HALLADOR ENERGY CO

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of Hallador Energy Company (hereinafter, “we”, “our” or “us”) and our wholly owned subsidiaries Hallador Power Company, LLC (“Hallador Power”), Sunrise Coal, LLC (“Sunrise”), and Hourglass Sands, LLC (“Hourglass”), as well as Hallador Power and Sunrise’s wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Hallador Power is engaged in the production of coal-fired electric power generation located in Sullivan County, Indiana. Sunrise is engaged in the production of steam coal from mines located in western Indiana.

Segment Information

Our business is organized based on the services and products we provide intwo segments: (i) Electric Operations and (ii) Coal Operations. The Chief Operating Decision Maker (“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.

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 a 50% interest in Sunrise Energy, LLC (“Sunrise Energy”), a private gas exploration company with operations in Indiana and Oaktown Gas, LLC, which we account for using the equity method.

During the fourth quarter of 2024, we sold our held-for-sale wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River. For further information, see “Note 21 – Assets Held For Sale” below.

The Electric Operations reportable segment includes electric power generation facilities of the Merom Power Plant (“Merom”).

The Coal Operations reportable segment includes our currently operating underground mining complex Oaktown 1 among other mining complexes and locations which operated throughout the year ended December 31, 2023 and were subsequently idled during the year ended December 31, 2024.

Reclassifications

Amounts in the prior years consolidated financial statements are reclassified whenever necessary to conform to the current year’s presentation. Any reclassification adjustments had no impact on prior year total assets, liabilities, net income or shareholders’ equity.

In the fourth quarter of 2024, the Company made certain reclassifications that reduced “other operating and maintenance costs” and increased “depreciation, depletion and amortization” on the Consolidated Statements of Operations for certain assets with a useful life of one to three years. The entire adjustment is reflected in the fourth quarter of 2024. Previous interim periods and prior year were not adjusted as the amounts were not material. The amounts recognized in the fourth quarter of 2024 that are related to the first, second and third quarters of 2024 were$2.1 million, $2.6 million and $1.7 million, respectively.

Cash and Cash Equivalents

Cash and cash equivalents include investments with maturities when purchased of three months or less. Cash balances at individual banks may exceed the federally insured limit by the Federal Deposit Insurance Corporation. The Company has not experienced any material losses in such accounts.

Restricted Cash

Restricted cash represents cash held by third parties primarily for future workers’ compensation claims and MISO escrow payments. Workers’ compensation is based estimated claim liabilities and MISO escrow payments are based on power purchased or sold related to power demand and our power purchase agreements (“PPA”).

Accounts Receivable

The timing of revenue recognition, billings and cash collections results in accounts receivable from customers. Customers are invoiced as power is delivered or as coal is shipped or at periodic intervals in accordance with contractual terms. Coal invoices typically include customary adjustments for the resolution of price variability, such as coal quality thresholds. Payments are generally received within thirty days of invoicing. Historically, credit losses have been insignificant. No charges for credit losses were recognized during the years ended December 31, 2024 or 2023.

Inventory and Parts and Supplies

Inventory and parts and supplies are valued at the lower of cost or net realizable value determined using the first-in first-out method. Inventory costs include labor, supplies, operating overhead, and other related costs incurred at or on behalf of the mining location or plant, including depreciation, depletion, and amortization of equipment, buildings, mineral rights, and mine development costs.

Contract Asset - Coal Purchase Agreement

Contract Asset - Coal Purchase Agreement, is the result of a coal purchase agreement with Hoosier whereby we purchased coal from Hoosier through May 31, 2023, at fixed prices which were below market prices at the date of entry into the agreement. This agreement was entered into as consideration in our 2022 acquisition of Merom. The asset was amortized to inventory as coal was purchased over the term of the agreement as the contract was fulfilled. During the years ended December 31, 2023, $19.6 million was amortized, of which $30.7 million was recognized in operating expenses on the consolidated statements of operations. The Coal Purchase Agreement term was from October 21, 2022 to May 31, 2023.

Prepaid Expenses

Prepaid expenses include prepaid insurance and other prepaid balances with vendors for various services paid for in advance of use.

Advanced Royalties

Coal leases that require minimum annual or advance payments and are recoverable from future production are generally deferred and charged to expense as the coal is subsequently produced. Advance royalties are included in other assets.

Plant Equipment and Mining Properties

The values of our Hallador Power property, plant and equipment were initially recorded at relative fair value based on the consideration paid upon closing of the acquisition of Merom in 2022. Other equipment is recorded at cost. Expenditures that extend the useful lives or increase the productivity of the assets are capitalized. The cost of maintenance and repairs that do not extend the useful lives or increase the productivity of the assets are expensed as

incurred. Most power plant equipment is depreciated over the remaining estimated useful life of the Merom at the time of equipment acquisition, orseven tonine years.

Mining properties are recorded at cost. Interest costs applicable to major asset additions are capitalized during the construction period. Expenditures that extend the useful lives or increase the productivity of the assets are capitalized. The cost of maintenance and repairs that do not extend the useful lives or increase the productivity of the assets are expensed as incurred. Other than land and most mining equipment, mining properties are depreciated using the units-of-production method over the estimated recoverable reserves. Most surface and underground mining equipment is depreciated using estimated useful lives ranging from three tofifteen years.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances, known as triggering events, indicate that the carrying amount of a long-lived asset or asset group, may not be recoverable. Management considers various factors when determining if long-lived assets should be evaluated for impairment, including a significant adverse change in the business climate or industry conditions (such as sustained decreases in commodity prices, volatility in energy costs, and the global economy), a current period operating or cash flow loss combined with a history of losses, a significant adverse change in the extent or manner in which an asset is used, or a current expectation that the asset will be sold or otherwise disposed of before the end of its useful life.

During the fourth quarter of 2024, the Company completed a review of its coal mining facilities and future mining plans. The impairment analysis was based upon our coal mining operating plans, market driven pricing and cost trends. As part of that analysis, the Company determined the carrying amount of its coal mining long-lived asset group was not recoverable and recorded a non-cash, long-lived asset impairment charge of$215.1 million in 2024. See “Note 19 – Impairment of Coal Properties” below related to our 2024 impairment. There wereno long-lived asset impairments during the year ended December 31, 2023.

