HNRG Hallador Energy Co - 10-K

ITEM 1A. RISK FACTORS

Risks Related to our Business

Global economic conditions or economic conditions in any of the industries in which our customers operate as well as sustained uncertainty in financial markets could have material adverse impacts on our business and financial condition that we currently cannot predict.

Weakness in global economic conditions or economic conditions in any of the industries we serve or in the financial markets could materially adversely affect our business and financial condition. For example:

the demand for electricity in the U.S. and globally may decline if economic conditions deteriorate, which may negatively impact the revenues, margins, and profitability of our business;

any inability of our customers to raise capital could adversely affect their ability to honor their obligations to us; and

our future ability to access the capital markets may be restricted as a result of future economic conditions, which could materially impact our ability to grow our business, including our planned addition of natural gas-fired generation to Merom and development of our coal reserves.

The stability and profitability of our operations could be adversely affected if our customers do not honor existing contracts or do not extend existing contracts or enter into new long-term contracts for accredited capacity, electric power or coal.

In 2025, a significant portion of our electric power, accredited capacity and coal sales were under contracts having a term greater than one year, which we refer to as long-term contracts. These contracts have historically provided a relatively secure market for the amount of production committed under the terms of the contracts. From time to time, industry conditions could make it more difficult for us to enter into long-term contracts with our customers, and if supply exceeds demand in the accredited capacity, electric power and coal industries, our customers may become less willing to lock in price or quantity commitments for an extended period of time. Accordingly, we may not be able to continue to obtain long-term sales contracts with reliable customers as existing contracts expire, which could subject an increasing portion of our revenue stream to the increased volatility of the spot market.

Our financial performance may be impacted by price fluctuations in the electric power markets, as well as fluctuations in coal markets and other market factors that are beyond our control.

Market prices for electric power, accredited capacity, coal and other ancillary services are unpredictable and tend to fluctuate substantially. Electric power generally must be produced concurrently with its use. As a result, power prices are subject to significant volatility due to supply and demand imbalances, especially in the day-ahead and spot markets. While we currently sell a significant portion of our electric power pursuant to long-term contracts (where we may be less susceptible to day-to-day fluctuations), we also sell a material amount of power in the competitive wholesale market including through MISO. A significant portion of the electricity we sell is used in residences and commercial businesses for heating and air conditioning. Long and short-term power prices may fluctuate substantially due to factors outside of the Company’s control, including:

changes in generation capacity in the Company’s markets, including the addition of new supplies of power as a result of the development of new plants, expansion of existing plants, retirement of existing plants or addition of new transmission capacity;

electric supply disruptions, including plant outages and transmission disruptions;

changes in power transmission infrastructure;

transportation capacity constraints or inefficiencies;

weather conditions, including extreme weather conditions and seasonal fluctuations, including the effects of climate change;

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changes in commodity prices and the supply and available inventory of commodities, including but not limited to natural gas, coal and oil;

changes in the demand for electric power, or in patterns of power usage, including the potential development of demand-side management tools and practices, distributed generation, and more efficient end-use technologies;

development of new fuels, new technologies and new forms of competition for the production of electric power;

economic and political conditions;

changes in law, including judicial decisions, environmental regulations and environmental legislation; and

federal, state and provincial power regulations and legislation, and regulations and actions of the ISO and RTOs.

Such factors and the associated fluctuations in power prices have affected the Company’s profitability in the past and are expected to continue to do so in the future.

Some of our long-term sales contracts contain provisions allowing for the termination of the contract or the suspension of purchases by customers or, in certain cases, the renegotiation of prices.

Several of our long-term electric power, accredited capacity and coal contracts contain provisions that allow the customer to suspend or terminate performance under the contract upon the occurrence or continuation of certain events that are beyond the customer’s reasonable control. Such events could include force majeure, labor disputes, mechanical malfunctions and changes in government regulations, including, in the case of our coal contracts, changes in environmental regulations rendering use of our coal inconsistent with the customer’s environmental compliance strategies. Additionally, most of our long-term coal contracts contain provisions requiring us to deliver coal within stated ranges for specific coal characteristics. Failure to meet these specifications can result in economic penalties, rejection or suspension of shipments or termination of the contracts. In the event of early termination of any of our long-term contracts, if we are unable to enter into new contracts or similar terms, our business, financial condition and results of operations could be adversely affected.

Further, long-term coal sales contracts may contain provisions that allow for the purchase price to be renegotiated at periodic intervals, however, we had no coal contracts with price reopeners at December 31, 2025. These price reopener provisions may automatically set a new price based on the prevailing market price or, in some instances, require the parties to the contract to agree on a new price. Any adjustment or renegotiation leading to a significantly lower contract price could adversely affect our operating profit margins. Accordingly, long-term contracts may provide only limited protection during adverse market conditions. In some circumstances, failure of the parties to agree on a price under a reopener provision can also lead to early termination of a contract.

We depend on a limited number of customers for a significant portion of our revenues, and the loss of one or more significant customers could affect our ability to maintain the sales volume, price of our products and profitability.

The following table shows consolidated operating revenue concentration greater than 10% in our Electric Operations segment in dollars and percentages for the periods presented:

Year Ended December 31,

Year Ended December 31,

Segment

(in thousands)

Customer A

Electric Operations

Customer B

Electric Operations

Customer C

Electric Operations

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The loss of one or more of these material customers without finding a replacement customer could have a material adverse effect on our business, financial condition and results of operations.

The following table shows consolidated operating revenue concentration greater than 10% in our Coal Operations segment in dollars and percentages for the periods presented:

Year Ended December 31,

Year Ended December 31,

Segment

(in thousands)

Customer A

Coal Operations

Customer B

Coal Operations

If in the future we lose any of these customers without finding replacement customers willing to purchase an equivalent amount of coal on similar terms, or if these customers were to decrease the amounts of coal purchased or the terms, including pricing terms, on which they buy coal from us, it could have a material adverse effect on our business, financial condition and results of operations.

Our recent efforts to sell our accredited capacity to long-term customers may not be successful.

In light of the fact that the Company believes it holds a considerable portion of the remaining unsold accredited capacity in MISO Zone 6, covering Indiana and parts of western Kentucky, the Company has recently focused its efforts on entering into one or more long-term contracts for the sale of its accredited capacity and energy to large load end user(s) through a utility or cooperative. Failure to enter into one or more long-term contracts may have a material adverse effect on our business, financial condition and results of operations.

Participation in MISO’s ERAS program may not achieve the benefits targeted by the Company and, if not successful,  could have a material adverse effect on the Company’s business, financial condition and/or results of operations .

On November 3, 2025, Hallador Power submitted an application to MISO’s ERAS program (the “ERAS program”) to obtain an interconnection that would allow the Company to add up to an additional 515 MW of natural gas generation adjacent to Hallador Power’s Merom Generating Station. On December 22, 2025, the Company received notice from MISO that its ERAS program application had been accepted by MISO, which is expected to move the Company into a 6- to 9-month MISO review and approval process to gain access to the power grid versus the traditional 4.5-year process.

MISO’s acceptance of the ERAS application for review does not guarantee that the Company’s application will ultimately be approved by MISO or, if approved, that the Company will be able to add  additional 515 MW of natural gas generation , or any additional generation, to take advantage of the approved interconnection. Participation in the ERAS program and construction and development of additional generation is capital intensive and includes construction, operational, financial, regulatory and legal risks that could impact the project’s viability and/or timeline, and the Company’s failure to achieve all or any of the targeted benefits of the ERAS program could have a material adverse effect on the Company’s business, financial condition and/or results of operations.

Expected demand growth from the technology sector, manufacturing and other users of electricity, which has driven recent improvements in the outlook for the competitive wholesale power generation market, may not actually occur or be sustained.

Recently, the market outlook for competitive wholesale power generation has improved largely based on expected future demand from several sources, including data centers and other technology sector requirements, re-shoring of manufacturing in the U.S., the electrification of industry, and other demand drivers. Various factors including but not limited to unfavorable macroeconomic conditions, increases in energy efficiency or supply, or advances in technology, could result in lower-than-expected electricity demand and unfavorable market conditions for our power generating business and lower demand for coal from our coal mining operations. A general economic slowdown or recession, a downturn in technology, manufacturing, or other sectors, an oversupply of natural gas, or various other economic

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conditions could reduce electricity and coal demand and prices. Improvements in energy efficiency, conservation efforts, and demand-side power management technologies, as well as other shifts in energy consumption, may reduce demand or slow demand growth, both from our power generating business and from our coal operations. Furthermore, the penetration of renewable generation resources has, and may continue to have, negative effects on wholesale power prices and the economics of dispatchable generation units. Advances in technology may also provide alternative methods to produce, dispatch, and store power, which could also lead to increased overall electricity supply. Any of these factors could impact the dispatch, capacity factors, and value of our generation facility and adversely impact demand for our coal.

Our ability to collect payments from our customers could be impaired if their creditworthiness declines or if they fail to honor their contracts with us.

Our ability to receive payment for electric power, accredited capacity and coal sold and delivered depends on the continued creditworthiness of our customers. If the creditworthiness of our customers declines significantly, our business could be adversely affected. In addition, if a customer refuses to accept shipments of our coal for which they have an existing contractual obligation, our revenues will decrease, and we may have to reduce production at our mines until our customer’s contractual obligations are honored.

Contractors that we use to provide employees at our power plant may experience work stoppages, slowdowns, lockouts or other labor disputes.

At Merom, our operator, CAMS, employs represented workers. While these workers are not Hallador Power employees, work stoppages, slowdowns, lockouts or other labor disputes within the CAMS workforce could adversely affect and disrupt our productivity and operations at the plant.

