Kevin Tracey: Got it. Okay. Thank you. Appreciate it.
Operator: Our next question comes from Ted Waters , a Private Investor. Your line is now open.
Unidentified Analyst: Hi, Brent. Thanks for taking my call. The question I had was could you tell me a little bit about your ability to sell megawatt hours into the future? For instance, could you start locking in 24 megawatt hour pricing going forward in the near-term? And if so, what would that be equivalent to in terms of coal tons? For instance, you sold $125 tons in Q3 if you were to sell into the megawatt hours in 24 today, what pricing is that putting today?
Brent Bilsland: Yes. So, the answer to that question is yes. We do have the ability to sell either in the day-ahead-market or we can sell basically a bilateral agreement with an energy trading company or a utility that would like to buy megawatt hours. What is the price of that? That’s up for negotiation and so that €“ and that changes every day, right, and every hour within the day. We do have curves that kind of show, hey, where things to power market is going forward. It €“ I don’t know if I’m ready to release any of that from proprietary perspective as far as that’s a plant basically one ton of Oaktown coal at the Merom plant generates about 2.2 megawatt hours, right? So if you take, there is various curves out there and various assumptions, but if you take a megawatt hour, the variable costs on that, you’re going to have about $5 a megawatt hour variable cost.
So let’s just talk for easy math, the megawatt hours, 50 bucks. It’s the equivalent of one ton of coal that’s going to produce 2.2 megawatt hour. So that’s $110 per ton equivalent track $5 in variable, excuse me, I’ve doubled it there, so $10 now. So now you’re roughly at $100 coal and then what’s your fixed cost to the plant. It’s a capacity payment covering your fixed cost to the plant or is it short or is it long, is capacity payment is exceeding fixed cost to the plant? So that’s kind of how we look at it. Hope that makes sense.
Unidentified Analyst: Yes, that’s €“ I assume now that’s how the math you do when you decide to sell to the third party or do the megawatt hours, that’s interesting.
Brent Bilsland: That’s basically exactly what we’re doing. We’re looking at what our assumptions are on forward power prices, realizing those change every day and what can we find a third party that would be willing to transact, say in 2024, for those megawatt hours. And there’s some requirements with that, right? I mean, there can be letters of credit that are required from the counterparty to be €“ to kind of secure and guarantee delivery of those electrons. So those are all things that we have to kind of look at and keep it balanced, but look there has been a lot of disruption in the energy markets with what’s going on in Europe, right. So you’ve got a lot of coal and natural gas or LNG flowing to Europe. And so, domestic coal is competing with that.
And if you look at it right now, gas is cheaper than coal, but the market needs all the coal generators to run. So you’ve kind of got coal generators in our opinion setting the price of power. So that will happen as long as demand exceeds all the gas generation and gas prices stay where they’re at. There is a lot of dynamics here. There is a lot of prices that move each and every day, but right now there is very healthy margins in producing power, and there’s very healthy margins in selling coal in the open market. So we’re happy with the position that we’re in as far as getting the company net debt free and contracting for capacity and energy prices that we think we can make a profit at. So that’s where we’re at.
