Talen Energy Corp. affiliate Cumulus Growth Holdings LLC sold its hyperscale datacenter campus in Pennsylvania to Amazon Web Services Inc. for $650 million.
The campus, which has up to 960 MW of datacenter capacity, is adjacent to and will be powered by Talen's 2,494-MW Susquehanna Nuclear power plant in Luzerne County, Pa. The independent power producer will both supply nuclear energy through a power purchase agreement and earn additional revenue from the Amazon.com Inc. subsidiary for any remaining power sold to the PJM Interconnection LLC market, Talen said in a March 4 statement.
Amazon Web Services paid Talen $350 million at closing, with the remaining $300 million to be received "after completing certain development milestones," Talen CFO Terry Nutt said during a March 4 conference call.
The company expects $361 million in net proceeds from the sale after taxes and transaction fees, paying off debt and interest related to Orion Energy Partners LP's investment in the datacenter and simplifying its capital structure.
"These long-term contracts will produce years of stable growing revenues for Susquehanna and Talen from a high-quality investment-grade counterparty," Nutt emphasized. "These revenues are at a premium to the nuclear [production tax credit]. The agreement significantly reduced risk in our earnings and cash flow by locking in long-term power prices, creating what we believe is an even more attractive investment opportunity and a strong growth profile for several years."
The nuclear production tax credit provides for floor pricing of $40/MWh to $44/MWh through 2032 and is indexed to inflation. Amazon Web Services will have a one-time option to cap its power purchases at 480 MW, and will also have options to extend its purchases, tied to a potential renewal of operating licenses for the Susquehanna units.
The sale is part of Talen's plan to maintain a clean balance sheet after emerging from Chapter 11 bankruptcy protection in May 2023. Allegheny Electric Cooperative Inc. owns a 10% interest in each of the two Susquehanna units, according to S&P Global Market Intelligence data.
"We would not have built a spec datacenter campus, but when we exited bankruptcy, that didn't matter," Talen Energy President and CEO Mark McFarland told analysts and investors. "We had the assets and we needed to create value out of these assets in the best way possible ... so we pivoted our thinking on how best to leverage these investments by getting the most out of what we do best, which is produce safe and reliable power."