Talen Energy Corporation (NASDAQ: TLN) A ‘Unicorn’ Power Play Set to Benefit from Data Center Demand
Talen Energy Corporation is quickly becoming one of the most exciting stories in the utility sector, with its shares soaring over 167% this year and an impressive 212% gain over the past 12 months. Once considered an obscure name, Talen has captured the market’s attention thanks to a groundbreaking deal with Amazon Web Services (AWS) to supply nuclear power to a data center campus. This trailblazing agreement, sourced from the Susquehanna nuclear plant in Pennsylvania, has put Talen in a unique position, making it the only independent power company to strike a nuclear deal with a major data center developer.
This AWS agreement has been described as Talen’s “crown jewel,” providing the company with a strategic foothold that could lead to more deals in the future. Currently, Talen has contracted up to 960 megawatts from the 2,200 megawatts available at Susquehanna, leaving room for further expansion and potential new agreements. This puts Talen in an enviable spot, especially as data center demand is set to explode, with developers expected to spend $250 billion annually on new facilities, according to Barclays analyst Nicholas Campanella.
Analysts are increasingly bullish on Talen, with firms like UBS and Barclays initiating coverage with strong buy ratings. UBS recently set a price target of $197, implying a 15% upside, while Barclays is even more optimistic, raising its target to $207, suggesting a potential 21% gain from current levels. The recent surge in Talen’s market cap, now approaching $9 billion, is further evidence of the growing investor interest.
The company’s future looks promising, with revenue from the AWS contract expected to start flowing in the second half of 2025. Barclays estimates that this deal will add $41 million in EBITDA next year, rising to $148 million by 2028. Talen’s ability to leverage the intellectual property gained from this AWS deal could pave the way for similar contracts across its other power assets, including natural gas plants.
Talen has also been active in managing its capital structure, announcing a $1.25 billion share repurchase program in early September, on top of the $931 million in shares it had already bought back. This aggressive buyback strategy underscores the company’s confidence in its growth trajectory and its commitment to returning value to shareholders.
However, it’s not all smooth sailing. The AWS deal has faced pushback from traditional utilities like Exelon and American Electric Power, who argue that Talen is circumventing grid interconnection fees. This dispute is currently before the Federal Energy Regulatory Commission (FERC), with a decision expected by early November. Despite this hurdle, most analysts, including those at UBS, believe that FERC will approve the contract, further solidifying Talen’s position as a leader in integrating nuclear power with cutting-edge tech infrastructure.
Talen Energy’s unique positioning in the power market, strong growth outlook, and recent analyst upgrades make it a compelling play for investors looking to tap into the intersection of energy and technology. As the demand for data centers grows, Talen’s strategic partnerships and innovative approach could see its stock reach new highs.
