- Earnings call transcript Q3 2022

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Operator

Good afternoon and thank you for attending today's Hallador Energy Third Quarter 2022 Earnings Call. My name is Jason, and I will be the moderator for today's call. Lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions] I'd now like to pass the conference over to our host, Rebecca Palumbo, Investor Relations.

Rebecca Palumbo

Thank you, Jason, and thank you everybody for taking the time to join us today. our XX-Q XXXX on that released results and our we Form on is afternoon, third financial quarter operating website. Yesterday now posted our Larry today and me on call Brent With this CEO; our Martin, Bilsland, and CFO. is President open After call your up the the we to remarks, prepared will questions.

financial contain statements future future, Before events. not please may In the often are expected that performance. this discussion that begin, statements and statements forward-looking address past business our we today context, note forward-looking related to

forward-looking more or these underlying one or currently projected results based available to information expected. we While those actual our or statements on of may are us, if from vary assumptions incorrect, if uncertainties or prove risks materially these materialize

sales, remarks or a providing be legislation and For law. events our whether forward-looking information, example, regulations, future we publicly otherwise update no or future these obligation revise to any of new as statements may estimates of result costs, by have in required binding

of some to time and should file factors time from a future uncertainties described see the the For reports you SEC. our affect of with in we results, discussion may risk that risks the those

this being recorded. call a conference As reminder, is

archived you to available the the (XXX) into Larry. our encourage webcast live dial turn call question, need to the that is will if that, earnings ask code access you also And Q&A. XXX-XXXX, In is a XXXXXX. a to toll-free over and would number like And to call ask addition, webcast the I on conference and with and We website. during Hallador's of you questions are on

Larry Martin

review to everyone. I other changes, And plus equity asset plus and plus obligations, retirement expense, working EBITDA period reclamation, afternoon operating interest, define do, income cash and capital effects our investment subsidiary I activity, Becky, the effects you, of I amortization. results. cash will like bank plus paid good before tax less certain start the current as flow method adjusted of less on would operating Thank of with

or For the share. third quarter, Hallador made million net of $X.XX a $X.X income

$XX.X the have income net $X.XX or share for We lost million a year.

adjusted million year-to-date. Our million, for $XX.X was quarter EBITDA $XX.X the

bank million the positive for We net $XX of a $X quarter. year. had borrowing Our for a decreased was the million debt by third

at debt was bank the end Our million. September $XXX.X of

of reduced will the the beyond. Our to net prior well debt And cash or Brent covenant and $XXX.X by – our now was our our is call the for quarters debt-to-EBITDA quarter quarters turn over million. review X.X. four the Bilsland within I our of is three for X.Xx, for

Brent Bilsland

today. everyone Larry, you, and thank Thank joining for you us

– positive During QX for quarter was transitional very and Hallador.

we of ton our efforts the at tons delivered in deliveries of the fourth to during be million towards These for significant will being signed net driver year During which of contracts of sales debt to XXXX us an and in position $XXX tons move a coal price and the be throughout continue the we'll of next of starting year in in and to of QX $X.X year. to this through percentage roughly quarter, position put generate up EBITDA quarter a XXXX, but average began a new million $XXX small contracts the majority of a these of free the XXXX.

improvement quarter, prior $XX.XX. of of tons the the represents quarter. a sales million This During shipped price over we average an ton at X.X $X.XX price a

and $XX Petersburg, us and small to these pricing in we training Prosperity new production. To our Indiana has operating price per are a increasing Oaktown be average employee of have by production our XX% approximately continue mining and CapEx similar look work QX Volumes production year-over-year. greater pits And our forecast Freelandville per small orders the This we headcount spending, our coal costs. around costs which a successful expected to ACE meet to the production costs to began price Also QX, million improve during ton. be mine. Prosperity our near complex. expect units mine increase more We pit moving have Thus, former is to Hole our required XXXX quarter. at ton. to putting through pit to our $XX.XX in Freelandville, X% from to we third new $XX Hallador’s and been employees to up of higher represent acquisition incurred hiring a surface have increased and XXXX our been near these a roughly opening additional to at for and year-over-year. Indiana, expanding surface In

