What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-06 · 144 added, 71 removed, 244 unchanged (47% of the section changed)

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• Material Changes in Results of Operations.

This section provides an analysis of our results of operations for the three months ended March 31, 2026 and 2025.

This section provides an analysis of our results of operations for the three and six months ended June 30, 2026 and 2025.

• Material Changes in Financial Condition.

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In the following text, the terms “we,” “our,” “the Company” and “us” may refer, as the context requires, to Hallador Energy Company (“Hallador”) or collectively to Hallador and its subsidiaries.

Unless otherwise indicated, operational data is presented as of March 31, 2026.

Unless otherwise indicated, operational data is presented as of June 30, 2026.

FORWARD-LOOKING STATEMENTS

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• risks associated with the expansion of our operations and properties;

• risks relating to Midcontinent Independent System Operator’s (“MISO”) Expedited Resource Addition Study (“ERAS”) program review and approval process;

• risks relating to our ability to fund and perform our obligations under the Asset Purchase Agreement (the "APA") with Energy World Corporation Ltd.

for the acquisition of turbine equipment, including our ability to secure financing for the remaining purchase price and related costs on a timely basis or at all, and the risk of default, forfeiture of amounts paid, or termination of the related agreements if we are unable to do so;

• risks relating to the international and domestic transportation, refurbishment, and delivery of the turbine equipment acquired under the APA, including delays, damage or loss in transit, and costs that exceed our current estimates;

• risks that we may be unable to deploy the turbine equipment acquired under the APA as planned, including because the Midcontinent Independent System Operator (“MISO”) does not approve our Expedited Resource Addition Study (“ERAS”) application or the related expansion project does not otherwise proceed, which could

require us to sell the project together with the equipment or sell the equipment on a standalone basis, potentially at a loss;

• risks relating to our ability to participate in the MISO ERAS program, which ultimately requires the approval of MISO of our application and is a capital intensive project subject to construction, operational, financial, regulatory and legal risks that could impact the project’s viability and/or timeline;

• risks relating to our ability to secure agreements in support of the development and construction of planned projects, including the expansion of the Merom Generating Station through the ERAS program;

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• other factors, including those discussed in “Item 1A.

Risk Factors” in our 2025 Form 10-K.

Risk Factors” in our Annual Report on Form 10-K.

If one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement.

When considering forward-looking statements, you should also keep in mind the risk factors described in “Item 1A.

Risk Factors” in our 2025 Form 10-K.

Risk Factors” in our Annual Report on Form 10-K.

The risk factors could also cause our actual results to differ materially from those contained in any forward-looking statement.

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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 monitor opportunities to expand the capacity 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 diversification, durability, scale, and geographic expansion opportunities to our Electric Operations.

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As discussed further under “Material Changes in Financial Condition — Capitalization” below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk.

Recent Developments

Turbine Equipment Acquisition.

On May 30, 2026, we entered into an APA with Energy World Corporation Ltd.

to acquire approximately 460 MW of Siemens gas turbines, generators, a steam turbine, and ancillary equipment for a total purchase price of $350.0 million.

We expect to incur approximately $100.0 million of additional costs for transportation, refurbishment, insurance, and logistics in connection with the delivery of the equipment.

The equipment supports our proposed expansion of generation capacity through MISO's ERAS program.

We retain the flexibility to determine the path that best creates value for shareholders, including advancing the full project, selling the project together with the equipment, or selling the equipment on a standalone basis.

See “ Note 14 — Commitments and Contingencies” to the condensed consolidated financial statements and “Liquidity and Capital Resources” below for additional information.

Competition and Other External Factors

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MATERIAL CHANGES IN RESULTS OF OPERATIONS

Our contracted forward sales for accredited capacity, energy, and coal are detailed below with estimated revenue from forward sales of $1.2 billion as of March 31, 2026.

Forward Sales Position (unaudited)*

Our contracted forward sales for accredited capacity, energy, and coal are detailed below with estimated revenue from forward sales of $2.4 billion as of June 30, 2026.

