Talen Energy Enters Agreement To Be Acquired

Talen Energy Corporation announced today that it has entered into a definitive merger agreement with affiliates of Riverstone Holdings LLC, a private investment firm, pursuant to which Talen will be acquired by Riverstone

Talen Energy operates a retail energy supply business and owns or controls 16,000 megawatts of capacity in eight states

Under terms of the merger agreement, all outstanding shares of Talen Energy common stock not currently owned by Riverstone affiliated entities will be acquired for $14.00 per share in cash. Affiliates of Riverstone currently own approximately 35 percent of the outstanding shares of Talen Energy common stock, which were issued in the June 2015 transaction that established Talen Energy by combining competitive generation assets that had been owned by affiliates of PPL Corporation and affiliates of Riverstone.

The purchase price represents a 56 percent premium to the closing price of $9.00 per share on March 31, 2016, the last trading day before public reports of a potential sale of Talen Energy, and a 101 percent premium to the 60-day volume-weighted average price of $6.95 per share through March 31.

The transaction has a total enterprise value of approximately $5.2 billion.

The parties currently expect the transaction to be completed by the end of 2016, subject to customary approvals

The agreement provides for a "go-shop" period, during which Talen Energy may actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals. The go-shop period is 40 days. Talen Energy will be permitted to continue discussions with certain parties that make a qualifying offer during the go-shop period for an additional 20 days and, subject to customary requirements included in the agreement, enter into or recommend a transaction with a person or group that makes a superior proposal. The agreement provides for the payment of a termination fee by Talen Energy to Riverstone in the event that the agreement is terminated for a superior proposal, which termination fee will be $50 million, but which will be reduced to $25 million if Talen Energy accepts a superior proposal made during the go-shop period.

The consideration for the common stock in the transaction, of approximately $1.8 billion, is expected to be funded by a conversion of Riverstone's existing ownership of 35 percent of the common stock of Talen into shares of the surviving corporation, Talen Energy's cash on hand, and proceeds of a $250 million new secured term loan. The new secured term loan is fully committed by Goldman Sachs Bank USA, Royal Bank of Canada, Barclays Bank plc, Credit Suisse AG and Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Deutsche Bank AG New York Branch, Morgan Stanley Senior Funding Inc., and the Bank of Tokyo-Mitsubishi UFJ Ltd., and will rank pari-passu with the existing first lien revolving credit facility of Talen Energy Supply LLC (a wholly owned subsidiary of Talen Energy) ("Energy Supply"), which will be reduced from $1.85 billion to $1.4 billion upon closing of the transaction. Concurrently with the signing of the merger agreement, all of Energy Supply's subsidiaries that currently guarantee its revolving credit facility have executed guarantees (effective as of the closing of the transaction) of Talen Energy's outstanding unsecured notes due 2025 ("2025 Notes") and its Pennsylvania Economic Development Financing Authority revenue bonds ("Municipal Bonds"), which together comprise approximately $831 million of Energy Supply's approximately $3.3 billion total unsecured debt that will remain outstanding. As a result of this new credit support for the 2025 Notes and the Municipal Bonds, it is expected that these notes and bonds will be structurally senior to the non-guaranteed unsecured debt of Energy Supply, and we believe that the issue ratings on the 2025 Notes and the Municipal Bonds will be maintained or improved.