EX-12.B 5 tln-2016331xex12b.htm EXHIBIT 12.B
Exhibit 12 (b)
TALEN ENERGY SUPPLY, LLC AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)

| Three Months |  |  |  |  |  |  |  |  |  |
| Ended March 31, 2016 |  | Years Ended December 31,
|  | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011
Earnings, as defined: |  |  |  |  |  |  |  |  |  |  |
Income (Loss) from Continuing Operations Before Income Taxes (a) | $ | 257 |  |  | $ | (368 | ) |  | $ | 303 |  |  | $ | (420 | ) |  | $ | 665 |  |  | $ | 1,061 |
Adjustments to reflect earnings from equity method investments on a cash basis | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |
| 257 |  |  | (368 | ) |  | 303 |  |  | (420 | ) |  | 665 |  |  | 1,062 |
Total fixed charges as below | 68 |  |  | 236 |  |  | 161 |  |  | 226 |  |  | 238 |  |  | 259 |
Less: |  |  |  |  |  |  |  |  |  |  |
Capitalized interest | 7 |  |  | 20 |  |  | 22 |  |  | 35 |  |  | 37 |  |  | 38 |
Interest expense and fixed charges related to discontinued operations | — |  |  | — |  |  | 10 |  |  | 14 |  |  | 12 |  |  | 6 |
Total fixed charges included in Income (Loss) from Continuing Operations Before Income Taxes | 61 |  |  | 216 |  |  | 129 |  |  | 177 |  |  | 189 |  |  | 215 |
Total earnings | $ | 318 |  |  | $ | (152 | ) |  | $ | 432 |  |  | $ | (243 | ) |  | $ | 854 |  |  | $ | 1,277 |
Fixed charges, as defined: |  |  |  |  |  |  |  |  |  |  |
Interest charges | $ | 67 |  |  | $ | 231 |  |  | $ | 156 |  |  | $ | 207 |  |  | $ | 214 |  |  | $ | 223 |
Estimated interest component of operating rentals | 1 |  |  | 5 |  |  | 5 |  |  | 19 |  |  | 24 |  |  | 36 |
Total fixed charges (b) | $ | 68 |  |  | $ | 236 |  |  | $ | 161 |  |  | $ | 226 |  |  | $ | 238 |  |  | $ | 259 |
Ratio of earnings to fixed charges (a) | 4.7 |  |  | (0.6 | ) |  | 2.7 |  |  | (1.1 | ) |  | 3.6 |  |  | 4.9 |

(a) | The three months ended March 31, 2016 includes $140 million of net pre-tax gains related to the sale of certain generation facilities. See Note 7 to the Financial Statements for additional information on the sales.

In 2015, $657 million non-cash, pre-tax goodwill and other long-lived asset impairment charges were recorded. See Note 16 to the Financial Statements in Talen Energy's 2015 10-K for additional information. As a result of these non-cash charges, earnings were lower in 2015, which resulted in less than one-to-one coverage. The adjusted amount of the deficiency, or the amount of fixed charges in excess of earnings, was $388 million.
To facilitate the sale of the hydroelectric generating facilities in 2014, in December 2013, Talen Montana terminated a lease agreement which resulted in a $697 million charge. See Note 6 to the Financial Statements in Talen Energy's 2015 10-K for additional information. As a result of these transactions, earnings were lower in 2014, which resulted in less than one-to-one coverage. The adjusted amount of the deficiency, or the amount of fixed charges in excess of earnings, was $469 million.

(b) | Interest on unrecognized tax benefits is not included in fixed charges.