| SEGMENTS OF BUSINESS |
Our business is organized based on the services and products we provide in two segments: (i) Electric Operations and (ii) Coal Operations. The CODM, who is the Company’s Chief Executive Officer, reviews and assesses operating performance measures related to our Electric Operations and our Coal Operations segments. Our Electric Operations segment includes the electric power generation facilities of our Merom power plant, which is a two-unit, 1,080-megawatt rated coal fired power plant located in Sullivan County, Indiana. Our sales region is in MISO Zone 6, which includes Indiana and a portion of western Kentucky. Revenues from our Electric Operations segment consist primarily of delivered energy and accredited capacity revenues. Fuel costs included in our Electric Operations segment include the cost of coal purchased from our Coal Operations segment, which are based on multi-year contracts which approximate market prices at the time the contracts were agreed. Our Coal Operations segment includes the Oaktown 1 underground mining complex, as well as other currently idled mining facilities, which produce high-quality bituminous coal from the Illinois Basin. Revenue from our Coal Operations segment consists of sales of coal to various third parties and to Merom. Coal sales to our Electric Operations are based on multi-year contracts that approximated market prices at the time the contracts were agreed. Intercompany coal sales and amounts above actual costs to produce the coal are eliminated in the condensed consolidated statements of operations. In addition to these reportable segments, the Company has a “Corporate and Other and Eliminations” category, which is not significant enough, on a stand-alone basis, to be considered an operating segment. Corporate and Other and Eliminations primarily consist of unallocated corporate costs and activities, including our equity method investments. The CODM evaluates segment performance based upon Segment EBITDA for each business segment. Segment EBITDA is calculated for each segment as follows: | 1. | For our Electric Operations segment, Segment EBITDA is comprised of accredited capacity and delivered energy revenues less certain significant segment expenses, which include (i) variable costs comprised of fuel costs and certain other operating costs, such as limestone and soda ash, (ii) other operating and maintenance costs, (iii) costs of purchased power, (iv) utilities, (v) labor and (vi) general and administrative costs. |
| 2. | For our Coal Operations segment, Segment EBITDA is comprised of coal sales less certain significant segment expenses, which include (i) fuel, (ii) other operating and maintenance costs, (iii) utilities, (iv) labor and (v) general and administrative costs. |
Segment EBITDA for each segment is a key measure used by our CODM and provides information about our core operating performance, significant expenses and ability to generate cash flow. Additionally, Segment EBITDA provides investors with the financial analytical framework upon which our CODM bases financial, operational, compensation and planning decisions and presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations. Our CODM reviews variable costs, as defined above, in our Electric Operations segment in order to evaluate the efficiency of that segment’s operations. Presented below are the Electric and Coal Operations key metrics reviewed by the CODM for the three months ended June 30, 2026 and 2025 (in thousands): | | | | | | | | | | | | | | | Three Months Ended June 30, | | | 2026 | | 2025 | | | Electric Operations | | Coal Operations | | Electric Operations | | Coal Operations | Delivered energy | | $ | 40,901 | | $ | — | | $ | 44,132 | | $ | — | Accredited capacity revenue | | | 18,608 | | | — | | | 15,844 | | | — | Coal sales | | | — | | | 50,874 | | | — | | | 45,529 | Total Sales | | | 59,509 | | | 50,874 | | | 59,976 | | | 45,529 | | | | | | | | | | | | | | Fuel | | | (25,263) | | | (786) | | | (21,328) | | | (434) | Other operating costs (1) | | | — | | | — | | | (1) | | | — | Total variable