Today, Hallador Energy Company (NASDAQ:HNRG), a provider of electric services, announced an amendment to its credit agreement that enhances its financial flexibility in pursuit of additional power purchase agreements and data center projects. This amendment follows the company's targeted Request for Proposals (RFP) earlier this year aimed at data center operations.
The amendment, dated September 27, 2024, with PNC Bank, National Association, as administrative agent, allows Hallador Energy and its subsidiaries to engage more freely in forward power purchase agreements. As part of the agreement, Hallador will make prepayments on outstanding term loans up to $20 million in aggregate upon receipt of payments under certain Eligible PPAs.
In terms of financial covenants, the Debt Service Coverage Ratio, set at 1.25 to 1.00, will now be tested starting after the fiscal quarter ending June 30, 2025. The amendment also modifies the Leverage Ratio covenant, setting a maximum of 5.50 to 1.00 for the fiscal quarter ending March 31, 2025, and 2.25 to 1.00 for each subsequent fiscal quarter. A new First Lien Leverage Ratio of 3.50 to 1.00 is established for the fiscal quarter ending March 31, 2025.
Additionally, Hallador must maintain a minimum liquidity of $10 million until the compliance certificate for the fiscal quarter ending June 30, 2025, is delivered and meet a minimum Consolidated EBITDA of $5 million for the fiscal quarters ending September 30, December 31, 2024, and March 31, 2025.
In other recent news, Hallador Energy, an Indiana-based energy company, has revealed a strategic shift towards wholesale electricity sales, specifically targeting the data center market. The company's second quarter financial performance for 2024 highlighted an addition of $45 million in forward energy sales, raising their total forward sales book to approximately $1.4 billion. This move comes despite the challenges faced in spot electricity sales due to low energy prices and surplus natural gas supply.
Hallador Energy has also been actively negotiating long-term power agreements with potential customers. Operational improvements have been implemented to generate approximately 1.5 million megawatt hours per quarter. The company has also decreased its bank debt by $31.5 million and raised capital through common stock issuance, improving its total liquidity to $60.7 million.
InvestingPro Insights
Hallador Energy's recent credit agreement amendment aligns with its strategic focus on power purchase agreements and data center projects. This move comes at a time when the company faces some financial challenges, as reflected in recent InvestingPro data.
According to InvestingPro, Hallador Energy's revenue for the last twelve months as of Q2 2024 stood at $485.54 million, with a revenue growth decline of 17.24% over the same period. This decline in revenue underscores the importance of the company's efforts to secure new power purchase agreements and expand into data center operations.
Despite these challenges, InvestingPro Tips highlight that Hallador Energy has shown strong returns over various time frames. The company has seen a significant return of 47.91% over the last month and an impressive 87.65% over the last six months. These positive price movements suggest that investors are optimistic about the company's strategic direction and potential for future growth.
It's worth noting that InvestingPro offers 13 additional tips for Hallador Energy, providing a more comprehensive analysis for investors interested in delving deeper into the company's prospects.
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