Talen plans pivot after Pa. gas plant rezoning proposal fails

Talen Energy Corp. still plans to sign a 1-gigawatt data center contract for 2028 delivery after a Pennsylvania county commission on Feb. 10 denied the company's request to rezone agricultural land to facilitate data center development near its Montour gas plant.

Talen was long expected to contract at least a portion of the 1,504-megawatt facility with a large load customer after shifting a landmark nuclear plant-and-datacenter colocation agreement with Amazon.com Inc. to a front-of-the-meter model in 2025. But concerns about affordability and environmental impacts led all three Montour County commissioners to vote against the independent power producer's proposal.

"Would we rather the commission vote the other way? Absolutely, no doubt," CEO Mark McFarland said during a Feb. 26 fourth-quarter earnings conference call. "We're going to figure that out and we have a number of other opportunities in the pipeline that avail themselves to do the same thing."

"It's almost irrelevant" if a data center contract for 1 GW of generation capacity is signed in 2026 because the customer will not begin receiving power until 2028, McFarland added.

The Montour decision is a "short-term hurdle" that Talen plans to treat like the Federal Energy Regulatory Commission's April 2025 decision to deny the IPP's request for rehearing of a 2024 order. That 2024 order rejected an amended interconnection service agreement for colocating another Amazon data center in Pennsylvania with the Susquehanna Nuclear plant.

"We stayed flexible, we retooled and ultimately pivoted to a better commercial solution," McFarland said. "We remain confident that we can do the same in this instance, too."

With Montour on the backburner, analysts at Scotiabank said some of Talen's recent acquisitions could secure long-term power purchase agreements.

"We see the legacy portfolio as lacking relative to peers in terms of plants that would make good candidates for data center contracts, as, beyond Susquehanna, very few assets are baseload units with high capacity factors," the analysts wrote in a Feb. 27 note to clients. "However, recently-acquired or to-be-acquired [gas] plants do seem like they should be attractive to hyperscalers, most notably Freedom, Guernsey, Lawrenceburg and Waterford."

Talen would also consider building new gas plants if certain requirements are met.

"New build is going to require either winning in the [PJM Interconnection reliability backstop procurement] and having a 15-year contract that allows for taking the merchant risk of the capacity off," McFarland said.

"It is the offtake agreement that defines this, in our opinion, not necessarily the turbine orders or the EPC," he added, referring to the engineering, procurement and construction process.

Talen recorded adjusted EBITDA of $382 million for the fourth quarter of 2025, compared with $164 million in the prior-year period. The S&P Capital IQ consensus estimate was $350.3 million.

The independent power producer posted full-year adjusted EBITDA of $1.04 billion, up significantly from $770 million in 2024. The S&P Capital IQ consensus estimate was $1.00 billion.