costs | | | (25,263) | | | (786) | | | (21,329) | | | (434) | | | | | | | | | | | | | | Other operating and maintenance costs (2) | | | (16,305) | | | (22,827) | | | (10,707) | | | (18,247) | Cost of purchased power | | | (8,633) | | | — | | | (2,172) | | | — | Utilities | | | (1,281) | | | (2,679) | | | (1,383) | | | (3,124) | Labor | | | (8,622) | | | (20,190) | | | (7,639) | | | (19,160) | Segment margin without general and administrative | | | (595) | | | 4,392 | | | 16,746 | | | 4,564 | General and administrative | | | (1,481) | | | (2,218) | | | (1,129) | | | (1,915) | Segment EBITDA | | $ | (2,076) | | $ | 2,174 | | $ | 15,617 | | $ | 2,649 |
Presented below are the Electric and Coal Operations key metrics reviewed by the CODM for the six months ended June 30, 2026 and 2025 (in thousands): | | | | | | | | | | | | | | | Six Months Ended June 30, | | | 2026 | | 2025 | | | Electric Operations | | Coal Operations | | Electric Operations | | Coal Operations | Delivered energy | | $ | 93,144 | | $ | — | | $ | 116,268 | | $ | — | Accredited capacity revenue | | | 34,142 | | | — | | | 29,651 | | | — | Coal sales | | | — | | | 97,286 | | | — | | | 100,303 | Total Sales | | | 127,286 | | | 97,286 | | | 145,919 | | | 100,303 | | | | | | | | | | | | | | Fuel | | | (52,790) | | | (1,314) | | | (59,399) | | | (990) | Other operating costs (1) | | | (29) | | | — | | | (9) | | | — | Total variable costs | | | (52,819) | | | (1,314) | | | (59,408) | | | (990) | | | | | | | | | | | | | | Other operating and maintenance costs (2) | | | (25,159) | | | (43,100) | | | (15,234) | | | (42,101) | Cost of purchased power | | | (23,496) | | | — | | | (9,012) | | | — | Utilities | | | (4,096) | | | (5,878) | | | (2,059) | | | (6,600) | Labor | | | (16,751) | | | (39,449) | | | (15,782) | | | (38,046) | Segment margin without general and administrative | | | 4,965 | | | 7,545 | | | 44,424 | | | 12,566 | General and administrative | | | (2,791) | | | (4,429) | | | (2,664) | | | (4,228) | Segment EBITDA | | $ | 2,174 | | $ | 3,116 | | $ | 41,760 | | $ | 8,338 |
(1) Other operating costs primarily include costs for lime dust. | (2) Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable included in fuel and other operating costs. |
Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the three months ended June 30, 2026 (in thousands): | | | | | | | | | | | | | | | | | | | | | Corporate and Other | | | | Reconciliation of Revenue: | | Electric Operations | | Coal Operations | | and Eliminations | | Consolidated | Delivered energy | | $ | 40,901 | | $ | — | | $ | — | | $ | 40,901 | Accredited capacity revenue | | | 18,608 | | | — | | | — | | | 18,608 | Other operating revenue | | | 231 | | | 788 | | | 376 | | | 1,395 | Coal sales (third party) | | | — | | | 40,601 | | | — | | | 40,601 | Coal sales (intercompany) | | | — | | | 10,273 | | | (10,273) | | | — | Operating Revenue | | $ | 59,740 | | $ | 51,662 | | $ | (9,897) | | $ | 101,505 |
Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the three months ended June 30, 2025 (in thousands): | | | | | | | | | | | | | | | | | | | | | Corporate and Other | | | | Reconciliation of Revenue: | | Electric Operations | | Coal Operations | | and Eliminations | | Consolidated | Delivered energy | | $ | 44,132 | | $ | — | | $ | — | | $ | 44,132 | Accredited capacity revenue | | | 15,844 | | | — | | | — | | | 15,844 | Other operating revenue | | | 3,115 | | | 1,363 | | | 224 | | | 4,702 | Coal sales (third party) | | | — | | | 38,147 | | | — | | | 38,147 | Coal sales (intercompany) | | | — | | | 7,382 | | | (7,382) | | | — | Operating Revenue | | $ | 63,091 | | $ | 46,892 | | $ | (7,158) | | $ | 102,825 |
Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the six months ended June 30, 2026 (in thousands): | | | | | | | | | | | | | | | | | | | | | Corporate and Other | | | | Reconciliation of Revenue: | | Electric Operations | | Coal Operations | | and Eliminations | | Consolidated | Delivered energy | | $ | 93,144 | | $ | — | | $ | — | | $ | 93,144 | Accredited capacity revenue | | | 34,142 | | | — | | | — | | | 34,142 | Other operating revenue | | | 368 | | | 1,928 | | | 730 | | | 3,026 | Coal sales (third party) | | | — | | | 75,681 | | | — | | | 75,681 | Coal sales (intercompany) | | | — | | | 21,605 | | | (21,605) | | | — | Operating Revenue | | $ | 127,654 | | $ | 99,214 | | $ | (20,875) | | $ | 205,993 |
Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues for the six months ended June 30, 2025 (in thousands): | | | | | | | | | | | | | | | | | | | | | Corporate and Other | | | | Reconciliation of Revenue: | | Electric Operations | | Coal Operations | | and Eliminations | | Consolidated | Delivered energy | | $ | 116,268 | | $ | — | | $ | — | | $ | 116,268 | Accredited capacity revenue | | | 29,651 | | | — | | | — | | | 29,651 | Other operating revenue | | | 3,202 | | | 2,624 | | | 472 | | | 6,298 | Coal sales (third party) | | | — | | | 68,332 | | | — | | | 68,332 | Coal sales (intercompany) | | | — | | | 31,971 | | | (31,971) | | | — | Operating Revenue | | $ | 149,121 | | $ | 102,927 | | $ | (31,499) | | $ | 220,549 |
Presented below is the summary of Segment EBITDA (in thousands): | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2026 | | 2025 | | 2026 | | 2025 | Electric Operations | | $ | (2,076) | | $ | 15,617 | | $ | 2,174 | | $ | 41,760 | Coal Operations | | | 2,174 | | | 2,649 | | | 3,116 | | | 8,338 | Total Segment EBITDA | | $ | 98 | | $ | 18,266 | | $ | 5,290 | | $ | 50,098 |
Presented below is our reconciliation of Segment EBITDA to the most comparable GAAP account, income (loss) before income taxes (in thousands): | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2026 | | 2025 | | 2026 | | 2025 | Segment EBITDA | | $ | 98 | | $ | 18,266 | | $ | 5,290 | | $ | 50,098 | All other | | | 325 | | | (683) | | | 2,085 | | | (1,855) | Other operating revenue | | | 1,395 | | | 4,702 | | | 3,026 | | | 6,298 | Depreciation, depletion and amortization | | | (9,905) | | | (5,542) | | | (20,511) | | | (20,519) | ARO accretion | | | (416) | | | (437) | | | (824) | | | (864) | Exploration costs | | | (287) | | | (98) | | | (371) | | | (119) | Gain (loss) on disposal or abandonment of assets, net | | | (15) | | | 55 | | | 186 | | | 76 | Interest income | | | 279 | | | 64 | | | 426 | | | 127 | Interest expense | | | (3,776) | | | (3,819) | | | (7,746) | | | (7,542) | Loss on extinguishment of debt | | | — | | | — | | | (230) | | | — | Equity method investment (loss) | | | (244) | | | 197 | | | (365) | | | (39) | Corporate — general and administrative | | | (3,853) | | | (4,457) | | | (7,190) | | | (7,434) | Income (Loss) before Income Taxes | | $ | (16,399) | | $ | 8,248 | | $ | (26,224) | | $ | 18,227 |
Presented below are our Electric and Coal Operations assets and capital expenditures for the periods presented below (in thousands): | | | | | | | | | | | | | | | | | | | | | Corporate and Other | | | | Other Reconciliations: | | Electric Operations | | Coal Operations (1) | | and Eliminations | | Consolidated | Assets at June 30, 2026 | | $ | 280,798 | | $ | 179,491 | | $ | 7,755 | | $ | 468,044 | Assets at December 31, 2025 | | $ | 256,529 | | $ | 148,957 | | $ | 2,567 | | $ | 408,053 | Capital Expenditures for the six months ended June 30, 2026 | | $ | 26,111 | | $ | 7,830 | | $ | — | | $ | 33,941 | Capital Expenditures for the six months ended June 30, 2025 | | $ | 12,700 | | $ | 12,037 | | $ | — | | $ | 24,737 |
| (1) | Coal Operations assets include cash held on behalf of the consolidated group. Cash held by our Coal Operations includes funds transferred from Electric Operations and Hallador for centralized treasury management purposes. This presentation is not reflective of Coal Operations earnings capacity; refer to the condensed consolidated balance sheets and the “Liquidity of Hallador” in the “Material Changes in Financial Condition” section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a complete view of the Company's cash position. |
Cash and cash equivalents included in Coal Operations assets were $28.1 million and $9.4 million as of June 30, 2026 and December 31, 2025, respectively.
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