Hallador Energy Company

Good afternoon. Thank you for attending Halador Energy's fourth quarter and full year 2024 earnings conference call. At this time, all participants are in 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 fourth quarter and full year 2024 results. With me today are President and CEO, Brent Vilswind, and CFO, Margie Hargrave. This afternoon, we released our fourth quarter and full year 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-K shortly. And with the preliminaries out of the way, I'll turn the call over to President and CEO, Brent Zeldman.

Thanks, Sean. Thank you, everyone, for joining us this afternoon. 2024 was a transformative year for Halidor as we evolved from our traditional position as a co-producer to vertically integrated power producer or IPP, while also advancing our products and services up the energy value chain. This deliberate shift aligns with broader market trends and our beliefs in the superior economics of the IPP model, which we feel is essential to unlocking long-term value for our shareholders. In October of 24, We reached an important milestone in our transformation by signing a non-binding term sheet with a leading global data center developer to support their power and accredited capacity needs for over a decade. We followed up the non-binding term sheet with an exclusivity agreement that runs from January through early June of 2025 and provides us with comfort based on our partner's willingness to pay up to $5 million throughout the exclusivity period. These agreements, in combination with our partner's additional large-scale financial commitments to third-party stakeholders necessary for the transaction, highlight the meaningful progress that we feel we've made towards finalizing a definitive agreement within our exclusivity period. While navigating these complex transactions requires coordination across multiple stakeholders, we remain encouraged by the commitment of our partners and believe this strategic partnership will drive long-term value for our shareholders. We continue to witness the prevalent industry trend of retiring dispatchable generation, including coal, in favor of non-dispatchable resources, such as wind and solar. We believe this transition from dispatchable to non-dispatchable generation makes the attributes of our subsidiary, Halador Power, much more valuable due to the enhanced reliability that we provide versus non-dispatchable generators. However, we believe the retirement of coal-based generation and lower natural gas prices could reduce the demand for coal supply. potentially lowering the value of our Sunrise Coal subsidiary. In anticipation of these market dynamics and in connection with our active management of the cost structures within Sunrise Coal, we proactively reduced volumes and shed higher cost coal reserves, which lowered our operational cash costs in the fourth quarter. During the fourth quarter of 2024, we also completed our annual impairment analysis, which was based upon our current operating plans, market-driven pricing and cost trends. As part of that analysis, we determined the carrying amount of Sunrise's long-lived assets were not recoverable and recorded a non-cash long-lived asset impairment charge of 215.1 million in the fourth quarter of 2024. We believe this analysis underscores the necessity and foresight of our ongoing focus and transition to power generation. Howard Power's ability to generate up to 6 million megawatt hours annually at Merham continues to provide significant opportunities. The forward power price curves indicate that the margins earned on energy produced at Merham and the value of accredited capacity sales assigned to the plan continue to increase. We have seen strong indications for price improvements in 2025 and beyond, particularly in relation to data center development efforts in Indiana. It is unclear whether the forward pricing curve has yet factored in this fast-growing demand. We have historically focused on selling energy through bespoke bilateral agreements on a unit or plant contingent basis. However, during 2024, we sold a limited amount of power on a firm basis. While we continue to limit these types of firm sales to mitigate risk, as we wait for high price unit contingent contracts to take effect, we expect to strategically utilize them to smooth our exposure to the spot market. This approach enables us to capture some of the episodic cash generation, largely driven by demand from extreme weather and various other conditions that stress the power grid, while also lessening the negative pricing impacts during the period of mild weather and low natural gas prices. This also enables us to shift from the lower pricing related to our initial Merrim acquisition to traditional wholesale market pricing, where we currently are in some regard and will largely be starting in 2026, and ultimately to the enhanced pricing and margins associated with supporting data centers and other large load end users as we look beyond 2026 and into the next decade. Despite an ongoing surplus of natural gas and mild weather patterns moderating energy prices throughout 2024, we began to see favorable pricing trends towards the end of the fourth quarter and early 2025. Combined with progress in our data center negotiations, this reinforces our belief that Merrim's earnings potential will expand meaningfully if we execute on our strategic initiatives. Additionally, we continue to believe that the ability to store a commodity is inherently tied to the volatility of that commodity. Coal can be piled up for years, thus the volatility is low. Oil and natural gas face transportation and storage challenges, which increase price volatility. The limitations of storing viable energy coupled with non-dispatchable generation gaining market share in an environment where the sun does not always shine and the wind does not always blow, indicates that energy price volatility could increase over the next decade. We believe this uncertain volatility will sustain a premium in forward power prices, benefiting our long-term positions. We are also optimistic about how it will empower ability to capture higher prices and energy volumes in 2025 and beyond. In 2024, we generated 3.8 million megawatt hours at an average price of $48.62 per megawatt hour. However, for 2025, we have already contracted four and a quarter million megawatt hours at an average price of $37.24 per megawatt hour. And for 2026, we have secured 3.4 million megawatt hours of sales at an average price of $44.43 per megawatt hour. This reflects approximately 71% and 57% of our potential energy sales for 2025 and 2026 respectively. Beyond 2026, we are optimistic in our ability to sell energy at higher prices in support of data center development or to traditional wholesale customers as indicated by the higher forward curve. Beyond the transaction we are negotiating for Merum, we are actively evaluating additional strategic transactions that could expand our electric operations, increasing geographic reach and enhanced scale. While opportunities to acquire dispatchable generation assets are limited and complex, Haldor is uniquely positioned to repurpose underperforming or retiring assets to meet rising demand from data centers and onshore industrial customers. We are optimistic about the potential to add to our strategic portfolio and the long-term benefits that such a transaction could produce for the company, its shareholders, and its customers. Shifting to coal, we spent much of 2024 optimizing our Sunrise Coal Division to better align with our electric operation. Following the restructuring we initiated in the first quarter, we reduced headcount focused production on our most profitable reserves, and made infrastructure improvements to increase efficiency. These efforts successfully offset cost pressures while enhancing operational flexibility. In 2025, we expect our Mirren Power Plant to consume 2.3 million tons of coal from our Sunrise Coal subsidiary as well as third parties. We expect Sunrise to sell an additional 3 million tons of coal to third parties. Turning to our results for the fourth quarter, our wholly owned subsidiary, Haldor Power, generated 1.16 million megawatt hours in Q4, up 5% from the 1.1 million megawatts in the third quarter. While the energy environment remains volatile, During the quarter, we continued to see incremental improvements based on stronger pricing and higher dispatch rates. The gas inventory levels are returning towards the historic norms, resulting in higher natural gas prices than we have seen in recent quarters. Our gross margin for our power segment was $62.13 per megawatt hour sold, compared to $52.10 and 70 cents in the third quarter. Looking ahead, our focus remains on maximizing the value of our Miriam power plant, while actively pursuing opportunities to acquire additional dispatchable generators that can add durability, scale and geographic expansion to our electric operations. Additionally, we are forging strong relationship with counterparties seeking limited volume firm energy sales to secure favorable collateral terms and effectively manage our Ford's power sales and risk in 2025 and 2026, which we believe will enhance our financial flexibility in the short to medium term. We are excited about our continued transformation from a commodities-focused coal producer to an IPP, a strategy we believe will unlock expanding energy market margins, drive sustainable growth, and enhance cash flow generation for our shareholders. I will now hand the call over to our CFO, Margie Hargrave, to take you through our financial results. Margie?