Talen Energy remains optimistic about its power agreement with Amazon, even in light of a regulatory hurdle. CEO Mac McFarland aimed to instill confidence in investors during the company’s fourth-quarter earnings call on Thursday. The rise in AI-driven electricity demand has significantly enhanced Talen’s stock performance over the previous year.
Despite facing regulatory obstacles, Talen Energy is moving forward with its initiative to supply power to an Amazon data center located next to its Susquehanna nuclear power plant in Pennsylvania. “We have an existing relationship with a hyperscaler who shows no signs of pulling back on growth and has invested material capital and sweat equity into the Susquehanna agreement to date and on an ongoing basis,” McFarland expressed.
He was referring to the company’s current interconnection service agreement with Amazon Web Services covering 300 megawatts of power. The surge in electricity demand driven by the AI boom has caused Big Tech firms, including Amazon, to enter into substantial agreements with independent power providers like Talen to accommodate this need.
When AWS and Talen initially announced their partnership last year, they disclosed contracts for 960 megawatts of co-located capacity. However, the Federal Energy Regulatory Commission blocked an interconnection service agreement in November that would have allowed a wider expansion of their power purchase agreement beyond the initial 300 megawatts. Talen responded by appealing the decision in federal court this January.
“Talen has time to adjust the contract to a different commercial arrangement and/or clarify the regulatory issues, and we are confident and focused on executing one or both of those options over time,” McFarland noted.
Talen reported a net income of $998 million attributable to stockholders for 2024. Nonetheless, shares saw a decline of 7.3% by the market’s close on Thursday. Talen is among several independent power producers whose stock prices surged last year as investors anticipated demand from Big Tech’s extensive AI data center expansions. Even following Thursday’s drop, Talen’s stock price has more than doubled compared to this time last year.
Shares of Vistra, another independent power producer that benefited from the AI boom, also experienced a decline following its earnings report. While McFarland sought to reassure investors, some remained skeptical. “We’re clearly getting anxious,” remarked Seaport Global analyst Angie Storozynski during the call.
