Carly Davenport +1(212)357-1914 | carly.davenport@gs.com Goldman Sachs & Co. LLC 13 October 2025 | 12:04AM EDT Equity Research AMERICAS UTILITIES Increase power demand CAGR to 2.6% through 2030E on increased data center demand In this note, we update our US power demand outlook to reflect the latest data center power demand update from the GS SUSTAIN team and updated EV power demand forecasts from the latest GS Autos team note. Our overall US power demand CAGR increases to 2.6% through 2030E (from 2.5% prev ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Power & Utilities** sector, particularly the demand and supply dynamics from 2025 to 2035, with significant emphasis on data centers and renewable energy sources [1][2][3]. Core Insights and Arguments 1. **Load Growth Projections**: Expected load growth of **2.4% CAGR** from 2025 to 2035, primarily driven by data centers (60% of growth) and electrification of vehicles and manufacturing [1][2]. 2. **Data Center Impact**: Anticipated **100 GW** of data center build-out over the next decade, contributing significantly to overall load growth [2][12]. 3. **Gas and Renewable Energy**: Gas generation is projected to grow at **2.3% CAGR**, with **164 GW** of new gas capacity expected by 2035. Renewables are expected to contribute nearly **60%** of incremental generation through 2030 [4][12][35]. 4. **Affordability Concerns**: Rising capacity prices (10x increase in PJM over four years) and electricity prices growing by **4% Y/Y** over the last five years indicate ongoing affordability challenges for utilities [3][19]. 5. **Coal Plant Retirements**: Anticipated **2/3rds withdrawal rate** for coal plants in retirement queue from 2025 to 2030, with significant battery storage installations to support intermittent power sources [6][25]. 6. **Capex Estimates**: Total capital expenditure expected to exceed **$800 billion** through 2035, with solar representing **42%** of the total spend [41][43]. Additional Important Insights 1. **Regional Focus**: Key regions for growth include **PJM** and **ERCOT**, with PJM expected to build **30 GW** of data centers by 2030 [5][39]. 2. **Nuclear and Wind Contributions**: Anticipated **7 GW** of nuclear uprates and **68 GW** of wind capacity additions, primarily onshore, with a focus on addressing intermittency issues [12][25]. 3. **Market Dynamics**: The interplay between reliability and affordability will be critical, with utilities needing to balance swift data center connections without significantly increasing costs for ratepayers [19][38]. 4. **Inflationary Pressures**: Capex inflation is a significant concern, particularly for gas and solar projects, which may impact overall project viability and timelines [42][43]. 5. **Long-term Outlook**: There is uncertainty regarding data center build-out in the 2030-35 timeframe, with estimates ranging widely and potential efficiency gains in power consumption expected [17][36]. Conclusion The Power & Utilities sector is poised for significant changes driven by data center demand, renewable energy growth, and the need for reliable energy sources. However, challenges related to affordability, regulatory scrutiny, and inflationary pressures will require careful navigation by industry stakeholders.

Group 1 - Enbridge Inc. (ENB) is well-positioned to meet the growing demand for reliable electricity from data centers through its natural gas transportation pipelines and renewable energy generation facilities [1][7] - The company continues to secure contracts from technology giants for supplying power and fuel from renewable projects and natural gas midstream infrastructures [2][7] - ENB has over 10 late-stage development projects aimed at supplying power and energy to data centers, enhancing its market position [2][7] Group 2 - ENB's midstream assets are strategically located near new data centers and natural gas-powered electricity generation units across North America, facilitating easy connections and incremental cash flows [3][7] - Other companies like Williams (WMB) and Kinder Morgan Inc. (KMI) are also positioned to meet the rising demand for cleaner power, with WMB focusing on behind-the-meter power plants [4][5] - ENB shares have increased by 26.7% over the past year, outperforming the industry average of 25.2% [6] Group 3 - From a valuation perspective, ENB trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 15.48X, which is above the industry average of 13.86X [9] - The Zacks Consensus Estimate for ENB's 2025 earnings has not seen any revisions over the past week, indicating stability in earnings expectations [11] - ENB currently holds a Zacks Rank 2 (Buy), reflecting positive market sentiment [12]