Forward Sales Position *

Accredited Capacity

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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, including rollover of unfulfilled coal commitments into future periods, and potential force majeure events.

Forward sales figures in the 2026 column are for the period from April 1, 2026 through December 31, 2026.

* Actual revenue related to forward sales positions may differ materially for various reasons, including unit contingencies, price adjustment features for coal quality and cost escalations, volume optionality provisions, including rollover of unfulfilled coal commitments into future periods, and potential force majeure events.

Certain contracted forward sales positions included above are subject to approval by the Indiana Utility Regulatory Commission.

Forward sales figures in the 2026 column are for the period from July 1, 2026 through December 31, 2026.

Discussion and Analysis of our Reportable Segments

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Electric Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Delivered Energy

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Income before Income Taxes

(1) Other operating costs primarily include costs for lime dust.

(2) Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable included in fuel and other operating costs.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

MWh Generated (in thousands)

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(2) Other operating and maintenance costs include all other operating and maintenance costs with the exceptions of those costs considered variable included in fuel and other operating costs.

Segment operating revenues from electric operations decreased $20.8 million, or 24.3%, compared to the first quarter of 2025, attributable to a $22.6 million decrease in sales of delivered energy partially offset by a $1.7 million increase in accredited capacity revenue.

Our Electric Operations generated 0.5 million fewer MWh, but purchased an additional 0.1 million MWh for resale resulting in a net decrease of energy sales of 0.4 million MWh, a decrease of 27.9% compared to the first quarter of 2025.

Lower plant availability in the first quarter of 2026 due to equipment issues at Merom had a significant impact on the total MWh generated.

The impacted generating unit is scheduled to undergo a major maintenance outage beginning in May 2026, which we expect will improve performance upon completion.

The price per MWh for delivered energy decreased 4.8% year-over-year from $46.42 for the three-month period ended March 31, 2025 to $44.21 in 2026.

Accredited capacity revenue increased 12.5% to $15.5 million for the three-month period ended March 31, 2026 from $13.8 million in the comparable prior year period.

Fuel costs on a segment basis decreased $10.5 million, or 27.7%, from the first quarter of 2025.

Fuel costs on a consolidated basis decreased $0.2 million or 1.5%, from the first quarter of 2025.

The decrease is due to electricity generation falling by 0.5 million MWh, or 34.0%.

We used 0.2 million tons less in production on both a segment and consolidated basis, as we utilized 0.2 million less tons produced at the Oaktown mining complex in 2026 compared to 2025.

The decrease in electric power generation was attributable to the aforementioned equipment issues, which resulted in 0.5 million lower MWh generated, compared to the same period in 2025.

The weather contributed to higher demand for electricity and natural gas causing an increase in the average spot price at Chicago citygate of $1.30 per thousand cubic feet to $5.70 per thousand cubic feet in January 2026 compared to January 2025.

Total fuel costs were impacted by an increase in the cost of coal consumed from $53.80 per ton in 2025 to $54.58 per ton in 2026.

Other operating and maintenance costs increased $4.3 million, or 95.6%, from the first quarter of 2025.

The increase was driven by increased maintenance activities attributable to the aforementioned equipment issues at Merom.

In addition to the increased maintenance activities in the first quarter of 2026, t he impacted generating unit will receive a major maintenance outage beginning in May.

Cost of purchased power increased $8.0 million, or 117.3%, from the first quarter of 2025.

Segment operating revenues from electric operations decreased $0.5 million, or 0.8%, compared to the second quarter of 2025, attributable to a $3.2 million decrease in sales of delivered energy that was partially offset by a $2.8 million increase in accredited capacity revenue.

The price per MWh for delivered energy decreased 20.8% year-over-year from $52.66 for the three-month period ended June 30, 2025 to $41.69 in 2026, primarily attributable to contract mix, driven by increased deliveries under lower-priced prepaid forward sales contracts.

Our Electric Operations generated a slightly increased quantity of MWh and purchased an additional 0.1 million MWh for resale resulting in a net increase of energy sales of 0.1 million MWh, an increase of 17.1% compared to the second quarter of 2025.

