Hallador Energy (NASDAQ:HNRG) reported a second-quarter net loss as a planned maintenance outage and limited unplanned downtime at its Merom power plant affected profitability, while management highlighted progress on its proposed Turtle Creek natural gas generation project and its expanding long-term contracted sales position.
Net loss for the second quarter of 2026 was $15.2 million, compared with net income of $8.2 million in the prior-year period. Total operating revenue declined to $101.5 million from $102.8 million a year earlier, while adjusted EBITDA was negative $2.9 million, compared with positive $3.4 million in the prior-year quarter.
Merom outage and reliability work weigh on quarterly results
Unit 2 performed well during the quarter, Bilsland said, although limited unplanned downtime occurred during periods of elevated market prices. That required Hallador to purchase power at higher prices to meet delivery obligations, magnifying the financial impact.
“Together, these factors weighed on our second quarter results,” Bilsland said, adding that management does not believe the quarter reflected Merom’s underlying earnings power. The company expects generation volumes to improve sequentially in the third quarter as the planned outage has concluded and reliability investments take effect.
CFO Todd Telesz said second-quarter electric sales were $59.5 million, compared with $60 million a year earlier. Accredited capacity revenue increased 17% year over year to $18.6 million, while total energy sales volume rose 17%. However, the average price per megawatt-hour for delivered energy fell to $41.69 from $52.66 in the previous year’s quarter.
Third-party coal sales rose to $40.6 million from $38.1 million. A 9% increase in the average third-party coal price per ton more than offset a 2% decline in third-party tons sold, Telesz said. Sunrise also sold 59,000 additional tons to Merom as the plant prepared for summer demand.
Cash flow used in operations was $23.9 million, compared with $11.4 million of operating cash flow generated in the year-earlier quarter. Telesz attributed the change primarily to the outage-related decline in profitability, higher purchased-power costs, and working-capital investment in inventory, parts and supplies.
Capital expenditures reached $26.3 million in the quarter, up from $13.1 million a year ago, largely reflecting Merom reliability upgrades and Turtle Creek development spending. The company expects maintenance capital spending to moderate through the remainder of 2026, with full-year capital expenditures expected to remain consistent with 2025 levels excluding Turtle Creek investments.
Turtle Creek cost estimate falls below $800 million
Management provided an update on Turtle Creek Gas, a proposed 460-megawatt simple-cycle natural-gas-fired generating plant to be developed at the Merom site. Bilsland said the project’s expected total cost has declined to less than $800 million, or roughly $1,700 per kilowatt, from a prior estimate of less than $900 million.
The lower estimate reflects more-defined equipment restoration and construction scopes, according to Bilsland. He also cited the project’s use of existing Merom-site infrastructure, including the site, water and related infrastructure, rather than requiring a greenfield development.
Hallador now targets commercial operation in the second half of 2028. The company expects turbine equipment to ship in September after management, its owner’s engineer and Siemens personnel inspected the equipment and disassembly process. Bilsland said the equipment was in good condition and that disassembly and packing were underway.
Turtle Creek entered MISO’s Expedited Resource Addition Study process on June 2. Hallador expects results, including required system-upgrade costs, in mid-August. Bilsland said indications from the study had been constructive, and the company is targeting a final investment decision and generator interconnection agreement in September following its review.
Management said it is evaluating equipment financing, structured debt, project-level financing and other alternatives, with a goal of limiting or avoiding equity dilution. Telesz said the company does not currently see a role for Department of Energy financing for Turtle Creek, although its DOE-related work has focused on Merom.
Contracted revenue position expands
Hallador’s forward energy and capacity sales position stood at approximately $1.6 billion at June 30, compared with $571.2 million at March 31 and $619.7 million a year earlier. Including $236.5 million of third-party forward coal sales, total contracted revenue was approximately $1.8 billion on a consolidated basis.
Including intercompany sales to Merom, the company’s forward sales book totaled approximately $2.4 billion on a segment basis. The figures include a 12-year capacity agreement signed in May. Bilsland said the company has capacity commitments extending through 2040 and is working toward additional forward sales before year-end.
Management said it sees continued demand for accredited capacity, particularly amid rising electricity needs associated with data-center development. Bilsland noted that a large data-center project has broken ground adjacent to Hallador property and another project is in early development on the opposite side of the plant.
The company is keeping much of its energy position open beyond the next few years, expecting energy pricing to strengthen as new electricity demand materializes. Bilsland said Hallador could make some energy sales this year if pricing is appropriate, potentially through a layered approach rather than fully contracting its position at once.
Liquidity and debt
Hallador drew $45 million under its delayed-draw term loan on May 15 and used part of the proceeds to repay $8 million outstanding under its revolving credit facility. Total bank debt was $45 million at June 30, compared with no bank debt at March 31.
Total liquidity was $84.2 million at quarter-end, down from $97.5 million at March 31 but up from $42 million a year earlier. Liquidity consisted of $29 million in unrestricted cash and cash equivalents and $55.2 million of remaining borrowing capacity under the revolving credit facility.
About Hallador Energy (NASDAQ:HNRG)
Hallador Energy Company is a coal producer and mine operator trading on NASDAQ under the symbol HNRG. The company’s primary business activities center on the production and sale of bituminous thermal coal. Hallador’s operations encompass two surface mines: the Shoal Creek Mine located in southwestern Indiana and the Bull Mountain Mine situated in eastern Montana. Both sites are designed to extract high-quality coal reserves for the power generation market.
Hallador Energy markets its coal primarily to electric utilities and industrial customers across the United States.