Mine Development

Costs of developing new mines, including asset retirement obligation assets, or significantly expanding the capacity of existing mines, are capitalized and amortized using the units-of-production method over estimated recoverable reserves.

Asset Retirement Obligations (“ARO”) – Reclamation

At the time they are incurred, legal obligations associated with the retirement of long-lived assets are reflected at their estimated fair value, with a corresponding charge to mine development. Obligations are typically incurred when the Company commences development of underground and surface mines and include reclamation of support facilities, refuse areas and slurry ponds.

Obligations are reflected at the present value of their future cash flows. The Company reflects accretion of the obligations for the period from the date they are incurred through the date they are extinguished. The ARO assets are amortized using the units-of-production method over estimated recoverable (proven and probable) reserves. The Company uses the credit-adjusted risk-free discount rates ranging from 7% to 10% to discount the obligation, inflation rates anticipated during the time to reclamation, and cost estimates prepared by its engineers inclusive of market risk premiums. Federal and state laws require that mines be reclaimed in accordance with specific standards and approved reclamation plans, as outlined in mining permits. Activities include reclamation of pit and support acreage at surface mines, sealing portals at underground mines, and reclamation of refuse areas and slurry ponds.

The Company reviews its ARO at least annually and reflects revisions for permit changes, changes in estimated reclamation costs and changes in the estimated timing of such costs. The change in estimate for the year ended December 31, 2023, was a result of a change in timing and acreage of expected reclamation of Merom. There was no change in estimate for the year ended December 31, 2024. In the event the Company is not able to perform reclamation, it has surety bonds at December 31, 2024 totaling $30.8 million to cover ARO. The undiscounted asset retirement obligation was $26.1 million and $26.6 million at December 31, 2024 and 2023, respectively.

The table below (in thousands) reflects the changes to ARO for the periods presented:

Contract Liabilities

Contract Liabilities include the PPA with Hoosier whereby Hallador Power is selling power to Hoosier through 2025 at fixed prices which were below market prices at the date the parties entered into the agreement. Hallador Power also agreed to a reduction in future capacity payments as part of the acquisition consideration. These agreements were entered into as consideration for the acquisition of Merom in 2022. The agreement was amended August 31, 2023 to extend through 2028. The amendment included additional obligations to Hoosier of $186.6 million, or $56.00 per MWh, as of December 31, 2024. The power purchase agreement liability is amortized to electric sales revenue pro-rata over the term of the agreement as the contract is fulfilled. During the years ended December 31, 2024 and 2023, amortization of the power purchase agreement contract liability totaled $47.1 million and $70.5 million, respectively. The Power Purchase Agreement term is from October 21, 2022 to May 31, 2028. The Capacity Payment Reductions occurred on May 31, 2023 and November 30, 2023 in the amount of $7.5 million each. The contract liability relating to this contract totaled$43.5 million as of December 31, 2024.

We also have contract liabilities arising from PPA’s for capacity and physically delivered power entered into whereas the customers made advance payments to Hallador Power. These contracts that have delivery periods through the Spring shoulder season ending May 31, 2025. The liability will be amortized to electric sales revenue over the remaining term of the agreement as the contract is fulfilled. The contract liability relating to these contracts totaled$42.0 million as of December 31, 2024.

During the year ended December 31, 2024, the Company entered into a$60.0 million prepaid physically delivered power contract. The power purchase agreement term is from June 1, 2025 through December 31, 2026. The power purchase agreement liability will be amortized to electric sales revenue pro-rata over the term of the agreementas the contract is fulfilled. The contract liability, including$1.2 million of implied interest relating to this contract totaled $61.2 million as of December 31, 2024.

Commitments and Contingencies

From time to time, we are involved in legal proceedings and/or may be subject to industry rulings that could bring rise to claims in the ordinary course of business. We have concluded that the likelihood is remote that the ultimate resolution of any pending litigation or pending claims will be material or have a material adverse effect on our business, financial position, results of operations or liquidity. See*“Note 22 – Contingencies”* related to our decision to settle certain litigation in February of 2025.

Fuel Costs

Fuel costs in our Electric Operations include coal purchased from Sunrise Coal and third parties to operate Merom. Fuel costs in our Coal Operations include mainly diesel, as well as natural gas and petroleum to operate our coal mines. These fuel costs are expensed as the fuel is used. The difference between Sunrise Coal’s cost to produce coal and the contracted sales price to Hallador Power is eliminated from fuel costs on the Consolidated Statements of Operations.

Income Taxes

Income taxes are provided based on the liability method of accounting. The provision for income taxes is based on pretax financial income. Deferred tax assets and liabilities are recognized for the future expected tax consequences of temporary differences between income tax and financial reporting and principally relate to differences in the tax basis of assets and liabilities and their reported amounts, using enacted tax rates in effect for the year in which differences are expected to reverse.

Net Income per Share

Basic earnings per share (“EPS”) are computed by dividing net earnings by the weighted average number of common shares outstanding for the period.

Diluted EPS attributable to common shareholders is computed by adjusting net earnings by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include shares of restricted stock units as if the units issued by us were vested and convertible debt. We apply the treasury stock method to account for the dilutive impact of its restricted stock units and the if converted method for its convertible notes. Anti-dilutive securities are excluded from diluted EPS. As a result of determining the effect of potentially dilutive securities, in certain periods, diluted net loss per share is the same as the basic net loss per share for the periods presented.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. The most significant estimates included in the preparation of the financial statements relate to: (i) deferred income tax accounts, (ii) coal reserves, (iii) SMCRA and other state statutes, (iv) depreciation, depletion, and amortization, (v) the lower of cost or net realizable value for our inventory (vi) estimates used in our impairment analysis, and (vii) estimates used in the calculation of ARO.

Long-term Contracts

Power Operations

As of December 31, 2024, we are committed to supply the following long-term delivered energy and capacity related to Hoosier and third-party customers:

For 2024, we derived 89% of our delivered energy and 88% of our capacity sales revenue from three andfour customers, respectively, each of which representing at least 10% of sales revenue. At December 31, 2024,100% of our accounts receivable were with three customers.

