Talen Energy CorpTLN
Talen Energy Corp Stock Compensation Disclosure
13. Stock-Based Compensation
In June 2023, TEC began granting performance stock units (“PSUs”) and restricted stock units (“RSUs”) to certain employees and non-employee directors under the Company’s 2023 Equity Incentive Plan (the “Equity Plan”). The aggregate number of shares authorized for issuance under the Equity Plan is 7,083,461 shares of common stock.
Equity to Liability Modification
In December 2025, certain executive officers executed agreements providing for certain PSU and RSU awards that are scheduled to vest in 2026 to be partially settled in cash. Generally, the cash settlement amount will be equal up to 60% of the net after-tax value on the vesting date of each such award. However, the cash settlement amount is subject to a cap. Additionally, all non-employee directors are expected to be offered the ability to net-settle (to account for income taxes) all of their PSUs and RSUs. Accordingly, the portion of each participant’s applicable awards that are expected to be settled in cash and all non-employee director awards were reclassified from equity to liability. As a result of the modification, a $501 million liability was recognized and presented as “Stock-based compensation liabilities” on the Consolidated Balance Sheets and was measured based on the closing share price of Talen’s common stock of $374.84 as of December 31, 2025 (Successor).
Performance Stock Units
PSUs have three-year or two-year cliff vesting schedules or vest upon consummation of a change in control event based on the satisfaction of a continued employment condition and the achievement of certain market conditions over a performance period. Participants will be awarded additional PSUs if market conditions exceed targets at the time of vesting. If the Company declares any cash dividends while the PSUs are outstanding, participants will be credited a dividend, payable at the time of vesting, based on the number of shares of common stock underlying the PSUs.
Changes in non-vested PSUs during the year ended December 31, 2025 (Successor) were:
| Liability-Classified PSUs | Equity-Classified PSUs | Total PSUs | Weighted-Average Grant Date Fair Value per Unit | |||||||||||||||||||||||
| Non-vested as of December 31, 2024 (Successor) | — | 956,347 | 956,347 | $ | 54.23 | |||||||||||||||||||||
Granted (a) | — | 102,275 | 102,275 | 498.40 | ||||||||||||||||||||||
| Forfeited | — | (288) | (288) | 645.03 | ||||||||||||||||||||||
Equity to liability modification (b) | 569,477 | (569,477) | — | 53.69 | ||||||||||||||||||||||
Non-vested as of December 31, 2025 (Successor) (c) | 569,477 | 488,857 | 1,058,334 | $ | 147.45 | |||||||||||||||||||||
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(a)The weighted-average grant date fair value per unit was $96.00 and $54.35 for the year ended December 31, 2024 (Successor) and for the period May 18 through December 31, 2023 (Successor), respectively.
(b)See description of December 2025 equity to liability modification above.
(c)Represents the target number of PSUs. Subject to the PSU award agreements, the actual amount of PSUs earned by participants at vesting can range from 0% to 200% of the target number of PSUs based on the Company’s stock price performance. In addition, certain of the PSUs are eligible to earn an additional amount of Talen shares based on the incremental Company stock price performance in excess of the PSU targets. Assuming all non-vested PSUs vested on December 31, 2025 (Successor) at the then current share price of the Company’s common stock the aggregate non-vested PSUs would be 1,268,275.
The fair value of PSUs is determined using a Monte Carlo valuation methodology based on the fair value of the underlying stock price at the grant date. Significant inputs and assumptions used in the valuations of PSUs were:
| Successor | ||||||||||||||||||||
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | May 18 through December 31, 2023 | ||||||||||||||||||
Volatility (a) | 40% - 50% | 25 | % | 25 | % | |||||||||||||||
| Expected term (in years) | 1.2 - 2 | 2.4 | 3 | |||||||||||||||||
Risk-free rate (b) | 3.52% - 3.99% | 4.29 | % | 4.35% - 4.59% | ||||||||||||||||
(a) Derived from an option pricing method based on the average asset volatility of peer companies and the Company’s leverage ratio.
(b) Based on the U.S. constant maturity treasury rate with a term matching the expected time to the end of the performance measurement period.
Restricted Stock Units
RSUs have three-year ratable or two-year cliff vesting schedules beginning on the grant date, with restrictions on transferring settled shares prior to the final scheduled vesting date for the three-year awards. The fair value of RSUs granted is based on the closing price of TEC common stock on the grant date.
Changes in non-vested RSUs during the year ended December 31, 2025 (Successor) were:
Liability-Classified RSUs | Equity-Classified RSUs | Total RSUs | Weighted-Average Grant Date Fair Value per Unit | |||||||||||||||||||||||
| Non-vested as of December 31, 2024 (Successor) | — | 549,405 | 549,405 | $ | 55.07 | |||||||||||||||||||||
Granted (a) | — | 53,096 | 53,096 | 209.82 | ||||||||||||||||||||||
| Forfeited | — | (372) | (372) | 378.67 | ||||||||||||||||||||||
| Vested | — | (261,476) | (261,476) | 48.71 | ||||||||||||||||||||||
Equity to liability modification (b) | 169,642 | (169,642) | — | 61.08 | ||||||||||||||||||||||
Non-vested as of December 31, 2025 (Successor) | 169,642 | 171,011 | 340,653 | $ | 106.18 | |||||||||||||||||||||
(a)The weighted-average grant date fair value per unit was $121.89 and $48.46 for the year ended December 31, 2024 (Successor) and for the period May 18 through December 31, 2023 (Successor), respectively.
(b)See description of December 2025 equity to liability modification above.
Stock-based Compensation Expense
Stock-based compensation expense presented as “General and administrative” on the Consolidated Statement of Operations was:
| Successor | ||||||||||||||||||||
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | May 18 through December 31, 2023 | ||||||||||||||||||
| Stock-based compensation expense, liability-classified awards | $ | 501 | $ | — | $ | — | ||||||||||||||
| Stock-based compensation expense, equity-classified awards | 25 | 33 | 19 | |||||||||||||||||
| Income tax benefit | (132) | (8) | (5) | |||||||||||||||||
| After-tax stock-based compensation expense | $ | 395 | $ | 24 | $ | 14 | ||||||||||||||
Unrecognized stock-based compensation expense and related periods of recognition as of December 31, 2025 (Successor) were:
PSUs | RSUs | |||||||||||||||||||||||||
Equity-Classified | Liability-Classified | Equity-Classified | Liability-Classified | |||||||||||||||||||||||
Unrecognized stock-based compensation expense (a) | $ | 33 | $ | 64 | $ | 9 | $ | 9 | ||||||||||||||||||
| Weighted-average period of recognition (in years) | 0.5 | 0.4 | 0.6 | 0.4 | ||||||||||||||||||||||
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(a) Stock-based compensation expense related to liability-classified awards is subject to variability due to changes in their value through the settlement date.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2015 | Feb 29, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.