Talen Energy plans turn to crypto and creditors frown

(Bloomberg) – Talen Energy Corp., which operates power plants in the northeastern United States and Texas, has unveiled an ambitious plan to focus more on clean energy and expand into extraction cryptocurrency, but the company’s bondholders are not sold.

The Woodlands, Texas-based company on Wednesday introduced potential investors to the strategy, which would require it to raise up to $ 800 million in new equity to fund the construction of two new data centers, including one. to mine cryptocurrency, according to analysts and investors who watched the presentation.

Talen – which owns a mix of natural gas, coal, nuclear and solar power plants – is the latest power company to focus more on renewables as US President Joe Biden strives to pull fossil fuels out of the way. electrical networks. But the company’s shift to crypto mining is new.

To do this, Talen, backed by Riverstone Holdings LLC, said it needed to recapitalize. Company management pointed out that it was a good company with an inadequate capital structure, according to viewers of the presentation, who asked not to be named because the event was private. Part of this recapitalization could include the creation of new corporate entities within the capital structure, analysts said.

Talen’s 6% unsecured notes due 2025 fell more than 4 cents on the dollar to about 84.25 cents on Thursday, according to data from Trace. Its 10.5% bond due 2026 last traded at around 91.6 cents, down from around 95.5 the day before the presentation.

The company did not immediately respond to a request for comment, while a spokesperson for Riverstone declined to comment.

According to a research note from Bank of America Corp., Talen expects the first phase of the data center to cost $ 350 million to $ 400 million, which would be funded with equity capital of $ 175 million to $ 225 million, as well as a debt at the project level. “

The company’s coin mining center is reportedly costing around $ 300 million, funded mostly by equity, Bank of America said. The company expects the facility to be operational by the middle of next year.

Talen has struggled at times in recent years, repeatedly declaring some of its natural gas plants bankrupt as its debt plunged to troubled levels.

In April, Talen announced a joint venture with clean energy developer Pattern Energy Group LP to develop approximately 1.4 gigawatts of solar and wind projects. “This joint venture will allow us to accelerate our clean energy transformation and increase Talen’s enterprise value,” said Alex Hernandez, chairman of Talen, in a statement in April.

BloombergNEF has projected 204 gigawatts of large-scale solar installations and 83 gigawatts of small-scale PV additions across the United States between 2021 and 2030. It also predicts that the country during this period will add 115 gigawatts of energy. wind turbine.

(Updates with refusal to comment on Riverstone in the sixth paragraph.)

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