Detailed narrative
Turtle Creek Gas Project Advancement
Hallador Energy is making significant strides on its proposed 460-megawatt simple cycle natural gas-fired plant, now formally named Turtle Creek Gas. The project's total cost estimate has been reduced to below $800 million, or approximately $1,700 per kW, an improvement from the previous estimate of less than $900 million.
The targeted commercial operations timeframe has been accelerated to the second half of 2028, positioning it as a low-cost peaking plant with a faster time to market compared to many comparable projects. Equipment inspection and disassembly are underway, with shipment expected in September.
Interconnection and Financing Progress
The Turtle Creek project's interconnection application entered MISO's Expedited Resource Addition Study (ERAS) on June 2, with results, including system upgrade costs, expected in mid-August. Indications from the study have been constructive. The company is finalizing construction scope and advancing financing discussions, aiming for a capital structure with little to no equity dilution.
Management expects to make a final investment decision and execute a generator interconnection agreement in September, contingent on favorable ERAS results and financing.
Strategic Market Positioning and Contracted Revenue
Hallador has secured landmark capacity agreements, including a three-year agreement at approximately 2x historical contracted capacity pricing and a subsequent 12-year agreement, totaling approximately $1.1 billion of contracted revenue. These agreements have increased the forward sales position to $2.4 billion, extending commitments through 2040.
The company's strategy focuses on long-dated capacity commitments and shorter-dated energy commitments, preserving an open energy position for anticipated repricing as energy demand accelerates, driven by large load customers like data centers.
Q2 Operational Performance and Merom Upgrades
Operationally, Q2 FY26 was impacted by a planned 60-day maintenance outage at Merom's Unit 1 for major reliability upgrades, as well as limited unplanned downtime at Unit 2. These factors led to a net loss of $15.2 million and negative Adjusted EBITDA of $2.9 million.
The company invested $26.3 million in capital expenditures during the quarter, primarily for these upgrades and Turtle Creek development. Management expects improved reliability and generation volumes sequentially in Q3, with full-year 2026 capital expenditures (excluding Turtle Creek) consistent with 2025 levels.
Demand Signals and Future Outlook
The market continues to confirm Hallador's thesis, with robust demand for accredited capacity and energy from a growing and diverse set of counterparties. Management noted visible demand signals, including a large data center project adjacent to their property and another in early development nearby.
The company aims to make additional forward sales for Merom before year-end and is optimistic about the market interest for Turtle Creek. Hallador believes its strong revenue visibility and strategic projects position it to compound shareholder value over the long term⏳.
Liquidity and Capital Structure
As of June 30, 2026, total liquidity was $84.2 million, consisting of $29 million in unrestricted cash and $55.2 million in revolving credit facility capacity. The company drew $45 million from its delayed draw term loan and repaid $8 million on its revolving credit facility, resulting in $45 million of total bank debt.
This liquidity is deemed sufficient to manage working capital and fund ongoing operations and investments at Merom. The financing strategy for Turtle Creek emphasizes preserving flexibility and minimizing equity dilution through a combination of project-level and structural alternatives.