Q1 2024 Hallador Energy Co Earnings Call
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Megan: Good afternoon. Thank you for attending today's Hallador Energy first quarter 2024 earnings call. My name is Megan, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to Becky Palumbo, Investor Relations, Hallador Energy. Please go ahead.
Good afternoon. Thank you for attending today's California Energy first quarter 2024 earnings call. My name is Megan and I'll be your moderator for today's call.
Rebecca Palumbo: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Megan: If you would like to ask a question. Please press star one on your telephone keypad I would now like to pass the conference over to Becky Palumbo Investor Relations withheld or energy. Please go ahead.
Rebecca Palumbo: Thank you, Dagan. Thank you, everybody, for taking the time today to join our discussion of our first quarter 2024 earnings. With me today are Brent Bilsland, our President and CEO, and our newly appointed CFL, Margie Hargraves. Yesterday afternoon, we released our first quarter 2024 financial and operating results in a press release that is now on our website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook for 2024.
Rebecca Palumbo: Thank you Dan.
Rebecca Palumbo: Thank you everybody for taking the time today to join our discussion on our first quarter 'twenty 'twenty four earnings with me today are Brett Devlin, our president and CEO and our newly appointed CFO Marty Heartbreak.
Rebecca Palumbo: Yesterday afternoon, we released our first quarter 'twenty 'twenty four financial and operating results in a press release.
Rebecca Palumbo: That is now on our website.
Rebecca Palumbo: Today, we will discuss those results as well as our perspective on current market conditions and outlook for 2024.
Rebecca Palumbo: Following our prepared remarks, we will open the call up to answer your questions. Before beginning, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the SEC and are also reflected in yesterday's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected.
Rebecca Palumbo: Following our prepared remarks, we will open the call it to answer your questions.
Rebecca Palumbo: In providing these remarks, Hallador is not under any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law to do so. We plan on filing our Form 10-Q later this afternoon. And with the preliminaries out of the way, I will now turn the call over to Martin.
Rebecca Palumbo: Before beginning a reminder, that some of our remarks today may include forward looking statements.
Martin: Subject to a variety of risks uncertainties and assumptions contained in our filings from time to time with the SBC and are also reflected in yesterday's press release.
Martin: While these forward looking statements are based on information currently available to us if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect actual results may vary materially from those we projected or expected.
Martin: Because I believe remark.
Martin: <unk> has no obligation to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise unless required by law to do so.
Martin: We plan on filing our Form 10-Q later this afternoon.
Martin: With the preliminaries out of the way I will now turn the call over to Marty.
Martin: Thank you, Becky, and good afternoon, everyone. First off, I'd like to personally thank Larry Martin for all of his hard work at Hallador and for making this transition so smooth and enjoyable. Larry will be on the call to assist in answering questions for this quarter.
Martin: Thank you Becky and good afternoon, everyone.
Martin: First off I'd like to personally thank Larry Martin for all of his hard work at hallow door and for making this transition so smooth and enjoyable.
Martin: Larry will be on the call to assist in answering questions for this quarter.
Marjorie A. Hargrave: Before we get started, I'd like to define adjusted EBITDA to refresh everyone's memory. Adjusted EBITDA is the sum of operating cash flow less the effects of certain subsidiary and equity method investment activity, plus bank interest, less the effects of working capital, period changes, plus cash paid on asset retirement obligation reclamations, plus other operations. For the first quarter of 2024, Hallador incurred a net loss of $1.7 million, which equates to a loss of $0.05 per share for both basic and diluted earnings.
Martin: Before we get started I'd like to define adjusted EBITA to refresh everyone's memory.
Marjorie A. Hargrave: Adjusted EBITDA as the sum of operating cash flow less the effects of certain subsidiary of an equity method investment activity plus.
Marjorie A. Hargrave: Plus bank interest less the effects of working capital period changes plus cash paid on asset retirement obligation reclamation plus other operations.
Marjorie A. Hargrave: For the first quarter of 'twenty 'twenty four how old are incurred a net loss of one 7 million.
Marjorie A. Hargrave: Which equates to a loss of <unk> five cents per share for both basic and diluted earnings.
Marjorie A. Hargrave: Our adjusted EBITDA for the quarter was $6.8 million, and our operating cash flow for the quarter was $16.4 million. Of the $16.4 million, we used $14.5 million to reduce our debt, and at quarter end, our funded debt balance was $77 million, and our net debt balance was $75.4 million. We also had 18.6 million LCs outstanding as of March 31, 2024. Our liquidity at quarter end was $39.5 million, and our debt to adjusted EBITDA, or leverage ratio, was 1.58, well within our covenant of 2.25. With that, I'll turn the call over to our CEO, Brent Bilsland. Thank you, Margie.
Marjorie A. Hargrave: Our adjusted EBITDA for the quarter was $6 8 million and our operating cash flow for the quarter was $16 $4 million.
Marjorie A. Hargrave: Of the $16 4 million, we used $14 5 million to reduce our debt and at quarter end, our funded debt balance was $77 million and our net debt balance was $75 $4 million.
Brent K. Bilsland: We also had $18 6 million of Lcs outstanding as of March 31, 'twenty 'twenty four.
Brent K. Bilsland: Our liquidity at quarter end was $39.5 million and our debt to adjusted EBITDA, Our leverage ratio was 1.5 day well within our covenant of 2.25.
Brent K. Bilsland: With that I'll turn the call over to our CEO Brent Bill Flynn. Thank you Marty.
Brent K. Bilsland: Throughout the first quarter, we continued our progress on transitioning the focus of Hallador from a coal production company to an independent power producer. For the first three months of 2024, our electric operations revenues exceeded that of our coal operations revenue. Additionally, we were successful in adding approximately $138 million in forward energy and capacity sales, growing our electric operations forward sales book to approximately 657 million as of March 31, 2024. This represents approximately 44% of Hallador's total contracted forward energy capacity and coal sales through 2029 and roughly one of roughly $1.5 billion.
Brent K. Bilsland: Throughout the first quarter, we continued our progress on transitioning the focus of how it or from a coal production company to an independent power producer.
Brent K. Bilsland: During the first three months of 2020 for our electric operations revenues exceeded that of our cooperations revenue.
Brent K. Bilsland: Additionally, we were successful in adding approximately.
Brent K. Bilsland: $138 million in forward energy and capacity sales.
Brent K. Bilsland: Growing our electric operations forward sales book to approximately 657 million as of March 31.
Brent K. Bilsland: 2020 for.
Brent K. Bilsland: This represents approximately 44% of Howard or his total contracted forward energy capacity in coal sales through 2029 and roughly one.
Brent K. Bilsland: <unk> of roughly $1 $5 billion.
Brent K. Bilsland: However, we believe future forward sales from our electric operations will soon eclipse our forward sales from our coal operations. Since January, we have evaluated and continue to evaluate several major power and capacity sales opportunities, including one proposal made to us that, if contracted, will result in more than a billion dollars worth of potential forward power sales. We continue to see strong indicators that demand and pricing remain on an upward trend. According to the Indiana Business Journal, in the last 12 months, there have been eight new data centers and or Bitcoin mining facility projects announced in the state of Indiana, where our Marin Power Plant is located.
Brent K. Bilsland: However, we believe future forward sales from our electric operations will soon eclipse our forward sales from our coal operations.
Brent K. Bilsland: In January we have evaluated and continue to evaluate several major power and capacity sales opportunities.
Brent K. Bilsland: Including one proposal made to us that if contracted will result in a more than $1 billion worth of potential forward power sales.
Brent K. Bilsland: We continue to see strong indicators that demand and pricing remain on an upward trend.
