The transaction is planned to be completed by the end of this year.
Mach Gen owns more than 2,500MW of combined-cycle, natural gas-fired generating capacity.
Talen Energy president and CEO Paul Farr said: "This negotiated deal represents a significant step in the execution of our growth strategy, and provides meaningful improvement in our cash flow profile.
"The transaction adds highly competitive combined cycle gas assets in NYISO and ISO-NE, two mature and liquid wholesale power markets, with the opportunity to create significant value by optimizing a very efficient gas-fired plant in Arizona."
Talen expects the transaction to increase its total generating capacity to 17,600MW from the current 15,000MW, reported Reuters.
Talen Energy is a spinoff of the power generation assets of PPL Energy Supply and investment firm Riverstone affiliate RJS Power.