For 2023, we derived 100% of our electric delivered energy generation from Hoosier and 91% of our capacity sales revenue from three customers, each representing at least 10% of capacity sales revenue. For the year ended December 31, 2023,100% of our electric sales and accounts receivable were withtwo customers.

Coal Operations

As of December 31, 2024, we are committed to supplying third-party customers 8.4 million tons of coal through 2028. There areno coal contracts with price reopeners at December 31, 2024. In addition, we are committed to supplying 9.2 million tons of coal to Merom through 2028. All committed tons to Merom are priced based upon the terms of the intercompany sales transactions.

For 2024, we derived 94% of our third-party coal sales from three customers, each representing at least 10% of coal sales. At December 31, 2024,98% of our coal operations accounts receivable was from four customers, each representing more than 10%.

For 2023, we derived 93% of our third-party coal sales from five customers, each representing at least 10% of coal sales. At December 31, 2023,85% of our coal operations accounts receivable was from four customers, each representing more than 10%.

Stock-based Compensation

Stock-based compensation for restricted stock units is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generallytwo tofour years) using the straight-line method.

Recent Accounting Pronouncements - Adopted

The Company has adopted Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which is effective retrospectively for the year end December 31, 2024. ASU 2023-07 primarily enhances disclosures about significant segment expenses regularly provided to the chief operating decision maker ("CODM"), the amount and composition of other segment items, and the title and position of the CODM. The Company updated the “Segment of Business” footnote below to reflect changes for what the CODM reviews on a regular basis. The Company updated its prior year information to conform to the current year presentation. See “Note 20 – Segments of Business” for enhanced disclosures associated with the adoption of ASU 2023-07.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 primarily requires enhanced disclosures to (1) disclose specific categories in the rate reconciliation, (2) disclose the amount of income taxes paid and expensed disaggregated by federal, state, and foreign taxes, with further disaggregation by individual jurisdictions if certain criteria are met, and (3) disclose income (loss) from continuing operations before income tax (benefit) disaggregated between domestic and foreign. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09, but do not expect it to have a material effect on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt - Debt With Conversion and Other Options (Subtopic 470-20): Induced Conversion of Convertible Debt Instruments. The objective of the standard is to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt with Conversion and Other

Options. This standard will affect entities that settle convertible debt instruments for which the conversion privileges are changed to induce conversion. The guidance will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of the new standard on its financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The standard will be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of adoption of the standard on its financial statement disclosures.

(2) INVENTORY

Inventory is valued at lower of cost or net realizable value (“NRV”). As of December 31, 2024 and 2023, coal inventory includes NRV adjustments of $0.3 million and $2.0 million, respectively.

(3) OTHER LONG-TERM ASSETS (IN THOUSANDS)

(4) BANK DEBT

On March 13, 2023, we executed an amendment (“March 13 th Amendment”) to our credit agreement with PNC Bank, National Association (in its capacity as administrative agent, "PNC"). The primary purpose of the March 13 th Amendment was to convert $35.0 million of the outstanding balance on the revolver into a new term loan with a maturity date of March 31, 2024, and extend the maturity date of the revolver to May 31, 2024. The March 13 th Amendment also reduced the total capacity under the revolver to $85.0 million and waived the maximum annual capital expenditure covenant for 2022 and increased the covenant for 2023 to $75.0 million. Subsequent to December 31, 2022, and prior to the effective date of the March 13 th Amendment, we had borrowed an additional $17.0 million under the revolver. Additionally, the March 13 th Amendment provided for the transition in interest rates from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) based pricing with ranges from SOFR plus 4.00% to SOFR plus 5.00%, depending on our leverage ratio.

On August 2, 2023, we executed an additional amendment (“August 2 nd Amendment”) to our credit agreement with PNC, which was accounted for as a debt extinguishment. The primary purpose of the August 2 nd Amendment was to convert $65.0 million of the outstanding funded debt into a new term loan with a maturity of March 31, 2026, and enter into a revolver of $75.0 million with a maturity of July 31, 2026. The August 2 nd Amendment increased the maximum annual capital expenditure limit to $100.0 million.

Prior to the March 13 th Amendment, bank debt was comprised of term debt ($5.5 million as of December 31, 2022) and a $120 million revolver ($79.7 million borrowed as of December 31, 2022). The term debt amortization was to conclude with the final payment of $5.5 million in March 2023. The revolver was to mature in September 2023. Under the provision of the March 13 th Amendment, bank debt was comprised of term debt ($35.0 million as of March 13, 2023) and an $85.0 million revolver ($40.2 million borrowed as of March 13, 2023). The term debt required payment of $10.0 million in June 2023 each quarter thereafter in 2023 and $5.0 million by March 31, 2024. Under the August 2 nd Amendment, bank debt was comprised of term debt ($58.5 million borrowed as of December 31, 2023) and a $75.0

million revolver ($33.0 million borrowed as of December 31, 2023). The term debt requires quarterly payments of $6.5 million beginning April 2024 through March 2026.

On September 27, 2024,* *the Company executed the First Amendment (“First Amendment”) to the Fourth Amended and Restated Credit Agreement, dated as of August 2, 2023 (as amended, the “Credit Agreement”), with PNC which was accounted for as a debt modification. The primary purpose of the First Amendment was to provide the Company with short-term covenant relief to pursue additional liquidity. The First Amendment provides for additional flexibility for the Company to enter into prepaid forward power sale contracts, provided that the Company repays outstanding term loans under the Credit Agreement (“Term Loan”) with proceeds received from certain eligible power purchase agreements, up to a maximum of $20.0 million. These required prepaid forward power sale Term Loan repayments, if any, will take the place of the $6.5 million quarterly Term Loan payments. During the fourth quarter of 2024, the Company entered into a prepaid forward power sales contract in which $20.0 million of the proceeds were used to pay our required $6.5 million quarterly loan payments through the third quarter of 2025 and also reduced our fourth quarter 2025 payment to $6.0 million. Furthermore, the First Amendment defines certain administrative changes which include, among other things, added requirements related to reporting, third party financial advisors, and appraisals on coal and power assets.

Bank debt was reduced by $47.5 million and increased by $6.3 million during the years ended December 31, 2024 and 2023, respectively.