The annual planned major maintenance outages had a significant impact on the total MWh generated during both the three months ended June 30, 2026 and 2025.

Accredited capacity revenue increased 17.4% to $18.6 million for the three-month period ended June 30, 2026 from $15.8 million in the comparable prior year period.

Fuel costs on a segment basis increased $3.9 million, or 18.4%, from the second quarter of 2025.

The increase is due to electric power generation increasing by 5.7% coupled with an increase in the cost of coal consumed of 2.7%, from $53.38 per ton in 2025 to $54.82 per ton in 2026 along with an increase in tons consumed.

Fuel costs on a consolidated basis were relatively unchanged from the second quarter of 2025 at $14.7 million, as fewer tons purchased from third parties, reflecting a heavier reliance on coal from Sunrise, offset a 6.0% increase in the average price per ton of coal purchased from third parties.

Natural gas pricing did not impact the demand for coal, as the average spot price at Chicago citygate only increased by $0.02 per thousand cubic feet to $2.94 per thousand cubic feet in April 2026 compared to April 2025.

The weather year-over-year had a muted impact on the demand for electricity.

Other operating and maintenance costs increased $5.6 million, or 52.3%, from the second quarter of 2025.

The increase was driven by increased maintenance activities in connection with the planned major maintenance outage.

The impacted generating unit came back online in July 2026.

Cost of purchased power increased $6.5 million, or 297.5%, from the second quarter of 2025.

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 economic net hourly purchases of power in the MISO market to satisfy our obligations, which we record as cost of purchased power.

In 2026, we purchased an incremental 51,000 MWh compared to 2025, an increase of 38.6% that was further impacted by the energy pricing dynamics at the time of the purchases.

Utilities expense decreased $0.5 million, or 80.2%, in the first quarter of 2026 compared to 2025.

The change was attributable to decreased production at Merom, as well as new meters installed in 2025 that allow for active management of pricing of auxiliary power in the day-ahead market.

Labor expenses were largely flat for the first quarter of 2026 versus the comparable period in 2025 as headcount was relatively stable year-over-year.

Interest expense increased $1.2 million, or 70.2%, from the first quarter of 2025.

The increase in our interest expense relates to accretion on our prepaid delivered energy contracts that were entered into in 2024 and 2025.

Income before income taxes decreased $24.3 million from $19.2 million of income before taxes in the first quarter of 2025 to a loss before taxes of $5.0 million in the first quarter of 2026, which is attributable to the items described in the discussion above.

In 2026, we purchased an incremental 0.1 million MWh compared to 2025, an increase of 119.0% that was further impacted by the energy pricing dynamics at the time of the purchases.

Labor expenses increased $1.0 million or 12.9% for the second quarter of 2026 versus the comparable period in 2025 driven by the impact of incremental maintenance efforts associated with the planned major maintenance outage in combination with annual wage increases.

Other operating revenue decreased $2.9 million or 92.6% compared to the second quarter of 2025, which included $3.0 million of revenue received related to contractual negotiations on an exclusivity agreement that did not recur in 2026.

Depreciation, depletion and amortization increased $0.3 million, or 6.2%, from the second quarter of 2025 as incremental depreciation from recent capital expenditures placed in service was only partially offset by lower depreciation expense from extending the estimated useful lives of the Merom Generating Station and related assets through 2040.

This change was accounted for prospectively as a change in accounting estimate and decreased depreciation expense by $1.2 million for the three months ended June 30, 2026.

See “Note 1 – Basis of Presentation” to the condensed consolidated financial statements for further information.

Interest expense increased $0.5 million, or 27.8%, from the second quarter of 2025.

The increase in our interest expense primarily relates to accretion on our prepaid delivered energy contracts that were entered into in 2024 and 2025.

Hallador has not entered into any new prepaid delivered energy contracts in 2026.

Income before income taxes decreased $21.4 million from $11.6 million of income before taxes in the second quarter of 2025 to a loss before income taxes of $9.8 million in the second quarter of 2026, which is attributable to the items described in the discussion above.