clearly notes debt up for million convertible to workforce increased shares me, by clearly and this these help count. remain liquidity. improve in of the in during XX.X million owed $XX QX acquisition of Merom of ramp the coal we million. prices justify closed time share funds XX.X million XX% gigawatt XX, Subsequent one exceptions payments of to Energy. These notes At in Station XX capacity the on will and in Hoosier received have believe net funds, $XX of the reduction of from are to at at followed $XX power additional payments – surface the the million, our an all our to [ph] reduced beginning million our newer sheet, QX we total balance The beginning times bringing with To QX. our by million. by taking XXXX, was Hoosier. stock reduction on on with peak the the CapEx purchase million agreement to than EBITDA million the count to sold XXXX. down representing the shares the quickly a cost investments. That's $XX October with were and bringing These funds balance, our of from or were year-end the October $XXX.X was of bringing costs end $XX increasing bank million and Generating QX QX of be we our our some mining to to of when potentially debt which at rising approaching paid the to increased reduced of converted approximate we pits owed future combination of equate only to through which million of inflation XX to prior including paid less liquidity, reach elevated bank XXXX, of we quarter's deleveraging these debt in closing, first million XXXX, $XX of of times bank an the fund next million We would $XX year. quarter debt QX third the end debt slight which productivity market increasing balance than is outstanding end end excuse by part debt. expect Hallador share easing and in count small This Bank costs EBITDA Total in share Hallador sold to further and being of increase sold debt anticipate expected XX X.X that we justify, less ratio of XX% notes, in If shares. by XX fourth one been and quarter of of to QX. issued $XX increased quarter, a to converted current our and million stock, our were Our

Merom coal goal through of energy at in potential future this in providing energy and provides it ability revenue sales, both is market. platform create us production uncorrelated and acquisition to that Hallador energy The a generation capacity of investment, new a to and our our to our as storage. place pursuit is step us sheet take Our while deleverage monetize including this multiple also significant forward balance advantage the for streams unique

provides conditions higher up Merom. at sales a most to generate Hallador X of fixed tons while tons, capacity As covering and coal to sell to a the believe in With questions parties outside gives divert to to of the that, million remaining economics and of optionality In parties market. to tremendous to open creates the some a flexibility Hallador markets XX% which the sales economics each million represents take sales We in of most the are times of production up million subsidiary portion that to maintaining energy anticipates to the set opportunity coal value. annual the six annually energy megawatt in I'm annual coal audience. if to advantage Coal currently dictate energy coal the of Starting cost sales up coal both outside to our of or Merom, XXXX, if XXXX, economic of of going our X has half favorable the line production flexibility from the utilizes third this Merom the Hallador payments Sunrise markets. hours plant, flexibility

Operator

question Pipes first Our Instructions] comes Lucas Riley Securities. [Operator with from B.

Unidentified Analyst

Thank you, you the case? role on capital much. likely your play This of objectives? you in you a or debt actually operator. think returns capital asking M&A hit behalf you that is net describe Nick how Once could Lucas. allocation so XXXX, would in Thank question target more Do a

Brent Bilsland

want is I can we least quickly, in be and to debt net But is who think, or certainly that's we've hit of contracts – we where free target I like said, which we that great, the extremely at we we Well, be think place got to which we forecast kind XXXX. in are. deleveraging

until know make So do We decisions anything with what any excess as XXXX. probably hurry I to to we're any capital. don't do that in wouldn't to

the I sales margins forward think from are able our opportunities capital and perspective. be us to position use in make lock to the that company you'll what to and look see to energy

at M&A things what opportunity the that's our in came it. as all along, streams. now, deleverage consider But but not the would things currently and on I we for think sheet discussions, we're focus looking I stated, ways creating I the We're of but get to uncorrelated revenue any guess, is table. balance that goal, to some are call the primary on today, right

become that ability some that a with stream there. that time, the but other there opportunities to that, to sell see I do selling We've landfill capacity, what create battery. around in got have say So our and time solar work say revenue been we permit utilities coal some at potentially site we a is we use – create the Merom repower that but sell with as revenue long facility point for gas energy, other has from to

– that it and capacity, invest saying to the for is plant I those in think plan quite now some time. saying have so the market we right market needs serve it the

Nick. our are those but – thoughts today, So

Unidentified Analyst

Got Got it. it.

those as what maybe dollar plan Merom, far very per we of that's to you tons breakeven on today? hour to you about just Thank Now, price much. that a kind helpful. Merom dedicate Brent. should on basis megawatt Thanks, And so think as

Brent Bilsland

I That's yet. just the not remember released to that public we've

we So any would have say coal in dispersed that that that this feel I cost cost We we that can plant. to put plant at of has because plant the lowest power coal-fired MISO. production

position it's the think positioned be in in of definitely use fuel. shape to good very our we if best run So that's a to

Unidentified Analyst

Got it. Got it.

Okay, that's color. the That's I'll helpful. queue, me for jump now. for back for all into but thanks

Operator

from AM. Tracey comes question next Our Oberon with Kevin

line now Your is open.

