Hallador Energy Company (HNRG) | The Buildout — AI Infrastructure
The Verdict
Hallador Energy is a vertically integrated independent power producer and fuel company with operations primarily in Indiana. It owns the Merom coal-fired plant and sells accredited capacity and wholesale energy into MISO, the resource-adequacy market that large-load projects, including data centers, need to move forward. Its Sunrise Coal segment mines Illinois Basin coal and supplies Merom, giving the company control over delivered fuel cost. The company is transitioning from a coal miner toward a multi-fuel IPP, with a planned natural gas peaking project at the same site.
| Market Cap | — |
| Revenue (TTM) | $452M |
| Revenue Growth | +10.0% |
| EBITDA Margin (TTM) | 17.0% |
| Net Cash | $37M |
| Earnings Beats | 5 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Signed a 12-year capacity agreement in May 2026 expected to generate more than $1 billion of contracted revenue from 2028 through 2040, at more than 2x historical contracted capacity pricing.
- Combined two capacity-only sales total approximately $1.1 billion and leave about two-thirds of accredited capacity sold through 2040, while energy remains open.
- Forward energy and capacity sales position was approximately $1.6 billion as of June 30, 2026, up from $571.2 million at March 31, 2026.
- Turtle Creek gas project has 460 MW of Siemens turbines acquired for $350 million; total project cost is expected below $800 million, or about $1,700/kW, with COD targeted H2 2028.
- A 1,000-acre data center development adjacent to the plant has broken ground, with a second project on the other side, giving direct visibility into local demand.
What We’re Watching
- Indiana Utility Regulatory Commission approval of the 12-year agreement expected H2 2026; rejection or delay would remove the largest single contracted revenue block.
- Turtle Creek ERAS study results expected mid-August 2026; upgrade costs could determine whether the September FID target holds.
- Merom Q3 2026 generation improvement: management expects sequential improvement, but power pricing remains uncertain.
- Additional forward sales before end of 2026: management targets selling remaining Merom capacity on multi-year contracts, with energy sales possibly layered in.
The thesis is strengthening on the contracted revenue side and weakening on current operations. Management has delivered the capacity sales it previewed, the forward book stepped up, and Turtle Creek cost and COD improved. But Q2 2026 produced a net loss, negative Adjusted EBITDA, and negative operating cash flow as Merom reliability problems persisted. The open question is whether Merom can sustain improved availability after the 2026 outage and convert the contracted forward book into clean cash flow.
Earnings Beat
For the June 2026 quarter, Hallador reported total operating revenue of approximately $101.5 million, a net loss of $15.2 million, and negative Adjusted EBITDA of $2.9 million. The Q2 call did not disclose a gross margin; management attributed the loss to the planned ~60-day Unit 1 maintenance outage, unplanned downtime during high-price periods, and replacement-power costs.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $100M | $102M | $118M | −14.9% |
| Gross margin | -0.6% | -126.5% | 57.2% | -5780bps |
| EBITDA | $4M | $18M | $29M | −87.9% |
| EPS | $-0.20 | $-0.00 | $0.23 | −187.0% |
| Accredited capacity revenue | $18.6M | $15.5M | n/a | +70% YoY |
Quarters like this one are the price of owning and improving a durable asset.— Brent Bilsland, Chairman and CEO, 2026-08-10
Management tone: On the August 10, 2026 call, management acknowledged the weak quarter directly and separated current operational results from what it called the more important transformation of the company into a multi-fuel independent power producer. Management did not minimize the operational weakness but repeatedly redirected attention to the forward book and Turtle Creek.
Management Guidance
Management has not published a consolidated full-year 2026 revenue or EBITDA guide. On the August 10, 2026 Q2 call, management said full-year 2026 capital expenditures are expected to remain consistent with 2025 levels, excluding investments related to Turtle Creek. Management also targets a final investment decision and generator interconnection agreement for Turtle Creek in September 2026, with total project cost expected below $800 million and commercial operations in the second half of 2028.
Trajectory
Revenue is roughly flat: Q1 FY2026 revenue was $100.2 million, down from $117.8 million a year earlier, and Q2 2026 revenue was approximately $101.5 million. Gross margin compressed sharply, from 57.2% in Q1 FY2025 to negative 0.6% in Q1 FY2026, driven by a 117.3% increase in cost of purchased power and a 95.6% rise in Electric Operations other O&M. Q2 delivered energy price fell to $41.69 from $52.66 a year earlier, while accredited capacity revenue rose 70% to $18.6 million. The current-period weakness reflects Merom outage work and replacement-power costs; the forward revenue base is stepping up as capacity contracts reprice.