Industry Overview - Utility service providers are benefiting from increased electricity tariffs, accretive acquisitions, cost reductions, and energy-efficiency initiatives [1] - The power industry is also seeing improvements in electric infrastructure resilience against adverse weather and a transition to renewable energy sources [1] Capital Expenditures - Maintenance and improvement of utilities' infrastructure rely heavily on capital expenditures for updating and modernizing assets [2] - Utility providers are investing in output enhancement to meet the growing demand for data centers [2] Transition to Renewable Energy - U.S. electric utilities are evolving beyond revenue generation due to climate measures and federal incentives, positioning them for gradual growth in the clean energy sector [3] Investment Opportunities - Companies like PPL Corporation and FirstEnergy are becoming attractive investment options due to strategic investments in grid infrastructure upgrades [4] - PPL is focusing on infrastructure projects to reduce outages and enhance service resilience [5] - FirstEnergy has expanded its regulated activities and is benefiting from improved economic conditions and increased demand [7] Data Center Demand - In Pennsylvania, potential data center demand has increased to 14.4 GW, with a projected capital investment of $0.75-$1.25 billion [6] - FirstEnergy's long-term data center load demand has grown over 80% since February 2025, totaling 11.1 GW [8] Earnings Estimates - The Zacks Consensus Estimate for PPL's 2025 and 2026 earnings per share indicates increases of 7.69% and 8.33%, respectively [9] - FirstEnergy's projected earnings show a decrease of 3.8% for 2025 but an increase of 6.72% for 2026 [11] Return on Equity - PPL's current return on equity (ROE) is 8.81%, while FirstEnergy's is 11.31%, outperforming the industry average of 10.14% [13] Strategic Investment Plans - PPL plans $20 billion in regulated capital investments from 2025 to 2028 [14] - FirstEnergy has planned investments of $28 billion between 2025 and 2029 [15] Dividend Yield - PPL's dividend yield is 2.97%, compared to FirstEnergy's 4.09% [16] Debt Position - PPL has a debt-to-capital ratio of 55.47%, while FirstEnergy's is 64.56%, both compared to the industry's 59.75% [17] - Both companies maintain a times interest earned (TIE) ratio above 1, indicating financial flexibility [18] Investment Recommendation - PPL is currently favored over FirstEnergy due to better debt management and growth in earnings estimates, with both stocks holding a Zacks Rank 3 (Hold) [19]

Financial Data and Key Metrics Changes - In Q4 2024, consolidated revenue was $94.8 million, down from $104.8 million in Q3 and $119.2 million in the prior year period [19] - The net loss for Q4 was $215.8 million, compared to a net income of $1.6 million in Q3 and a net loss of $10.2 million in the prior year period, primarily due to a non-cash impairment charge of approximately $215 million related to the Sunrise coal subsidiary [20] - Operating cash flow increased to $38.9 million in Q4 from an operating cash used of $12.9 million in Q3 [20] - Adjusted EBITDA for Q4 was $6.2 million, down from $9.6 million in Q3 [20] Business Line Data and Key Metrics Changes - Electric sales in Q4 were $69.7 million, down from $71.7 million in Q3 and up from $37.1 million in the prior year period [19] - Coal sales were $23.4 million in Q4, down from $31.7 million in Q3 and $91.7 million in the prior year period, reflecting a strategic reduction in coal production [19] - Hallador Power generated 1,160,000 megawatt hours in Q4, a 5% increase from 1,100,000 megawatt hours in Q3 [17] Market Data and Key Metrics Changes - The forward energy and capacity sales position increased to $685.7 million as of December 31, 2024, compared to $616.9 million at the end of Q3 [21] - Total forward sales book as of December 31, 2024, was $1.6 billion, up from $1.4 billion at the end of Q3 [21] Company Strategy and Development Direction - The company is transitioning from a traditional coal producer to a vertically integrated power producer, aligning with market trends favoring the IPP model [6] - Strategic partnerships are being pursued, including a non-binding term sheet with a global data center developer, which is expected to drive long-term value [6][7] - The company is actively evaluating additional strategic transactions to expand electric operations and enhance scale [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted the ongoing trend of retiring dispatchable generation in favor of non-dispatchable resources, which could enhance the value of Hallador Power [8] - The company anticipates favorable pricing trends for power sales in 2025 and beyond, driven by data center development efforts [10][12] - Management expressed optimism about capturing higher prices and energy volumes in the future, despite current market volatility [13] Other Important Information - The company completed its annual impairment analysis, resulting in a non-cash long-lived asset impairment charge of $215.1 million [9] - Capital expenditures for 2024 totaled $53.4 million, with expectations of approximately $66 million for 2025 [20][21] Q&A Session Summary Question: Regulatory and review process with the grid operator - Management highlighted multiple access requests from developers, indicating a favorable environment for potential sales [24][25] Question: Remaining items before a definitive agreement - Management indicated that while progress has been made, a deal is not finalized until signed, with an exclusivity agreement in place until June [27] Question: Co-firing requirements and capital intensity - Current laws require coal-fired plants to co-fire with natural gas by 2032, and feasibility studies are underway [29] Question: Acquisition of generating assets - Management is exploring opportunities across various states, emphasizing a case-by-case evaluation of potential acquisitions [33][44] Question: Pricing expectations for deals - Management expects to maintain a premium to forward curves due to increasing demand from data centers and hyperscalers [51] Question: Capacity payments in long-term agreements - Capacity payments are expected to cover fixed costs of the plant, estimated at around $60 million [62]