Our debt is recorded at amortized cost, which approximates fair value due to the variable interest rates in the agreement and is collateralized primarily by our assets.

Liquidity

As of December 31, 2024, we had additional borrowing capacity of $30.6 million under the revolver and total liquidity of $37.8 million. Our additional borrowing capacity is net of $19.4 million in outstanding letters of credit as of December 31, 2024 that were required to maintain surety bonds. Liquidity consists of additional borrowing capacity and cash and cash equivalents.

Fees

Unamortized bank fees and other costs incurred in connection with our initial facility totaled $4.3 million. Additional costs incurred with the First Amendment totaled $0.6 million*.* These unamortized bank fees were deferred and are being amortized over the term of the loan.* *

During 2023 we recognized a loss on extinguishment of debt of $1.5 million for the write-off of unamortized loan fees related to the August 2 nd Amendment to our credit agreement, which was accounted for as a debt extinguishment. The remaining costs were deferred and are being amortized over the term of the loan. Unamortized bank fees as of December 31, 2024 and 2023, were $2.5 million and $3.6 million, respectively.

Bank debt, less debt issuance costs, is presented below (in thousands):

Covenants

The First Amendment, among other things, provided the Company with short-term covenant relief to pursue additional liquidity. The First Amendment waived the Company’s Leverage Ratio requirement for the third and fourth quarters of 2024, increased the threshold to 5.50 to 1.00 for the first quarter of 2025, and decreased the threshold back to 2.25 to 1.00 for each fiscal quarter thereafter. Additionally, the Debt Service Coverage Ratio requirement (1.25 to 1.00) was waived from third quarter of 2024 through the first quarter of 2025. The First Amendment also added additional financial covenants which include: (i) a maximum First Lien Leverage Ratio for the first quarter of 2025, calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed 3.50 to 1.00; (ii) a minimum liquidity requirement of $10.0 million, beginning on the First Amendment execution date and ending when the second quarter of 2025 compliance certificate is received; and (iii) a minimum quarterly EBITDA requirement, as defined in the First Amendment, of $5.0 million for the third quarter of 2024 through the first quarter of 2025.

As of December 31, 2024, our liquidity of $37.8 million and quarterly EBITDA of $6.2 million were in compliance with the requirements of the Credit Agreement.

Interest Rate

The interest rate on the facility ranges from SOFR plus 4.00% to SOFR plus 5.00%, depending on our Leverage Ratio. As of December 31, 2024, we were paying SOFR plus 5.00% on the outstanding bank debt which equates to an all-in rate of 9.48%.

(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (IN THOUSANDS)

(6) REVENUE

Revenue from Contracts with Customers

We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all of the consideration will be collected. We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer.

Electric operations

We concluded that for a Power Purchase Agreement (“PPA”) that is not determined to be a lease or derivative, the definition of a contract and the criteria in ASC 606, Revenue from Contracts with Customers (“ASC 606”), is met at the time a PPA is executed by the parties, as this is the point at which enforceable rights and obligations are established. Accordingly, we concluded that a PPA that is not determined to be a lease or derivative constitutes a valid contract under ASC 606.

We recognize revenue daily, based on an output method of capacity made available as part of any stand-ready obligations for contract capacity performance obligations and daily, based on an output method of MWh of electricity delivered.

For the delivered energy performance obligation in the PPA with Hoosier, we recognize revenue daily for actual delivered electricity plus the amortization of the contract liability as a result of the Asset Purchase Agreement with Hoosier. For the delivered energy to all other customers, we recognize revenue daily for the actual delivered electricity.

Coal operations

Our coal revenue is derived from sales to customers of coal produced at its facilities. Our customers typically purchase coal directly from our mine sites where the sale occurs and where title, risk of loss, and control pass to the customer at that point. Our customers arrange for and bear the costs of transporting their coal from our mines to their plants or other specified discharge points. Our customers are typically domestic utility companies. Our coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, or include a pre-determined escalation in price for each year. Price re-opener and index provisions may allow either party to commence a renegotiation of the contract price at a pre-determined time. Price re-opener provisions may automatically set a new price based on the prevailing market price or, in some instances, require us to negotiate a new price, sometimes within specified ranges of prices. The terms of our coal sales agreements result from competitive bidding and extensive negotiations with customers. Consequently, the terms of these contracts vary by customer.

Coal sales agreements will typically contain coal quality specifications. With coal quality specifications in place, the raw coal sold by us to the customer at the delivery point must be substantially free of magnetic material and other foreign material impurities and crushed to a maximum size as set forth in the respective coal sales agreement. Price adjustments are made and billed in the month the coal sale was recognized based on quality standards that are specified in the coal sales agreement, such as British thermal unit (“Btu”) factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped.

Disaggregation of Revenue

Revenue is disaggregated by revenue source for our electric operations and primary geographic markets for our coal operations, as we believe this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Electric operations

Coal operations

Performance Obligations

Electric Operations

We concluded that each megawatt hour (“MWh”) of delivered energy is capable of being distinct as a customer could benefit from each on its own by using/consuming it as a part of its operations. We also concluded that the stand-ready obligation to be available to provide electricity is capable of being distinct as each unit of capacity provides an economic benefit to the holder and could be sold by the customer.

In accordance with our Asset Purchase Agreement (“Hoosier APA”) with Hoosier in which Hallador Power shall sell, and Hoosier shall buy, delivered energy quantities through 2025 at the contract price, which is $34.00 per MWh. We have remaining delivered energy obligations to Hoosier totaling $59.0 million through 2025 as of December 31, 2024. The agreement was amended August 31, 2023 to extend through 2028. The amendment included additional obligations to Hoosier of $186.6 million, or $56.00 per MWh, as of December 31, 2024.

In addition to delivered energy, under the Hoosier APA, Hallador Power shall provide a stand-ready obligation to provide electricity to MISO, also known as contract capacity. The contract capacity that Hallador Power shall provide to Hoosier is 917 megawatts (“MW”) for contract year one, and on average 300 MW for contract years two to four. Hoosier shall pay Hallador Power the capacity price of $5.80 per kilowatt month for the contract capacity. We have remaining capacity obligations to Hoosier through 2025 totaling $18.6 million as of December 31, 2024. The agreement was amended August 31, 2023, to extend through 2028, with additional capacity obligation to Hoosier of $59.5 million as of December 31, 2024, at a price of $7.02 per kilowatt month for the contract capacity.