Brent K. Bilsland: According to the Indiana business Journal in the last 12 months there have been eight Datacenters, Andrew a bitcoin mining facility projects announced in the state of Indiana, where our mayor and power plant is located.
Brent K. Bilsland: We have also seen a major utility amend its integrated resource plan and publicly state that it previously underestimated new electricity demand growth by as much as 17 times. MISO has released information arguing that their capacity reserve margin, the amount of excess generating capacity in their system, could go negative by as soon as next year.
Brent K. Bilsland: We have also seen a major utility amend their integrated resource plan and publicly state that it previously underestimated new electricity demand growth by as much as 17 times.
Brent K. Bilsland: MISO has released information, arguing that their capacity reserve margin.
Brent K. Bilsland: Meaning the amount of excess generating capacity in their system.
Brent K. Bilsland: Could go negative by as soon as next year.
Brent K. Bilsland: Monitoring the equity markets further strengthens our belief that investors and other IPPs are also anticipating similar increases in power demand, demonstrated most clearly through the more than doubling of market capitalizations of at least two of those IPPs across the previous 12 months. In support of our expectation that Hallador Power Sales will continue to exceed our traditional Sunrise Coal subsidiary, we anticipate changing Hallador's SIC code, to 4911 Electric Services, from 1220 by Tummin as co-producer in the future on the electric side of the business. Indicators for future power pricing appear much healthier than we have seen in recent months. We believe these indicators are supported by both our Forward Power Sales Book pricing and third-party Future Power Curve. Additionally,
Brent K. Bilsland: Monitoring the equity markets further strengthens our belief that investors and other ipp's are also anticipating similar increases in power demand demonstrated most clearly through the more than doubling our market capitalization of at least two of those ipp's across the.
Brent K. Bilsland: It is 12 months.
Brent K. Bilsland: In support of our expectation how old or power sales will continue to exceed our traditional sunrise coal subsidiary, we anticipate changing how it or is this I C code.
Brent K. Bilsland: 249, 11 electric services.
Brent K. Bilsland: From 12 22 minutes co producer in the future.
Brent K. Bilsland: On the electric side of the business.
Brent K. Bilsland: Indicators for future power pricing appear much healthier than we have seen in recent months.
Brent K. Bilsland: We believe these indicators are supported by both our forward power sales book pricing.
Brent K. Bilsland: And third party future power curves.
Brent K. Bilsland: Additionally, <unk>.
Brent K. Bilsland: Natural gas future prices are in contango, meaning future gas prices exceed spot gas prices that have been depressing overall power prices for the last several quarters. As we discussed last quarter, the dynamics of the natural gas market paired with the non-standard mild weather throughout the Midwest have impacted pricing and our power plant dispatch rates thus far in 2024. Future prices seem to indicate improvement on both these fronts, which we view as a positive for our going forward operation. In April, we also lost a targeted request for proposals for Power Demand, supporting new development at our Marin Power Plant. Responses are due in mid-May, but early indications point to a high level of interest.
Brent K. Bilsland: Natural gas future prices are in contango, meaning future gas prices exceed.
Brent K. Bilsland: Spot gas prices that have been depressing overall power prices for the last several quarters.
Brent K. Bilsland: As we discussed last quarter, the dynamics of the natural gas market paired with the non standard mild weather.
Brent K. Bilsland: Throughout the Midwest impacted pricing and our power plant dispatch rates, thus far in 2020 for.
Brent K. Bilsland: Future prices seem to indicate improvement on both these fronts.
Brent K. Bilsland: Which we view as a positive for our go forward operations.
Brent K. Bilsland: In April we also lost a targeted request for proposals.
Brent K. Bilsland: For power demand supporting new development at our Marion power plant.
Brent K. Bilsland: Responses are due in mid May, but early indications point to a high level of interest.
Brent K. Bilsland: The RFP is available on our website for any interested parties that did not already receive the information. Our goal is for Hallador Power to generate approximately 1.5 million megawatt hours on a quarterly basis, which equates to approximately 6 million megawatt hours annually. During the first quarter, Hallador Power generated 816,000 megawatt hours, or 54% of our target, despite an average price of $41.90. The favorable pricing is a result of experiencing sales prices as high as $250 per megawatt hour for limited times during the quarter, balanced against several days of pricing below our variable costs to produce.
Brent K. Bilsland: They are the RFP is available on our website for any interested parties that have not already received the information.
Brent K. Bilsland: Our goal is for Howard or power to generate approximately $1 5 million megawatt hours on a quarterly basis, which equates to approximately 6 million megawatt hours annually.
Brent K. Bilsland: During the first quarter, how it or power generated 816000 megawatt hours or 54% of our target despite an average price of $41.90.
Brent K. Bilsland: The favorable pricing as a result of experiencing sales prices as high as 200 $250 per megawatt hour for limited times during the quarter.
Brent K. Bilsland: Balanced against several days of pricing below our variable cost to produce.
Brent K. Bilsland: In forward selling capacity, we target annual sales of around $65 million to help offset our fixed annual costs at the plant, which are currently approximated at around $60 million annually. We have already sold a large portion of our future capacity, which we believe makes us excuse me.
Brent K. Bilsland: When forward selling capacity, we target annual sales of around 65 million to help offset.
Brent K. Bilsland: Our fixed and your cost at the plant.
Brent K. Bilsland: Which are currently approximated at around $60 million annually.
Brent K. Bilsland: We have already sold a large portion of our future capacity, which we believe makes us.
Speaker Change: Oh excuse me.
Brent K. Bilsland: We've already sold a large portion of our future capacity, which we believe makes our forward capacity sales goal readily attainable for the next several years. As a condition of acquiring the Marin Power Plant, we agreed to sell 1.66 million megawatt hours of energy in 2024 and 1.6 million megawatt hours in 2025 at $34 per megawatt hour to the plant seller, representing 27% of our annual 6 million megawatt hour goal. Since this original transaction, we have been successful in selling over 5 million megawatt hours of energy to third parties at an average price of approximately $54 per megawatt hour over the years 2024 through 2029. This roughly $20 per megawatt hour jump in average pricing has us very excited about future sales. During the first quarter, our variable costs at the plant were $31.88 per megawatt hour.
Brent K. Bilsland: We have already sold a large portion of our future capacity, which we believe makes us.
Brent K. Bilsland: Our forward capacity sales go readily attainable for the next several years.
Brent K. Bilsland: As a condition of acquiring the mayor and power plant, we agreed to sell 1.66 million megawatt hours of energy in 2024.
Brent K. Bilsland: And $1 6 million megawatt hours in 2025 at $34 per megawatt hour to the plant seller.
Brent K. Bilsland: Representing 27% of our annual 6 million megawatt hour goal.
Brent K. Bilsland: Census original transaction, we have been successful in selling over 5 million megawatt hours of energy to third parties at an average price of approximately $54 per megawatt hour over the years 'twenty 'twenty four and through 2029.
Brent K. Bilsland: This roughly $20 per megawatt hour jump in average pricing has us very excited about future sales.
Brent K. Bilsland: During the first quarter, our variable costs at the plant were $31 88 per megawatt hour.
Brent K. Bilsland: While we believe that we can typically achieve lower per megawatt hour costs, the low energy prices during the quarter necessitated that we run our plant at slower speeds and resulted in more frequent than normal starts and stops to avoid selling below our cost. [inaudible] Running in this manner is less fuel efficient than if we were able to consistently generate at a 6 million megawatt hour pace, which we think could lower variable costs by as much as 10%.
Brent K. Bilsland: While we believe that we can typically achieve lower per megawatt hour cost the low energy prices during the quarter necessitated that we run our plant at slower speeds and resulted in more frequent the normal starts and stops to avoid selling below cost.
