Moody’s revises Talen Energy to negative

Moody's Investors Service said it affirmed Talen Energy Supply LLC's corporate family rating at Ba2 and revised its outlook to negative from stable.

At the same time, the agency assigned a Ba3 senior unsecured rating to $237.57 million of Pennsylvania Economic Development Financing Authority's revenue bonds currently being remarketed by Talen.

The negative outlook reflects the sustained downward trend in gas and power prices in the unregulated markets in the U.S. Although the results of the authority’s capacity market auction for 2018/2019 released on Aug. 21 will lead to an incremental improvement to Talen's cash flow, this will be insufficient to offset the declines in the broader energy markets.

Moody’s said the negative outlook is also driven by its expectation that the pending acquisition of Mach Gen LLC will incrementally worsen Talen's cash flow to debt leverage. The agency noted that the acquisition will, however, improve Talen's business risk profile because the acquired assets are efficient gas plants, which are currently in favor due to low gas prices and lower CO2 emissions than coal. The plants will also somewhat improve the company's geographic diversification because they are located outside of the authority market where most of Talen's assets are concentrated.

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