Hallador Energy pany(HNRG) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total operating revenue for Q1 2025 increased to $117.8 million compared to $94.8 million in Q4 2024 and $111.6 million in the prior year period [16] - Net income improved to $10 million in Q1 2025 from a net loss of $215.8 million in Q4 2024 and the prior year period [16] - Operating cash flow increased to $38.4 million in Q1 2025 from $32.5 million in Q4 2024 and $16.4 million in the prior year period [16] - Adjusted EBITDA rose significantly to $19.3 million in Q1 2025 from $6.2 million in Q4 2024 and $6.8 million in the prior year period [16] - Total bank debt was reduced to $23 million as of March 31, 2025, down from $44 million at the end of Q4 2024 and $77 million at the end of Q1 2024 [17] - Total liquidity increased to $69 million as of March 31, 2025, compared to $37.8 million at the end of Q4 2024 and $39.5 million at the end of Q1 2024 [17] Business Line Data and Key Metrics Changes - Electric sales for Q1 2025 increased to $85.9 million compared to $69.7 million in Q4 2024 and $60.7 million in the prior year period [15] - Coal sales were $54.8 million for Q1 2025, compared to $42.4 million in Q4 2024 and $66 million in the prior year period, reflecting a strategic reduction in coal production [15] Market Data and Key Metrics Changes - The forward power curves indicate increasing margins for energy produced at the Merum plant, with accredited capacity sold at prices exceeding $600 per megawatt day in the recent MISO auction [10] - Approximately 3 million megawatt hours have been contracted for the balance of 2025 at an average price of $37.20, and 3.4 million megawatt hours for 2026 at an average price of $44.43, reflecting strong market demand [11] Company Strategy and Development Direction - The company is focused on becoming a vertically integrated independent power producer, leveraging strong counterparty relationships to manage price volatility and demand fluctuations [5][6] - Ongoing negotiations with a leading global data center developer are progressing, with the potential for long-term energy supply agreements [6][7] - The company is exploring opportunities to acquire additional dispatchable assets to enhance scale and diversify revenue streams [8] - Plans to evaluate the addition of natural gas co-firing capabilities at the Merum plant to provide fuel flexibility and manage operating expenses [9] Management's Comments on Operating Environment and Future Outlook - Management believes that the trend of retiring dispatchable generators in favor of non-dispatchable resources will create volatility in energy markets, enhancing the value of their operations [8] - The company expects to produce approximately 3.8 million tons of coal in 2025, with the potential to increase production if market conditions support it [12] - There is growing demand for reliable power, particularly as grid volatility increases, positioning the company well for sustained growth [14] Other Important Information - The company did not utilize its ATM program in the first quarter and has not used it since Q2 2024 [17] - The company is optimistic about selling energy at higher prices in support of data center development and traditional wholesale customers beyond 2026 [11] Q&A Session Summary Question: Regarding the exclusivity period with the counterparty - Management is evaluating whether to grant an extension for the exclusivity period or continue negotiations non-exclusively while considering other interests [20][22] Question: Final steps in negotiations with the initial counterparty - Most major points have been negotiated, and the focus is now on finalizing details with the hyperscaler and ensuring alignment among all parties [24][25] Question: Timing and capital intensity for co-firing with natural gas - The company is analyzing the feasibility of co-firing and expects to provide updates in the future, with positive indications from contractors [26][28] Question: Structure of long-term deals with hyperscalers - The structure has been negotiated to be on a unit contingent basis for over a decade in length [30]