Brent K. Bilsland: Our cost structure.
Brent K. Bilsland: Running in this manner is less fuel efficient than if we were able to consistently generate at $6 million megawatt hour pace.
Brent K. Bilsland: We think could lower variable costs by as much as 10%.
Brent K. Bilsland: Shifting to the cold side of the business, as previously discussed, in late February, our coal operations undertook an initiative designed to strengthen our financial and operational efficiency and create significant operational savings and higher margins in our coal sector. This step helps to advance our transition from a Company primarily focused on coal production to a more resilient and diversified IPP. As part of this initiative, we will idle production at our higher cost prosperity model and substantially idle production at the Freelandville mine with minimal production until current reclamation projects are completed in late May or early June of this year.
Brent K. Bilsland: Shifting to the coal side of the business.
Brent K. Bilsland: As previously discussed in late February our cooperations segment.
Brent K. Bilsland: Undertook an initiative designed to strengthen our financial and operational efficiency.
Brent K. Bilsland: Create significant operational savings and higher margins in our coal segment.
Brent K. Bilsland: This helps.
Brent K. Bilsland: It helps to advance our transition from a.
Brent K. Bilsland: Company, primarily focused on cold production towards.
Brent K. Bilsland: More resilient and diversified IPP.
Brent K. Bilsland: As part of this initiative, we idled production at our higher cost prosperity mine.
Brent K. Bilsland: Substantially idled production at the Freedom Anvil mine with minimal production until current reclamation projects are completed in late may or early June of this year.
Brent K. Bilsland: As we have previously said, we expect this initiative to reduce our capital investment for coal production in 2024 by approximately $10 million. We also focus our seven units of underground equipment on four units of our lowest cost production at our Oaktown mine. We also reduced our workforce by approximately 110 employees. Mining costs for the quarter were $53.38 per ton.
Brent K. Bilsland: As we've previously said, we expect this initiative to reduce our capital investment for coal production in 2024 by approximately $10 million.
Brent K. Bilsland: We also focused our seven units of underground equipment on four units of our lowest cost production at our hotel mine.
Brent K. Bilsland: We also reduced our workforce by approximately 110 employees.
Brent K. Bilsland: Mining costs for the quarter were $53.38 per ton.
Brent K. Bilsland: However, at Oaktown, we saw mining costs in March decrease into the 30s on a per kilometer basis. Well, there are several factors that impacted this cost reduction. We continue to monitor operations and strategic initiatives to better understand the longevity of these favorable conditions. Historically, Sunrise Coal has generated approximately 6 million tons of coal annually. Following the restructuring, we expect Sunrise to produce roughly three and a half million tons of coal on an annualized basis in 2024.
Brent K. Bilsland: However, red Oak town, we saw mining costs in March decrease into the Thirty's on a per ton basis.
Brent K. Bilsland: Well there are several factors that impacted this cost reduction.
Brent K. Bilsland: We continue to monitor operations and strategic initiatives to better understand the longevity of these favorable conditions.
Brent K. Bilsland: Historically Sunrise coal has generated approximately 6 million tons of coal annually.
Brent K. Bilsland: Following the restructuring we expect sunrise to produce roughly three and a half million tons of coal on an annualized basis for 2024.
Brent K. Bilsland: If market conditions warrant, our current operations are capable of producing at a four and a half million ton annualized pace. This year, we have also secured supplemental coal from third-party suppliers at favorable prices. This allows us to diversify self-production supply risk and provides us with additional flexibility in our sales portfolio. The optionality to obtain low-cost tons either internally or from third parties, while capturing upward swings in the commodity markets for coal, should continue, should further maximize margins while optimizing fuel costs at our Marin facility.
Brent K. Bilsland: If market conditions warrant our current operations are capable of producing at a four and a half million ton annualized pace.
Brent K. Bilsland: This year, we have also secured supplemental coal from third party suppliers at favorable prices.
Brent K. Bilsland: Allows us to diversify self production supply risks.
Brent K. Bilsland: It provides us with additional flexibility in our sales portfolio.
Brent K. Bilsland: The optionality to obtain low cost tons, either internally or from third parties, while capturing upward swings in the commodity markets for cole should continue should further maximize margins, while optimizing fuel costs at our mirror facility.
Brent K. Bilsland: We continued our build out of what we consider to be a best-in-class, independent power producer management team in April. And in April, we welcomed Marci Hargrave as our new CFO. Margie comes to Hallador with broad-based experience in power production and capital markets. Adding Margie is a continuation of the breadth and depth of the IPP talent.
Brent K. Bilsland: We continued on.
Brent K. Bilsland: Our build out of what we consider to be a best in class independent power producer management team in April and in April we welcomed marshy hard grade as our new CFO.
Brent K. Bilsland: Margie comes to held or broad based experience and power production and capital markets.
Brent K. Bilsland: Adding marshy is a continuation of the breadth and depth of the IPP talent we continue.
Brent K. Bilsland: We continue to add at Hallador. Over the last two years, we have been successful in hiring our president of Hallador Power, a chief legal officer with data communications expertise, our Senior Vice President of Power Marketing, and a manager of environmental engineering, all of whom are accelerating our continued development of Hallador's current operation and future power acquisition capability. These prospects and our strong future sales position make us at Hallador very excited about the future of our company.
Brent K. Bilsland: To add at how it or.
Brent K. Bilsland: Over the last two years, we have been successful in hiring our president of how to power it.
Brent K. Bilsland: Chief legal officer at with data communications expertise.
Brent K. Bilsland: Our senior Vice President of power marketing.
Brent K. Bilsland: And a manager of environmental engineering, all of whom are accelerating our continued development of powder as current operational.
Brent K. Bilsland: And future power acquisition capabilities.
Brent K. Bilsland: These prospects and our strong future sales position make us at how old are very excited about the future of our company.
Brent K. Bilsland: Also want to thank Larry Martin for his 17 years of service at how it or Larry has been a trusted advisor and a friend.
Speaker Change: Wish him success in retirement later this year.
Brent K. Bilsland: I also want to thank Larry Martin for his 17 years of service at Hallador. Larry has been a trusted advisor and a friend. We wish him success in his retirement later this year. That concludes our prepared remarks. I'll now open up the call to any questions.
Speaker Change: That concludes our prepared remarks, I'll now open up the call for any questions.
Operator: If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question goes to the line of Lucas Pipes with B. Reilly Financials. Your line is open.
Speaker Change: Thank you.
Speaker Change: I would like to ask a question. Please press star followed by one on your telephone keypad.
Germany: For any reason you would like Germany has a question. Please press star followed by two.
Lucas Nathaniel Pipes: Again to ask a question press star one.
Operator: As a reminder, if you're using a speaker phone. Please remember to pick up your handset before asking your question. Please pause here briefly these questions are registered.
Operator: Okay.
Operator: Okay.
Lucas Nathaniel Pipes: Our first question goes to the line of Lucas pipes with B Riley Financial's. Your line is now open.
Lucas Nathaniel Pipes: Thank you very much, Operator. Good afternoon, everyone.
Lucas Nathaniel Pipes: Thank you very much operator, good afternoon, everyone.
Lucas Nathaniel Pipes: First, I want to add my congratulations to Larry and my best wishes for his retirement. Brent, thanks Lucas. Brent, I want to touch on your kind of forward sales position on the power side. There's that, nice jump in 2026. 2025 to 55. $36.37 versus just $36.06. And I wondered if you could remind us what drove that? I have a suspicion, but I would be curious to hear more about that. And could you maybe walk us through a pro forma revenue buildup for the power segment, assuming some kind of the forward power price market holds, and you sell the remaining capacity? Thank you very much.
