Talen Energy
Talen is a US-listed power utility company, whose assets include the 6th largest nuclear power station in the USA, as well as a part-completed datacentre, and other conventional power generation assets in the North-East and Texas.
- Pillar
- Quoted equities
- Theme
- Event driven equities
- Status
- Current investment
- Geography
- USA
- Invested date
- 2023
The investment exemplifies RIT’s approach of finding undiscovered assets in listed markets, with paths to value realisation, led by motivated and experienced management teams. We invested in the company in the second half of 2023, when it was relatively undiscovered, having just emerged from a restructuring of its capital structure, when the shares did not trade on a major exchange.
In recognition of the vital role nuclear plays in the energy transition as the only carbon free, baseload energy source, the Inflation Reduction Act of 2022 provided a floor to revenues from nuclear power plants. This provided significant downside protection relative to our purchase price of the company’s shares. And to the upside, we had optionality from a purchase of the datacentre by a major cloud infrastructure provider, any nuclear revenues above the floor, and the sale of the conventional assets.
In March 2024, the company sold its datacentre and signed a long-term power purchase agreement with Amazon Web Services which added approximately $1.5-2bn to the company’s value. Later that month, the company sold its Texas conventional assets for $785m, ahead of all analyst estimates. In July, the company ‘up-listed’ its stock to the Nasdaq, introducing a new cohort of buyers of the stock. Throughout this period, the company bought back approximately 20% of its shares using sale proceeds and free cashflow. Talen was our largest direct equity position at the end of 2023 and its share price increased by nearly 150% in the 10 months from our time of purchase to July 2024.