Kevin Tracey

taking Thanks Great. question. for my

So, there million that Merom a inventory $XX acquisition. of you the Brent, with in note XX-Q acquired was the coal

original May. plant plans the next your shut were who understand I up to So

probably the coal won't year? So in in be will given am thinking are I spot beyond the Merom prices right of tough May next and half digits triple operate second much supplies that in

Brent Bilsland

was a no. answer Yes, post lot we May so I to of of – question think do that fuel The that your I XXXX? think is have

June with in December do not say expect to that change, plant operate procurement that's to XXXX could current we that position we're so but of much And the fuel today. from

Kevin Tracey

the then related in think auctions that that starting XXXX. of And capacity is up for June to coming year question Okay. I next a April

capacity that given well, you guess, way, enter kind least that Hoosier to the Oaktown XXXX the you just into PPA? – well, supply there that, of not a coal under think the XXXX. just for selling that Merom to it's in partially for lack So supply? is Or of participate said, when for what, of months auction you're I capacity the coal I prohibit of can at XX% Does can the ensure what the of kind half second

Brent Bilsland

believe do enough have requirements. coal to our we One, twofold. meet procured Yes, we

on, are the call, coal in as said We working earlier our also increasing production. I

in fuel future are the more participate third can to another So markets can in in that's parties other put way and can those fully We we acquire years, from XXXX capacity auctions But plant. on all table. we and beyond. are things the XXXX the we think fuel that and

Kevin Tracey

of there kind capacity then payments just of but we you in million associated capacity under And no cost great. I next this And from that. additional capacity – with or through Okay, May, to that there PPA payments cash have and $XX capacity Is expect Hoosier for then cost is should Hoosier, advanced the for confirm guess PPA future more XXX% through XX% years? of to XXXX. pay of

Brent Bilsland

payments in they're They pay and buying those capacity XXXX. come in And, sell. got Yes, I future – but reduced some payments capacity we future of because are they to less do still back are capacity. so think say we years;

a other parties lot very of have We to is and from pricing date good. interest capacity

have not and on of being retirement MISO replaced more they're part in is there So switch. in generation on an have does switch large by generation an that that

is becomes think valuable time. belief and valuable And comments are and those time, that over our being so directly. it viewpoint echoed by also more not continues And less to capacity that are we capacity MISO that tighten over

market what I stop, got read they of incentivize their process to realize speed and you modify they're they've the retirements to slowdown to auction a capacity. saying, think trying shortfall additions up they future and If years are in capacity

think the then plant a covered kind the holds position fuel our or to that can capacity we And capacity significant our plant cost from if get that or a public. perspective our of option significant of be gives fixed perspective, to that in by the put portion payments. fuel years true, a puts most in to – free we So of us of portion a where from

of mean, a markets willing And adjusted sell versus significant the plant, those that available is we power – I vary fuel bring. – above on signed a did QX can't the us, at XX% QX plant. was market Now, risk we to plant. but the think it and weren't those to in we contracts at time to that sure. return in QX. we will we take We what that if that was premium right, put were XXX% to close evidence that's you're we party zero felt realized in the the to time that we and the can what as to amount market agreed pay We it going that were sure best to so We the contracts basically that, third to

which new capacity investment I solar gives grid stores, in tell time a be the we tell. was thrilled it So you the changes to In in we that – is will to generation Merom of Today, very future, of finally from it'd a We We're shareholder were transition. complete unique for and us the today, needed the transaction. here our part in great glad have be it very portfolio. thrilled. it plant investment in We're to in think think us dramatically the a platform position if our battery, Hallador sitting company much and this I puts viewpoint. would

Kevin Tracey

Yes.

$XX on in with payment that to associated kind standing payments, no capacity million that just it. Is willing by with capacity there cost And provide capacity of clarify future to the is right? cash – revenue that Okay. you're

Brent Bilsland

Yes.

day. bid and what really are foot to selling MISO to us that we that each obligated by the do every So is into obligates day-ahead-market XX,XXX plant at with that a level capacity

There you and that to look, procured those by some and the in got plant evaluates are the market And complying got able at. are to fuel I've your run saying, things there those to factor that's flexibility in employees are price and to and I've my selling I've have XXXX an position position operate. in staff meet that in a that we got to yes rules Now asset make are think with monitor existing we make gets is rules. it we basically all will hey, as that capacity contracts that inventory that that go. what be capacity, to plant to But ready say sure bid And to with that at. around beyond. we

do… to trying are we what So

Larry Martin

even in so capacity – the buying related into we though is don't don't correlated into market. income, me that we fixed So, at have the though order to bid it Brent, – expenses we – to plant capacity the that have do let costs whoever or even

Kevin Tracey

it. Got it. Got

have but what you could If just what kind will understand the million company, curious sneak of Okay. spend in kind $XX I past CapEx of I [indiscernible] just elevated be forward, these on I opening as CapEx just is Merom one call comment on this a you're you if that'd one guess range. year be then are to up sites, last I'm normalized new in year, CapEx in the going Thanks. any million And more thinking? it's next as is $XX great. the

Larry Martin

our ramping So, be to to next at at Merom, coal two our yes, expect we million range, have our up two with the little categories equipment surface higher we – even year, forward the be then coal $XX cost mines surface a $XX we could CapEx, And cap of million there. CapEx CapEx have. going

over. then timing and million haven't And POs $XX it's We $XX be $XX we got start maybe that the since years now, expect haven't maintenance CapEx bought Limitations year, the we that the analyzing regular $XX think, million, when we Guidelines but the $XX knocked will Right and Effluent about that into have ELG we just the three to for yet. into next million the to out our range. over and figured we planning our million I plant next million have just plant start reliability get to we million will $XX by to XXXX that And with in process.

