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Stock-Based Compensation | 6 Months Ended
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Jun. 30, 2025
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | 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. Stock-based Compensation Expense Stock-based compensation expense presented as “General and administrative” on the Consolidated Statement of Operations for the periods was:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Stock-based compensation expense |  | $ | 16 |  |  | $ | 8 |  |  | $ | 27 |  |  | $ | 16 |
Income tax benefit |  | (4) |  |  | (2) |  |  | (7) |  |  | (4) |
After-tax stock-based compensation expense |  | $ | 12 |  |  | $ | 6 |  |  | $ | 20 |  |  | $ | 12 |
Performance Stock Units PSUs have three-year ratable 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. The following table summarizes the Company’s non-vested PSUs and changes during the year:
|  | Units (a) |  | Weighted-Average Grant Date Fair Value per Unit
Non-vested as of December 31, 2024 |  | 956,347 |  |  | $ | 54.23 |
Granted |  | 101,825 |  |  | 463.10 |
Non-vested as of June 30, 2025 (b) |  | 1,058,172 |  |  | $ | 93.58 |
_____________ (a)Represents the target number of PSUs. (b)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. Based on the share price of the Company’s common stock as of June 30, 2025, the aggregate non-vested PSUs were 2,337,445. As of June 30, 2025, $54 million of unrecognized compensation cost related to unvested PSUs granted are expected to be recognized over a weighted average period of approximately 1.0 years. The fair value of the PSUs was determined using a Monte Carlo valuation methodology based on the fair value of the underlying stock price at the grant date and the significant inputs and assumptions summarized below:
|  | Six Months Ended June 30, 2025 |  |
Volatility (a) |  | 40 | % |  |
Expected term (in years) |  | 2 |  |
Risk-free rate (b) |  | 3.99 | % |  |
__________________ (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 each award. The fair value of the RSUs granted is derived from the closing price of TEC common stock on the grant date. The following table summarizes the Company’s non-vested RSUs and changes during the year:
|  | Units |  | Weighted-Average Grant Date Fair Value per Unit
Non-vested as of December 31, 2024 |  | 549,405 |  |  | $ | 55.07 |
Granted |  | 52,514 |  |  | 207.95 |
Vested |  | (236,553) |  |  | (48.10) |
Non-vested as of June 30, 2025 |  | 365,366 |  |  | $ | 81.56 |
As of June 30, 2025, $23 million of unrecognized compensation cost related to unvested RSUs granted are expected to be recognized over a weighted average period of approximately 1.0 years.

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