Operator: Our next question comes from Arthur Calavritinos with ANC Capital. Your line is now open.
Arthur Calavritinos: All right, thank you. Let me ask you something on the €“ on the debt reduction to zero that €“ that’s going to happen. You’ve got that locked in for this year, right?
Brent Bilsland: Not quite sure what you mean by locked in.
Arthur Calavritinos: It’s going to be paid off, I mean, 95% confidence interval, what I mean? I mean given what you’re looking at right now. We’re not going to get any surprises and say, okay, we couldn’t take it down like at all. I mean, right now you’re pretty confident the debt should get to be de minimis, right, by year end.
Brent Bilsland: Yes, I think from our perspective we’ve contracted for the coal, right. So we know that our average sales price is going to come up significantly. So we’re going to see significantly higher margins, something in the low 20s. We have to produce the coal, which we’ve always historically been able to do. We’re trying to €“ we are increasing our production. With those increases in production we have a slight increase in cost, but some of that is coming from higher cost surface pits, but we’re forecasting a higher cost curve moving forward. And we are reliant upon our customers, providing transportation to pick up the coal, which that piece is out of our control. It’s in our customers’ control. But from a forecast perspective, we see no reason why we shouldn’t be materially net debt free by the end of the year.
Arthur Calavritinos: Okay. And
Brent Bilsland: I’m sorry, by the end of
Arthur Calavritinos: By the end of €“ I want to be clear at the end of 2023.
Brent Bilsland: 2023, yes.
Arthur Calavritinos: Yes. So, again, let me €“ a different question. When you guys are looking at projects, right, internal rates of return with the businesses, any €“ I don’t know discipline or does €“ are you seeing better opportunities? You mentioned storage. Again it must be difficult to do a spreadsheet to model that out because what I’m concerned about is I don’t want to see you guys do like a lot of storage or something and it doesn’t work out. That’s all. So I’m just trying to figure out what your discipline is, how you look at stuff and how decide to exit if that were to happen.
Brent Bilsland: Yes, I think, our focus right now is that we are essentially long energy, long capacity and we’re in a pretty good sales position. If you look at us for the next couple years, our hedge position there is pretty well ahead. We don’t have a lot of excess electricity to sell until 2024. So we’re trying to figure out what’s the best way to do that. And there’s various ways to do that, some of which require some amount of capital. And so what we’re saying is, is look 2023 is about getting our balance sheet in a very delevered position and trying to position the company to have profitable power capacity in fuel sales in 2024. So that’s kind of what we’re focused on. When we talked about energy storage, The Inflation Reduction Act was released and approved this year.
However, they’re still writing some of the technical rules around that. And so I don’t think it’s fair for us to say today we will or we won’t do battery storage because quite frankly we’re waiting for the rules to be finalized to understand is that a good rate of return for us or not. Today, I couldn’t tell you yes or no, right. So
