Hallador Energy Company

Good afternoon. Thank you for attending Halodora Energy's third quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I'd now like to turn the conference over to Sean Mansouri, the company's investor relations advisor with Elevate IR. Please go ahead, Sean.

Thank you, and good afternoon, everyone. We appreciate you joining us to discuss our third quarter 2024 results. With me today are President and CEO, Brent Bilsland, and CFO, Marjorie Hargrave. This afternoon, we released our third quarter 2024 financial and operating results in a press release that is now on the Halidor Investor Relations website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook. Following prepared remarks, we will open the call to answer your questions. Before we begin, 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 today'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. In providing these remarks, Halidor has no 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 shortly. And with the preliminaries out of the way, I'll turn the call over to President and CEO, Brent Bilseland.

Thanks, Sean. And thank you, everyone, for joining us this afternoon. I'm happy to announce that during the third quarter, we reached an all-important milestone in our transformation as an independent power producer by signing a non-binding term sheet with a leading global data center developer. Our team is working diligently to finalize definitive agreements with this partner and the relevant utilities that will support the delivery of our energy and capacity to a large load end user. As we previously discussed, these types of deals are complex, multi-party arrangements involving multiple stakeholders. If we're successful in reaching these agreements, we'll secure long-term contracts for a substantial portion of our plant's energy and capacity, at improved margins, extending for over a decade. As a reminder, our proposed in front of the meter transaction involves selling our power and capacity through utility or cooperative, which would be in contrast to the behind-the-meter structures that have created recent regulatory challenges that you may have seen associated with other deals of this type. We are optimistic that we will be successful in finalizing a long-term data center transaction given Indiana's business-friendly climate and favorable tax policy. We believe we hold a considerable portion of the remaining unsold accredited capacity in MISO Zone 6, covering Indiana and parts of western Kentucky where demand continues to grow. While we have not yet reached binding agreements, we are encouraged by the progress with this partner and the strong interest we continue to see from other potential counterparties in our energy and capacity offerings. We believe we have selected a highly strategic and experienced global partner and are pleased with progress that we've made to date. Further, the supply response from the accredited capacity market continues to be restricted. MISO has reduced the capacity accreditation awarded to intermittent resources like wind and solar. This constraint makes it challenging for the market to meet accredited capacity needs through resources other than coal, gas, and nuclear. Additionally, the response from accredited capacity suppliers has been muted, in part due to the regulatory and environmental challenges facing all types of dispatchable generation, including gas. This limited supply response is further constrained by an influx of solar and wind projects that provide minimal accredited capacity, overwhelming the queue and delaying access for essential dispatchable generation projects. Each of these factors contributes to our belief that accredited capacity we have is likely to remain valuable into the foreseeable future. Now, MISO has recently sought to change the way in which accredited capacity is calculated and awarded. and we continue to evaluate how that may impact our future capacity awards. However, this does not change our sentiment with respect to the value of what we have or what we expect to be awarded in the coming years. Turning to the results for the quarter, our wholly-owned subsidiary, Haldor Power, generated 1.1 million megawatt hours in Q3, up from 800,000 megawatt hours in the second quarter. While the energy environment remains challenging, during the quarter we saw incremental improvements based on stronger pricing and higher dispatch rates. Even though our pricing remains weak, we're encouraged that gas inventory levels are returning towards their historic norms. Additionally, our power plant ran more frequently this quarter, thus our cost improved significantly. This and other factors led to a material increase in gross margin for our power segment, to $16.36 per megawatt hour sold, compared to $8.11 in Q2. Subsequent to quarter end, we executed a $60 million prepaid power purchase agreement, or PPA, with an existing customer in the global asset management industry, which is on the heels of a $45 million PPA we signed in the second quarter. These types of deals support our near-term operations while positioning the company to continue advancing negotiations of a long-term agreement we described earlier. In our Sunrise Coal Division, we continued to make progress with the restructuring of our mining operations, an initiative we launched in Q1. During the third quarter, we completed a project for four of our most productive units, bringing all operating units to a split-air system, which helps to improve efficiency and reduce operational costs at the mine. While it is still early, we believe the optimization projects we have implemented in connection with the restructuring will help increase the tons of coal mined per man-hour, while decreasing the cost per ton of the coal that we will mine. Overall, we're enthusiastic about the direction of the energy markets and our strategic positioning. We believe the surge in demand from data centers and other industrial users presents a meaningful opportunity to transform our financial profile over the long term. With the strength in balance sheets and an improving environment for both coal and power sales, we are well equipped to capitalize on the multi-year growth opportunity ahead of us. I will now hand the call over to Margie Hargrave Before opening Q&A and returning for closing remarks.