During the second quarter of 2024, the Company entered into an 11-month, $45.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,302,480 MWh. Since the period between customer payment

and the transfer of promised services is less than one year, we have elected the practical expedient which allows us to not assess whether a customer contract has a significant financing component.

During the fourth quarter of 2024, we entered into a 19-month, $60.0 million prepaid physically delivered power contract in which Hallador will provide a total of 1,918,200 MWh. As the total amount paid up-front by the customer differs from the stand-alone selling price of the transferred power, the Company concluded the contract contains a significant financing component. The contract liability associated with the $60.0 million prepayment will be accreted over the agreement term based upon the Company’s incremental borrowing rate which approximates 10.3%, and the accretion will be separately recognized as interest expense.

The Company also has additional PPA’s with customers for capacity whereas the customers made advance payments to Hallador Power in the amounts of $35.4 million and $35.3 million during the years ended December 31, 2024 and 2023, respectively. The delivery periods related to these prepayments are June 1 through May 31. The liability will be amortized to electric sales revenue as the contract is fulfilled.

Additionally, during the fourth quarter of 2024, we entered into three contracts in the amount of $52.1 million to provide a total of 1,389,600 MWh from December 2024 through December 2025. We have energy and capacity obligations to customers, excluding the Hoosier APA, through 2029 totaling $230.8 million and $131.3 million, respectively, as of December 31, 2024*.*

Coal Operations

A performance obligation is a promise in a contract with a customer to provide distinct goods or services. Performance obligations are the unit of account for purposes of applying the revenue recognition standard and therefore determine when and how revenue is recognized. In most of our coal contracts, the customer contracts with us to provide coal that meets certain quality criteria. We consider each ton of coal a separate performance obligation and allocate the transaction price based on the base price per the contract, increased or decreased for quality adjustments.

We recognize revenue at a point in time as the customer does not have control over the asset at any point during the fulfillment of the contract. For substantially all of our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine. This is also the point at which physical possession of the coal transfers to the customer, as well as the right to receive substantially all benefits and the risk of loss in ownership of the coal.

We have remaining coal sales performance obligations relating to fixed priced contracts to third-party customers of approximately $460.4 million, which represent the average fixed prices on our committed contracts as of December 31, 2024. We expect to recognize approximately 32.7% of this coal sales revenue in 2025, with the remainder recognized through 2028.

The coal tons used to determine the remaining performance obligations are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such option exists in the customer contract.

Contract Balances

Under ASC 606, the timing of when a performance obligation is satisfied can affect the presentation of accounts receivable, contract assets, and contract liabilities. The main distinction between accounts receivable and contract assets is whether consideration is conditional on something other than the passage of time. A receivable is an entity’s right to consideration that is unconditional.

Under the typical payment terms of our contracts with customers, the customer pays us a base price for the coal, increased or decreased for any quality adjustments, electricity, or capacity. Amounts billed and due are recorded as trade accounts receivable and included in accounts receivable in our consolidated balance sheets.

We received payments related to advanced capacity and advanced physically delivered energy of $160.0 million and $41.2 million for the years ending December 31, 2024 and 2023, respectively. Of the amount of contract liabilities that we recorded as of the beginning of the period, we recognized$70.2 million and $123.6 million of electric revenue related to these advance contract liability payments for the years ended December 31, 2024 and 2023, respectively. We do not currently have any other contracts in place where it would transfer coal, electricity or capacity in advance of knowing the final price, and thus do not have any other contract assets recorded. Contract liabilities also arise when consideration is received in advance of performance.

(7) INCOME TAXES

Our income tax is different than the expected amount computed using the applicable federal statutory income tax rate of 21%. The reasons for and effects of such differences for the years ended December 31st are below (in thousands):

The deferred tax assets and liabilities resulting from temporary differences between book and tax basis are comprised of the following at December 31st (in thousands):

Our effective tax rate (“ETR”) for 2024 and 2023 was approximately 4% and 9% respectively. The tax rate for the years ended December 31, 2024 and 2023 are not predictive of future tax rates. Our ETR differs from the statutory rate due to statutory depletion in excess of tax basis, return to provision adjustments, stock-based compensation and changes in the valuation allowance. The deduction for statutory depletion does not necessarily change proportionately to changes in income before income taxes.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Due to historical cumulative losses over the prior three years as well as projected losses over the next year, we believe that it is not more likely than not that the benefit from certain federal and state deferred tax assets will be realized. As such, we have recorded a full valuation allowance as of December 31, 2024.

The remaining federal NOLs generated in pre-2018 years of $19.5 million can offset 100% of future years’ taxable income. The federal NOLs generated in post 2017 years of $104.9 million can offset 80% of future years’ taxable income. The pre-2018 federal NOLs will expire in varying amounts from 2035 to 2037 if they are not utilized. Indiana NOLs, which total $168.0 million, have a 20-year carryforward period and will expire in the years 2034 to 2044 if they are not utilized.

We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions, to determine whether the positions will be more likely than not be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year. We identified our federal tax return and our Indiana state tax return as “major” tax jurisdictions. We believe that our income tax filing positions and deduction will be sustained on audit and do not anticipate any adjustments that will result in a material change to its consolidated financial position. While not material, we record any penalties and interest as general and administrative expense. Tax returns filed with the Internal Revenue Service and state entities generally remain subject to examination for three years after filing.

(8) STOCK COMPENSATION PLANS

Restricted Stock Units (RSUs)

The table below shows the number of RSUs available for issuance at December 31, 2024:

RSU Vesting Schedule

Shares vested in 2024 had a value of $2.0 million based on the share price of $5.33 on their vesting dates. Under our RSU plan, participants are allowed to relinquish shares to pay for their required statutory income taxes.

The outstanding RSUs have a value of $8.9 million based on the March 10, 2025 closing stock price of $8.60.

For the years ended December 31, 2024 and 2023, stock-based compensation was $4.5 million and $3.6 million, respectively.