In our Coal Operations, although none of our coal employees are members of unions, our workforce may not remain union-free in the future.

None of our employees are represented under collective bargaining agreements. However, all of our workforce may not remain union-free in the future, and legislative, regulatory or other governmental action could make it more difficult to remain union-free. If some or all of our currently union-free operations were to become unionized, it could adversely affect our productivity and increase the risk of work stoppages at our mining complexes. In addition, even if we remain union-free, our operations could still be adversely affected by work stoppages at unionized companies, particularly if union workers were to orchestrate boycotts against our operations.

The operation and maintenance of the Merom facilities or future investment in the Merom facilities are subject to operational risks that could adversely affect our financial position, results of operations and cash flows.

The Company acquired Merom in October 2022. The operation and maintenance of generating facilities like Merom involves many risks, including the performance by key contracted suppliers and maintenance providers; increases in the costs for or limited availability of key supplies, labor and services; breakdown or failure of facilities; curtailment of facilities by counterparties; or the impact of unusual, adverse weather conditions or other natural events, as well as the risk of performance below expected levels of output or efficiency. The Merom facilities contain older generating equipment, which even if maintained in accordance with good engineering and prudent utility practices, may require additional capital expenditures to continue operating at peak efficiency. From time to time, the Merom facilities may experience transformer failures that may cause one or more of its units to be offline for an extended period of time. We may also be subject to costs associated with any unexpected failure to produce and deliver power, including failure caused by breakdown or forced outage, as well as the repair of damage to facilities due to storms, natural disasters, wars, sabotage, terrorist acts and other catastrophic events. Additionally, supply chain shortages or delays on key operating components, including but not limited to, transformers, boiler equipment and chemicals or catalysts could materially and adversely impact our operations and reduce revenues or expose the company to significant cover damages related to longer term contracts. Facility outages could also subject us to market or contractual penalties. Such increased costs, unplanned outages and market or contractual penalties could have an adverse effect on the Company’s business, financial results and prospects.

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Completion of growth projects and future expansion could require significant amounts of financing that may not be available to us on acceptable terms, or at all.

We plan to fund capital expenditures for our current growth projects with existing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity. Under our outstanding Form S-3 “universal shelf” registration statement, we have the ability, subject to market conditions, to access the debt and equity capital markets as needed. At times, weakness in the energy sector in general and coal, in particular, has significantly impacted access to the debt and equity capital markets. Accordingly, our funding plans may be negatively impacted by this constrained environment as well as numerous other factors, including higher than anticipated capital expenditures or lower than expected cash flow from operations. In addition, we may be unable to refinance our current debt obligations when they expire or obtain adequate funding prior to expiry because our lending counterparties may be unwilling or unable to meet their funding obligations. Furthermore, additional growth projects and expansion opportunities may develop in the future that could also require significant amounts of financing that may not be available to us on acceptable terms or in the amounts we expect, or at all.

Various factors could adversely impact the debt and equity capital markets as well as our credit risk profile or our ability to remain in compliance with the financial covenants under our then current debt agreements, which in turn could have a material adverse effect on our financial condition, results of operations and cash flows. If we are unable to finance our growth and future expansions as expected, we could be required to seek alternative financing, the terms of which may not be attractive to us, or to revise or cancel our plans.

Terrorist attacks or cyber-incidents could result in information theft, data corruption, operational disruption and/or financial loss.

Like most companies, we have become increasingly dependent upon digital technologies, including information systems, infrastructure and cloud applications and services, to operate our businesses, to process and record financial and operating data, communicate with our business partners, analyze mine and mining information, estimate quantities of coal reserves, as well as other activities related to our businesses. Strategic targets, such as energy-related assets, could be at greater risk of future terrorist or cyber-attacks than other targets in the U.S. Deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third-parties, could lead to corruption or loss of our proprietary data and potentially sensitive data, delays in production or delivery, difficulty in completing and settling transactions, challenges in maintaining our books and records, environmental damage, communication interruptions, other operational disruptions and third-party liability. Our insurance may not protect us against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, as cyber incidents continue to evolve, we could be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents.

We may not recover our investments in our power, mining, and other assets, which may require us to recognize impairment charges related to those assets.

The value of our assets has from time to time been adversely affected by numerous uncertain factors, some of which are beyond our control, including, but not limited to unfavorable changes in the economic environments in which we operate, lower-than-expected commodity pricing (including capacity, electric and coal), unplanned outages, technical and geological operating difficulties, an inability to economically extract our coal reserves and unanticipated increases in operating costs. In 2024, the Company determined the carrying amount of its long-lived assets were not recoverable and recorded a non-cash, long-lived asset impairment charge of $215.1 million in the fourth quarter of 2024. See “ Note 19 – Impairment of Coal Properties” to the Consolidated Financial Statements in this Form 10-K for further information on the impairment analysis. The factors noted above may trigger the recognition of additional impairment charges in the future, which could have a substantial impact on our results of coal operations.

In the future, as investments in Merom become more significant, the value of those assets could be adversely affected by numerous uncertain factors, some of which are beyond our control, including, but not limited to unfavorable changes in the economic environments in which we operate, commodity pricing, environmental, litigation, weather, and regulatory

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and/or legal changes. These factors may trigger the recognition of additional impairment charges in the future, which could have a substantial impact on our results of power operations.

If we are unable to comply with the covenants contained in our credit agreement, the lenders could declare all amounts outstanding to be due and payable and foreclose on their collateral, which could materially adversely affect our financial condition and operations.

Our ability to comply with the covenants in our credit agreement may be affected by changes in economic or business conditions or other events that are beyond our control. If we fail to comply with these covenants, we may be in default under our credit agreement, which may entitle the lenders to accelerate the debt obligations. In order to avoid defaulting on our indebtedness, we may be required to take actions such as reducing or delaying capital expenditures, reducing or eliminating dividends or share repurchases, selling assets, restructuring or refinancing all or part of our existing debt, or seeking additional equity capital, any of which may not be available on terms that are favorable to us, if at all. In the event of an event of default under our credit agreement, the lenders could declare all amounts outstanding to be due and payable and foreclose on their collateral, which could materially adversely affect our financial condition and operations. See “ Note 4 – Bank Debt” to the Consolidated Financial Statements in this Form 10-K for further discussion of our credit facilities.

Our indebtedness may limit our ability to borrow additional funds or capitalize on business opportunities.

As of December 31, 2025, our funded bank debt was $30.0 million and we held letters of credit totaling $16.2 million. Our leverage may:

adversely affect our ability to finance future operations and capital needs;

limit our ability to pursue acquisitions and other business opportunities; and

make our results of operations more susceptible to adverse economic or operating conditions.

Various limitations in our debt agreements may reduce our ability to incur additional indebtedness, to engage in some transactions, and capitalize on business opportunities. Any subsequent refinancing of our current indebtedness or any new indebtedness could have similar or greater restrictions.

If our financial condition deteriorates, certain credit assurance provisions in our power contracts could require additional collateral.

Certain of our power contracts contain credit assurance provisions tied to our financial condition. Should our financial condition deteriorate, these provisions may require substantial collateral that may have a materially adverse effect on our financial condition.

Investor and lender focus on ESG matters may negatively impact our business, financial results, and stock price.

Companies across all industries, including companies in the fossil-fuel industry, have faced increased scrutiny from stakeholders related to their ESG practices. Companies that do not adapt or comply with investor or stakeholder expectations and standards or are perceived to have not responded appropriately to ESG issues, regardless of any legal requirement to do so, may suffer reputational damage and the business, financial condition, and stock price of such companies could be materially and adversely affected. Several advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including through the investment and voting practices of investment advisers, public pension funds, universities, and other members of the investing community. These activities include increasing attention to and demands for action related to climate change, promoting the use of substitutes to fossil-fuel products, encouraging the divestment of fossil-fuel equities, and pressuring lenders to limit funding to companies engaged in the extraction of fossil-fuel reserves. These activities could increase costs, impact our supply chain, reduce demand for our coal, reduce our profits, increase the potential for investigations and litigation, impair our brand, limit our choices for lenders, insurance providers and business partners, and have negative impacts on our stock price and access to capital markets.

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In addition, certain organizations that provide corporate governance and other corporate risk information to investors have developed scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Currently, there are no universal standards for such scores or ratings, but consideration of sustainability evaluations is becoming more broadly accepted by investors. Indeed, many investment funds focus on positive ESG business practices and sustainability scores when making investments, whereas other funds may use certain ESG criteria to “screen” certain sectors, such as coal or fossil fuels more generally, out of their investments. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with companies to require improved ESG disclosure or performance or sell their interests in the company, particularly if its ESG performance does not improve. Moreover, certain members of the broader investment community may consider a company’s sustainability score as a reputational or other factor in making an investment decision. Companies in the energy industry, and in particular those focused on coal, natural gas, or oil extraction, often do not score as well under ESG assessments compared to companies in other industries. Consequently, a low ESG or sustainability score could result in our securities being excluded from the portfolios of certain investment funds and investors, restricting our access to capital to fund our continuing operations and growth opportunities. Additionally, to the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations.

Public statements with respect to ESG matters, such as emission reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,” i.e., misleading information or false claims overstating potential ESG benefits. Certain non-governmental organizations and other private actors have filed lawsuits under various securities and consumer protection laws alleging that certain ESG-statements, goals, or standards were misleading, false, or otherwise deceptive. As a result, we may face increased litigation risks from private parties and governmental authorities related to our ESG efforts. Similarly, we could be criticized by ESG detractors for the scope and nature of any ESG policies or initiatives we implement. We could also be subjected to negative responses by governmental actors, such as state legislation, retaliatory legislative treatment or litigation by state or federal agencies, or face negative publicity campaigns that could adversely affect our reputation, business, financial performance and growth. In addition, any alleged claims of greenwashing against us or others in our industry may lead to further negative sentiment and diversion of investments. Additionally, we could face increasing costs as we attempt to comply with and navigate further ESG-related focus and scrutiny.