Segment operating revenues from electric operations for the six months ended June 30, 2026 decreased $18.6 million, or 12.8% compared to the first half of 2025, attributable to a $23.1 million decrease in sales of delivered energy partially offset by a $4.5 million increase in accredited capacity revenue.

Our Electric Operations generated 0.4 million fewer MWh, but purchased an additional 0.2 million MWh for resale resulting in a net decrease of energy sales of 0.3 million MWh, a decrease of 12.1% compared to the first half of 2025.

Lower plant availability in the first half of 2026 due to equipment issues at Merom had a significant impact on the total MWh generated.

The impacted generating unit underwent a planned major maintenance outage beginning in May and the unit returned to operation in July.

The price per MWh for delivered energy decreased 8.8% year-over-year from $48.61 for the six-month period ended June 30, 2025 to $44.31 in 2026.

Accredited capacity revenue increased 15.1% to $34.1 million for the six-month period ended June 30, 2026 from $29.7 million in the comparable prior year period.

Fuel costs on a segment basis decreased $6.6 million, or 11.1%, from the first half of 2025.

The decrease is due to electric power generation falling by 0.4 million MWh, or 20.3%.

We consumed 0.1 million fewer tons of coal on both a segment and consolidated basis in 2026 compared to 2025.

The decrease in electric power generation was largely attributable to the equipment issues experienced during Q1 2026, which resulted in 0.4 million lower MWh generated during the six months ended June 30, 2026, compared to the same period in 2025.

The decrease was partially offset by an increase in the cost of coal consumed from $53.65 per ton in 2025 to $54.69 per ton in 2026.

Fuel costs on a consolidated basis were relatively unchanged from the first half of 2025 at $29.1 million down from $29.3 million in 2025.

Other operating and maintenance costs increased $9.9 million, or 65.2%, from the first half of 2025.

The increase was driven by increased maintenance activities attributable to the aforementioned equipment issues at Merom in combination with expenses from the planned major maintenance outage.

The impacted generating unit returned to service in July 2026 .

Cost of purchased power increased $14.5 million, or 160.7%, from the first half of 2025.

In 2026, we purchased an incremental 0.2 million MWh compared to 2025, an increase of 69.9% that was further impacted by the energy pricing dynamics at the time of the purchases.

Utilities expense increased $2.0 million, or 98.9%, compared to 2025, which was largely attributable to the frequency and timing of energy intensive start-ups of the generating units.

Labor expenses increased $1.0 million, or 6.1% in the first half of 2026 versus the comparable period in 2025 driven by the impact of incremental maintenance efforts associated with planned major maintenance outage in combination with annual wage increases.

Other operating revenue decreased $2.8 million or 88.5% compared to the first half of 2025.

This decrease primarily reflects the $3.0 million exclusivity agreement fee received in the second quarter of 2025.

Depreciation, depletion and amortization increased $1.5 million, or 14.9%, compared to the first half of 2025, driven by capital additions placed in service, partially offset by a $1.2 million decrease resulting from the change in the estimated useful life of the Merom Generating Station described above.

Interest expense increased $1.7 million, or 48.0%, from the first half of 2025.

The increase in our interest expense primarily relates to accretion on our prepaid delivered energy contracts that were entered into in 2024 and 2025.

Hallador has not entered into any new prepaid delivered energy contracts in 2026.

Income before income taxes decreased $45.7 million from $30.8 million of income before taxes in the first half of 2025 to a loss before taxes of $14.9 million in the first half of 2026, which is attributable to the items described in the discussion above.

Coal Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Other Operating and Maintenance Costs

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Income (Loss) before Income Taxes

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Tons Sold (in thousands)

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Interest expense

Loss on Extinguishment of Debt

Income (Loss) before Income Taxes

Segment operating revenue from coal operations (including intercompany sales to Merom) decreased $8.4 million, or 15.3%, compared to the first quarter of 2025.

Segment operating revenue from coal operations (including intercompany sales to Merom) increased $5.3 million, or 11.7%, compared to the second quarter of 2025.

The increase was driven by higher volume in combination with an increase in the average sales price for our coal.