Lucas Nathaniel Pipes: First I want to add my congratulations to Larry and my best wishes.
Lucas Nathaniel Pipes: For retirement.
Lucas Nathaniel Pipes:
Speaker Change: Brian Thanks for that.
Lucas Nathaniel Pipes: Right.
Lucas Nathaniel Pipes:
Lucas Nathaniel Pipes: But I wanted to.
Lucas Nathaniel Pipes: Touch on your kind of forward sales position on the power side there is that.
Lucas Nathaniel Pipes: Nice jump in 2026 versus 2025.
Lucas Nathaniel Pipes: 255.
Lucas Nathaniel Pipes: That was 37% versus just the 30 606 and I wondered if you could remind us.
Lucas Nathaniel Pipes: What what what what drove that.
Lucas Nathaniel Pipes: I have a suspicion, but would be curious to hear more about that.
Lucas Nathaniel Pipes: Could you maybe walk us through our pro forma revenue buildup of the power segment assuming.
Speaker Change: Got it.
Lucas Nathaniel Pipes: Power price market.
Lucas Nathaniel Pipes: Holt and also you sell the remaining capacity. Thank you very much.
Brent K. Bilsland: Yeah, so on the call, you know, we sold a fair amount of 2024 and 2025 energy to the seller of the plant as a condition of selling the plant, at $34 a megawatt hour. And what we're trying to, what we stated on the call is that And we essentially have sold over 5 million megawatt hours since that time to other participants and, including, well, anyhow, the market, at, you know, $54. And so we continue to see fairly strong prices on the forward sales curve. And it's just a result of, I mean, you can't pick up the paper.
Speaker Change: Yeah. So as stated on the call you know we sold.
Brent K. Bilsland: A fair amount of 2024 and 2025 energy.
Brent K. Bilsland: To the seller of the plant as a condition of selling the plan.
Brent K. Bilsland: At $34.
Brent K. Bilsland: On a megawatt hour and what we're trying to always.
Brent K. Bilsland: Stated on the call is that.
Brent K. Bilsland: We essentially have sold over 5 million megawatt hours since that time.
Brent K. Bilsland: Two other participants and including well to any other market.
Brent K. Bilsland: At.
Brent K. Bilsland: $54.
Brent K. Bilsland: And so we continue to see fairly strong pricing in the forward sales curve.
Brent K. Bilsland: And it's just a result of I mean, you can't pick up the paper.
Brent K. Bilsland: , Kevin Tracey, Rebecca Palumbo, Jason Lustig, Hallador Energy Co , Kevin Tracey, Rebecca Palumbo, Jason Lustig, Hallador Energy Co, And, you know, we've got MISO expressing their concerns about, you know, could their reserve margin go negative next year, which I don't even know if that's possible, but it kind of speaks to the tightness of [inaudible] And so as we continue to make forward sales You know, we're encouraged by the by the pricing that we see, we also, as outlined, saw an offer made to us for over over a billion dollars worth of future energy and capacity sales. So the reason, you know, we don't have that contracted yet and that, you know, that deal may or may not happen, but there's a number of RFPs going on right now.
Brent K. Bilsland: Any day and night.
Brent K. Bilsland: And read or hear about you know how all of this new demand, we're seeing from AI and Evs onshoring.
Brent K. Bilsland: And you know we've got MISO expressing their concerns about you know could could their reserve margin go negative next year, which I don't even know if that's possible, but it's kind of speaks to the tightness.
Brent K. Bilsland: Of.
Brent K. Bilsland: The market and and.
Brent K. Bilsland: And so as we continue to make forward sales.
Brent K. Bilsland: We're encouraged by the pricing that we see.
Brent K. Bilsland: So.
Brent K. Bilsland: As outlined saw.
Brent K. Bilsland: On offer made to us for over.
Brent K. Bilsland: Over $1 billion worth of future energy and capacity sales. So the reason, we don't have that contracted yet.
Brent K. Bilsland: Deal may or may not happen, but there's a number of rfps going on right now.
Brent K. Bilsland: Plus.
Brent K. Bilsland: Plus, for us, our RFP is associated with, you know, mostly data center type customers, trying to get them to locate on or near the property. So we think there's a lot of competition. And one of the things we just kind of wanted to state is that, you know, if you look back, I think in the third quarter, we had something like we added 300 million in sales, fourth quarter, like 400 million in the power division, and this quarter, 138.
Brent K. Bilsland: R.
Brent K. Bilsland: Our RFP associated with.
Brent K. Bilsland: Mostly data center type customers trying to get them to locate on or near the property.
Brent K. Bilsland: So we think theres a lot of competition.
Brent K. Bilsland: And one of the things, we just kind of wanted to state is that if you look back.
Brent K. Bilsland: In the third quarter, we had something like we added $300 million in sales in the fourth quarter like $400 million in the power Division. This quarter 138, but we feel that there's going to be the potential.
Brent K. Bilsland: But we feel that there is going to be the potential for some very large traction transactions this year. And so we just kind of wanted to signal that to the market that, you know, we're hopeful that we can transact sometime this year on some very profitable and large transactions. So I think that was the first part of your question. When we look at, you know, what's the revenue line of the power plant? It's basically made up of energy and capacity. And so on.
Brent K. Bilsland: For some very large traction.
Brent K. Bilsland: Men's actions. This year is there and so we just kind of wanted to signal that to the market that.
Brent K. Bilsland: You know we're hopeful that we can we can transact sometime this year on some very.
Brent K. Bilsland: Profitable and loop and large transaction.
Brent K. Bilsland: So I think that was the first part of your question.
Brent K. Bilsland: When we look at.
Brent K. Bilsland: What's the revenue line of the power plant and it's basically made up of energy and capacity sales.
Brent K. Bilsland: And so.
Brent K. Bilsland: You know, we have not been as hedged as we would like to be in the fourth quarter of last year and the first quarter of this year, which has meant we've been selling a large percentage of our Powered division on the spot market, which at times can be very high prices. We saw prices as high as $250 a megawatt hour in January. But we also see times where it's below our cost structure, and we're turning our plan off, or we're slowing it down at night, or something like that.
Brent K. Bilsland: We have not been as hedged as we would like to be.
Brent K. Bilsland: In the fourth quarter of last year and first quarter of this year.
Brent K. Bilsland: Uh huh.
Brent K. Bilsland: We have been.
Brent K. Bilsland: Selling in the spot a large percentage of our.
Brent K. Bilsland: Powered division in the spot market.
Brent K. Bilsland: Which at times can be very high prices, we saw prices as high as $250 a megawatt hour.
Brent K. Bilsland: In January but.
Brent K. Bilsland: But we also see times, where it's below our cost structure and we're turning our plan offer we're slowing it down at night or something like that so the goal is.
Brent K. Bilsland: So the goal is to contract a higher percentage of our forward sales so that we can get the plants up and operating and leave them on, right? And so, so, you know, we say that our goal is 6 million megawatt hours a year. That's something that we think is attainable and something that we're working towards. So look for more on that front from us in the future.
Brent K. Bilsland: Two to contract a higher percentage of our forward sales.
Brent K. Bilsland: So that we can get the plants up up and operating and leave them on right.
Brent K. Bilsland: And.
Brent K. Bilsland: So so.
Brent K. Bilsland: <unk>.
Brent K. Bilsland: We've stated that our goal of 6 million megawatt hours a year that that's that's a <unk>.
Brent K. Bilsland: Something that we think is attainable and something that we are working towards.
Brent K. Bilsland: So look so look for more on that front out of us in the future.