Enhanced data privacy and data protection laws and regulations or any non-compliance with such laws and regulations, could adversely affect our business and financial results.

Consistent with the trend established by passage of the General Data Protection Regulation (the “GDPR”), the development and evolving nature of domestic and international privacy regulation and enforcement could impact and potentially limit how Hallador processes personal information. For example, California residents have certain privacy rights (including the right to limit the use and disclosure of sensitive personal information, and the right to request that a business delete personal information collected about them, among other rights), established by the California Consumer Privacy Act (“CCPA”) and enforced by a state privacy regulator, resulting in more scrutiny of business practices and disclosures. Additional states including Virginia, Utah, Connecticut, Colorado, and Nevada have similarly adopted enhanced data privacy legislation patterned after the standards set forth by CCPA, including broader data access rights, with some states even requiring businesses to perform data protection assessments for certain processing activities. In 2025, state privacy laws go into effect in a number of states, including Delaware, Maryland, Minnesota, Nebraska, and New Jersey, among others.

As new laws and regulations are enacted by legislators or adopted by regulators, requiring businesses to implement processes to enable customer access to their data and enhanced data protection and management standards, we cannot forecast the impact that they may have on the Company’s business. Any non-compliance with laws may result in proceedings or actions against the Company by governmental entities or individuals. Moreover, any inquiries or investigations, government penalties or sanctions, or civil actions by individuals may be costly to comply with, resulting in negative publicity, increased operating costs, significant management time and attention, and may lead to remedies that harm the business, including fines, demands or orders that existing business practices be modified or terminated.

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Risks Related to our Industries

Substantial or extended volatility in coal prices could negatively impact our results of operations in both our Electric Operations and Coal Operations segments.

Our results of operations are primarily dependent upon the price we pay for our coal in the case of our Electric Operations, or the prices we receive for our coal in our Coal Operations, as well as our ability to improve productivity and control costs. These prices depend upon factors beyond our control, including:

the supply of and demand for domestic and foreign coal;

weather conditions and patterns that affect demand for or our ability to produce coal;

the proximity to and capacity of transportation facilities;

supply chain and cost of raw materials for coal operations;

competition from other coal suppliers;

domestic and foreign governmental regulations and taxes;

the price and availability of alternative fuels;

the effect of worldwide energy consumption, including the impact of technological advances on energy consumption;

overall domestic and global economic conditions;

international developments impacting supply of coal; and

the impact of domestic and foreign governmental laws and regulations, including environmental and climate change regulations and regulations affecting the coal mining industry and coal-fired power plants, and delays in the receipt of, failure to receive, failure to maintain or revocation of necessary governmental permits.

Any adverse change in these factors could result in weaker demand and lower prices for our products. With respect to our Coal Operations, a substantial or extended decline in coal prices could materially and adversely affect us by decreasing our revenues to the extent we are not protected by the terms of existing coal supply agreements (although the adverse impact of a decline in coal prices may in some cases be offset by lower coal prices we pay in our Electric Operations).

Competition within the coal industry could adversely affect our financial results.

In our Coal Operations, we compete with other coal producers for domestic coal sales in various regions of the U.S. The most important factors on which we compete are delivered price ( i.e. , the cost of coal delivered to the customer, including transportation costs, which are generally paid by our customers either directly or indirectly), coal quality characteristics, contract flexibility ( e.g. , volume optionality and multiple supply sources) and reliability of supply. In addition, deregulation within the coal industry, may encourage new market entrants and could increase the number of competitors we face. Some competitors could have, among other things, larger financial and operating resources, lower per ton cost of production, or relationships with specific transportation providers. The competition among coal producers could impact our ability to retain or attract customers and could adversely impact our revenues and cash from operations. In our Electric Operations, similar risks apply with respect to our ability to purchase coal on attractive terms relative to other competitors in the market.

Changes in taxes or tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.

We pay certain taxes and fees related to our operations. Congress or state legislatures may seek to increase these taxes and fees that relate specifically to the coal industry. We cannot predict further developments, and such increases could have a material adverse effect on our results of operations, financial position, and cash flows.

Further, there is continuing uncertainty surrounding tariffs and international trade relations, and it is difficult for us to predict future trade measures and the impact they will have on our business and operations.

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Tariffs or trade restrictions that may be implemented by the U.S. or retaliatory trade measures or tariffs implemented by other countries, could result in reduced economic activity, increased costs in operating our business, reduced demand and changes in purchasing behaviors for thermal coal, limits on trade with the U.S. or other potentially adverse economic outcomes. While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows and could reduce our revenues and cash available for distribution.

Changes in consumption patterns by utilities regarding the use of coal, including plans by utilities to shut down or move away from coal-fired generation, have affected our ability to sell the coal we produce.

The domestic electric utility industry accounts for the vast majority of domestic coal consumption. The amount of coal consumed by the domestic electric utility industry is affected primarily by the overall demand for electricity, environmental and other governmental regulations, and the price and availability of competing fuels for power plants such as nuclear, natural gas and fuel oil as well as alternative sources of energy. Natural gas fired generation has the potential to displace a significant amount of coal-fired electric power generation in the near term, particularly from older, less efficient coal-fired power plants.

Environmental regulation of GHG emissions also could accelerate the use by utilities of fuels other than coal. In addition, federal and state mandates for increased use of electricity derived from renewable energy sources could affect demand for coal. Such mandates, combined with other incentives to use renewable energy sources, such as tax credits, could make alternative fuel sources more competitive with coal. A decrease in coal consumption by the domestic electric utility industry could adversely affect the demand for or the price of coal, which could negatively impact our results of operations and reduce our cash from operations.

Other factors, such as efficiency improvements associated with technologies powered by electricity have slowed electricity demand growth and could contribute to slower growth in the future. Further decreases in the demand for electricity, such as decreases that could be caused by a worsening of current economic conditions or a prolonged economic recession, could have a material adverse effect on the demand for coal and our business over the long term.

Extensive environmental laws and regulations affect coal consumers and have corresponding effects on the demand for coal as a fuel source.

Federal, state and local laws and regulations extensively regulate the amount of sulfur dioxide, PM, nitrogen oxides, mercury and other compounds emitted into the air and pollutants in wastewater from coal-fired electric power plants, which are the ultimate consumers of much of our coal. These laws and regulations can require significant emission control expenditures for many coal-fired power plants, and various new and proposed laws and regulations could require further emission reductions and associated emission control expenditures. These laws and regulations could affect demand and prices for coal. There is also continuing pressure on federal and state regulators to impose limits on carbon dioxide emissions from electric power plants, particularly coal-fired power plants. Further, far-reaching federal regulations promulgated by the EPA in the last several years, such as CSAPR, MATS, 316(a) and (b) rules, CCR rules, and ELGs have led to the premature retirement of coal-fired generating units and a significant reduction in the amount of coal-fired generating capacity in the U.S. These rules could also lead to material capital expenditures for our electric generating operations.

Our operations are subject to a series of risks resulting from climate change.

Combustion of fossil fuels, such as the coal we produce in our Coal Operations and the energy we produce in our Electric Operations, results in the emission of carbon dioxide into the atmosphere. Concerns about the environmental impacts of such emissions have resulted in a series of regulatory, political, litigation, and financial risks for our business. Global climate issues continue to attract public and scientific attention. Increasing government attention is being paid to global climate issues and to emissions of GHGs, including emissions due to fossil fuels.

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The adoption and implementation of new or more stringent international, federal, or state legislation, regulations, or other regulatory initiatives that impose more stringent standards for GHG emissions from fossil-fuel companies could result in increased costs of compliance or costs of consuming, and thereby reduce demand for coal and increase costs of our power generation operations, which could reduce the profitability of our interests. Additionally, political, litigation, and financial risks could result in either us restricting or canceling mining activities, incurring liability for infrastructure damages as a result of climatic changes, or having an impaired ability to continue to operate our coal mining and power generation businesses in an economic manner. One or more of these developments, as well as concerted conservation and efficiency efforts that result in reduced electricity consumption, and consumer and corporate preferences for non-fossil-fuel sources, including alternative energy sources, could cause prices and sales of capacity and electricity from Merom or of our coal to materially decline and could cause our costs to increase and adversely affect our revenues and results of operations.

Climate change may also result in various physical risks, such as the increased frequency or intensity of extreme weather events or changes in meteorological and hydrological patterns that could adversely impact our operations. Such physical risks may result in damage to our facilities or otherwise adversely impact operations which could decrease our production. We may not have insurance to cover these risks and the consequences for our operations could have a negative impact on the costs and revenues from operations.

We or our customers could be subject to risks related to the alleged effects of climate change.

Increasing attention to climate change risk has also resulted in a recent trend of governmental investigations and private litigation by state and local governmental agencies as well as private plaintiffs in an effort to hold energy companies accountable for the alleged effects of climate change. Other public nuisance lawsuits have been brought in the past against power, coal, and oil & gas companies alleging that their operations are contributing to climate change. The plaintiffs in these suits sought various remedies, including punitive and compensatory damages and injunctive relief. While the U.S. Supreme Court held that federal common law provided no basis for public nuisance claims against the defendants in those cases, tort-type liabilities remain a possibility and a source of concern. Government entities in other states (including California and New York) have brought similar claims seeking to hold a wide variety of companies that produce fossil fuels liable for the alleged impacts of the GHG emissions attributable to those fuels. Those lawsuits allege damages as a result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort theories. Separately, litigation has been brought against certain fossil-fuel companies alleging that they have been aware of the adverse effects of climate change for some time but failed to adequately disclose such impacts to their investors or consumers. We have not been made a party to these other suits, but it is possible that we could be included in similar future lawsuits initiated by state and local governments as well as private claimants.