As of December 31, 2024, unrecognized stock compensation expense to be recognized over the remaining 3-year vesting period was $2.7 million, and we had 54,084 RSUs available for future issuance. RSUs are not allocated earnings and losses as they are considered non-participating securities. Forfeitures are recognized as they occur.

Stock Options

We haveno stock options outstanding.

(9) EMPLOYEE BENEFITS

Our employee benefit expenses for the years ended December 31st are below (in thousands):

Of the amounts in the above table, $15.2 million and $21.5 million are recorded in “labor” in the consolidated statements of operations for the years ended December 31, 2024 and 2023, respectively, with the remainder in general and administrative.

Our mine employees are also covered by workers’ compensation and such costs were approximately $4.0 million and $4.9 million for 2024 and 2023, respectively, and are recorded in “labor” in the consolidated statements of operations. Workers’ compensation is a no-fault system by which individuals who sustain work-related injuries or occupational diseases are compensated. Benefits and coverage are mandated by each state which includes disability ratings, medical claims, rehabilitation services, and death and survivor benefits. We are partially self-insured for such claims, however, its operations are protected from these perils through stop-loss insurance policies. Our maximum annual exposure is limited to $1.0 million per occurrence with a $4.0 million aggregate deductible.

(10) LEASES

We determine if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, we record a right-of-use (“ROU”) asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. If our lease does not provide an implicit rate in the contract, we use our incremental borrowing rate when calculating the present value.

We have operating leases for office space with remaining lease terms ranging fromone month to approximately eight years. As most of the leases do not provide an implicit rate, we calculate the ROU assets and lease liabilities using our secured incremental borrowing rate at the lease commencement date. Imputed interest on our operating leases was $0.3 million as of December 31, 2024. At December 31, 2024 and 2023, respectively, we had approximately $0.7 million of ROU operating lease assets recorded within buildings and equipment on the consolidated balance sheets. Operating lease expense associated with ROU assets is recognized on a monthly basis over the lease term in operating costs on the consolidated statements of operation.

We entered into three finance leases during 2023 andfive finance leases during 2024, which are accounted for as failed sale-leaseback transactions. Finance lease assets are included in finance lease right-of-use assets on the consolidated balance sheets and the associated finance lease liabilities are reflected within current portion of lease financing and long-term lease financing on the consolidated balance sheets as applicable. Depreciation on our finance lease assets was $5.2 million and $2.3 million for the years ended December 31, 2024 and 2023, respectively. Interest expense on our finance lease liability was $1.5 million during the year ended December 31, 2024. Imputed interest expense on our future remaining finance lease liability was $1.7 million for the year ended December 31, 2024. We had deferred financing fees of $0.2 million and $0.1 million at December 31, 2024 and 2023, respectively, in connection with entry into the finance leases. These deferred financing fees will be amortized on a straight-line basis over the term of the finance leases.

Information related to leases was as follows as of December 31st (in thousands):

We recognized the following costs related to our leases in our consolidated balance sheets:

Future minimum lease payments under non-cancellable leases as of December 31, 2024, were as follows:

(11) SELF INSURANCE

We self-insure non-leased underground mining equipment. Such equipment is allocated among four mining units dispersed over seven miles andseven mining units dispersed over eleven miles, at December 31, 2024 and 2023, respectively. The historical cost of such equipment was approximately $227.8 million and $262.0 million as of December 31, 2024 and 2023, respectively.

We also self-insure for workers’ compensation claims under a guaranteed cost program. Under this program, we are responsible for the first$1.0 million per claim up to an aggregate of $4.0 million annually. Restricted cash of $3.4 million and $3.8 million as of December 31, 2024 and 2023, respectively, represents cash held and controlled by a third party and is restricted for future workers’ compensation claim payments. The Company had$4.3 million and $3.6 million of workers’ compensation reserve as of December 31, 2024 and 2023, respectively in “Accounts payable and accrued liabilities” on the Consolidated Balance Sheets.

(12) NET INCOME (LOSS) PER SHARE

The following table (in thousands, except per share amounts) sets forth the computation of basic earnings per share for the periods presented:

The following table (in thousands, except per share amounts) sets forth the computation of diluted net income (loss) per share:

(13) FAIR VALUE MEASUREMENTS

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. We have no Level 1 instruments.

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. See asset impairment discussion below in Nonrecurring Fair Value Measurements sections below.

Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). ARO liabilities use Level 3 non-recurring fair value measures as further discussed in “Note 1 – Summary of Significant Accounting Policies”.

Nonrecurring Fair Value Measurements

During the fourth quarter of 2024, the Company completed its review of the coal mining facilities and future mining plans. The impairment analysis was based upon the coal mining operating plans of the Company, market driven pricing and cost trends. As part of that analysis, the Company determined the carrying amount of its coal mining long-lived asset group was not recoverable and recorded a non-cash, long-lived asset impairment charge of $215.1 million in 2024.

The discounted cash flow model was calculated using projected economics for the Coal Operations assets, using the Company’s mining plan and reserve estimates to be mined and sold at prevailing commodity prices, operating expenses, and production cost levels, which are classified as Level 3 inputs.

(14) EQUITY METHOD INVESTMENTS

We own a 50% interest in Sunrise Energy, which owns gas reserves and gathering equipment with plans to develop and operate such reserves. Sunrise Energy also plans to develop and explore for oil, natural gas, and coal-bed methane gas reserves on or near our underground coal reserves. The carrying value of the investment included in the consolidated balance sheets as of December 31, 2024 and 2023 was $2.1 million and $2.8 million, respectively.

The Company also owns a 50% interest in Oaktown Gas, LLC. Oaktown Gas, LLC operates an emission abatement project through the destruction of gases extracted from the Oaktown mines to generate carbon credits and other emissions offset credits. The carrying value of the investment included in the consolidated balance sheets as of December 31, 2024 was $0.5 million.

(15) CONVERTIBLE NOTES

On July 29, 2022, we issued a$5.0 million senior unsecured convertible note (the “July 29 th Note”) to a related party affiliated with an independent member of our board of directors. The July 29 th Note carried an interest rate of 8% per annum with a maturity date of December 29, 2028. For the period August 18, 2022, through August 17, 2024, the holder had the option to convert the July 29 th Note into shares of the Company’s common stock at a conversion price of$6.254. During the first quarter of 2024, the holders of the July 29 th Note converted them into 799,488 shares of common stock of the Company, and in connection with such early conversion, we elected to pay interest through August 2025 with 112,570 shares of common stock on the conversion date. We recorded inducement expense which is reported in loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of$0.6 million during the three months ended March 31, 2024. As of December 31, 2024, the entire July 29 th Note had been converted to shares of common stock of the Company.