Lucas Nathaniel Pipes: So should we assume, thank you for this, Brent, should we assume that you
Brent K. Bilsland: So should we assume thank you for this brand should we assume that you.
Lucas Nathaniel Pipes: What.
Speaker Change: Kind of more hedged in the future.
Brent K. Bilsland: Yes, that's our goal. We've been trying to do that in a very low-risk way, right? We've talked in the past about unit contingent plant contingent type transactions in that, you know, if we can't produce, we don't have to cover. So those have been slower to put together, but we've been successful in putting them together. And so we You know, we will hopefully continue to do more of that. But none of that is ever guaranteed. We're just seeing a very high level of interest from a lot of different players, and so that's what's got us encouraged.
Brent: Yes, that's our goal.
Brent K. Bilsland: <unk> been trying to do that.
Brent K. Bilsland: And a very low risk way right, we've talked in the past about.
Brent K. Bilsland: Unit contingent plan contingent type transactions and that if we can't produce we don't have to cover.
Brent K. Bilsland: So those those have been slower to put together, but we've been successful in putting those together.
Brent K. Bilsland: And so we.
Brent K. Bilsland: We will.
Brent K. Bilsland: Hopefully continue to do more of that none of that is ever guaranteed we're just seeing.
Brent K. Bilsland: A very large level of interest from a lot of different players.
Brent K. Bilsland: And so that's so that's got us encouraged.
Lucas Nathaniel Pipes: very helpful. If you were to do something kind of behind the meter with the data center at site, what would be a good benchmark for the power pricing? Would it be based on kind of MISO pricing and the curve, or would this be a bilateral agreement where prices could deviate from those?
Brent K. Bilsland: Very helpful. If you were to do it.
Lucas Nathaniel Pipes: Something kind of behind the meter with the data center at site.
Lucas Nathaniel Pipes: What would be a good benchmark for the power pricing would it be based on kind of MISO pricing in the curve or or what the bilateral.
Lucas Nathaniel Pipes: Bilateral agreement where prices could deviate from some dose.
Lucas Nathaniel Pipes: Benchmarks.
Brent K. Bilsland: Well, we'll see. I mean, we don't have the results back from the RFP. We're expecting those data points later this month. But certainly, those types of transactions will have to compete with what we can do in the more traditional market. So, you know, we feel that competition is good for us.
Speaker Change: Well, we'll see I mean, we're we don't have the results back from the RFP, we're expecting those data points later this month.
Brent K. Bilsland:
Brent K. Bilsland: But certainly you know.
Brent K. Bilsland: Those type of transactions, we'll have to compete with.
Brent K. Bilsland: What we can do in the <unk>.
Brent K. Bilsland: More traditional markets.
Brent K. Bilsland: So we feel that competition is is good for us.
Lucas Nathaniel Pipes: Thank you. And can you speak a little bit about the connectivity at the site? Would your site qualify for any data center, or could there be limitations due to constraints on the bandwidth of your connectivity?
Speaker Change: Thank you and and can you speak a little bit to the kind of connectivity.
Lucas Nathaniel Pipes: At the site.
Lucas Nathaniel Pipes: Your site qualify for.
Lucas Nathaniel Pipes: Any data center or could there be limitations there too.
Lucas Nathaniel Pipes: Strains on.
Speaker Change: The bandwidth of your connectivity.
Brent K. Bilsland: So we have a one gigawatt interconnection at MIRM. I believe the transmission lines flowing in and out of that substation there are around 1.6 gigawatts. And so, you know, it offers an interesting situation where we can potentially supply a customer directly from the plant, or those electrons can be purchased from the grid.
Lucas Nathaniel Pipes: So we have a one gigawatt of interconnection.
Brent K. Bilsland: At mirror.
Brent K. Bilsland: I believe the transmission lines flowing in and out of that substation there are around.
Brent K. Bilsland: One six gigawatts.
Brent K. Bilsland: And so.
Brent K. Bilsland: It offers a.
Brent K. Bilsland: An interesting situation where.
Brent K. Bilsland: We can potentially supply customer directly from the plant or those electrons can be purchased.
Brent K. Bilsland: From from the grid.
Lucas Nathaniel Pipes: Thank you for that. But in terms of the kind of fiber access, no, no constraints you're aware of.
Speaker Change: Thank you for that.
Lucas Nathaniel Pipes: But in terms of that kind.
Lucas Nathaniel Pipes: Of fiber access no no.
Lucas Nathaniel Pipes: No constraints you're aware of.
Brent K. Bilsland: Well, pretty much every location has to have some level of fiber built into the location, right? Because these are potentially, you know, what I guess the first question is, what will the size of the facility be and, and whatnot? So, those are all questions that we've yet to answer, but again, you know, we kind of mentioned earlier that our chief legal officer kind of comes from the data communications world, so we've been able to tap into that network of people and get really good advice. So we think that talking to customers and talking to our advisors, this is very feasible, and there seems to be a high level of interest. Very helpful.
Lucas Nathaniel Pipes: Well pretty much every location has to do some level of fiber build in to the location right. Because these are very potentially.
Brent K. Bilsland: I guess the first question is what will the size of the facility be in.
Brent K. Bilsland: And whatnot so.
Brent K. Bilsland: Those are all questions that we've yet to answer but.
Brent K. Bilsland: Again, we kind of mentioned earlier that our our chief legal officer kind of comes from the data communications World. So we've been able to tap into that.
Brent K. Bilsland: Network of people and get really good advice, so we think that.
Brent K. Bilsland: And talking to the customers and talking to our advisors that this is very feasible and and there seems to be a high level of interest.
Lucas Nathaniel Pipes: Thank you very much for that, Brent. Best of luck. Larry, again, best wishes to you all. I'll turn it over. Thank you.
Brent K. Bilsland: Very helpful. Thank.
Speaker Change: Thank you very much for that Brent.
Speaker Change: Best of luck, Larry again, best wishes to you all I'll turn it over thank you.
Lucas Nathaniel Pipes: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you Luca.
Operator: As a reminder, to register a question, please press star followed by one on your telephone keypad. Our next question will go to the line of Jeff Braunschick with Cove Street Capital. Your line is now open. Hello, ladies and gentlemen.
Lucas Nathaniel Pipes: As a reminder to register a question. Please press star followed by one on your telephone keypad.
Jeffrey Bronchick: Our next question will go to the line of Jeff, Jeff <unk> with Cove Street Capital. Your line is now open.
Jeffrey Bronchick: Hello now, ladies and gentlemen. Hey, Brent and Marcie, could you maybe just go over the cash flow implications of what we have today and the current, you know, structures in place and sort of an expectation for cash needs over the balance of the year, as far as you can see? And then help us walk through what the model looks like under you get rid of the, you know, the contractual, you know, low sales, and you're signing these conceptual big contracts. How does the cash flow model look going forward?
Jeffrey Bronchick: Hello, ladies and gentlemen.
Speaker Change: Hey, Brett and.
Jeffrey Bronchick: Maybe just go over the cash flow implications.
Jeffrey Bronchick: What we have today and the current structures in place.
Jeffrey Bronchick: And sort of an expectation for cash needs over the balance of the year as far as you can see and then.
Jeffrey Bronchick: Help us walk through the <unk>.
Jeffrey Bronchick: Model look like under you get rid of the contractual low sales and you're signing these conceptual big contracts.
Jeffrey Bronchick: How does the cash flow model look going forward.
Jeffrey Bronchick: Well.
Jeffrey Bronchick: You got a lot of questions wrapped up in one there. So I think we're clear that we don't give out, you know, forward-looking guidance. I think we can talk at a high level about, you know, what our cost structure looks like, and what our revenue looks like, right? I guess, yeah, I'm not looking for guidance. What I'm saying is you guys have woken up and said we're changing the model, and the model change clearly has cash flow implications which are, you know, transitory at best, or at least, not good, and therefore, you guys are, you know, tapping different versions of liquidity to kind of keep the engine rolling.
