Talen Energy Corporation (NYSE:TLN) Q1 2016 Earnings Conference Call - Final Transcript
May 10, 2016 • 08:00 am ET
second Unit 1 LP turbine. That leaves the third and final LP turbine blade replacement on Unit 1 for the outage scheduled in the spring of 2018. I want to thank the entire Susquehanna team for staying focused on safe execution of this work, all while keeping Susquehanna Unit 2 running at a capacity factor of 100% for 10 months and counting. Fantastic work by all.
The great operating performance and the addition of assets to the portfolio over the past year allowed us to achieve comparable adjusted EBITDA performance for the quarter versus Q1 2015, despite significant declines in energy prices. As we noted when we provided you 2016 adjusted EBITDA and adjusted free cash flow guidance on our year-end call in late February, we excluded from that guidance the financial contribution of the assets being sold to meet the FERC mitigation requirements. Our revised guidance ranges have been updated to reflect the actual financial contribution of those assets, which were sold. And Jeremy will comment more on that in his remarks.
On slide 6, we begin the commercial and operational review. Given our fuel diverse portfolio, you can clearly see the impact low natural gas prices are having on generation assets in the region. Gas continues to gain additional runtime at the expense of coal, a major driver of our decision to invest in gasification of the Brunner Island Plant and our evaluation of a similar investment at the Montour asset.
Susquehanna generation was lower year on year, primarily due to a difference in the timing of the 2015 and 2016 refueling outages. Our forced outage performance continues to be extremely strong, setting us up well for CP, and pay for performance capacity constructs in both PJM and New England. We begin the 2019, 2020 PJM capacity auction this week, with results expected to be announced on May 24. As usual, we're not providing a forecast of the auction results, but we see better behavior around economically and environmentally challenged assets as a key driver of the outcome.
On the safety front, we continue to make meaningful strides to improve our safety track record as evidenced in the chart on the bottom right of the slide. But we remain highly focused on achieving even better levels of safety performance.
Turning now to market updates, beginning with PJM on slide 7, I would broadly highlight that we've seen an improvement in forward gas and power pricing in all markets since the end of February. Outside of just the pricing improvement in PJM that you can see in the graphs, we secured key victories at the Supreme Court -- US Supreme Court in the Maryland and New Jersey litigation on subsidized new gas builds, and from FERC and the Ohio attempt to subsidize existing merchant generation. Maintaining a level playing field among competitors is an essential element to having well-structured transparent and functioning markets that encourage sensible investments in existing and new generation resources.
Now, moving to the ERCOT market