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

Aug 04, 2016 • 08:00 am ET

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

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from Julien Dumoulin-Smith of UBS. Please go ahead.

Analyst
Julien Dumoulin-Smith

Hi, good morning.

Executive
Paul Farr

Good morning, Julien.

Analyst
Julien Dumoulin-Smith

So quick question. Following up on the latest PJM capacity auction results, can you describe a little bit more in detail what is -- what your intentions are with respect to the assets that may or may not be impinged by CPO requirements? Just what you think about your compliance strategies and next year's auction moving that 100% threshold as well as just what the lower prices mean for some of the more peripheral assets.

Executive
Paul Farr

I think I got your question, Julien. If I don't answer it fully, let me know. You kind of broke up in the middle there. So the strategy that we employed this past year was the same as the prior year. We basically risk assess and rank every asset in the portfolio as it relates to the clearing prices in the auction and trying to project what other folks are doing with their assets, looking at assets that are in the queue to be added, and the prices that we believe those owners would need to see relative to forward sparks and everything else to justify building those and create a bidding strategy accordingly.

We would expect to -- and again, since there are no solid fuel or other constraints or requirements related to assets, technically all the assets that are there conform and are able to bid into the product -- the new product. So -- and we bid them as such. So, we'll continue that strategy moving forward. We do expect to see based upon those low prices depending what happens in certain states that are looking to provide subsidies for generation. The folks that have committed generation may not ultimately deliver that.

When we look at those assets and see the negative cash flows coming off them, we don't understand how those owners can commit them that number of years forward, continue to maintain them from a capex perspective and operate them, and so we'll bid into the subsequent auctions, bilat [Phonetic] arrangements as those evolve and we get closer to the delivery year. So I don't think our strategy changes at all moving forward.

Analyst
Julien Dumoulin-Smith

Okay. Excellent. And then moving on to the nuclear assets and specifically Susquehanna, can you elaborate a little bit on where you think the State of Pennsylvania is and the state of your own asset following what happened in New York recently?

Executive
Paul Farr

Yes. We're obviously still digesting what just transpired in New York and we'll -- as it relates to other situations where subsidies have been provided to competitive gen and other states we'll evaluate that. Nuclear is obviously a unique resource, and states like Pennsylvania and Illinois and New York and a few others that have a large percentage of nuclear in their generation mix as they assess the capability to meet clean air requirements going into the future, if any material portion of that generation were