Speaker Change: You've got a lot of questions wrapped up in one there.
Jeffrey Bronchick: So I think we're.
Jeffrey Bronchick: Clear that we don't give out forward.
Jeffrey Bronchick: Forward looking guidance.
Jeffrey Bronchick: I think we can talk at a high level of.
Jeffrey Bronchick: You know what our cost structure looks like.
Jeffrey Bronchick: And what our revenue looks like right. So I guess, yes, I was looking for guidance on what it what I'm, saying is you guys have woken up and said, we're changing the model and the model change clearly has cash flow implications, which are you know transitory it back.
Jeffrey Bronchick: At least transitory not good and therefore, you guys are tapping different versions of our liquidity to kind of keep the engine rolling and I'm. Just curious you know I understand transition issues, but on a higher level and independent IPP. That's publicly traded we should look like what as far as it can.
Jeffrey Bronchick: And I'm just curious, you know, I understand transition issues, but on a higher level, like an independent IPP that's publicly traded, we should look like what as far as a cash flow profile, I'm talking pre-cash flow?
Jeffrey Bronchick: Cash flow profile I'm talking free cash flow.
Jeffrey Bronchick: That's what I'm trying to get at.
Jeffrey Bronchick: That's what I'm trying to get a.
Brent K. Bilsland: Yeah, I think what we're trying to say is... You know, look, on the revenue side, we've got, I mean, we clearly state what our prices are, right? They're our average prices for energy somewhere between $36 a megawatt hour average in 2025 to, you know, as high as 55.37 in 2026. That's for the energy.
Jeffrey Bronchick: Yeah.
Speaker Change: Yeah, I think what we're trying to say is.
Brent K. Bilsland: Look on the revenue side, we've got I mean, we.
Brent K. Bilsland: Clearly state what our what our prices are right. There are average prices are.
Brent K. Bilsland: For the energy somewhere between $36 a megawatt hour average in 2025 to as high as 50, 537% in 2026.
Brent K. Bilsland: As for the energy.
Brent K. Bilsland: Capacity, you know, we're targeting $65 million in sales. Some years are better than that. Some years are worse.
Brent K. Bilsland: Capacity.
Brent K. Bilsland:
Brent K. Bilsland: We are targeting.
Brent K. Bilsland: $65 million.
Brent K. Bilsland: And sales some years are better than that some years are worse, but if you divide that by six.
Brent K. Bilsland: But if you divide that by six million megawatt hours, that's going to be, you know, a little over, somewhere between $10 and $11 a megawatt hour, right? So total those two lines together, and you have, depending on the year, somewhere between $47 and $56, sorry, $66 a megawatt hour. That's the revenue line. On the expense side, you know, we have a cost structure that's going to be.
Brent K. Bilsland: Million megawatt hours, that's gonna be you know a little over.
Brent K. Bilsland: You know somewhere between 10 and $11 a megawatt hour right.
Brent K. Bilsland: So total of those two lines together and you have.
Brent K. Bilsland: Depending on the year somewhere between 47 and $56.
Brent K. Bilsland: Excuse me $66 a megawatt hour.
Brent K. Bilsland: That's the revenue line.
Brent K. Bilsland: On the expense side.
Brent K. Bilsland: We have a cost structure, that's that's going to be.
Brent K. Bilsland: And in the.
Brent K. Bilsland: Variable costs.
Brent K. Bilsland: This quarter was around 32 bucks, and You know, it's 60, assuming a $60 million cost divided by 6 million megawatt hours would be $10, right? So, So now, you know, $60 margins, $40 cost, that's a $20 margin, 6 million megawatt hours, that's $120 million if we can hit all of our goals. We'll see if we're successful in hitting all of our goals.
Brent K. Bilsland: This quarter was around 32 Bucks and.
Brent K. Bilsland: Fixed cost that.
Brent K. Bilsland: At 60, assuming a $60 million cost divided by 6 million megawatt hours would be $10 right. So.
Brent K. Bilsland: So now <unk>.
Brent K. Bilsland: $60 margins $40 costs of $20 margin 6 million megawatt hours Thats, a 100 $120 million, if we can hit all of our goals.
Brent K. Bilsland: We'll see if we're successful in hitting all of our goals.
Jeffrey Bronchick: Isn't it isn't by definition the IPP world, I mean, you're never going to sell You don't want to sell out 100% of your capacity at the prices that the buyers want, and vice versa. So there's always a contracted versus spot, hence, isn't the IPP model highly variable in, you know, here you'll gush cash, and the next year you'll be, you I mean, just help me out on how you're looking through this after multiple years.
Speaker Change: But isn't it isn't by definition, the IPP world, you're never going to South you don't want to sell out of 100% of your capacity at the prices that the buyers want.
Jeffrey Bronchick: And vice versa. So there's always a contracted versus spot hence is not the IPP model highly variable and here Youre gosh cash in the next year, you'll be doing converts from the board I mean, just help me out on how youre looking through this over multiple years, let's assume.
Brent K. Bilsland: Let's assume you guys execute perfectly. That's what I'm trying to get at, of our capacity sold, and so achieving that goal. There's a high likelihood of doing that because we've already got a high percentage of it. So, right, I mean, if you're looking at percent of capacity contracted. It's 100% this year, it's 82% next year, it's 77% the year beyond that, and it's 64% the year beyond that.
Jeffrey Bronchick: You guys execute perfectly.
Brent K. Bilsland: That's what I'm trying to get I think I think on the capacity side, we've clearly list out that we have a high percentage.
Brent K. Bilsland: Of our capacity sold.
Brent K. Bilsland: So obtaining that goal.
Brent K. Bilsland: There's a high likelihood of doing that because we've already got a high percentage of it.
Brent K. Bilsland: Right I mean, if youre looking at percent of capacity contracted.
Brent K. Bilsland: It's 100% this year, it's 82% next year at <unk> 77 per cent theory on that at 64% a year beyond that so we don't have a lot of work to do.
Brent K. Bilsland: So we don't have a lot of work to do to obtain that goal. Where we've got to do work is on the energy side of the business, which is why, you know, we think in the next handful of months, we have participated in RFPs from our customers, and we lost an RFP, to target data center or industrial uses of power through an agreement with Hoosier Energy that we announced last quarter.
Brent K. Bilsland: To obtain that goal.
Brent K. Bilsland: We've got to do work is on the energy side of the business.
Brent K. Bilsland: Which is why we think in the next handful of the bonds.
Brent K. Bilsland: That we have participated.
Brent K. Bilsland: In Rfps of our customers and we've lost an RFP.
Brent K. Bilsland: To target.
Brent K. Bilsland:
Brent K. Bilsland: Data center or industrial uses of power through an agreement with Who's your energy.
Brent K. Bilsland: That we announced last quarter.
Brent K. Bilsland: So we'll see how successful we are, but we would like to get a decent percentage of our plant contracted out so that we can get both units up and running and at least have both units running at minimum load, which would be about 65% of our generated output running at minimum load all the time. So that's kind of the goal, and that's, I think, what we're looking at and then, you know, the cold side of the business.
Brent K. Bilsland: So we'll see how successful we are but we would like to get a decent.
Brent K. Bilsland: Decent percentage of our.
Brent K. Bilsland: Plant contracted out so that we can get both units up and running.
Brent K. Bilsland: And at least have both units running at minimum load.
Brent K. Bilsland: Which would be about 65%.
Brent K. Bilsland: Of our generated output to run at minimum load all the time.
