indicates very high recovery if Talen defaults, is unchanged.

Talen announced the sale of its data center campus for $650 million and used $186 million of the proceeds to fully repay non-recourse debt at Cumulus Digital Holdings. About $300 million is held in escrow and will be available to Talen on the completion of development milestones related to the data center. This is expected in the second half of 2024.

Talen also reported various commercial agreements, including a power purchase agreement for the supply of carbon-free power from the Susquehanna nuclear power plant and the long-term sale of carbon-free attributes from the facility.

“The positive outlook reflects the potential for an upgrade once the pending development milestones associated with the data center sale are completed. An upgrade will also require confidence that Talen can sustain S&P Global Ratings- adjusted debt to EBITDA of less than 4x, and free operating cash flow to debt (FOCF to debt) of more than 10%, through our forecast period,” S&P said in a press release.

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