Our operations may impact the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, which could result in liabilities to us. In addition, government inspectors, under certain circumstances, have the ability to order our operations to be shut down based on environmental considerations.

Our operations currently use hazardous materials and generate limited quantities of hazardous wastes from time to time. Drainage flowing from or caused by mining activities can be acidic with elevated levels of dissolved metals, a condition referred to as “acid mine drainage.” Additionally, our electric power generating operations result in air emissions, wastewater effluent, and the generation of coal combustion residuals. We could become subject to claims for toxic torts, natural resource damages and other damages, as well as for the investigation and clean-up of soil, surface water, groundwater and other media. Such claims may arise, for example, out of conditions at sites that we currently own or operate, as well as at sites that we previously owned or operated, or may acquire. Our liability for such claims may be joint and several, so that we may be held responsible for more than our share of the contamination or other damages, or for the entire share. In addition, government inspectors, under certain circumstances, may have the ability to order our operations to be shut down based on a perceived or actual violation of regulations concerning hazardous substances and other matters related to environmental protection.

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These and other similar unforeseen impacts that our operations may have on the environment, as well as exposures to hazardous substances or wastes associated with our operations, could result in costs and liabilities that could adversely affect our businesses, revenues and results of operations.

Litigation resulting from disputes with our customers could result in substantial costs, liabilities, and loss of revenues.

From time to time we have disputes with our customers over the provisions of long-term electric and coal supply contracts relating to, among other things, electric and coal pricing, coal quality, quantity and the existence of specified conditions beyond our or our customers’ control that suspend performance obligations under the particular contract. Disputes could occur in the future, and we may not be able to resolve those disputes in a satisfactory manner, which could have a material adverse effect on our business, financial condition and results of operations.

Our profitability in our Electric and Coal Operations could decline due to unanticipated operating conditions and other events that are not within our control and that may not be fully covered under our insurance policies.

Our power plant and mining operations are influenced by changing conditions or events that can affect production levels and costs for varying lengths of time and, as a result, can diminish our profitability. These conditions and events include, among others:

processing equipment failures and unexpected maintenance problems;

unavailability of required equipment;

prices for fuel, steel, explosives and other supplies;

fines and penalties incurred as a result of alleged violations of environmental and safety laws and regulations;

variations in thickness of the layer, or seam, of coal;

amounts of overburden, partings, rock and other natural materials;

weather conditions, such as heavy rains, flooding, ice and other natural events affecting operations, transportation or customers;

accidental water discharges and other geological conditions;

seismic activities, ground failures, rock bursts or structural cave-ins or slides;

fires;

employee injuries or fatalities;

labor-related interruptions;

increased reclamation costs;

inability to acquire, maintain or renew mining rights or electric and mining permits in a timely manner, if at all;

fluctuations in transportation costs and the availability or reliability of transportation; and

unexpected operational interruptions due to other factors.

These conditions have the potential to significantly impact our operating results. Prolonged disruption of production would result in a decrease in our revenues and profitability, which could materially adversely impact our quarterly or annual results.

Our inability to obtain commercial insurance at acceptable rates or our failure to adequately reserve for self-insured exposures could increase our expenses and have a negative impact on our business.

We believe that commercial insurance coverage is prudent in certain areas of our business for risk management. Insurance costs could increase substantially in the future and could be affected by natural disasters, fear of terrorism, financial irregularities, cybersecurity breaches and other fraud at publicly traded companies, intervention by the government, an increase in the number of claims received by the carriers, and a decrease in the number of insurance carriers. In addition, the carriers with which we hold our policies could go out of business or be otherwise unable to fulfill their contractual obligations or could disagree with our interpretation of the coverage or the amounts owed. In addition, for certain types or levels of risk, such as risks associated with certain natural disasters or terrorist attacks, we may determine that we cannot obtain commercial insurance at acceptable rates, if at all. Therefore, we may choose to

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forego or limit our purchase of relevant commercial insurance, choosing instead to self-insure one or more types or levels of risks. If we suffer a substantial loss that is not covered by commercial insurance or our self-insurance reserves, the loss and related expenses could harm our business and operating results. Also, exposures exist for which no insurance may be available and for which we have not reserved. In addition, environmental activists could try to hamper fossil-fuel companies by other means including pressuring insurance and surety companies into restricting access to certain needed coverages.

Our Electric and Coal Operations are subject to extensive and costly laws and regulations, and such current and future laws and regulations could increase current operating costs or limit our ability to produce coal.

We are subject to numerous federal, state and local laws and regulations affecting the coal mining industry and the electric generation industry, including laws and regulations pertaining to employee health and safety, permitting and licensing requirements, air and water quality standards, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, the discharge or release of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. Many of these same risks apply to our electric operations and the operation of a coal-fired generating facility, including impacts on air, surface water, groundwater and the environment. Certain of these laws and regulations may impose strict liability without regard to fault or legality of the original conduct. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial liabilities, and the issuance of injunctions limiting or prohibiting the performance of operations. Complying with these laws and regulations could be costly and time-consuming and could delay commencement or continuation of exploration or production operations. The possibility exists that new laws or regulations may be adopted, or that judicial interpretations or more stringent enforcement of existing laws and regulations could occur, which could materially affect our mining operations, cash flow, and profitability, either through direct impacts on our mining and electric operations, or indirect impacts that discourage or limit our customers’ use of coal or purchase of coal-fired electricity. Federal and state laws addressing safety practices impose stringent reporting requirements and civil and criminal penalties for violations. Federal and state regulatory agencies continue to interpret and implement these laws and propose new regulations and standards. Implementing and complying with these laws and regulations has increased and will continue to increase our operational expense and have an adverse effect on our results of operation and financial position.

Changes in the U.S. political environment, including those resulting from the new in Presidential Administration and control of Congress, and to regulatory agencies, may result in significant changes to regulatory framework and enforcements.

As a result of the 2024 presidential election, changes in the Presidency and both houses of Congress may result in significant changes in, and have resulted in uncertainty with respect to, legislation, regulation, implementation or repeal of laws and rules related to our industry, our coal products, and our electric power operations. The new Presidential Administration has rescinded various prior Executive Orders and has issued new Executive Orders and taken other related executive actions. Many of these policy changes will require further rulemaking actions or other formal steps before they would become law. In addition, the new Administration has taken actions to reduce the number of federal employees and to eliminate certain federal agencies or reduce their authority. As a result, there is significant uncertainty regarding whether or how regulations and the agencies that administer and enforce these regulations may change as a result of the actions taken to date and possible future actions by the new Administration. Additionally, there may be litigation over such regulatory changes, and if public enforcement decreases as a result of such changes, private litigation over environmental matters may increase.

Changes to existing policies and rules regarding our industry, including those recently instituted, in addition to anticipated new rule proposals, may result in significant regulatory changes, increased penalties for non-compliance, increased competition, or increased private litigation. We also anticipate that there may be changes in legislative control and legislative priorities. As a result, future legislation may be proposed or passed that may adversely affect our business, operating results and financial condition.

We continually monitor these developments in order to respond to the changing regulatory environment impacting our business. While it is not possible to predict whether and when any such changes will occur, could harm our business,

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operating results and financial condition. If we are slow or unable to adapt to any such changes, our business, operating results and financial condition could be adversely affected.

We may be unable to obtain and renew permits necessary for our operations, which could reduce our production, cash flow and profitability.

Mining and electricity generation companies must obtain numerous governmental permits or approvals that impose strict conditions and obligations relating to various environmental and safety matters in connection with our operations. The permitting rules are complex and can change over time. Regulatory authorities exercise considerable discretion in the timing and scope of permit issuance. The public has the right to comment on permit applications and otherwise participate in the permitting process, including through court intervention. Accordingly, permits required to conduct our operations may not be issued, maintained, or renewed, or may not be issued or renewed in a timely fashion, or may involve requirements that restrict our ability to economically conduct our mining operations or power generation operations. Limitations on our ability to conduct our operations due to the inability to obtain or renew necessary permits or similar approvals could reduce our production, cash flow, and profitability.

In addition, some of our permits could be subject to challenges from the public, which could result in additional costs or delays in the permitting process, or even an inability to obtain permits, permit modifications or permit renewals necessary for our operations.

Inflation could result in higher costs and decreased profitability.

The U.S., European Union and other large economies have recently experienced inflation at a rate significantly higher than recent decades. This recent inflation has resulted in rising prices, including increases in labor costs, freight rates, prices for energy and other costs, and has adversely impacted us and may further impact us negatively in the future. Our efforts to recover inflation-based cost increases from our customers may be hampered as a result of the structure of our contracts and competitive pressures. Accordingly, substantial inflation may have an adverse impact on our business, financial position, results of operations and cash flows. Inflation has also resulted in higher interest rates in the U.S., which could increase our cost of debt borrowing in the future.

Increases in interest rates could adversely affect our business.

Although the Federal Reserve decreased the federal interest rate multiple times in 2025, the rate continues to be elevated and there can be no assurance that the rates will continue to decrease or that it will not be increased in 2026 or beyond. We have exposure to past increases in interest rates and may be affected further in the future. Based on our variable debt level of $30.0 million as of December 31, 2025, comprised of funds drawn on our outstanding bank debt, an increase of one percentage point in the interest rate will result in an increase in annual interest expense of $0.3 million. Any indebtedness we incur in the future may also expose us to increased interest rates, whether as a result of higher fixed rates at the time such a new facility is entered into or because such new indebtedness accrues interest at a variable rate. As a result, our results of operations, cash flows and financial condition could be materially adversely affected by significant increases in interest rates.

