Hallador and the unnamed data center developer signed an Conversion Transaction Commitment Agreement effective January 2, 2025.
During the third quarter of 2024, Hallador signed a non-binding term sheet with the developer to support the delivery of energy and capacity, through a utility partner, for 10+ years.
Hallador Power’s Merom Generating Station is a two-unit, 1080MW coal-fired power plant located in Sullivan County, Indiana. During the company’s Q3 call in November, after the non-binding term sheet was signed, executives told investors the offtaker would receive a “majority of the output of the plant.”
Hallador Power has been interested in marketing its Merom site to data centers and other high-density power users. The company issued an RFP in March 2024, offering up to 1GW of coal-fired power generation for purchase, with varying dates of availability. At that time, the company said it would be willing to consider partnering on “additional generation and/or future transition of plant to alternative generation sources including gas and/or solar”.
This latest agreement with the data center developer provides exclusivity in negotiations for a period of 105 business days and cumulative payments of up to $5 million to Hallador Power Company, with $1 million due in January, $2 million of payments due in March if the parties have not satisfied certain conditions, and an additional $2 million in June if such conditions have not been satisfied by the end of the exclusivity period. The parties will use the exclusivity period to finalize selection of a utility partner and to negotiate and complete other definitive agreements related to the proposed transaction.
If Hallador Power Company is successful in executing definitive agreements and once the transaction commences, it is expected to contract the majority of the its energy and capacity at prices higher than the forward curve for more than a decade, it said.
Hallador Energy Company has two core businesses: Hallador Power Company, which produces electricity and capacity at Merom Generating Station, and Sunrise Coal, which produces and supplies fuel to the Merom plant and other companies.
The company could not be reached for comment on Wednesday.
Under different ownership, Merom Generating Station was expected to be retired in May 2023. But in October 2022, Hallador Energy Company finalized the purchase of the plant from Hoosier Energy.
The transaction includes a 3.5-year power purchase agreement (PPA). Hoosier would purchase 100% of the plant’s energy and capacity through May 2023, reducing purchases to 22% of energy output and 32% of its capacity beginning in June 2023 and through 2025.
The companies’ existing renewable PPA – signed in May 2021 and representing 150MW of solar generation and 50MW of battery storage – would be retained, with its start date delayed until Merom’s eventual retirement. Through that PPA, the companies would develop up to 1GW of renewable energy at the site.
Hoosier had previously said it would sell the plant if the right deal came to fruition. After entertaining interest from a number of different parties, the company found a partner in Hallador, which said it could operate the plant at a much lower cost, given ownership and control of fuel supply.
Coal for data center power?
While the rise of data center development has ushered in discussions on meeting the subsequent increased demand with clean energy or advanced and traditional nuclear power, some projects are sticking to the classics like coal- or gas-fired generation.
Residents of a low-income North Omaha community celebrated the planned closure of a coal plant in 2023, because it caused high asthma rates and poor air quality. But the closure was postponed due to increased electricity demand from data centers. Coal is now planned to burn in North Omaha through 2026.
