We came across a bullish thesis on Hallador Energy Company (HNRG) on Substack by Multibagger Monitor. In this article, we will summarize the bulls’ thesis on HNRG. Hallador Energy Company (HNRG)’s share was trading at $14.47 as of April 23rd. HNRG’s trailing P/E was 13.83 according to Yahoo Finance.
Aerial view of an opencast coal mine, its vastness conveying the magnitude of its operations.
Hallador Energy (HNRG) is a small-cap energy company based in Indiana, historically known for its coal mining operations through its Sunrise Coal subsidiary. But today, Hallador is in the midst of a high-stakes transformation. It’s pivoting from being a pure-play coal miner to an integrated power producer (IPP) — a transition that, if successful, could significantly rerate the stock. Currently trading around $13.50, Hallador offers investors an asymmetric setup with a defined near-term catalyst and meaningful long-term optionality.
The heart of this transformation lies in Hallador’s 2022 acquisition of the Merom Generating Station, a 1,080 MW coal-fired power plant in Sullivan County, Indiana. This deal not only gave Hallador a second business line — Hallador Power — but also handed it something far more valuable: the plant’s MISO grid interconnection rights, which are increasingly scarce and strategically vital. These rights are a prerequisite for delivering power to large data center clients in the region. In the words of Hallador’s management, they’re “the new oil.”
Hallador is currently in an exclusivity period with a major hyperscaler, and negotiations are advanced for a long-term power purchase agreement (PPA) — potentially locking in 10–15 years of stable cash flow. The company also recently cleared the final regulatory hurdle, receiving Expedited Project Review (EPR) approval from MISO, a critical milestone that allows Hallador to fast-track its generation upgrades and load modifications to accommodate the data center. Yet the market, by all appearances, has not priced in any of this upside.
The implications of a signed PPA are massive. Based on management commentary and industry comps, a successful agreement could bring in $200–250 million in annual EBITDA — nearly 40% of the company’s current market cap in one year alone. That doesn’t even factor in the upside from multiple expansion: if the market begins valuing Hallador more like a utility than a coal miner, its earnings multiple could rise from ~2.5x EBITDA to 8–10x, pushing the stock well into the $20–25 range near-term, with a potential path toward $40–50 as the new model gains investor attention.
What makes the risk/reward so compelling is the built-in downside protection. Even if the PPA doesn’t materialize, Hallador’s core coal operations remain profitable, generating an estimated $100 million in run-rate EBIT. The Sunrise Coal division supplies Merom and other customers, benefiting from higher domestic demand and constrained supply due to regulatory bottlenecks and ESG-driven underinvestment. Despite a one-time $215 million goodwill impairment earlier this year, the business remains fundamentally strong, with zero net debt, positive free cash flow, and meaningful insider ownership.
Strategically, Hallador is perfectly positioned. Indiana is becoming a key data center hub thanks to tax incentives, abundant land, and relatively cheap power. The region’s electricity grid, managed by MISO, is already in a capacity shortfall, making existing baseload power assets like Merom even more valuable. Large tech companies — including Amazon, Google, and Meta — are pouring billions into the Midwest, and Hallador’s MISO interconnection gives it a competitive edge in attracting long-term, high-credit-quality customers.
If a PPA is finalized — which could happen as early as June 2025 — Hallador plans to hold an investor call to explain its new business model. That moment could catalyze a major revaluation. Until then, the market is giving investors a rare chance to buy a pre-PPA IPP with a visible path to utility-like cash flow, but at a distressed coal valuation.
In short, Hallador Energy is a legacy coal company standing on the brink of becoming a modern power producer. Investors get a free call option on that transformation — with a cheap stock, a defined near-term catalyst, and a path to structural rerating.
Hallador Energy Company (HNRG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held HNRG at the end of the fourth quarter which was 21 in the previous quarter. While we acknowledge the risk and potential of HNRG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HNRG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.