Good afternoon. Thank you for attending Hallador Energy's Fourth Quarter and Full Year 2024 Earnings Conference Call. At this time, all participants are in 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 fourth quarter and full year 2024 results. With me today are President and CEO, Brent Bilsland and CFO, Marjorie 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 Hallador 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, Hallador 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 Bilsland.

Thanks, Sean. Thank you, everyone, for joining us this afternoon. 2024 was a transformative year for Hallador as we evolved from our traditional position as a coal producer to a 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 belief in the superior economics of the IPP model, which we feel is essential to unlocking long-term value for our shareholders. In October of 2024, 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 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 partners' willingness to pay up to $5 million throughout the exclusivity period. These agreements, in combination with our partners' 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, Hallador 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. Hallador Power's ability to generate up to 6 million megawatt hours annually at Merom continues to provide significant opportunities. The forward power price curves indicate that the margins earned on energy produced at Merom and the value of accredited capacity sales assigned to the plant 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-priced 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 Merom 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 Merom'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 position. We are also optimistic about Hallador Power's 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 4.25 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 Merom, we are actively evaluating additional strategic transactions that could expand our electric operations, increasing geographic reach and enhancing scale. While opportunities to acquire dispatchable generation assets are limited and complex, Hallador 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've 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 Merom 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, Hallador 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 $52.7 in the third quarter. Looking ahead, our focus remains on maximizing the value of our Merom 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 relationships with counterparties seeking limited volume firm energy sales to secure favorable collateral terms and effectively manage our forward 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, Marjorie Hargrave, to take you through our financial results. Margie?

Thank you, Brent, and good afternoon, everyone. Jumping right into the fourth quarter results. On a segment basis, electric sales for the fourth quarter were $69.7 million, compared to $71.7 million for Q3 and $37.1 million in the prior year period, while coal sales were $23.4 million for the fourth quarter compared to $31.7 million in Q3 and $91.7 million in the prior year period. The expected year-over-year decline in coal sales was driven by our decision to reduce coal production as part of the restructuring of our Sunrise Coal division. On a consolidated basis, we generated $94.8 million in revenue for the fourth quarter, compared to $104.8 million in Q3 and $119.2 million in the prior year period. Net loss for the quarter was $215.8 million, compared to net income of $1.6 million in Q3 and net loss of $10.2 million in the prior year period. As Brent mentioned earlier, Q4 net loss was impacted by an approximate $215 million non-cash write down associated with the value of our Sunrise Coal subsidiary. Operating cash flow for the fourth quarter increased to $38.9 million, compared to operating cash used of $12.9 million in Q3 and $20.1 million in the prior year period, with the increase driven by a prepaid physical delivered power contract entered into during the fourth quarter. Adjusted EBITDA, a non-GAAP measure, which is reconciled in our earnings press release issued earlier today, was $6.2 million for Q4 compared to $9.6 million in Q3 and $2.1 million in the prior year period. We invested $13.8 million in capital expenditures during the fourth quarter, bringing total 2024 CapEx to $53.4 million. As we look to 2025, we expect CapEx to be approximately $66 million for the year, with roughly 20% related to federally mandated EPA ELG regulation. As of December 31, 2024, our forward energy and capacity sales position increased to $685.7 million, compared to $616.9 million at the end of Q3 and $658.1 million as of December 31, 2023. When combined with our forward fuel sales, which were up more than 40% to $460.7 million, compared to the end of Q3, our total forward sales book as of December 31, 2024, was $1.6 billion compared to $1.4 billion at the end of Q3 and $1.5 billion as of December 31, 2023. In response to the more challenging environment for spot pricing, we continue to focus on strengthening our balance sheet. During the fourth quarter, we've reduced our total bank debt to $44 million, compared to $70 million at September 30, 2024, and $91.5 million outstanding at the end of last year. Additionally, we did not utilize our ATM program in the fourth quarter and have not utilized it since Q2 2024. Total liquidity at December 31, 2024, was $37.8 million, compared to $34.9 million at September 30, 2024, and $26.2 million at December 31, 2023. This concludes our prepared remarks, and we will now open it up for questions from those participating in the call. Operator, back to you.

Our first question comes from Nick Giles with B. Riley Securities. Your line is open.

Thank you very much, operator, and good evening, everyone. My first question, I wanted to ask about the regulatory and review process with the grid operator. There was obviously some reporting around the submitted EPR form. So I was curious if you'd be able to offer any additional color around where this fits into ultimately reaching a definitive agreement? Thanks very much.

