Talen Stock Soars on Plant Purchases. Why the Market Is Excited About the Nuclear Play’s Bet on Gas.

Talen Energy said the acquisition would increase its ability to provide power to data centers. (Dreamstime)

Talen Energy stock was soaring early Friday after it expanded its power plant portfolio. This time it’s gas rather than nuclear that has the market excited.

The independent power producer said late Thursday it would acquire two combined-cycle gas-fired plants for $3.5 billion. It is financing the deal by issuing $3.8 billion in new debt, which will also be used for refinancing.

The acquired plants are Caithness Energy’s Moxie Freedom Energy Center in Pennsylvania and Caithness Energy and BlackRock’s Guernsey Power Station in Ohio. Both are located in the Pennsylvania-New Jersey-Maryland Interconnection, or PJM, market. They will add around three gigawatts of capacity, bringing Talen’s total to 14 gigawatts.

Talen shares rose 20% when the market opened to $316.07. The stock has more than doubled in the past year, largely on enthusiasm about its deal to provide nuclear energy to data centers for Amazon.com.

“We view this development favorably” and see this as Talen “extending the runway of assets that they can leverage amidst the power demand boom within PJM and comes on the heels of the AWS [Amazon Web Services’ deal announced last month,” wrote UBS analyst William Appicelli in a research note.

The plants would increase Talen’s forecast adjusted free cash for 2026 to $956 million from $693 million, according to the UBS analyst’s forecasts. Appicelli raised his target price on Talen to $399 from $366 and kept a Buy rating on the stock.

The increasing need for energy to power artificial-intelligence technology has supported Talen and peers Constellation Energy and Vistra.

Earlier this week President Donald Trump appeared at an event in Pennsylvania where more than $92 billion in new investments in AI and energy infrastructure were announced in the region. Alphabet Google pledged a $25 billion investment toward data center and AI infrastructure across the Pennsylvania, New Jersey, and Maryland region over the next two years.

“The addition of the [gas-fired plants] to Talen’s portfolio enhances Talen’s ability to offer reliable, scalable, grid-supported and regionally diverse low-carbon capacity to hyperscale data centers and large commercial off-takers,” the company said in a statement.

Talen said the deal is in line with its target of annual share buybacks of around $500 million through 2026, with its aim being to return to capital allocation of 70% of adjusted free cash flow thereafter. The acquisitions are expected to close in the fourth quarter of this year.

Write to Adam Clark at adam.clark@barrons.com