Fluctuations in transportation costs and the availability or reliability of transportation could reduce revenues by causing us to reduce our production or by impairing our ability to supply coal to our customers.

Transportation costs represent a significant portion of the total cost of coal for our customers and, as a result, the cost of transportation is a critical factor in a customer’s purchasing decision. Increases in transportation costs could make coal a less competitive source of energy or could make our coal production less competitive than coal produced from other sources. Disruption of transportation services due to weather-related problems, flooding, drought, accidents, mechanical difficulties, strikes, lockouts, bottlenecks or other events could temporarily impair our ability to supply coal to our customers. Our transportation providers could face difficulties in the future that could impair our ability to supply coal to our customers, resulting in decreased revenues. If there are disruptions of the transportation services provided by our primary rail carriers that transport our coal and we are unable to find alternative transportation providers to ship our coal, our business could be adversely affected.

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Conversely, significant decreases in transportation costs could result in increased competition from coal producers in other parts of the country. For instance, difficulty in coordinating the many eastern coal loading facilities, the large number of small shipments, the steeper average grades of the terrain and a more unionized workforce are all issues that combine to make coal shipments originating in the eastern U.S. inherently more expensive on a per-mile basis than coal shipments originating in the western U.S. Historically, high coal transportation rates from the western coal-producing areas into certain eastern markets limited the use of western coal in those markets. Lower rail rates from the western coal producing areas to markets served by eastern U.S. coal producers have created major competitive challenges for eastern coal producers. In the event of further reductions in transportation costs from western coal-producing areas, the increased competition with certain eastern coal markets could have a material adverse effect on our business, financial condition, and results of operations.

States in which our coal is transported by truck may modify or increase enforcement of their laws regarding weight limits or coal trucks on public roads. Such legislation and enforcement efforts could result in shipment delays and increased costs. An increase in transportation costs could have an adverse effect on our ability to increase or to maintain production and could adversely affect revenues.

Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the COVID- 19 pandemic), labor unrest, transport capacity and costs, port security, weather conditions, natural disasters, or other events that could alter or suspend our operations, slow or disrupt port activities, or affect foreign trade are beyond our control and could materially disrupt our ability to participate in the export market for coal sales, which could adversely affect our sales and our results of operations.

We may not be able to successfully grow through future acquisitions.

Our future growth could be limited if we are unable to continue to make acquisitions, or if we are unable to successfully integrate the companies, businesses, or properties we acquire. We may not be successful in consummating any acquisitions and the consequences of undertaking these acquisitions are unknown. Moreover, any acquisition could be dilutive to earnings. Our ability to make acquisitions in the future could require significant amounts of financing that may not be available to us under acceptable terms and may be limited by restrictions under our existing or future debt agreements, competition from other companies for attractive opportunities or the lack of suitable acquisition candidates.

Expansions and acquisitions involve a number of risks, including integration risk, which could cause us not to realize the anticipated benefits.

If we are unable to successfully integrate the companies, businesses, or properties we acquire, our profitability may decline, and we could experience a material adverse effect on our business, financial condition, or results of operations. Expansion and acquisition transactions involve various inherent risks, including:

uncertainties in assessing the value, strengths, and potential profitability of, and identifying the extent of all weaknesses, risks, contingent and other liabilities (including environmental or safety liabilities) of, expansion and acquisition opportunities;

the ability to achieve identified operating and financial synergies anticipated to result from an expansion or an acquisition;

problems that could arise from the integration of the new operations; and

unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying our rationale for pursuing the expansion or acquisition opportunity.

the validity of our assumptions about estimated proved reserves, future production, prices, revenues, capital expenditures, and operating expenses;

a decrease in our liquidity by using a significant portion of our cash generated from operations or borrowing capacity to finance acquisitions;

a significant increase in our interest expense or financial leverage if we incur debt to finance acquisitions;

the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate;

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mistaken assumptions about the overall cost of equity or debt;

our ability to obtain satisfactory title to the assets we acquire;

an inability to hire, train or retain qualified personnel to manage and operate the acquired assets; and

the occurrence of other significant changes, such as impairment of properties, goodwill or other intangible assets, asset devaluation, or restructuring charges.

Any one or more of these factors could cause us not to realize the benefits anticipated to result from an expansion or acquisition. Any expansion or acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. In addition, future expansions or acquisitions could result in us assuming more long-term liabilities relative to the value of the acquired assets than we have assumed in our previous expansions and/or acquisitions.

The estimates of our coal reserves could prove inaccurate and could result in decreased profitability in our Coal Operations.

The estimates of our coal reserves could vary substantially from actual amounts of coal we are able to recover economically. All of the reserves presented in this Annual Report on Form 10-K constitute proven and probable reserves. There are numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond our control. Estimates of coal reserves necessarily depend upon a number of variables and assumptions, any one of which could vary considerably from actual results. These factors and assumptions relate to:

geological and mining conditions, which may not be fully identified by available exploration data and/or differ from our experiences in areas where we currently mine;

the percentage of coal in the ground ultimately recoverable;

historical production from the area compared with production from other producing areas;

the assumed effects of regulation and taxes by governmental agencies;

future improvements in mining technology; and

assumptions concerning future coal prices, operating costs, capital expenditures, severance and excise taxes, and development and reclamation costs.

For these reasons, estimates of the recoverable quantities of coal attributable to any particular group of properties, classifications of reserves based on risk of recovery and estimates of future net cash flows expected from these properties as prepared by different engineers, or by the same engineers at different times, may vary substantially. Actual production, revenue, and expenditures with respect to our reserves will likely vary from estimates, and these variations may be material. Any inaccuracy in the estimates of our reserves could result in higher-than-expected costs and decreased profitability in our Coal Operations.

Mining in certain areas in which we operate is more difficult and involves more regulatory constraints than mining in other areas of the U.S., which could affect the mining operations and cost structures of these areas.

The geological characteristics of some of our coal reserves, such as depth of overburden and coal seam thickness, make them difficult and costly to mine. As mines become depleted, replacement reserves may not be available when required or, if available, may not be mineable at costs comparable to those characteristics of the depleting mines. In addition, permitting, licensing and other environmental and regulatory requirements associated with certain of our mining operations are more costly and time-consuming to satisfy. These factors could materially adversely affect the mining operations and cost structures of, and our customers’ ability to use coal produced by, our mines.

Unexpected increases in raw material costs could significantly impair our operating profitability.

Our operations are affected by commodity prices. In our Coal Operations, we use significant amounts of steel, petroleum products, and other raw materials in various pieces of mining equipment, supplies and materials, including the roof bolts required by the room-and-pillar method of mining. Steel prices and the prices of scrap steel, natural gas and coking coal consumed in the production of iron and steel fluctuate significantly and could change unexpectedly. Our Electric

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Operations are also affected by many of these same commodity prices, including chemicals and catalysts necessary to operate the plant in accordance with environmental and other regulations, fuel oil, limestone, and raw materials used in the manufacture and maintenance of equipment throughout the plant. Inflationary pressures have and could continue to lead to price increases affecting many of the components of our operating expenses such as fuel, steel, other materials and maintenance expense.

There could be acts of nature or terrorist attacks or threats that could also impact the future costs of raw materials. Future volatility in the price of steel, petroleum products or other raw materials will impact our operational expenses and could result in significant fluctuations in our profitability.

Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations and, therefore, our ability to mine or lease coal.

Federal and state laws require us to obtain surety bonds to secure performance or payment of certain long-term obligations, such as mine closure or reclamation costs. We may have difficulty procuring or maintaining our surety bonds. Our bond issuers may demand higher fees, additional collateral, including letters of credit or other terms less favorable to us upon those renewals. Because we are required by state and federal law to have these bonds in place before mining can commence or continue, failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect our ability to mine or lease coal. That failure could result from a variety of factors, including lack of availability, higher expense or unfavorable market terms, the exercise by third-party surety bond issuers of their right to refuse to renew the surety and restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of our financing arrangements.

Certain federal income tax deductions currently available with respect to coal mining and production may be eliminated as a result of future legislation.

In past years, members of Congress have indicated a desire to eliminate certain key U.S. federal income tax provisions currently applicable to coal companies, including the percentage depletion allowance with respect to coal properties. Elimination of those provisions would negatively impact our financial statements and results of operations.

Disruptions in supply chains could significantly impair our operating profitability.

We are dependent upon vendors to supply equipment within our power plant, mining equipment, safety equipment, supplies, and materials. If a vendor fails to deliver on its commitments, or if common carriers have difficulty providing capacity to meet demands for their services, we could experience reductions in our production or increased production costs, which could lead to reduced profitability and adversely affect our results of operations.

The Russian-Ukrainian conflict, and sanctions brought against Russia, as well as other disruptions throughout Europe and the Middle East have caused significant market disruptions that may lead to increased volatility in the price of commodities.

The extent and duration of the military conflict involving Russia and Ukraine, resulting sanctions and future market or supply disruptions in the region are impossible to predict, but could be significant and may have a severe adverse effect on the region. Globally, various governments have banned imports from Russia including commodities such as coal. Additionally, the increasing hostilities in the Middle East, including the recent conflict between Iran and Israel and the United States’ military actions against Iran, could result in additional disruptions in the commodities markets, supply chain and the global economy. These events have caused volatility in the aforementioned commodity markets. Although we have not experienced any material adverse effect on our results of operations, financial condition or cash flows as a result of the war or conflict or the resulting volatility from such events, such volatility, may significantly affect prices for our coal or the cost of supplies and equipment, as well as the prices of competing sources of energy for our electric power plant customers.