Yes. Hi, Nick. EPR filings are done by utilities at various locations across the state and their network, their respective networks. We certainly can't comment to all of those. We would probably highlight that there are several developers and hyperscalers out there asking to take electrons off the grid for various developments. And we can't speak to which one we're particularly involved with at this time. We would say that we're thrilled that there are multiple access requests throughout the state because Hallador is in a position to sell to any and all of them. Should we not go forward with the particular development that we're with now. So I guess what I'm saying is we're not going to comment as to where our particular location of our project is, but we are happy that there are multiple projects out there should our project not come to fruition. So lots of good backup opportunities out there that we see on the radar as possibilities.

Understood. Brent, that's helpful. Maybe just to ask it in a different way. I mean, how should we think about remaining items between now and the definitive agreement? Is there further due diligence required in the case of the developer, or have we reached a stage in the process where it really could just be down to a series of approvals?

Yes. We're not going to be able to shed a ton of light. I apologize as to all the steps and where we're at in that process. During Q1, we signed an exclusivity agreement that runs through the first week of June. So I think that speaks, you know, to some degree to timing, and we were certainly glad to see the financial commitment from our counterparty, with that agreement. But we've also seen further commitments with our counterparty, with some of the other players in the process. Look, we continue to be encouraged with the process that is made and the sincerity and commitment that we see from our counterparty, and we think we've made great progress. But a deal is not done until a deal is signed. And when that happens, we'll announce it. But we don't anticipate making a lot of announcements between today and the finish line. When it's signed, then we'll have a deal and it'll be announced.

Understood. That's helpful. Maybe just as we think about the long-term agreement itself and Merom, I believe there could be a requirement to coal fire with natural gas after the turn of the decade. And so, I was curious if you could speak to what's required at Merom and maybe the capital intensity of any upgrades?

Yes. So the current law does state that all coal-fired power plants must coal fire, I think, by 2032. That allows them to run to 2039 and beyond. And so, we have begun studies to review that process and what that would take. We are fortunate that we have a natural gas line in close proximity to the plant, and we have hired a group to study that, that has performed many coal firing of coal-fired power plants throughout the country, including a sister unit, Tamira. So we feel that the feasibility of such a study is of such a process is very doable. And as we learn more about the cost and timing of that, we'll share that with the market, but we're not prepared to do that today.

Got it. Got it. That's helpful. Maybe one more if I could. I mean Brent, you mentioned additional opportunities to acquire generating assets beyond Merom. And so, I was curious if you could add any color around geography, scale, and how we might think about acquisition costs. I know Merom was more a transfer of ownership type of structure. And so, should we think about similar opportunities where you might assume environmental liabilities and enter into some sort of forward agreement for energy? Thank you.

We are exploring various opportunities located in different states across the U.S., both in coal and gas sectors. We believe there are more opportunities available, and our teams are actively investigating these options. However, we need to evaluate each opportunity individually due to the diverse economics, challenges, and prospects each presents. It's challenging to provide specific details about costs or locations until we are further committed to these opportunities. What we want to convey is that our teams are currently engaged in discussions, and we feel optimistic about the market.

Fair enough. That's good to hear. And then, sorry, as far as in terms of any agreement, should we think about energy delivery on a contingent basis similar to some of your other agreements, or would this be more of a long-term firm commitment? Just any additional color around structure.

Yes. We typically sell the majority of our power on a unit contingent or plant contingent basis, and we would look to do that going forward in the future.

Thank you. Our next question comes from Jeff Gramp with Alliance Global Partners. Your line is open.

Good afternoon, guys. At the risk of beating a dead horse, I'll try to ask the data center question a little different way. What would you guys say are the major risks from your perspective with respect to locking something down over the next few months? Is there a way to kind of assess that on the outside at a high level?

We always strive to underpromise and overdeliver. We believe that all trends are in our favor. There is a growing demand for power, driven by data centers, onshoring of industry, and the adoption of electric vehicles. At the same time, in order to access the grid in MISO, you need to provide accredited capacity, which we possess. MISO and other grid operators have reduced the accredited capacity attributed to renewables significantly. Previously, wind received about 50% of its nameplate capacity and solar also received around 50%, but now those figures have dropped to 15% and 5%. MISO plans to reduce that capacity even further in a few years. Therefore, you need to acquire accredited capacity from sources that can be turned on, such as coal, gas, or nuclear. There are no nuclear facilities in Indiana. If you want to establish something in MISO Zone 6, which includes Indiana and the northern third of Kentucky, you have to secure accredited capacity, and we believe the only viable sources today are coal and gas generation. This is why we feel optimistic about eventually achieving our goals, although timing remains uncertain. We set an exclusivity period for the first week of June, which is the best indication we have regarding timing at this moment.