The Model
The model projects FY+1 revenue of $440 million with EBITDA of $60 million (13.6% margin), and FY+2 revenue of $540 million with EBITDA of $138 million (25.5% margin). The near-term projection reflects the current contracted capacity book, while the FY+2 step-up is consistent with the forward capacity revenue stepping up across 2027 and 2028 and with management's expectation that energy repricing follows capacity with a lag.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $469M | $440M | $540M |
| YoY Growth | — | −6.3% | +22.7% |
| EBITDA | $102M | $60M | $138M |
| EBITDA Margin | 21.8% | 13.6% | 25.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 8.8% above analyst consensus.
Management has not published a consolidated full-year 2026 revenue or EBITDA guide. On the August 10, 2026 Q2 call, management said full-year 2026 capital expenditures are expected to remain consistent with 2025 levels, excluding investments related to Turtle Creek. Management also targets a final investment decision and generator interconnection agreement for Turtle Creek in September 2026, with total project cost expected below $800 million and commercial operations in the second half of 2028.
What Could Go Right — and Wrong
- IURC approves the 12-year capacity agreement in H2 2026, confirming more than $1 billion of contracted revenue.
- MISO ERAS results come back with manageable upgrade costs, and Hallador reaches a final investment decision and generator interconnection agreement on Turtle Creek in September 2026.
- Merom delivers higher generation and availability in Q3 2026 after the ~60-day Unit 1 outage and reliability upgrades.
- Management sells the remaining Merom accredited capacity and layers in energy sales before end of 2026, extending the forward book.
- Energy prices follow capacity higher, monetizing the deliberately open energy position beyond the next few years.
- IURC delays or rejects the 12-year agreement, removing the largest single contracted revenue block.
- MISO ERAS upgrade costs come in high enough to stall Turtle Creek FID or damage the below-$800 million project economics.
- Merom reliability does not recover, forcing more high-priced replacement-power purchases and continued losses.
- Energy repricing stays weak, leaving the open energy book as lower-margin, lower-visibility revenue.
Looking Ahead
Over the next year, the story pivots on regulatory approval, MISO interconnection costs, and Merom reliability. The IURC decision on the 12-year capacity agreement is expected in H2 2026. Turtle Creek ERAS study results are due mid-August 2026, with FID and generator interconnection targeted for September 2026; turbine shipment is also expected in September. Work toward additional forward sales before end of 2026 and DOE ELG matching funds starting around Q4 2026 round out the near-term milestones.
- Mid-August 2026Turtle Creek ERAS study results — MISO system upgrade costs revealed; determines September FID viability.
- September 2026Turtle Creek FID and GIA — Targeted final investment decision and generator interconnection agreement.
- September 2026Siemens turbine equipment shipment — Equipment expected on the water for the Turtle Creek gas project.
- H2 2026IURC approval of 12-year agreement — Regulatory approval needed for >$1B contracted capacity revenue.
- Q4 2026DOE ELG matching funds — Matching dollars expected to begin, continuing into 2027–2028.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $401M | $469M | $452M | +16.9% |
| Gross Margin | 43.2% | 12.2% | 4.3% | 3,105bps |
| EBITDA | −$153M | $102M | $486M | +166.7% |
| EBITDA Margin | -38.2% | 21.8% | 17.0% | +5,999bps |
| Net Income | −$226M | $42M | $23M | +118.5% |
| Free Cash Flow | $13M | $12M | $149M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)4.3%
- EBITDA Margin (TTM)17.0%
- Net Margin (TTM)5.0%
- ROIC18.6%
- FCF Conversion-2.6%
- SBC / Revenue0.8%
The Company
Hallador Energy is a vertically integrated independent power producer and fuel company. Through Hallador Power, it owns and operates the 1,080 MW Merom coal-fired generating station in Sullivan County, Indiana, selling accredited capacity and wholesale energy into MISO. Management says accredited capacity is often the gating factor for data centers and other large-load projects.
Through Sunrise Coal, Hallador mines bituminous coal from the Illinois Basin at the Oaktown Mining Complex, about 20 miles from Merom. The mine supplies Merom internally and sells third-party coal to Midwest and Southeast power plants. Hallador owns 50% interests in Sunrise Energy and Oaktown Gas, and uses CAMS for Merom operations and ACES for wholesale power activities. The company is transitioning toward multi-fuel generation, with the 460 MW Turtle Creek natural gas project at the Merom site.
Business Segments
Competitive Landscape
Hallador competes in two arenas: coal mining and electric generation, where it sells accredited capacity and wholesale energy into MISO. The supplied source material does not name specific competitors. The company's stated edge is physical: it owns the Merom plant and its MISO interconnection, plus physical Siemens turbines for Turtle Creek.
Supply Chain
Hallador sits between coal fuel supply and MISO power demand. Its own Sunrise mine supplies Merom, while third-party coal goes to Midwest and Southeast utilities; no neighbor transcript named Hallador directly.
More on HNRG: Earnings recap