These events, along with trade and monetary sanctions, as well as any escalation of the conflicts and future developments, could significantly affect worldwide market prices and demand for our coal and cause turmoil in the

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capital markets and generally in the global financial system. Additionally, the geopolitical and macroeconomic consequences of these events and associated sanctions cannot be predicted, but could severely impact the world economy. If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for products, causing a reduction in our revenues or an increase in our costs and thereby materially and adversely affecting our results of operations.

Natural disasters and other events beyond our control could materially adversely affect us.

Natural disasters or other events outside of our control may cause damage or disruption to our operations, and thus could have a negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. This may result in delays in mine production or delivery to customers, malfunctioning or shutdown of our generating facility. Such events could make it difficult or impossible for us to deliver our products and services to our customers and could decrease demand for our services. We cannot assure you that our power generation and mine facilities will always operate normally in the future.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis, which should be read in conjunction with our consolidated financial statements, is intended to assist in providing an understanding of our results of operations and financial condition and is organized as follows:

Overview. This section provides a general description of our business and recent events.

Results of Operations. This section provides an analysis of our results of operations for the years ended December 31, 2025 and 2024.

Liquidity and Capital Resources. This section provides an analysis of our liquidity and consolidated statements of cash flows.

Critical Accounting Policies, Judgments and Estimates. This section discusses those material accounting policies that involve uncertainties and require significant judgment in their application.

Quantitative and Qualitative Disclosures about Market Risk. This section provides discussion and analysis of the commodity, interest rate and other market risks that our company faces.

Included below is an analysis of our results of operations and cash flows for 2025, as compared to 2024. An analysis of our results of operations and cash flows for 2024, as compared to 2023, can be found under “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2024, which is available through the SEC’s website at www.sec.gov.

The capitalized terms used below have been defined in the notes to our consolidated financial statements. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Hallador or collectively to Hallador and its subsidiaries.

OVERVIEW

General

Hallador is a vertically integrated, independent power producer IPP and fuel company with operations primarily in Indiana. The Company operates across multiple stages of the energy supply chain, from accredited capacity and energy to coal. The Company’s electric operations are located within the MISO footprint. Our operations comprise Hallador Power that provides accredited capacity and energy to utilities and other energy market participants through the MISO interconnection, and Sunrise that mines bituminous coal in Indiana to serve various power plants in the Midwest and Southeast United States.

Operations

Our business is organized based on the services and products we provide in two segments: (i) Electric Operations and (ii) Coal Operations. The Company also holds 50% interests in Sunrise Energy, LLC and Oaktown Gas, LLC, which are accounted for using the equity method. Through its operating subsidiaries, the Company delivers three main products to its customers.

Accredited Capacity. Hallador Power, the Company’s wholly-owned electric subsidiary, owns and operates the Merom Power Plant (“Merom”), a 1,080 MW coal-fired power generating station, consisting of two steam turbine generators. Unit 1 entered commercial operations in 1982 and Unit 2 in 1983. The units are dispatched through its MISO interconnection. In order to purchase energy through the MISO Interconnection, an end user must supply or purchase accredited capacity for an equivalent load. As accredited capacity is primarily available in large quantities from dispatchable sources of energy, such as natural gas and coal-fired power plants, Hallador Power sells accredited capacity to utilities and other energy market participants within the MISO system through PPAs and other bilateral transactions.

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Energy. In addition to accredited capacity, Hallador Power sells wholesale energy to utilities, generation and transmission cooperatives, and other energy market participants within the MISO system through PPAs and other bilateral transactions, and sells on a spot basis in the day-ahead and real-time MISO markets.

Coal. Sunrise, the Company’s wholly-owned mining subsidiary, mines coal from reserves found in the ILB. Coal mined by Sunrise is used as a primary fuel source for generating electricity at various power plants in the Midwest and Southeast United States. In addition, Sunrise has a developed infrastructure for the transport of coal, which is typically sold free on board from the shipping point, including rail networks and truck loading systems, facilitating the efficient movement of the resource from the mine to its customers. Sunrise’s Oaktown Mining Complex is about twenty miles from Merom, which is located in Sullivan County, Indiana, enabling Merom and Sunrise to take advantage of low-cost fuel on a delivered basis.

In the first quarter of 2024, we announced a restructuring of our Coal Operations to address the increase in costs we experienced at our mines, that resulted in a significant reduction in headcount and the temporary idling of our mining operations at the Oaktown Mine No. 2. During the fourth quarter of 2024, we completed our review of the coal mining facilities and future mining plans. The analysis was based upon our finalized coal mining operating plans, market driven pricing and cost trends. As part of that analysis, we determined the carrying amount of our coal mining long-lived asset group was not recoverable and recorded a non-cash, long-lived asset impairment charge of $215.1 million in the fourth quarter of 2024. See “Note 19 – Impairment of Coal Properties” to the Consolidated Financial Statements in this Form 10-K for further information on the impairment analysis.

Strategy and Management Focus

We view our business as two integrated operations, “Electric Operations” (our gigawatt Merom power generating station), and “Coal Operations” (our coal mining and coal sales group).

We strive to achieve margin expansion through organic revenue growth and profitability in our operations by negotiating and fulfilling contracts for accredited capacity, wholesale energy, and thermal coal to utilities and other energy market participants. We continue to monitor opportunities to expand the volume of our electric generation capabilities through expansion of existing facilities utilizing MISO’s ERAS program, or via acquisition. We continue to evaluate other strategic transactions that could add durability, scale, and geographic expansion opportunities to our Electric Operations. While these types of deals are limited and complex, we believe that Hallador is well-positioned to transform retiring and/or underperforming assets into future opportunities. This will enable us to supply high demand end users, such as data centers and on-shored industrial customers, with minimal impact to retail consumers. In addition, we focus our organic capital investments on strategic maintenance projects to maintain our safe operational performance and improve the reliability of Merom.

As discussed further under “Liquidity and Capital Resources — Capitalization” below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk.

Competition and Other External Factors

We are experiencing competition in both our Electric and Coal Operations. This competition drives lower market prices for our products and services. Competitors for our Electric Operations include other power generators who bid into the MISO interconnection, while competitors for our Coal Operations include other mining entities that are able to service our existing and potential customers via truck or rail within the Midwest and Southeast United States.

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RESULTS OF OPERATIONS

Our contracted forward sales for electricity, accredited capacity and coal are detailed below with estimated revenue from forward sales of $1.3 billion as of December 31, 2025.

Forward Sales Position

Total

Power

Energy

Contracted MWh (in millions)

Average contracted price per MWh

Contracted revenue (in millions)

Accredited Capacity

Average daily contracted accredited capacity MW

Average contracted accredited capacity price per MWd

Contracted accredited capacity revenue (in millions)

Total Energy & Accredited Capacity Revenue

Contracted Power revenue (in millions)

Coal

Priced tons - 3rd party (in millions)

Avg price per ton - 3rd party

Contracted coal revenue - 3rd party (in millions)

TOTAL CONTRACTED REVENUE (IN MILLIONS) - CONSOLIDATED

Priced tons - Intercompany (in millions)

Avg price per ton - Intercompany

Contracted coal revenue - Intercompany (in millions)

TOTAL CONTRACTED REVENUE (IN MILLIONS) - SEGMENT

Actual revenue related to forward sales positions may differ materially for various reasons, including price adjustment features for coal quality and cost escalations, volume optionality provisions and potential force majeure events.

Discussion and Analysis of our Reportable Segments

Our business is organized based on the services and products we provide in two 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 our 50% interests in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana and Oaktown Gas, LLC, which we account for using the equity method.

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Electric Operations

Year Ended December 31,

(in thousands)

Delivered energy

Accredited capacity revenue

Electric sales

Fuel

Other operating costs (1)

Other operating and maintenance costs (2)

Cost of purchased power

Utilities

Labor

General and administrative

Segment EBITDA

Other operating revenue

Depreciation, depletion and amortization

ARO accretion

Interest income

Interest expense

Income before Income Taxes

Other operating costs primarily include costs for lime dust.

Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable as discussed above in (1).

Year Ended December 31,

(per MWh)

MWh generated (in thousands)

MWh purchased (in thousands)

MWh sold (in thousands)

Delivered energy

Accredited capacity revenue

Electric sales

Fuel

Other operating costs (1)

Other operating and maintenance costs (2)

Cost of purchased power

Utilities

Labor

General and administrative

Segment EBITDA

Other operating revenue

Depreciation, depletion and amortization

ARO accretion

Interest income

Interest expense

Income (Loss) before Income Taxes

Other operating costs primarily include costs for lime dust.

Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable as discussed above in (1).

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Segment operating revenues from electric operations increased $49.2 million, or 18.8%, compared to 2024 attributable to an increase in sales of delivered energy while accredited capacity revenue was stable. Our electric operations generated an additional 0.9 million MWh and purchased an additional 0.1 million MWh for resale resulting in incremental energy sales of 1.0 million MWh, an increase of 23.7% compared to 2024. Seasonal weather in the first and third quarters of 2025 leading to incremental generation was offset by lower plant availability due to equipment issues at Merom in the fourth quarter impacting total MWh generated. The price per MWh was relatively flat year-over-year at $48.82 for 2025 compared to $48.62 for 2024. Accredited capacity revenue totaled $58.1 million for each of the years ended December 31, 2025 and 2024.

Other operating revenue increased $2.6 million, or 273.6%, compared to 2024 attributable to the exclusivity payments received during the contractual negotiations for the future accredited capacity and energy generated at Merom.