On August 8, 2022, we issued an additional $4.0 million of senior unsecured convertible notes (the “August 8 th Notes”) to related parties affiliated with independent members of our board of directors. The August 8 th Notes carried an interest rate of 8% per annum with a maturity date of December 29, 2028. For the period August 18, 2022, through August 17, 2024, the holder had the option to convert the Notes into shares of the Company’s common stock at a conversion price of $6.254. Beginning August 8, 2025, we could elect to redeem the August 8 th Notes and the holder was obligated to surrender them at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from the Company, the holder could have elected to convert the principal balance and accrued interest into the Company’s common stock. During the first quarter of 2024, the holders converted $3.0 million of the August 8 th Notes into 479,693 shares of common stock of the Company, and in connection with such early conversion, we elected to pay interest through August 2025 with 67,542 shares of common stock on the conversion date. During the same period, the holders also converted accrued interest into 57,564 shares of the Company’s common stock.

We recorded inducement expense which is reported in** loss on extinguishment of debt during the first quarter of 2024 in the condensed consolidated statements of operations in the amount of $0.3 million. During the second quarter of 2024, the holder converted the remaining $1.0 million of August 8 th Notes into 159,898 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 5,099 and 25,003, respectively, on the conversion date. We recorded inducement expense which is reported in** **loss on extinguishment of debt during the second quarter of 2024 in the condensed consolidated statements of operations in the amount of $0.2 million. As of December 31, 2024, the entire August 8 th Note had been converted to shares of common stock of the Company.

On August 12, 2022, we issued an additional $10.0 million senior unsecured convertible note (the “August 12 th Note”) to an unrelated party. The August 12 th Note carried an interest rate of 8% per annum with a maturity date of December 31, 2026. For the period August 18, 2022, through the maturity date, the holder had the option to convert the August 12 th Note into shares of the Company’s common stock at a conversion price of $6.15. Beginning August 12, 2025, we could elect to redeem the August 12 th Note and the holder would have been obligated to surrender at 100% of the outstanding principal balance together with any accrued unpaid interest. Upon receipt of the redemption notice from the Company, the holder could elect to convert the principal balance and accrued interest into the Company’s common stock. During the three months ended March 31, 2024, the holder converted accrued interest into 65,041 shares of the Company’s common stock. During the second quarter of 2024, the holder converted the $10.0 million August 12 th Note into 1,626,016 shares of common stock of the Company, and in connection with such early conversion, we paid accrued interest and additional shares of common stock of 49,716 and 224,268, respectively, on the conversion date. We recorded inducement expense which is reported in** **loss on extinguishment of debt in the condensed consolidated statements of operations in the amount of $1.7 million during the second quarter of 2024. As of December 31, 2024, the entire August 12 th Note had been converted to shares of common stock of the Company.

The funds received from the issuance of the various notes described above were used to provide additional working capital to the Company. The conversion price and number of shares of our common stock issuable upon conversion of the above notes are subject to adjustment from time to time for any subdivision or consolidation of our shares of common stock and other standard dilutive events.

(16) NOTES PAYABLE – RELATED PARTIES

In March 2024, we issued unsecured promissory notes, having a 12-month maturity date and 12% per annum interest rate, to (i) Charles R. Wesley IV Revocable Trust (in which our director Charles R. Wesley IV has a pecuniary interest) in the principal amount of $2,000,000, (ii) Lubar Opportunities Fund I, LLC (in which are our director David J. Lubar has a pecuniary interest) in the principal amount of $2,500,000, and (iii) Hallador Alternative Investment Advisors LLC (in which our director David C. Hardie has a pecuniary interest) in the principal amount of $500,000. The related party notes were paid off in June 2024 with proceeds from the prepaid physically delivered power contract mentioned above in “Note 6 – Revenue”.

(17) ORGANIZATIONAL RESTRUCTURING

On February 23, 2024, (the “Effective Date”), we committed to a reorganization effort in the Coal Operations Segment (the “Reorganization Plan”) that included a workforce reduction of approximately 110 employees, or approximately 12% of the workforce. The reduction in workforce was communicated to employees on the Effective Date and implemented immediately, subject to certain administrative procedures. The Reorganization Plan is designed to strengthen our financial and operational efficiency and create significant operational savings and higher margins in our coal segment. This step will help to advance our transition from a company primarily focused on coal production to a more resilient and diversified integrated independent power producer (“IPP”). As part of this initiative, we substantially idled production at our higher cost surface mines, Prosperity Mine, and Freelandville Mine, with minimal ongoing production. We also focused our seven units of underground equipment on four units of our lowest cost production at our Oaktown Mine. In connection with the Reorganization Plan, we incurred aggregate expenses of$1.9 million ($1.1 million in the first quarter of 2024 and$0.8 million in the second quarter of 2024) that were included in*“Labor”* in the consolidated statements of operations. These charges related to compensation, tax, professional, and insurance related expenses and are considered one-time charges paid during 2024. The coal mining properties asset group was

tested for impairment as result of the organizational restructuring passing the undiscounted recoverability test. See “Note 19 – Impairment of Coal Properties” for additional changes to the Company’s mining plans that occurred during the fourth quarter of 2024.

(18) AT MARKET AGREEMENT

On December 18, 2023, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”), pursuant to which we may issue and sell, from time to time, shares (the “Shares”) of our common stock, par value $0.01 per share (the “Common Stock”), with aggregate gross proceeds of up to $50.0 million through an “at-the-market” equity offering program under which the Agent will act as sales agent (the “ATM Program”). Under the Sales Agreement, we or the Agent have the right, by giving five (5) days’ notice, to terminate the Sales Agreement in our and the Agents sole discretion. The Agent may also terminate the Agreement, by notice to us, upon the occurrence of certain events described in the Sales Agreement.