We sold 0.9 million tons of coal during the second quarter of 2026, an increase of 44,000 tons, or 4.9%, versus 2025.

Our average sales price, on a segment basis, increased $3.31 per ton from $51.16 per ton to $54.47 per ton.

The increased sales were driven by improved coal demand from Merom in preparation for summer, as Sunrise sold 59,000 incremental tons to Merom, partially offset by a 2.0% decrease in tons sold to third parties in the second quarter of 2026 compared to 2025.

On a consolidated basis, third party sales increased $2.5 million,

or 6.4%, versus the second quarter of 2025, attributable to the 8.6% increase in our average third party price per ton, which more than offset a 2.0% decrease in tons sold to third parties.

Other operating and maintenance costs increased $4.6 million, or 25.1%, which is largely attributable to higher mine expansion costs as well as the increase in total tons sold of 44,000, or 4.9%, versus the second quarter of 2025.

Labor expenses increased $1.0 million, or 5.4%, from the second quarter of 2025, leading to a small increase in labor cost per ton sold of $0.09 per ton up to $21.62 per ton for the three months ended June 30, 2026.

Depreciation, Depletion and Amortization increased by $4.0 million compared to the second quarter of 2025, largely as a result of a $4.8 million out-of-period adjustment recorded during the second quarter of 2025 due to an overstatement of depreciation, depletion and amortization expense in the first quarter of 2025.

Interest expense decreased $1.8 million, or 93.1%, from $1.9 million for the three months ended June 30, 2025 to $0.1 million in 2026.

The decrease is attributable to the paydown of the Company’s previous bank facility from $30.0 million at December 31, 2025, while the new bank facility is not held within the Coal Operations segment.

Income before income taxes decreased by $3.3 million from income before income taxes of $1.4 million in the second quarter of 2025 to a loss before income taxes of $1.9 million in 2026.

The main drivers of this change in income (loss) before income taxes are described in the discussion above.

Segment operating revenue from coal operations (including intercompany sales to Merom) decreased $3.0 million, or 3.0%, compared to the six months ended June 30, 2025.

The decrease was driven by lower volume partially offset by an increase in the average sales price for our coal.

We sold 0.9 million tons of coal during the first quarter of 2026, a decrease of 0.2 million tons, or 20.3%, versus 2025.

We sold 1.8 million tons of coal during the first six months of 2026, a decrease of 0.2 million tons, or 8.8%, versus 2025.

Our average sales price, on a segment basis, increased $3.26 per ton from $51.15 per ton to $54.41 per ton.

The decreased sales were driven by lower coal demand from Merom due to the aforementioned equipment issues.

Sunrise sold 0.3 million fewer tons of coal to Merom, offset by a 7.2% increase in tons sold to third parties in the first quarter of 2026 compared to 2025.

On a consolidated basis, third party sales increased $4.9 million, or 16.2%, versus the first quarter of 2025 attributable to 0.3 million incremental tons sold to third parties, supplemented by an 8.4% increase in our average third party price per ton.

Other operating and maintenance costs decreased $3.6 million, or 15.0%, which is attributable to the decrease in total tons sold of 0.2 million, or 20.3%, versus the first quarter of 2025, partially offset by mine expansion costs at Oaktown.

Labor expenses increased $0.4 million, or 2.0%, from the first quarter of 2025;

however, because tons sold declined 20.3%, labor cost per ton sold rose $4.92 as production at the mine outpaced coal sales.

Depreciation, Depletion and Amortization decreased by $5.6 million, or 57.1%, compared to the first quarter of 2025, partially attributable to the lower production during the first quarter of 2026.

Following the impairment of our coal operations, the cost basis of our coal operations assets upon which depreciation, depletion and amortization is calculated was also lower resulting in significantly lower expense.

Interest expense decreased $1.2 million, or 59.4%, from $2.0 million for the three months ended March 31, 2025 to $0.8 million in 2026.

The decrease is attributable to the paydown of the Company’s bank facility from $30.0 million at December 31, 2025 to zero at March 31, 2026.

Loss before income taxes narrowed by $2.1 million, or 41.4% compared to the first quarter of 2025.

