Wolfe Research The Wolfe Power Trip

The Wolfe Power Trip September 14, 2026

Higher rates mostly not an issue for IPPs Wolfe/MTM/Cons Estimates Sentiment meter. We hold our sentiment meter flat at a "2" after a quiet-ish end to the Ticker IPPs summer in IPP-land. Fall should be busy. FERC is set to rule on RBP by 9/29 and IRAS CEG by 10/12. Our sense is FERC will largely approve the RBP with minimal modifications Wolfe $12.14 $13.18 $16.76 MTM $12.33 $13.35 $17.03 given the alignment with the White House/PJM Governors Statement of Principles. Cons $12.04 $13.27 $16.76 We'll be watching the order to see if FERC better clarifies whether "protecting NRG Wolfe $5,549 $5,915 $6,136 existing deals" includes the IPP's hyperscaler offtake agreements (TLN/AMZN and MTM $5,693 $5,933 $6,308 VST/META). It's then a tight turnaround to PJM kicking off the central procurement Cons $5,511 $6,080 $6,510 on 9/30. It's possible the start of the RBP catalyzes bilateral agreements. On IRAS, TLN Wolfe $2,193 $2,767 $3,048 stakeholder comments were largely oppositional – IPPs, hyperscalers, and even some MTM $2,173 $2,758 $3,215 T&D utilities pushed back on the legality and jurisdictional issues. Hard to know where Cons $2,135 $2,722 $2,962 VST FERC will land here, but we wouldn't be surprised if there are significant modifications Wolfe $7,291 $7,493 $7,992 or even potentially outright rejection. Over in Texas, ERCOT informed loads of their MTM $7,502 $7,526 $7,911 Cons $7,269 $8,089 $8,800 initial load classification on 9/3. NRG disclosed its initial 1.2 GW data center deal was included as studied load – not surprising given the 2029 COD. VST's Comanche/ Integrated Utilities

AMZN appears to be base load. We got updates from Friday's PUCT meeting (link) PEG Wolfe $4.37 $4.66 $5.00 and expect more at tomorrow's ERCOT meeting (link). For now, conditional Batch MTM $4.37 $4.70 $5.09 Zero load is split 66 GW base and 125 GW studied, ramping through 2032. Cons $4.37 $4.67 $5.03 Source: Wolfe Utilities & Power Research

10-year treasuries are approaching 5%, how do IPPs trade in rising rates? Fundamentally, we see the group as well-positioned. These companies are all generating strong FCF. Both CEG and VST are investment grade and taking on very little net new debt, while employing buybacks. TLN is also de-levering and has zero growth capex right now. NRG is a bit of an exception as their leverage is currently Steve Fleishman elevated (~4x) and they are planning for growth capex that requires incremental ( debt. SEI is also currently carrying elevated leverage (~5x), but their growth plan is View Steve’s Research fully-funded and they quickly de-lever with rapid EBITDA growth over the next ~2 View Comp Table years. EROC is a recent IPO that has no debt and $0.6B in net cash – rates aren't an Michael Sullivan, CFA issue. The last time the 10-year approached 5% was this time 3 years ago. The IPPs ( outperformed both into and out of the early-October peak in rates, as the AI trade started taking hold. Before that, you have to look pre-GFC for 5% on the 10-year. Abigail Sneddon None of the IPPs, except NRG, existed then, so there isn't much history to work with. Drilling down into debt exposures. We looked at this last week for regulated utilities (note) and now take a look for IPPs. We break out the total rate-exposed debt – variable rate debt (less any interest rate swaps and excluding undrawn revolvers) plus upcoming maturities. We then show the EPS/FCF impact of a 1% move in rates. NRG and TLN have the highest percentage of variable rate debt. TLN has zero maturities this decade though. VST has very little variable debt, but a few near-term maturities. CEG has a lot of interest rate swap protection and no near-term maturities. SEI would need to see rates move much higher for their modest floating rate debt exposure to move. Overall, NRG is likely most sensitive to higher interest rates, but it is still very manageable overall.

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Interest Rate Sensitivities As the 10-year Treasury yield…