Brent K. Bilsland: So that's kind of the goal and that's what I think what we're.
Brent K. Bilsland: Looking at and then the coal side of the business.
Brent K. Bilsland: Our power plant is, you know, one of our largest customers, and so, you know, that kind of has an internal hedge on our cost structure, being able to produce coal at cost and deliver it to ourselves. We do purchase some coal from outside parties, just to kind of diversify that risk. And, you know, that seems to be working out as well.
Brent K. Bilsland: Our power plant is one of our largest customers.
Brent K. Bilsland: And so you know that kind of has an.
Brent K. Bilsland: An internal hedge on our cost structure.
Brent K. Bilsland: Being able to produce coal at costs and deliver it to ourselves we do purchase some coal from outside parties just to kind of diversify that risk.
Brent K. Bilsland: And.
Brent K. Bilsland: That seems to be working out as well.
Speaker Change: Alright, Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Operator: As a reminder, to register a question, please press star followed by one on your telephone keypad. The next question will go to the follow-up on Lucas Pipes with B. Reilly Financials. Your line is now open. Thank you very much for taking my follow-up question.
Brent K. Bilsland: As a reminder to register a question. Please press star followed by one on your telephone keypad.
Lucas Nathaniel Pipes: The next question will go to the follow up of Lucas pipes with B Riley financial your line is now open.
Lucas Nathaniel Pipes: Thank you very much for taking my follow-up question. Brent, I want to ask you about the recently unveiled EPA clean power rule. At what point would you consider making investments? What do you think is the Legal Outlook for this rule?
Lucas Nathaniel Pipes: Thank you very much for taking my follow up question.
Lucas Nathaniel Pipes: Brent I wanted to ask you about that.
Lucas Nathaniel Pipes: Recently unveiled the EPA clean power rule.
Lucas Nathaniel Pipes: At what point would you consider making investments.
Lucas Nathaniel Pipes: What do you think is the.
Lucas Nathaniel Pipes: I appreciate it.
Lucas Nathaniel Pipes: Legal outlook for this rule I appreciate your thoughts thank you.
Lucas Nathaniel Pipes: Well look I think.
Brent K. Bilsland: I think the world is trying to balance a couple different things. On the one hand, we want to keep the lights on 24-7, and we seem to have for the first time in 20, maybe 30 years, a significant growth in demand for electrons. And at the same time, you know, the world desires lower carbon emissions. So that's kind of the tug of war that I think goes on there and the challenge that we're all being guided to. And, you know, the grid took 150, 50 years or so to build, and it's designed for a system of base load power and spinning generation.
Lucas Nathaniel Pipes: I think the.
Brent K. Bilsland: The World is trying to balance a couple of different things on one hand.
Brent K. Bilsland: We want to keep the lights on 24, seven and we seem to have.
Brent K. Bilsland: For the first time in 20, maybe 30 years.
Brent K. Bilsland: No significant growth in demand for electronics.
Brent K. Bilsland: And at the same time.
Brent K. Bilsland: The world desires lower carbon emissions.
Brent K. Bilsland: So that's kind of the tug of war that.
Brent K. Bilsland: I think goes on there.
Brent K. Bilsland: And the challenge that we're all being guard.
Brent K. Bilsland: Guided too.
Brent K. Bilsland: And on, you know, and in many cases, it needs on-site fuel. And so we're trying to transition to something else in a short period of time, and that's going to be really, really challenging. And so, you know, we've seen this new carbon plan come out. I suspect it will be kept. And I've, you know, I've, we've read different legal theories and the like that, you know, it's probably headed to the U.S. Supreme Court.
Brent K. Bilsland: And the grid.
Brent K. Bilsland: 150 50.
Brent K. Bilsland: Years or so to build.
Brent K. Bilsland: And it's designed for a system of base load power and spending generation.
Brent K. Bilsland: And then in many cases it needs onsite fuel.
Brent K. Bilsland: And so.
Brent K. Bilsland: We're trying to transition to something else in a short period of time and that's that's going to be really really challenging.
Brent K. Bilsland: And so you know.
Brent K. Bilsland: We've seen this new carbon plant come out.
Brent K. Bilsland: I suspect it will be stayed.
Brent K. Bilsland: And.
Brent K. Bilsland: We read different legal series and like that.
Brent K. Bilsland: It's probably headed to the U S Supreme Court.
Brent K. Bilsland: And if I had to bet, I would bet they'll probably say it was unlawful, but regardless of that, to me, it does give a path for our business to run through 2039. And, you know, that would be co-firing with gas, which we have studied for the last nine months to see if that is an alternative that, um, you know, a lever that makes sense for us to pull.
Brent K. Bilsland: And if I had to bet I would bet they'll bill.
Brent K. Bilsland: Probably.
Brent K. Bilsland: Let's say it was unlawful but.
Brent K. Bilsland: But regardless of that to me it does give a path for our business.
Brent K. Bilsland: To run through.
Brent K. Bilsland: <unk> thousand 39.
Brent K. Bilsland: And you know that it would be with co firing with gas, which we have for the last nine months been studying to see if that is an alternative that.
Brent K. Bilsland:
Brent K. Bilsland: A lever that.
Brent K. Bilsland: So we're continuing to evaluate that, and we're continuing to evaluate these new rules. There are going to be a lot of changes. But I think at the end of the day, the fact that will always win out is that the lights must always stay on. And if they don't, they'll be new leaders, right? Because people just aren't going to accept rolling blackouts in this country. And so I think physics prevails
Brent K. Bilsland: Makes sense for us to to pool. So we're continuing to evaluate that and we're continuing to evaluate these new rules.
Brent K. Bilsland: There's going to be a lot of changes.
Brent K. Bilsland: I think at the end of the day. The fact that we will always went out is.
Brent K. Bilsland: The lights must always stay on.
Brent K. Bilsland: And if they don't.
Brent K. Bilsland: There'll be new leaders right because people just aren't going to accept rolling blackouts in this country.
Brent K. Bilsland: That doesn't mean that the desire isn't there; we're not working towards that path. I just think we have to do so in a very responsible way. And so all this is probably going to take much longer than politicians and headlines would have you believe. I mean, it wasn't that long ago, three, four years ago, they were saying that we were going to be, you know, carbon free by 2030, and then it was 2035.
Brent K. Bilsland: And so I think physics prevails that doesn't mean that the desire is that there were not working towards that path I. Just think we have to do so.
Brent K. Bilsland: In a very responsible way.
Brent K. Bilsland: And.
Brent K. Bilsland: So all of this is probably going to take much longer.
Brent K. Bilsland: Then what.
Brent K. Bilsland: <unk> and headlines would have you believe.
Brent K. Bilsland: I mean, it wasn't that long ago, three or four years ago. They were saying that we were going to be.
Brent K. Bilsland: Carbon free by 2030 in 'twenty than it was 2035 and.
Brent K. Bilsland: Now we have a pathway for.
Brent K. Bilsland: And now we have a pathway for the existing fleet to stay on until 2039. And, you know, if this rule stays around, it essentially means that any new gap plant builds have to have carbon capture and storage, which to me makes it extremely challenging for anyone to build a new gas plant. It kind of means that we're probably going to rely on the existing fleet in some capacity for much, much longer, but there'll certainly be a lot of lawyers that spend time analyzing. These bills, I mean, these rules were 1400 pages long. So they're very detailed and specific.
Brent K. Bilsland: The existing fleet to stay on until 2039.
Brent K. Bilsland: And if this rule stays around is essentially means that any new gas plant builds have to have carbon capture and storage.
Brent K. Bilsland: Which to me makes it extremely challenged gene for anyone to build a new gas plant.