Understood. I appreciate those details. That's helpful. And on the potential acquisition of other power assets, understanding you can't talk without the specific transaction, but just kind of curious to dig in like what does the buy box look like for you guys? Are there things that absolutely make sense a la coal, versus things that maybe don't make sense? And also curious, how important is control over fuel supply for whatever potential power generation asset? How important is that aspect for anything in the future relative to what you have now? Thanks.

So we've mentioned before that we have looked at both coal and gas generation, and we've mentioned that we've looked at other markets besides just MISO, and so, in the U.S. As far as coal supply to a coal plant, I think it's an advantage. It provides us with a lot of flexibility, but it isn't necessarily a have-to-have. It certainly is a nice to have, because we do see times where the economic rent does make its way down to the fuel supply versus the power generator. The nice thing about the setup we have now is we're vertically integrated. And so, we feel we capture that economic rent regardless of which side of the ledger, the power side or the fuel side that it falls to. So we like our position. We certainly wouldn't be afraid of a plant in the future that we don't own the coal or the fuel supply to. But again, you just kind of have to evaluate all of these plants on a case-by-case basis. They all have pros and cons. But we certainly think we understand how to unlock the value of the asset that we have, and we're looking to see if we can find situations that are similar to what we have today.

Thank you. Our next question comes from Jaeyoung with Summit Ridge Capital Management. Your line is open.

Hi, guys. Thanks for taking my question. My first question is, in terms of pricing on a deal, have your views changed at all or do you still expect a premium to the forward curves?

No, we still expect the premium to the forward curve. Nothing in that regard has changed. We feel that the data center developers and hyperscalers continue to be very aggressive in the space. And we think that the addition of OpenAI and their Stargate project continues to add to that competition. I mean, essentially by them joining in the race, we've gone from four hyperscalers to five. And so, that continues to put upward pressure on the economics, which is good for us.

Right. And that was my next question was, it seems like the environment has shifted in your favor the last few months. You mentioned there's more competition for demand for power, but it also seems like the co-location deals being held up by the regulators also helps you guys. So is there potentially upward pressure on pricing that you guys could realize?

A deal is not final until it's signed, but we believe we have made significant progress in our negotiations, and we are pleased with the terms we have reached so far. Now, our focus is on finalizing the deal.

Got you. Okay. And my last question, I know there's only so much you can talk about, but as we sit here today, do you feel better about getting a deal done than you did maybe two or three months ago? How do you feel about the progress you've made?

Yes. I do think that we've made material steps. Again, the financial commitment that we've seen not just to us but to other counterparties involved in the transaction is encouraging. And so, from that perspective, I feel like our odds of success have continued to improve, particularly with the progress that we've made with our counterparties.

Right. And when you say financial commitment, do you mean CapEx for GPUs and things like that?

I don't want to get too far down into where the money is going, but yes, we've seen significant financial commitments from the parties involved, and we think they wouldn't do that if they didn't feel that there was a high probability of success.

Our next question comes from Nick Giles with B. Riley Securities. Your line is open.

Thanks for taking my follow-up. I just wanted to go back to the CapEx guidance you outlined earlier in the call. If you could maybe break that down between what's allocated to maintenance and what might be allocated to provisions like the ELG rule. I might have misheard that, but that's my first follow-up. Thank you.

Yes, we did specify the allocation for the ELG rules, which we estimated to be around 20%. We have forecasted and budgeted $66 million for 2025, with approximately $14.8 million designated for the ELG rules.

Got it. Thanks, Margie. And maybe just how should we think about so that would imply, would that imply upwards of $40 million for sustaining CapEx, or how should we think about kind of a good sustaining CapEx figure to work within the long-term?

Okay. I would honestly say we normally have about $50 million to $60 million. So if we took out the $15 million, we'd be at $51 million. We were at $53.4 million this year, 2024. So I always think between $50 million and $60 million.

Got it. That's very helpful. And maybe just along those lines, I was curious to get an updated view of how you're thinking about capacity payments in any long-term agreement. I think previous guidance was that capacity payments could cover fixed costs of the plant. So is that still a reasonable bogey?

Yes. It's normally about $60 million.

Okay. And then I promise it will be my last one. Could you just speak to progress on the optimization of the operating footprint on the coal side? I mean, where do cash costs stand today? And then as we think about fuel needs at Marom, does your internal supply cover full capacity, or would you likely need to purchase some third-party coal as well?

Yes. So we made progress in the fourth quarter. Our cash costs were down into the low 40s, which was significantly better than being in the low 50s where we were earlier in the year. As far as fuel supply goes, we do purchase fuel for the plant from other suppliers throughout the state. And it's just kind of helped us from a diversity of supply, and so we buy from multiple vendors for the plant.

This concludes our question and answer session and today's conference call. Thank you for participating. You may now disconnect.