Kevin Tracey

Got it.

Okay. Thank you. it. Appreciate

Operator

Investor. [ph], from comes next Our Private Instructions] question a Waters Ted [Operator

now Your open. line is

Unidentified Analyst

my taking the of was into $XXX me today, a start tons in in to tell that The for what near-term? today? hours For ability locking coal to bit And XX QX the XX putting you sold about For sell equivalent could future? instance, terms little I question megawatt be going pricing that pricing is call. what in forward were Thanks if tons? in instance, Brent. could you had you megawatt your in hours hour the Hi, would you into sell if so, megawatt to

Brent Bilsland

Yes.

if megawatt curves any power coal a megawatt going megawatt one basically plant I'm there cost. What is for the hours. and in energy assumptions, as proprietary We variable company So an the with a megawatt – hour, there you know don't either about the So, that is that of take, question the and a that's and is every every have sell take – market sell hour release day-ahead-market ability day. where utility you to but bilateral day, things trading have if the about show, on of basically of various ready can or curves X.X like negotiation that to that That's ton up a at generates agreement that within a hours, price $X to answer I We plant do buy do various out from yes. or Merom right? going It to forward. we the would that, you're have that? and to of hey, is perspective far right, kind if as that variable costs so to Oaktown changes the hour

easy coal X.X hour. the just megawatt bucks. XX math, produce megawatt of talk one So ton going of It's to the for equivalent that's hours, let's

in so it variable, now. equivalent So there, $XXX $X excuse per ton that's doubled $XX I've me, track

a it the look short what's Hope is roughly plant So the we fixed to it your then payment the So is fixed that's exceeding plant. at how plant? to makes your that is to it. or now is kind cost fixed payment or It's sense. long, you're covering capacity capacity cost and coal $XXX at cost of

Unidentified Analyst

or assume how do now when the that's that's to you decide Yes, megawatt do you interesting. that's math party hours, the third I to – the sell

Brent Bilsland

for there some that, on are with those a to and third doing. those of what I That's letters megawatt to that XXXX, the exactly be kind what can power mean, – be basically those assumptions find say credit guarantee hours. can transact, every day in requirements willing looking would secure of at counterparty prices, and what are electrons. delivery we party from our right? be forward required realizing we're to And of We're change there's that

but So lot at been those in have going are all and Europe, has on things what's right. energy markets we of to kind of that look in balanced, look the there it keep disruption with a

of got a natural flowing So Europe. to or coal and lot LNG you've gas

it And market to is at so, domestic gas And cheaper the if now, coal look coal is coal, but competing right all that. generators with the than run. you needs

generators opinion in So the our you've kind power. of got setting price coal of

that happen in a exceeds very as healthy where lot here. dynamics day, as move each in and and generation every open the in very they're prices but power, of is gas demand So healthy of right there there's coal margins lot stay is gas will the that market. at. and now selling a producing all long prices margins There is There

net profit we're with at. we're prices the we that as can and that free we capacity far think So as company a make in debt getting contracting happy and for the position energy

that's we're So at. where

Operator

Calavritinos comes Arthur ANC with from Our next question Capital.

Your line is now open.

Arthur Calavritinos

thank right, All you.

on ask that something to you – that's happen. debt – reduction the me the zero going to Let on

this You've got in right? year, locked that for

Brent Bilsland

quite sure mean you what Not in. by locked

Arthur Calavritinos

should to I off, what mean, going minimis, get mean? what at We're XX% It's take year like by right mean to de I okay, any be at be you're it paid end. and say, we to going down surprises looking confidence not couldn't all. interval, pretty mean, right, confident the now. you're get now right I debt I given

Brent Bilsland

from contracted the Yes, for I perspective our think right. we've coal,

price is to that significantly. going come average know we up our So sales

margins, going XXs. higher the to something see we're significantly in low So

surface we in We're With trying we produce to is to the increase a have higher cost, coming to in cost We have our increasing of increases able cost – production that are which we've do. we're but coal, free our those upon coal, perspective, forecast are slight net debt our a some production. see been reliant that is higher the forecasting curve we end control. pits, year. from in always It's And But we why which our but of we historically by a transportation materially of reason forward. pick up control. shouldn't to no moving customers' the the customers, out from be piece providing

Arthur Calavritinos

And Okay.

