Talen Energy Corporation (NYSE:TLN) Q2 2016 Earnings Conference Call - Final Transcript

Good morning, and welcome to the Talen Energy Second Quarter Results Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Andy Ludwig, Director of Investor Relations. Mr. Ludwig, please go ahead.

Thanks, Ed, and good morning, everyone. Thank you for joining the Talen Energy Corporation conference call to discuss second quarter 2016 results. Today's presentation is being webcast, and we are providing slides of the presentation on our website at Talenenergy.com.

This presentation may contain forward-looking statements, and we encourage you to review our filings with the SEC to learn more about certain risk factors that could cause actual results to differ from these forward-looking statements.

This presentation also will contain references to non-GAAP financial information that we use to measure our business. You can find the reconciliation between the non-GAAP financial measures we use and the most directly comparable GAAP measures in the schedules to our earnings release and in the presentation that we posted on our website.

With that, I'll now turn the call over to Paul Farr, Talen Energy President and CEO.

Thanks, Andy, and thank you, all, for joining us on our Q2 earnings call this morning. Joining me on the call today besides Andy are Jeremy McGuire, our CFO, and Joe Hopf who leads our commercial and non-nuclear generation teams.

Given the early June announcement of our go-private transaction with Riverstone, we're going to follow a different and more abbreviated approach today. As outlined on Slide 3, I'll provide some color on our Q2 financial results and our 2016 forecast and then provide a transaction update after which we'll take your questions.

Let's turn to Slide 4 and look at highlights for the second quarter. Financial results were fully in-line with expectations driven by lower energy prices and nuclear availability. These drivers were partially offset by reduced O&M spending. We continue to identify areas to reduce costs and will continue executing on that front, especially in the face of challenging forward energy and capacity prices. Our year-to-date performance and expectations for the balance of the year drive the reaffirmation of our 2016 adjusted EBITDA and adjusted free cash flow guidance ranges.

On June 3, we announced the go private transaction with Riverstone with shareowners receiving $14 per share in cash upon the close of the transaction. The close of the transaction is predicated on successful shareowner approval, various regulatory approvals, and other closing conditions. We remain on track to close the transaction by the end of the year. Since we have a separate slide covering an update on the transaction, I'll move to Slide 5.

The big driver of adjusted EBITDA for Q2 2016 versus Q2 2015 was margins. Higher margins from the net asset change in Talen Energy's portfolio were more than offset by lower spark spreads in the East, lower prices and generation availability in the Pacific Northwest, and lower availability at Susquehanna driven by the timing of refueling outages between