Business Description

Hallador Energy Company (“Hallador” or the “Company”) 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 value chain, from accredited capacity and energy to coal. The Company’s electric operations are located within the Midcontinent Independent System Operator’s ("MISO") footprint. Our operations comprise Hallador Power Company, LLC (“Hallador Power”) that provides accredited capacity and energy to utilities and other energy market participants through its MISO interconnection, and Sunrise Coal, LLC (“Sunrise”) that mines bituminous coal in Indiana to serve various power plants in the Midwest and Southeast United States. 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, as described below. 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 meaningful 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 mainly through power purchase agreements (“PPAs”) and other bilateral transactions. 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. Fuel. Sunrise, the Company’s wholly-owned mining subsidiary, mines coal from reserves found in the Illinois Basin (“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. See “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” for a discussion of our business. Regulation and Laws Our electric power generation and coal mining businesses are subject to regulation by federal and state agencies and local authorities on matters such as: ● employee health and safety; ● mine permits and other licensing requirements; ● air quality standards, including greenhouse gas emissions; ● water quality standards; ● hazardous substances; ● solid waste management; ● plant and wildlife protection and historic and archeological site and cultural resource protection; 5 Table of Contents ● storage and handling of explosives; ● wetlands protection; ● surface subsidence from underground mining; and ● the effects, if any, that electric power generation or mining activities, including coal combustion residuals, have on groundwater quality and availability. Federal agencies that exercise regulatory authority over our businesses, include but are not limited to the Federal Energy Regulatory Commission (“FERC”), the Occupational Safety and Health Administration's (“OSHA”), and the Mine Safety and Health Administration (“MSHA”). The following discussion provides an overview of certain key federal regulatory matters applicable to our business. FERC.…