Brent Bilsland

I'm sorry, of… by the end

Arthur Calavritinos

of the to – By end of XXXX. end want at I the clear be

Brent Bilsland

yes. XXXX,

Arthur Calavritinos

Yes.

me it let When – opportunities? again, don't know with you I guys a you different internal or question. is – That's So, or of any are out of better difficult don't rates seeing all. – storage about mentioned discipline I'm and doesn't model see to looking do out. businesses, does at you to a must something what because spreadsheet lot right, a return projects, guys storage. concerned want are You to Again it be the like that I work do

were happen. is, and look stuff to decide what trying out just at to you how figure discipline your if I'm how that So exit to

Brent Bilsland

pretty Yes, our position. right essentially sales a now focus I we're think, that energy, long we and in are long capacity good is

for If don't have you at well excess sell is ahead. position us lot of our electricity years, until a look hedge next XXXX. We the pretty couple to there

do there's that. ways capital. to of various best out So of way to what's figure amount we're do some And some which require trying to that, the

the power to sales sheet balance and fuel profitable And so what very to position about a position in capacity trying have XXXX. delevered is, look in in we're our saying company getting is is XXXX

and focused Inflation The So about we on. of this that's released we're kind talked energy what approved was Reduction Act When storage, year.

they're around still writing rules However, that. some the of technical

battery it's will And us think finalized we're couldn't to not. quite yes fair be today return the us we Today, rate of for to a no, because to we or good you won't waiting right. or do tell that say don't or frankly is for for rules so I I storage understand

So…

Arthur Calavritinos

it. got Okay,

Brent Bilsland

We'll wait for that. rules. evaluate those We'll

developers if I company this think a battery to coal as bought but to in is developers future, platform, everybody power backed to far plant. place we're trying grid. out people PJM are dying I into rights true already to acquisition applications. to to transition solar what point for Q that trying study. they've is appears We We we're up interconnect. don't already Q today. what say have this have fired and study a the is MISO right. four coal is And backed some stopped years. to mean, own that's the up, has been a a study do really the Q what interconnect is We plug The a accepting today, so

to So the down is if use at approval the I in MISO, the to even somewhere. if solar street, have – power who's the minimal another be that got ISO, point approve the application application. do to to grid PJM, happens have both edge and best they we versus that with ISOs that to very that grid they but we developer mean, the team our accept with they'll won't the your near In and that battery, on might management decides jump accept plant board our the work apply to close would MISO's they've application. some repower on of MISO and four in future have years trying to get application, to do be

XX% So replacing XX causing And a hours, it to the in generation we're fossil turning to places to the transition that's generation mean plug cannot operators hours that we're off right? be going I in, of switch. generation that's on from has of only one with year. a of this XX% given that run year. enough can hours with a problem grid not given is for off there's things turning a turned on We're in that run renewables an standpoint the it's from and And

challenges the today. so seeing is And the that's grid that

off power look, ahead Well, couple someone, is always grid to we're demand You new keep what some power to the their hey, off. leaves as outlined, agreed getting is That's That's different hopefully who we then being reduced, levers time response for. we to know, operators they're case. have the – they've week I of balance who number looking spent to shut with a the them last demand that basically lever time. in is, demand which totally system And response not reach shutting response is is right? of the

all So those reasons… for

Arthur Calavritinos

ahead. go Yes,

Brent Bilsland

Yes.

has the So all Merom invested place as of for a well all reasons, in. in has been environmental compliance plant for that this such It those ELGs. except investment value

can period because Hallador have because of our the of That’s very are attributes we is. do look the in this the we’re it available different That valuable And that will to wholesale ELGs – what that. run beyond today. to pulled But these power provide essentially The time. attributes real a invest and make than XXXX, what but motivation Power to fewer We’ve in to not thinking is that’s think subsidiary, grid. it fewer a the are what that there that Merom. is have which power that in trigger that generator, grid. generators public owns is to utility our Hallador XXXX. becomes investments evaluating to XXXX, asset We in to more XXXX we And those on yet, be position

and like is is. So, that’s we this look for what those reasons, thinking our what

Arthur Calavritinos

last one Thank thing. it. And Got you.

say, in Boston. like, to We’re we’re I going was

industries regulators guys people valuable ask, So change we’re New really right, shutdowns more like realize summertime. to are as you realize, legislation some, news you had let citizens it’s we’ve stuff, be I’m The are have where the where regulation would national of in get how and the cares like – type things about. or more we you England, But to these favorable just me how thinking specifically are. finally the shutdowns, tight. in already to going like if nobody some

Brent Bilsland

Well, yes.

of sits the who X% because to of billion the seen time saw GDP, rules generation of right, we’ve we’ve Electric it, $XXX in first Look, outage power the realizes seen seen in make XXX say dark renewables, is. period Liability power a right? it the And and around of lives. works, in changes we the We’ve how approaches United for X% is massive They nothing their crashes, happen. Casio, multiple crashes over seen valuable generation I cost electricity every that think [ph] else five-day so we Texas U.S. XX% energy the Yeah, States. Council this and Texas. people that grid it’s but anyone caught, lost they're capital any without Texas,