Sunrise sold 0.2 million fewer tons of coal to Merom, offset by a 2.0% increase in tons sold to third parties in the six months ended June 30, 2026 compared to 2025.

On a consolidated basis, third party sales increased $7.3 million, or 10.8%, versus the first half of 2025 attributable to 2.0% more tons sold to third parties, supplemented by an 8.5% increase in our average third party price per ton.

Other operating and maintenance costs increased $1.0 million, or 2.4%, which is attributable to higher mine expansion costs, offset by the decrease in total tons sold of 0.2 million, or 8.8%, versus the first six months of 2025.

Labor expenses increased $1.4 million, or 3.7%, from the six months ended June 30, 2025;

however, because tons sold declined 8.8%, labor cost per ton sold rose $2.66 to $22.06 per ton as production at the mine outpaced coal sales.

Depreciation, Depletion and Amortization decreased by $1.6 million, or 15.3%, compared to the first six months of 2025.

Interest expense decreased $3.0 million, or 76.0%, from $3.9 million for the six months ended June 30, 2025 to $0.9 million in 2026.

Loss before income taxes increased by $1.2 million, or 33.1% compared to the first six months of 2025.

The main drivers of this change in loss before income taxes are described in the discussion above.

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EARNINGS (LOSS) PER SHARE

Our effective tax rate (“ETR”) is estimated at ~5.2% and ~0% for the three months ended March 31, 2026 and 2025, respectively.

For the three months ended March 31, 2026, we estimated our annual ETR based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate.

Our effective tax rate (“ETR”) is estimated at ~6.4% and ~0% for the six months ended June 30, 2026 and 2025, respectively.

For the six months ended June 30, 2026, we estimated our annual ETR based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate.

Our ETR differs from the statutory rate due primarily to statutory depletion in excess of tax basis and changes in the valuation allowance.

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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.

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 $43.4 million of cash and restricted cash as of March 31, 2026 versus $15.4 million at December 31, 2025.

Hallador had $34.9 million of cash and restricted cash as of June 30, 2026 versus $15.4 million at December 31, 2025.

Liquidity of Hallador

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Financial Statements - Note 4 – Bank Debt” to our unaudited condensed 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 March 31, 2026 unaudited condensed consolidated balance sheet.

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 June 30, 2026 unaudited condensed 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.

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Liquidity consists of our additional borrowing capacity and unrestricted cash and cash equivalents.

As of March 31, 2026, we had additional borrowing capacity of $60.8 million under the New Revolving Credit Facility and total liquidity of $97.5 million.

Our additional borrowing capacity is net of $14.2 million in outstanding letters of credit as of March 31, 2026 that were required to maintain surety bonds and other credit support obligations.

As of June 30, 2026, we had additional borrowing capacity of $55.3 million under the New Revolving Credit Facility and total liquidity of $84.2 million.

Our additional borrowing capacity is net of $19.7 million in outstanding letters of credit as of June 30, 2026 that were required to maintain surety bonds and other credit support obligations.

Turbine Equipment Acquisition

As of June 30, 2026, we had paid $8.2 million of the purchase price under the APA in the form of payments to third party vendors made on behalf of the Seller, and subsequent to quarter end, through July 31, 2026, we paid an additional $3.0 million to such vendors.

The remaining balance of the purchase price of approximately $338.8 million, together with the approximately $100.0 million of expected transportation, refurbishment, insurance, and logistics costs, represents a material cash requirement that significantly exceeds our liquidity of $84.2 million as of June 30, 2026.

The timing of the remaining payments will be determined in accordance with the APA, with the substantial majority of the purchase price expected to become payable in connection with delivery of the equipment, currently anticipated in the second half of 2026.

We are evaluating financing alternatives to fund the remaining purchase price and related costs, which may include project-level financing, structured financing arrangements supported by our contracted revenue base, proceeds from long-term offtake agreements, borrowings under our New Credit Facility, and issuances of debt or equity securities.

There can be no assurance that financing will be available on acceptable terms, or at all.