Fuel costs on a segment basis increased $20.8 million, or 18.6%, from 2024. Fuel costs on a consolidated basis increased $15.3 million or 33.0%, from 2024. This increase is due to electricity generation increasing by 0.9 million MWh, or 22.6%. We used an incremental 0.3 million tons in production on both a segment and consolidated basis compared to the prior year. We utilized approximately 0.1 million more tons produced at the Oaktown mining complex in 2025 compared to 2024. The increase in demand for electric power was related to seasonal weather in the first and third quarters of 2025, which resulted in 0.6 million and 0.5 million incremental MWh respectively, compared to the same periods in 2024. The weather contributed to higher demand for natural gas in Indiana causing an increase in the average spot prices of $0.84 per thousand cubic feet, or 24.1% compared to 2024. Total fuel costs benefited from a slight decrease in the cost of coal consumed from $54.30 per ton in 2024 to $53.98 per ton in 2025. We also made an adjustment to coal inventory during the third quarter of 2025 as part of the Company’s routine inventory reconciliation process resulting in an increase in fuel costs of $2.6 million.

Cost of purchased power increased $10.0 million, or 91.9%, from 2024. W hen there is an outage at one of the generating units at Merom or energy hours at the Merom Hub are priced below our production cost, we have the option to make net hourly purchases of power in the MISO market to satisfy our obligations, which we record as cost of purchased power. Approximately 47.0% of the 2025 net hourly purchases occurred in the fourth quarter as a result of the equipment issues.

Utilities increased $2.5 million, or 122.8%, in 2025 compared to 2024. The change was attributable to increased production at Merom, as well as incremental billing for auxiliary power.

Labor increased $1.8 million, or 5.9%, in 2025 versus 2024. The increase in labor costs is attributable to year-over-year wage increases and the use of outsourced labor.

Interest expense increased $7.2 million, or 385.2%. The increase in our interest expense relates to accretion on our prepaid delivered energy contracts that were entered into in October 2024, and various points in 2025.

Income before income taxes increased $5.4 million, or 10.5%, compared to 2024 and is attributable to the items described in the discussion above.

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Coal Operations

Year Ended December 31,

(in thousands)

Coal sales

Fuel

Other operating and maintenance costs

Utilities

Labor

General and administrative

Segment EBITDA

Other operating revenue

Depreciation, depletion and amortization

Asset impairment

ARO accretion

Exploration costs

Gain (loss) on disposal or abandonment of assets, net

Interest income

Interest expense

Settlement of litigation

Income (Loss) before Income Taxes

Year Ended December 31,

(per ton)

Tons sold

Coal sales

Fuel

Other operating and maintenance costs

Utilities

Labor

General and administrative

Segment EBITDA

Other operating revenue

Depreciation, depletion and amortization

Asset impairment

ARO accretion

Exploration costs

Gain (loss) on disposal or abandonment of assets, net

Interest income

Interest expense

Settlement of litigation

Income (Loss) before Income Taxes

During 2024, we undertook an Organizational Restructuring of our Coal Operations. See “ Note 17 – Organizational Restructuring ” in the Consolidated Financial Statements for further information. The Organizational Restructuring provided better operating leverage for our Coal Operations as decreased labor costs were a significant driver of our improved performance.

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Segment operating revenue from coal operations increased $18.5 million, or 9.1%, versus 2024, despite only actively mining Oaktown Mine No. 1 during 2025. The increase was due to increases in volume offset by a reduction in the average sales price for our coal. We sold 4.3 million tons of coal in 2025, an increase of 0.4 million tons, or 11.6%, versus 2024. Our average sales price, on a segment basis, decreased $1.14 per ton from $52.41 per ton to $51.27 per ton. The incremental sales were made possible through increased demand for coal fired electricity due to seasonal weather specifically in the third quarter of 2025. On a consolidated basis, third-party sales increased $11.2 million, or 8.2%, versus 2024 attributable to 0.3 million incremental tons sold, offset by a 3.5% reduction in our average third-party price per ton.

Other operating and maintenance costs increased $10.6 million, or 11.9%, which is attributable to the 0.4 million ton, or 11.6%, increase in total tons sold versus 2024. Labor decreased $7.3 million, or 8.6%, from 2024, resulting in a reduction in labor cost per ton sold of $3.99 attributable to more efficient operations following the idling of Oaktown Mine No. 2 during 2024. The change was driven by the Reorganization Plan disclosed in  “Note 17 — Organizational Restructuring”  to the Consolidated Financial Statements. As part of the Organizational Restructuring, we incurred aggregate expenses of $1.9 million in 2024 that were included in coal operations labor costs. These charges related to compensation, tax, professional, and insurance related expenses and are considered non-recurring charges paid during 2024. Through the organizational restructuring and regular attrition during the year, our coal employee headcount decreased by 305 employees.

We recorded an asset impairment of $215.1 million during 2024. During the fourth quarter of 2024, we completed our annual business plan review. We evaluated core hole samples at several of our mines, reviewing the quality of the mine seam and density of the coal. The core hole samples at our Oaktown Mine No. 2 mine were of a lower quality and density than that of Oaktown Mine No. 1. As such, we decided to temporarily seal Oaktown Mine No. 2, and to focus coal production at Oaktown Mine No. 1, which has lower recovery costs. Due to that decision, we determined a triggering event had occurred and completed an impairment review to determine if the carrying value of our coal properties were impaired by comparing the net book value of our coal properties to estimated undiscounted future net cash flows. The result of the undiscounted cash flow test indicated the carrying amount of our 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 and recorded an impairment charge.

Depreciation, Depletion and Amortization decreased by $27.8 million, or 60.1%, in 2025 compared to 2024. Following the impairment of our coal operations discussed above, the cost basis of our coal operations assets upon which depreciation, depletion and amortization is calculated was much lower resulting in significantly lower expense.

Interest expense decreased $3.2 million, or 29.3%, from $11.0 million in 2024 to $7.8 million in 2025. The decrease is attributable to the net paydown of the Company’s bank facility from $44.0 million at December 31, 2024 to $30.0 million at December 31, 2025 coupled with decreased interest rates of 1.5% on our revolving credit facility and 0.41% on the term loan from 2024 to 2025.

Income (loss) before income taxes increased $274.6 million, or 100.2%, from a loss of $274.1 million in 2024 to income of $0.5 million in 2025. The main drivers of this change in income from operations are described in the discussion above.

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Quarterly coal sales and cost data follow on a segment basis (in thousands, except for per ton data and wash plant recovery percentage):

All Mines

Tons produced

Tons sold

Wash plant recovery in %

Capex (Coal Operations)

Capex per ton sold (Coal Operations)

Average cost per ton sold⁽ⁱ⁾

All Mines

Tons produced

Tons sold

Wash plant recovery in %

Capex (Coal Operations)

Capex per ton sold (Coal Operations)

Average cost per ton sold⁽ⁱ⁾

i) Average cost per ton sold is calculated as the sum of the Coal Operation’s “Fuel”, “Other Operating and Maintenance Costs”, “Utilities” and “Labor” costs, divided by tons sold for the respective period in this table. Coal Operations costs are presented in the “Discussion and Analysis of our Reportable Segments” above. During the fourth quarter of 2024, the Company made certain reclassification adjustments to other operating and maintenance costs and depreciation, depletion and amortization .

Presentation of Consolidated Information

The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Form 10-K. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year. The tables present our unaudited quarterly results of operations for the eight quarters ended December 31, 2025, and include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair presentation of our consolidated operating results for the quarters presented. In the fourth quarter of 2024, the Company made certain reclassifications that reduced “other operating and maintenance costs” and increased “depreciation, depletion and amortization” 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 periods 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.

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Mar-31

Jun-30

Sep-30

Dec-31

Total 2025

(in thousands, except per share information)

SALES AND OPERATING REVENUES:

Electric sales

Coal sales

Other revenues

Total revenue

EXPENSES:

Fuel

Other operating and maintenance costs

Cost of purchased power

Utilities

Labor

Depreciation, depletion and amortization

ARO accretion

Exploration costs

General and administrative

Gain on disposal or abandonment of assets, net

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

Interest income

Interest expense

Loss on extinguishment of debt

Equity method investment income (loss)

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX EXPENSE (BENEFIT):

Current

Deferred

Total income tax expense (benefit)

NET INCOME (LOSS)

NET INCOME (LOSS) PER SHARE:

Basic

Diluted

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

Diluted

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Mar-31

Jun-30

Sep-30

Dec-31

Total 2024

(in thousands, except per share information)

SALES AND OPERATING REVENUES:

Electric sales

Coal sales

Other revenues

Total revenue

EXPENSES:

Fuel

Other operating and maintenance costs

Cost of purchased power

Utilities

Labor

Depreciation, depletion and amortization

ARO accretion

Exploration costs

General and administrative

(Gain) loss on disposal or abandonment of assets, net

Asset impairment

Settlement of litigation

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

Interest income

Interest expense

Loss on extinguishment of debt

Equity method investment income (loss)

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX EXPENSE (BENEFIT):

Current

Deferred

Total income tax expense (benefit)

NET INCOME (LOSS)

NET INCOME (LOSS) PER SHARE:

Basic

Diluted

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

Diluted

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Income Taxes

Our effective tax rate (“ETR”) is approximately 4% for the years ended December 31, 2025 and 2024. For the year ended December 31, 2025, our ETR differs from the statutory rate due primarily to statutory depletion in excess of tax basis and changes in the valuation allowance. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income (loss) before income taxes.

Restricted Stock Grants

See “Item 8. Financial Statements - Note 8 - Stock Compensation Plans” in the Consolidated Financial Statements for a discussion of RSUs.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements at the corporate level. Each of our significant operating subsidiaries typically generate cash from operating activities, but our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, and other factors.