ISOs wouldn’t in other the against I country, bet this but I doesn’t hope So it. happen throughout

a backed the same a But You’ve MISO they’re plan mean, our from bad the operator, day, if PJM’s having Officer to day, have by Chief of the public this Operating be backed I up literally quote going got a myself. day bad a we’re that’s MISO. PJM. nation’s plan to is saying, grid up is day. to by bad having be

the that that realize grid. in there’s of this grid the done changing but new new risks bringing they is that. trying So with profile It’s are being risk very pursuit associated the to reduce and change, is rapidly, a climate to

should shut convert to market it have So we’re And we’re the the And and rights from it. to it are the plan happening an all we the online continue to headed on economic that’s this decide. set when we plant else, going is today. while. telling now all remain to right fast. Merom where us should around stick want perspective, for this to signals down think we too think to along, let invest We’ve something we needs a economic We

Arthur Calavritinos

Great very commentary. much. you Okay, great. Thank

Brent Bilsland

Thank you.

Operator

[ph] from with Hallmark. Our next Andrew question Love comes

now Your line is open.

Unidentified Analyst

Thanks.

obligation price capacity? quarter. bilateral a something a you is, that question more on good at electrical My congratulations selling predetermined means to energy explain could or you So market price it or Are a then deliver a what? what when you clearly little a sell at is

Brent Bilsland

public – buy so grid, from to want that are electrons a to So and particular given someone to a right? have, their capacity. hour, MICO XXX,XXX scenario, rated worth they means, gigawatt which buy I in load you sell MISO the member of customers if you of need a be and who following utility has to have in you’re you if power a So basically able any to you MICO supply sell, have with of gigawatt to customers,

have So have not nameplate, year we Merom’s changes rated sell, payers. is which right? megawatts. will member, is produce customers excuse It’s we are rate So hour. megawatts capacity We nameplate any don’t because megawatts, XXX around ratings with today, we given – all me power were load sorts can plant. do selling X,XXX every a there’s following not MICO that of on XXX different MISO’s in to. It’s somewhere electricity Merom, actually

power generator. a wholesale We’re

from are So electrons buying not since we no to provide them MISO, we obligation have capacity.

So we – but yet we capacity. have

capacity case, So we’re selling our different this to Hoosier. In it sell part utilities. we to of

capacity. in where with today we’re one have selling another agreement We South utility

they electrons to contractually that their met buy use to the So show obligation, that to MICO they’ve grid. from can

But of MISO could June in So that every MICO message for obligated of a megawatts would these willing says, capacity megawatt here’s for XXX we we’re a to bid into this XXXX And… are many MICO these if tomorrow at is you’ve day, that they we prices. plant of It that, send and through buy hours, to obligation – agreed to May which electricity worth wants right, basically what its us to that terms obligates to come year, when the how to which somebody we for to. a at bid XXXX, buy sold like calendar saying in say, on. do, XXXX, megawatts XXXX in Hallador and does from XX, XXX that, to first the each

Unidentified Analyst

an and anything. must have you But meet price to some criteria obligation, doesn’t it mean otherwise

Brent Bilsland

Correct.

in. there we So bid price what parameters about are can

Or We so if our to right? think limit loss cost. bid we low is at want, bid three times we we as can a I up can as the choose.

Unidentified Analyst

if then they must And accept you deliver. it,

Brent Bilsland

And we paid. – and Correct. with get

in $XX. bid we say let’s So at

last the would to for the Hallador for $XX, we given that day, of paid next at the bid get turn say that hour price. $XX generator So in let’s on

turn matching box we’re told to So to doing supply. all demand is is on,

it a these Look, at $X of of megawatt. hours and where bidding $X in of and like us think provide So guys layered coming got in got you’ve megawatt, solar the we’ll operators saying, at cake, the wind right you’ve maybe

going in on $XX gas be And saying, at on, assets in either plan hey, we’re have such we’re now and nuclear as of then so the higher you got to the going You’ve megawatt. coming what load, or coal to look, this in, and up get all we’re off, we’re was we but everybody hour. stack particular generations to the meet the paid until bid highest MICO the way hey, that bidding is, saying to for price gets bid up and we’re going enough

Unidentified Analyst

prediction follow up, all, a what your XXXX? then all And of for was CapEx in

Larry Martin

was, XX coal XX the to plant. XX, Yes, at and to about around ELG. on for And was then for XX it it XX reliability XX

Unidentified Analyst

ELG means what?

Larry Martin

guidelines That put a ago. be, The effluent to with in the compliance limitation out be that EPA by we few years has to have XXXX.

Unidentified Analyst

At XXXX…. the end of

Brent Bilsland

three million million Roughly, that’s years. to $XX roughly the next over $XX

And so…

Unidentified Analyst

Okay. Thank you.

Brent Bilsland

you, Anday. Thank

Operator

Our comes Jeff Cove with from next question Capital. Street Bronchick

open. now is line Your

Jeff Bronchick

Good. very afternoon, Thank gentlemen. you much. Good

out in capacity all Merom? in or $XXX the coal payments XXXX” quickly, include million does just is So “expected of that from EBITDA, the that

Brent Bilsland

the into, includes the mean No, don’t in most, the majority that capacity fuel majority the because plant. be limitations me, have the and entered front our PPA for will from XXXX of, but and payments of coal of I I EBITDA Merom. we’ve right here the of in

Jeff Bronchick

operating Merom XX the that optionality, XX payments? payments, Got it. is that and then, on to the including to in will basis and the even, at you cashflow And all the you get, when or is basically that say ELG then run break basis, an capacity you maintenance enable

Brent Bilsland

What So a labor, but is anticipate relatively at fair production coal in price. In have to Hoosier right? coming March, April in plan. XXXX amount not from a XXXX. we’ve our the of sorry, of will February, sold revenue, do that’s we’re January, cover, what we’re get power saying, a fixed I’m which mostly plant is low capacity all that which costs fixed cost majority We of got saying We nearly the from going we have, run, is a that we’re Jeff. mostly in we perspective, our to of EBITDA plant, May, XXXX and

So that. make we on the on a we make don’t but margin margin it, huge

to unfold the plant. are of in XXXX. have a through We starting more we but don’t fuel of lot June to December put

sell We bot. we at more expect, we currently though of fuel a So per a potentially make lot money megawatt don’t can on don’t basis, higher a have hour even electrons we could price. because

requirements bot fuel not some have meet our in to We XXXX.

today, all we’re of we the lot we don’t to making XXXX. at So signal plant in trying anticipate, a don’t is that – money

ahead make where we We’ve sell by a or coal We market results. to sale margin utility XXXX a XXXX. can take judging think we we any and through expect in to put that can can say a not we in either change company. Merom on Oaktown, prices of XXXX But… that have we public Merom, the forecast out of day bilateral today, we at that electrons in that, to unsold that for sell And out could be good we trading or that forecast the

Jeff Bronchick

truly good, spend XX you it the You still right? XX, have for whether run unless or down to to plant not, close

Brent Bilsland

Correct.

we’re this down. the what was So going to mode saying is shut plant in of that, Hoosier we’re

[indiscernible] did the XX on maintenance to nine months. as plant, last spend here the not And in they of money much so, as

is get And as a you everything system. got got condition meet a or guideline ELG little of controls. little most condition, plant kind then not it’s control we saying we’ve spend it today today’s maintenance, plant money to in than we’re So to have what some for requirements, not in some compliance expense that better to it elevated far maintenance environmental As limitation to better. on better need that but does has compliant become an This need we’ve affluent

an So that to investment the that is The right choose today evaluating tweaking around technology. we make is we’re rules the that still sure EPA this.

of in haven’t challenging still by the it to compliance to what set little of end and a the they end rules to So it XXXX. order when know get then race makes

XXXX plan expense, we run the if the for year, we wouldn’t plant didn’t XXXX. do So beyond that to

position has So, think our company we And feel that. frankly, better quite we in put we this make at can it. a much in money

not our for to window most tend in We right? our time, Our only limited there’s take but I limited so liquid plant, coal opportunity we buyers, sellers. day. lock day market, the periods of often. the to up of is If every electrons closes the sell sell open and can we there’s coal mean, to

the acquisition liquidity And of revenue we the stream go improved our with dramatically have we product. Merom improved. So Yes, ahead. the dramatically had of

Jeff Bronchick

getting you’re think I at. No, I what get

sign of your at story terms sort you or I XXX% the plant customers XX this at of, you because question could that. that’s life sign you contracts if next were one of XXX Because, really, a at $XX And conversely, was XX guy so the either you year to it assimilate do ton, bottom. And only would my closing answers in a it’s was obviously, a mean, right. of wanted

really at answer balancing should look the be, be day to, it that’s getting that Merom not less going X for like we I for always de-risk take need So million into does looking guess every today.We sell we’ll Is you ways to your XXX, to should fits right? world that and and is look, am we we’re that, I game longer we tons that but duration and plan.

Brent Bilsland

or market, you’re I best still mean, plan is I the if, Well, lot basis, Hallador optionality, go. money, happened that’s then makes that’s yet – think go. personally that Jeff. a exist think what that’s year. And in I available to saying and most gives we’ll If I We the market, did think, this us. that on us we’ll a where market, would the think opportunity is if where the of risk shareholder which didn’t it you adjusted quarter fuel second I that the of that’s traditional

say Now, our have we didn’t power and the We us time control. risk to be time, plant prices it control would plant to in adjusted, the by that at fair, in certain right? I be the had wasn’t what

to just it open market. So on going very sell say, was easy No, we’re this to the

in some everyone in. going more capacity have a a to we’re always you on and gives month, get Those What for ideas saying but like what plant, questions When XXXX. the are happen? to owning look, it prior today plant we behind going can Merom talk we’re is, Because to going owned that we’re than back get electrons, more this working economics our less parties no you find one to way third comes to look with we’ve mind are going guys as and need buy now this fuel us to lock That ideas. keep generate now. really, working in about is now profitable to thing? to well, fuel, or visibility We’re the to, forward. to right we great be to

So hopeful now XXXX. that to EBITDA, third more that much meaningful for conversations with the can we’re parties transact, in projecting we that and we’re capacity adds are a

So are we’re trying together, put we think there’s time upside will to if we in tell. successful, what

But into ahead at for – As the far at now, money a significant, insight sell in more given we in us XXXX, closer today’s as because data we’ll it’s always know lock can we we lot another XXXX it’s given get that. in market more we to that shed liquidity to as market. that in and us avenue sell we more, plant prices, we make and know the can we as

price liquid. it’s taker, a Now you’re but

Jeff Bronchick

Now got it.

well, a a scheme. I throw this you’ve I RSUs new, to Okay. sort year best just RSU work fruitful And board, time I plan really my you if could display a as sucking just opposed dock have it bold lap. time some my that my kind some complete or your would would package, plan a guys, adopted if world and didn’t getting you the to would’ve got made the it’s us that and doubled and three weighted. just for an you thing you Thoughtful, be but sort time operational neutral, well. that of would and in were to but return either, is I this, I RSU say grant were you is guys you have would’ve shareholder is interesting. if And an mental or would hence comment, I would which it up say full is of gave is and And of address, don’t tripled Could greatly of committed bold get a waking this in work a be it, mess. last I pay would a uncertainty. optionality, point that, could be being physical it, thing last Life

ahead. go Okay,

Brent Bilsland

are both EBITDA RSU teams executive Our based and… metrics, based on on

Larry Martin

numbers, annual term. Yeah, the Short for exactly.

Jeff Bronchick

don’t so mean, time. should should winning I CEO more. I like Yeah. you paid to and That’s appreciate argument it say your be I for you, is take as a argue, just

Operator

call Securities. Riley next Our from Lucas B. from comes Pipes

line open. Your now is

Lucas Pipes

my about you to might Yes. you and so so think converts sources that be more for sources your look potential, much. at other would follow-up. you capital, to Thank as you you Brent, Thank you future point? much converts the just or of open and maybe spoke taking remarks, prepared about

Brent Bilsland

are was was a Well, our And our when balance I time the significantly convert, if leveraging where think we it EBITDA did juncture, we sheet. at this the poor. performance

to had we prices, the Our Power all same Plant, were take of advantage opportunity say coal us. high and that knocking door Merom when we three on were were And I of in increase the in this laying at time, kind of but opportunity. things is production, acquire point opportunity, front the sell yet, the those the of that

take spend to So more couldn’t money to CapEx, we knew had more market. of any and go rely on any we advantage that, on debt we the of really

the So we went convert. to why that’s

seeing the Looking opposite. forward, we’re

meet deleveraging, Our should sufficient that our needs. we capital balance completely sheet feel so the to and be is debt market

shareholder. flow Hallador look work to and our cash So I don’t juncture, continue for the on look at this do deleverage anymore just converse, – balance to to and we sheet create, streams

Lucas Pipes

me. helpful. referenced. maybe very for then more it. And one Got just you

deliveries real to you’re as reference discussions shipped. real Has these performance higher being this You referenced return believe progressing around you’d scheduled kind providers to how levels? last and were with of just and improved XX% are I figure quarter looking of

Brent Bilsland

of kind it’s Yes, customer by customer.

they’re well doing more And not. in would same. been up, up say performance others front I the customers and pick has are that of Some we’re on are And what both really with picking of those. communications to required

Lucas Pipes

thanks luck. enough. best Got color it. Fair Well, continue for and the all of

Brent Bilsland

thank All you. right,

Operator

team questions, back There call over for are remarks. to closing so I’ll pass the no further the management

Brent Bilsland

us see everyone think as we’ve about opportunity in taking I front seen position Hallador history of we’re appreciate very time of I ever the And in company. in. our excited we’re Look, we future the of and that much the today as the and

got we excited about we’ve the getting that structure to those of capital and management in and think we’re the opportunities. So team place, advantage take

you. interesting things us and of for Thank look So forward more to all look quarter. talking to next out

Operator

Thank the your concludes participation. you for call. conference That

lines. disconnect your You may now

Hallador Energy (HNRG) 16 Nov 222022 Q3 Earnings call transcript