If we are unable to obtain financing on a timely basis, we may seek to renegotiate or extend the payment terms under the APA, which may not be available to us on acceptable terms or at all.

If we are unable to renegotiate or extend the payment terms, a failure to make payments when due could result in termination of the APA, the forfeiture of amounts we have already paid, and other damages.

In addition, our ability to incur additional indebtedness under our New Credit Facility to fund the remaining purchase price and related costs is subject to compliance with the financial covenants described under “Item 1.

Financial Statements - Note 4 – Bank Debt” to our unaudited condensed consolidated financial

statements, as amended, and there can be no assurance that we will have sufficient availability under those covenants when needed, or that our lenders would agree to further amend those covenants if required.

Consolidated Statement of Cash Flows Summary.

The first quarter of 2026 and 2025 unaudited condensed consolidated statements of cash flows are summarized as follows:

Three Months Ended March 31,

Net cash provided by operating activities

The unaudited condensed consolidated statements of cash flows are summarized as follows for the periods presented:

Six Months Ended June 30,

Net cash (used in) provided by operating activities

Net cash used in investing activities

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Operating Activities.

The decrease in net cash provided by our operating activities is primarily attributable to the combination of (i) lower Adjusted EBITDA and related working capital items, (ii) increased inventory levels, (iii) incremental amortization of prepaid forward sales contracts for cash received in prior periods, and (iv) lower cash payments of interest, partially offset by incremental cash received for annual sales of accredited capacity compared to the first quarter of 2025.

The decrease in net cash provided by our operating activities is primarily attributable to the combination of (i) lower Adjusted EBITDA and related working capital items, (ii) increased inventory levels, (iii) lower cash receipts from prepaid forward sales contracts, partially offset by lower cash payments of interest and incremental cash received for annual sales of accredited capacity compared to the first half of 2025.

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 condensed consolidated statements of operations.

Investing Activities.

The change in net cash used by our investing activities is primarily attributable to (i) a decrease in our capital expenditures of $4.0 million partially attributable to lower capitalization of mine development costs and (ii) a $0.2 million increase in the proceeds from sales of equipment.

For the three months ended March 31, 2026, capital expenditures (“Capex”) was $7.7 million allocated as follows (in millions):

The change in net cash used by our investing activities is primarily attributable to (i) an increase in our capital expenditures of $9.2 million attributable to incremental capital expenditure projects of $4.5 million at Merom and an incremental $8.9 million related to the ERAS Project, of which $8.2 million related to payments under the APA, (see “Note 14 – Commitments and Contingencies” ) to the condensed consolidated financial statements, partially offset by lower capitalization of mine development costs at Oaktown and (ii) a $0.3 million decrease in investments in equity method affiliates.

For the six months ended June 30, 2026, capital expenditures (“Capex”) was $33.9 million allocated as follows (in millions):

Capex per the condensed consolidated statements of cash flows

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Financing Activities.

The increase in net cash provided by our financing activities is primarily attributable to the net effect of (i) an increase in cash of $53.8 million from the net proceeds of the CMPO, (ii) a reduction in cash attributable to higher net repayments of bank debt of $9.0 million, and (iii) a decrease in cash from incremental lease financing payments of $1.5 million.

The increase in net cash provided by our financing activities is primarily attributable to the net effect of (i) an increase in cash of $53.8 million from the net proceeds of the CMPO, (ii) an increase in net borrowings of bank debt of $14.0 million, (iii) incremental payments of debt issuance costs of $5.9 million, and (iv) a decrease in cash from incremental lease financing payments of $1.2 million.

Capitalization

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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 daily 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 includes a commitment fee of 0.50% on any daily unused portions of the New Revolving Credit Facility.

Following the draw of the Delayed Draw Term Loan in May 2026, the principal balance of the Delayed Draw Term Loan is 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.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations ” included in our 2025 Form 10-K.

For a discussion of recent accounting pronouncements, newly adopted and recent accounting pronouncements not yet adopted, see “ Note 2 – Recent Accounting Pronouncements” to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report.

We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the three months ended March 31, 2026.

We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the three and six months ended June 30, 2026.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis