Talen Energy shares surge on $3.5 billion gas-fired power plant deals

Shares of Talen Energy TLN jumped more than 15% on Friday in premarket trading, a day after the power producer announced deals worth $3.5 billion to buy two gas-fired plants.

The utility company on Thursday said it will buy the Moxie Freedom Energy Center in Pennsylvania from Caithness Energy and the Guernsey Power Station in Ohio from Caithness Energy and BlackRock.

Brokerage UBS said the deals allow Talen to "extend the runway" of assets they can leverage as power demand surges from data centers used for artificial intelligence technologies.

Gas-fired plants remain a critical bridge in the U.S. energy transition, providing dependable and dispatchable power at scale.

The deals give Talen "new flexibility to capitalize on robust data center contracting demand," and may help increase its valuation, J.P. Morgan said.

Last month, Talen had announced a partnership with Amazon.com to supply up to 1,920 megawatts of electricity from its Susquehanna nuclear plant in Pennsylvania to Amazon Web Services data centers.

CEO Mac McFarland said Thursday's deals add "more than the equivalent" of another Susquehanna plant to the company's platform.

The average buying price of the two plants is about 53% of the cost of buying new turbines, according to analysts at brokerage Evercore. "Buy over build continues the momentum," they said.

Talen said the two plants, which add nearly 3 gigawatts of capacity, are among the most efficient in the PJM Interconnection, a regional transmission organization that manages the flow of wholesale electricity in parts of the Eastern United States, stretching from Illinois to New Jersey.

The deals are expected to bolster Talen Energy's 2026 adjusted core profit by more than 40% and boost its free cash flow by 40% in 2026 and over 50% through 2029.