Brent K. Bilsland: So it kind of means that we're probably going to rely on the existing fleet and some capacity for much much longer.
Brent K. Bilsland: But there will certainly be a lot of lawyers that are.
Brent K. Bilsland: Let's spend time analyzing.
Brent K. Bilsland: These bills I mean.
Brent K. Bilsland: These rules were 1400 pages long so they are very <unk>.
Brent K. Bilsland: And I think the industry is still trying to figure out, you know, exactly what the exact interpretation is because it gets very specific for each fuel source. But to me, it's a near death blow to a new gas plant build, which further makes all right, so how do you expand the grid? You can't build new gas. Nobody's building new coal.
Brent K. Bilsland: Detailed and specific and I think the industry is still trying to figure out you know.
Brent K. Bilsland: Exactly what.
Brent K. Bilsland: What the exact interpretation is.
Brent K. Bilsland: Because it gets very specific for each fuel source, but to me. It's it's a near death blow to a new gas plant Bill.
Brent K. Bilsland: Which further makes alright, so how do you how do you expand the grid.
Brent K. Bilsland: You can't build new gas Nobody's building new coal.
Brent K. Bilsland: Everyone who's tried to build a new nuclear plant has had huge, huge cost overruns by 2x or more. So, and the capacity accreditation that we're seeing MISO hand out to wind and solar is 5% of nameplate. All right, so you got to build 20X of whatever wind and solar is to get, you know, that you got the 20 gigawatts of solar to get one gigawatt of capacity. I mean, that's why math is very problematic.
Brent K. Bilsland: Everyone, who has tried to build a new nuclear plant has has has huge huge cost overruns by two extra more.
Brent K. Bilsland: So.
Brent K. Bilsland: And the capacity accreditation that we're seeing MISO handout to wind and solar is 5% of nameplate.
Brent K. Bilsland: Alright, so you got to build.
Brent K. Bilsland: 20 ex of whatever wind and solar is to get.
Brent K. Bilsland: No.
Brent K. Bilsland: You've got the 20 gigawatts of solar to get one gigawatt of capacity.
Brent K. Bilsland: I mean, that's that's.
Brent K. Bilsland: That math is very problematic so.
Brent K. Bilsland: So, I don't think there are any easy answers or solutions here, but we are becoming more and more convinced about the longevity of our business, the profitability of our business, and, you know, mostly because we are kind of transitioning the company from a business that had a shrinking demand to a business that has a growing demand, and I think that has great benefit for the long-term shareholders of Hallador.
Brent K. Bilsland: I don't think there's any easy answers of solutions here, but.
Brent K. Bilsland: We are becoming more and more convinced about the longevity of our business the profitability of our business and.
Brent K. Bilsland: And mostly because we are transitioning the company.
Brent K. Bilsland: From a business that had a shrinking demand.
Brent K. Bilsland: To a business that has a growing demand.
Brent K. Bilsland: And I think that has great benefit to the long term shareholders of powder.
Lucas Nathaniel Pipes: Very helpful. Thank you, Brent, for following up on this. First, co-firing with natural gas, how much would that cost to make a plant change for that? How long would it take, and then, on the back of your thesis that you just articulated, are you looking at acquisitions of other coal-fired power plants, be it in MISO or across?
Speaker Change: Very helpful. Thank you Brian to two follow ups on this.
Lucas Nathaniel Pipes: First.
Lucas Nathaniel Pipes: Co firing with natural gas, how much what that cost to make up.
Lucas Nathaniel Pipes: Plant change for that.
Lucas Nathaniel Pipes: How long would it take and then on the back of your thesis that you just articulated.
Lucas Nathaniel Pipes: Are you looking at.
Lucas Nathaniel Pipes: Acquisitions of other coal fired power plant.
Lucas Nathaniel Pipes: And MISO or across the nation.
Brent K. Bilsland: Yeah, so we're still, like I said, we're still evaluating what co-firing the plant would look like. And there are different ways of doing that. So we're not really ready to come out with a cost estimate, though it is feasible. And then secondly, Excuse me, I got interrupted. The second part of your question again, Lucas, was what?
Speaker Change: Yes, so we're still like I said, we're still evaluating.
Speaker Change: What what.
Brent K. Bilsland: Co firing the plant would look like.
Brent K. Bilsland: And there's different ways of doing that so we're not really ready to come out with the cost estimate.
Speaker Change: Though it is feasible.
Brent K. Bilsland: And.
Speaker Change: And then secondly.
Speaker Change: I got interrupted.
Speaker Change: The second part of your question again Lucas was what.
Unknown Attendee: Unknown Attendee, Kevin Tracey, Rebecca Palumbo, Jason Lustig, Hallador Energy Co.
Brent K. Bilsland: Oh.
Brent K. Bilsland: Yes.
Unknown Attendee: Yeah.
Brent K. Bilsland: Yeah, I think we're always in the market, and we're always having some level of conversation with someone about acquisitions and what that might look like. It's definitely something that, as we talked about on the call, we continue to build out our team of experts and kind of bolster our capabilities to, you know, acquire plants, operate plants, and increase the overall value of those assets. And I think that that's what we're trying to do. And that's, you know, part of the reason for the RFP with the different data center groups to see if that's another way that we can add value to the platform that we have.
Speaker Change: Yes, I think we're always in the market.
Brent K. Bilsland: And were always having some level of conversation with someone about.
Brent K. Bilsland: Acquisitions, and what that might look like.
Brent K. Bilsland: It's definitely something that.
Brent K. Bilsland: You know as we've talked about on the call. We continue to build out our team of experts.
Brent K. Bilsland: And it kind of bolster our capabilities too.
Brent K. Bilsland: You know.
Brent K. Bilsland: Acquire plants operated plants and increase the overall value.
Brent K. Bilsland: Of those assets and I think that.
Brent K. Bilsland: That's what we're trying to do and that's part of the reason of the.
Brent K. Bilsland: RFP with.
Brent K. Bilsland: With the different data center groups to see if that's another way that we can add value.
Brent K. Bilsland: To the platform that we have.
Brent K. Bilsland: Okay.
Lucas Nathaniel Pipes: Brent, I appreciate all the insights. Again, best of luck. Thank you.
Speaker Change: Brent I appreciate all that.
Lucas Nathaniel Pipes: All the insights again best of luck.
Lucas Nathaniel Pipes: Yeah.
Speaker Change: Thank you.
Lucas Nathaniel Pipes: Yeah.
Speaker Change: Thank you.
Operator: Again, to ask a question, please press the star followed by one on your telephone keypad. We will pause here briefly as questions get registered. There are no additional questions waiting at this time, so I'll pass the conference back over to Brent Bilsland for closing remarks.
Lucas Nathaniel Pipes: Again to ask a question. Please press star one followed by Chris. Please press Star followed by one on your telephone keypad, we will pause here briefly ask questions get registered.
Brent K. Bilsland: There are no additional questions waiting at this time, so I'll pass the conference back over to Brent Brent Biz Lynn for closing remarks.
Brent K. Bilsland: Well, I just want to thank everyone for their time today and their continued interest in Hallador. Thank you.
Brent K. Bilsland: Well I just want to thank everyone for their time today and their.
Brent K. Bilsland: Their continued interest in <unk>. Thank you.
Brent K. Bilsland: Yeah.
Brent K. Bilsland: Yeah.
Operator: That concludes the Hallador Energy first quarter 2024 earnings call. Thank you for your participation. I hope you have a wonderful rest of your day.
Brent K. Bilsland: That concludes the <unk> energy first quarter 2024 earnings call. Thank you for your participation I Hope you have a wonderful rest of your day.
Operator: [music].
Operator: Okay.