During December 2023, we issued 794,000 shares of Common Stock under the ATM Program for net proceeds of $7.3 million. During the year ended December 31, 2024, we issued 4,654,430 shares of Common Stock under the ATM Program for net proceeds of $34.5 million.

(19) IMPAIRMENT OF COAL PROPERTIES

Annually, the Company reviews its business plans for the next several years, with specific emphasis on the upcoming year. This business plan review involves updates to its mining plans that take into account many factors, such as changes in market price trends, cost trends, expected demand trends, its latest engineering studies and current year operational and financial results. During the fourth quarter of 2024, the Company began its annual business plan review. The Company evaluated core hole samples at several of its mines, reviewing the quality of the mine seam and density of the coal. Based upon market price trends, the Company believes the required course of action is to only produce those reserves that will allow it the lowest possible cost, and therefore capture the highest possible margins. The core hole samples at the Oaktown 2 mine were of a lower quality and density than that of the Oaktown 1 mine. As such, at the conclusion of the Company’s annual business plan review during the fourth quarter of 2024, it decided to temporarily seal the Oaktown 2 mine, and to focus coal production at the Oaktown 1 mine, which has lower recovery costs.

As a result of the Company’s decision to temporarily seal the Oaktown 2 mine, the Company determined a triggering event had occurred. The Company then completed an impairment review to determine if the carrying value of its coal properties were impaired. The Company compared the net book value of its coal properties to estimated undiscounted future net cash flows. The result of this undiscounted cash flow test indicated the carrying amount of its coal properties may not be recoverable. As a result, the Company prepared a discounted cash flow model (Level 3 fair value measurement under the fair value hierarchy) to estimate fair value. Significant inputs used to determine fair value include estimates of future cash flows from coal sales and minimum payments, an appropriate discount rate and the useful economic life. The estimated cash flows are the product of a process that began with current realized pricing as of the measurement date and included an adjustment for risk related to the realization of such future cash flows.

The discounted cash flow model used assumptions regarding the projected economics of the Coal Operations assets, given prevailing commodity prices and operating expense levels, which are classified as Level 3 inputs. Coal Operations assets include all of our coal mining properties as these properties are all within the same asset group given the near proximity to one another and their sharing of personnel and assets used to fulfill customer contracts. The Company utilized an estimated market participant discount rate of 11.5% and assumed production that is consistent with our current mining plans and reserve estimates that equate to approximately 3.6 million tons per year until all reserves are produced as part of the analysis.

The result of the discounted cash flow analysis confirmed that fourth quarter of 2024 changes to the mining plans caused the carrying amount of its coal properties to not be recoverable. As a result, the Company recorded an impairment expense during the fourth quarter of 2024 of$215.1 million. The Company did not record an impairment during the year ended December 31, 2023.

(20) SEGMENTS OF BUSINESS

Our business is organized based on the services and products we provide intwo segments: (i) Electric Operations and (ii) Coal Operations. The Chief Operating Decision Maker (“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 atwo unit,1080-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 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 are entered into.

Our Coal Operations segment includes the Oaktown 1 and 2 underground mining complexes, as well as other currently idled mining facilities, which produce high-quality bituminous coal from the Illinois Basin. Revenues from our Coal Operations segment consist of sales of coal to various third-parties and to Merom. Coal sales to our Electric Operations are based on multi-year contracts which approximate market prices at the time the contracts are entered into. Intercompany coal sales and amounts above actual costs to produce the coal are eliminated in the 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 EBITDA margin for each business segment. EBITDA margin is calculated for each segment as follows:

EBITDA margin 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, EBITDA margin 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 segments operations.

Presented below are the Electric and Coal Operations key metrics reviewed by the CODM at December 31, 2024 (in thousands):

Presented below are the Electric and Coal Operations key metrics reviewed by the CODM at December 31, 2023 (in thousands):

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues at December 31, 2024 (in thousands):

Presented below are the Electric and Coal Operations revenues reconciled to our consolidated operating revenues at December 31, 2023 (in thousands):

Presented below is our reconciliation of EBITDA Margin to the most comparable GAAP account, income (loss) before income taxes at December 31, 2024 (in thousands):

Presented below is our reconciliation of EBITDA Margin to the most comparable GAAP account, income (loss) before income taxes at December 31, 2023 (in thousands):

Presented below are our Electric and Coal Operations assets and capital expenditures at December 31, 2024 (in thousands):

Presented below are our Electric and Coal Operations assets and capital expenditures at December 31, 2023 (in thousands):

(21) ASSETS HELD FOR SALE

During the third quarter of 2024, the Company considered strategic alternatives with respect to its wholly-owned subsidiary Summit. Summit primarily held property, plant and equipment. On July 29, 2024, the Company entered into aninety day right of first refusal (“ROFR”) with a potential buyer of Summit for$3.2 million. As of July 29, 2024, Summit met the held-for-sale criteria, and its assets were included in "assets held-for-sale" in the current assets section of the consolidated balance sheets. The Company recorded the Summit assets, once held for sale, at the lower of their carrying value or their estimated fair value less cost to sell. The Company also did not record depreciation and amortization of$0.1 million ($0.1 million after-tax) on assets held-for-sale and continued to do so while held-for-sale criteria was met.

Fair value is the amount at which an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques or may be observable using quoted market prices. The Company used a market approach consisting of the contractual ROFR sales price, subject to prorations for property taxes and utilities, to determine the fair value, and subtracted estimated costs to sell from that calculated fair value.

The sale of Summit did not represent a strategic shift that has or will have a major effect on the Company, and as such, did not qualify for treatment as a discontinued operation.

The Company sold Summit on December 23, 2024 for $3.2 million. The Company recorded a $1.7 million gain in*“(Gain) loss on disposal or abandonment of assets, net”* in its consolidated statements of operations.

(22) CONTINGENCIES

Our Coal Operations subsidiary is party to litigation in which the plaintiffs allege violations of the Fair Labor Standards Act and state law due to alleged failure to compensate for time "donning" and "doffing" equipment and to account for certain bonuses in the calculation of overtime rates and pay. In January 2025, we agreed to settle with the plaintiffs such litigation for $2.8 million, which is recorded in “accounts payable and accrued liabilities” on our consolidated balance sheets at December 31, 2024.