Cash and cash equivalents

Hallador had $15.4 million of cash and restricted cash as of December 31, 2025 versus $12.2 million at December 31, 2024.

Liquidity of Hallador

Our short-term sources of corporate liquidity include (i) cash and cash equivalents held by Hallador, (ii) cash provided by operations, (iii) interest income received on our cash and cash equivalents and, (iv) borrowing availability under our bank facility. For the details of the borrowing availability under our bank facility, see “Item 8. Financial Statements - Note 4 – Bank Debt” to our Consolidated Financial Statements.

The liquidity of Hallador generally is used to fund (i) capital expenditures, (ii) debt service requirements and (iii) general and administrative expenses, as well as to settle certain obligations that are not included on our December 31, 2025 consolidated balance sheet. In this regard, we have commitments related to (a) leases of railcars that qualify for the short-term lease exception and (b) certain operating costs associated with our Electric Operations and our Coal Operations.

From time to time, we may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) the satisfaction of contingent liabilities, (iii) capital distributions to Hallador equity owners, (iv) the repayment of third-party debt, or (v) income tax payments. No assurance can be given that any external funding would be available to us on favorable terms, or at all.

Consolidated Statement of Cash Flows Summary.

The 2025 and 2024 consolidated statements of cash flows are summarized as follows:

Year ended December 31,

Change

(in millions)

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Increase in cash, cash equivalents, and restricted cash

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Operating Activities. The increase in net cash provided by our operating activities is primarily attributable to the combination of (i) an increase in cash provided by our Adjusted EBITDA and related working capital items, (ii) new prepaid forward sales contracts in 2025, and (iii) lower cash payments of interest. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.

Investing Activities. The change in net cash used by our investing activities is primarily attributable to the net effect of (i) an increase in our capital expenditures of $15.8 million (ii) a $1.1 million decrease in the proceeds from sales of equipment, and (iii) a $3.2 million decrease in proceeds from held-for-sale investments.

For the year ended December 31, 2025, our Capex was $69.2 million allocated as follows (in millions):

Oaktown

Merom

Merom – ELG

ERAS Project

Capex per the Condensed Consolidated Statements of Cash Flows

We expect our 2026 capital expenditures to modestly increase as compared to our 2025 capital expenditures, excluding any impacts of the ERAS project. The actual amount of our 2026 capital expenditures may vary from our expectations for a variety of reasons, including (i) changes in (a) the competitive or regulatory environment, (b) business plans, or (c) our expected future operating results and (ii) the availability of sufficient capital. Accordingly, no assurance can be given that our actual capital expenditures will not vary materially from our expectations.

Financing Activities. The decrease in net cash used in our financing activities is primarily attributable to the net effect of (i) a decrease in cash used of $33.5 million due to lower net repayments of debt, (ii) a reduction in cash provided from the issuance of equity securities of $21.0 million, and (iii) a decrease in cash provided of $5.1 million in proceeds from sales and leaseback arrangements.

Capitalization

We seek to maintain our debt at levels that provide for equity returns without assuming undue risk. Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in our credit agreement is dependent primarily on our ability to maintain or increase the Adjusted EBITDA of our consolidated businesses, maintain adequate liquidity and coverage of fixed charges, and to achieve adequate returns on our capital expenditures and acquisitions. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations. In addition, our ability to obtain additional debt financing is limited by the incurrence-based leverage covenants contained in our debt instruments. For example, if the Adjusted EBITDA of our business was to decline, our ability to obtain additional debt could be limited.

As of December 31, 2025, our bank debt was $30.0 million, which was repaid subsequent to year-end as further described below. 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 Bank, National Association (in its capacity as administrative agent, "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 provided for additional flexibility for the Company to enter into prepaid forward power sale contracts, provided that the Company repaid 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, would take the place of the $6.5 million quarterly Term Loan payments.

On June 27, 2025,   the Company executed the Third Amendment (“Third Amendment”) to our Credit Agreement, which was accounted for as a debt modification. The primary purpose of the Third Amendment was to provide additional

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operating flexibility for the remainder of 2025 by redefining covenants, deferring certain covenants until the third quarter of 2025 and moving our October 2025 payment to January 2026. The Third Amendment provided for additional flexibility for the Company to enter into prepaid forward power sale contracts, provided that the Company maintained one hundred percent of the outstanding aggregate principal balance of the Term Loan as a compensating balance. As part of the Third Amendment, the required October 2025 principal payment of $6.0 million and the January 2026 principal payment of $6.5 million, pursuant to the Term Loan, were both due in January 2026. The balance of the Term Loan was paid off in November 2025.

On March 5, 2026, Hallador entered into a credit agreement with Texas Capital Bank and Old National Bank, among others, that replaces the Credit Agreement with PNC Bank and includes a $75.0 million revolving credit facility (the "New Revolving Credit Facility") and a $45.0 million delayed draw term loan (the "Delayed Draw Term Loan", and together with the New Revolving Credit Facility, the "New Credit Facility"). The New Credit Facility bears interest with margins ranging from 2.25% to 3.75% above SOFR or the applicable base rate, subject to a SOFR floor of 1.00%. The applicable margin is determined based upon the Company's leverage ratio and the type of loan drawn. The New Credit Facility includes a commitment fee of 0.50% on any unused portions of the New Revolving Credit Facility. If the Delayed Draw Term Loan occurs, which is subject to meeting certain conditions, the principal balance of the Delayed Draw Term Loan shall be due and payable in equal quarterly installments of 2.5% of the original principal amount of such Delayed Draw Term Loan with a final payment of the remaining balance upon maturity. The New Credit Facility matures on March 5, 2029, and is collateralized by substantially all our assets. When drawn, the proceeds from the New Credit Facility may be used for ongoing working capital and general corporate purposes. Liquidity at December 31, 2025 excludes the availability under the New Credit Facility.

See “ Item 8. Financial Statements - Note 4 – Bank Debt ” to our Consolidated Financial Statements for additional discussion about our bank debt and related liquidity.

Off-Balance Sheet Arrangements

Other than our surety bonds for reclamation, we have no material off-balance sheet arrangements. We have recorded the present value of reclamation obligations of $17.8 million, including $6.2 million at Merom, presented as asset retirement obligations (ARO) in our accompanying consolidated balance sheets. In the event we are not able to perform reclamation, we have surety bonds in place totaling $30.9 million to cover ARO.

CRITICAL ACCOUNTING ESTIMATES

In connection with the preparation of our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe the following accounting policies are critical in the preparation of our consolidated financial statements because of the judgment necessary to account for these matters and the significant estimates involved, which are susceptible to change:

estimates of coal reserves;

asset retirement obligations;

income tax accounting; and

impairment of long-lived assets.

Estimates of Coal Reserves

The reserve estimates are used in the depreciation, depletion and amortization calculations and our internal cash flow projections. If these estimates turn out to be materially under or over-stated, our depreciation, depletion and amortization expense and impairment test may be affected. The process of estimating reserves is complex, requiring significant judgment in the evaluation of all available geological, geophysical, engineering and economic data. The reserve

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estimates are prepared by professional engineers, both internal and external, and are subject to change over time as more data becomes available. Changes in the reserves estimates from the prior year were nominal.

Asset Retirement Obligations

SMCRA and similar state statutes require, among other things, that surface disturbance be restored in accordance with specified standards and approved reclamation plans. SMCRA requires us to restore affected surface areas to approximate the original contours as contemporaneously as practicable with the completion of surface mining operations. Federal law and some states impose on mine operators the responsibility for replacing certain water supplies damaged by mining operations and repairing or compensating for damage to certain structures occurring on the surface as a result of mine subsidence, a consequence of longwall mining and possibly other mining operations.

Obligations are reflected at the present value of their future cash flows. We reflect 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. We use 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. Activities include reclamation of pit and support acreage at surface mines, sealing portals at underground mines, reclamation of refuse areas, slurry ponds and our landfill.

Accretion expense is recognized on the obligation through the expected settlement date. On at least an annual basis, we review our entire reclamation liability and make necessary adjustments for permit changes as granted by state authorities, changes in the timing and extent of reclamation activities, and revisions to cost estimates and productivity assumptions, to reflect current experience. Any difference between the recorded amount of the liability and the actual cost of reclamation will be recognized as a gain or loss when the obligation is settled.

Income Tax Accounting

We are required to estimate the amount of income taxes for the current year and the deferred tax assets and liabilities for the future tax consequences of differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating losses and tax credit carryforwards, using enacted tax rates for the year in which those temporary differences are expected to be recovered or settled. This process requires our management to make assessments regarding the timing and probability of the ultimate tax impact of such items.

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. 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 deductions would be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position. We have not taken any significant uncertain tax positions and our tax provision and returns are prepared by a large public accounting firm with significant experience in energy-related industries. Changes to the estimates from reported amounts in the prior year were not significant.

Impairment of Long-lived Assets

Long-lived assets used in operations are depreciated and assessed for impairment annually or whenever changes in facts and circumstances indicate a possible significant deterioration in future cash flows is expected to be generated by an asset group. For impairment assessments, management groups individual assets based on a judgmental assessment of the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The determination of the lowest level of cash flows is largely based on nature of production, common infrastructure, common sales points, common regulation and management oversight to make such determinations. These determinations could impact the analysis and measurement of a potential asset impairment. This cash flow analysis is largely dependent upon the operating plans of the Company, which are reviewed by the Company and its Board of Directors no less than annually, normally during the 4 th  quarter of each year. Changes in anticipated activity levels, pricing or operating expenses can have significant effects on the ultimate value of the undiscounted cash flow analysis.

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