The only thing that really happened is when you saw the invasion of Ukraine, you saw governments come out and purchase every BTU they could get their hands on, and so particularly in Europe, right? And you’ve seen other countries now say, well, gosh, I think it was Malaysia that — I’m saying that wrong, Pakistan, Pakistan, they had relied heavily on natural gas plants that import LNG. Europe did up the LNG, they couldn’t afford the LNG. So now you see Pakistan building 10 gigawatts of coal-fired power plants because they say, look, we’re not going to allow ourselves to get single fuel concentrated again and put ourselves in that position. I would say Europe very much still has an energy crisis going on. They got bailed out because they bought very aggressively heading into winter was created a summer shortage here last summer and then Europe had weather patterns that were 30 degrees above normal this winter.
And so here they overbought and then demand didn’t show up. And that’s put out a cooling effect short term on energy prices and power prices. But long term, they still are sanctioning the largest gas exporter in the world, the second largest oil exporter in the world and the third largest coal exporter in the world in Russia. And I think that we’re seeing that we had a stat last night saying that the budget of Russia has been hit by about 50% now with all these sanctions on its energy markets. Well, that means that the economics to produce the BTU in Russia has declined significantly. And I think you’ll see production come off there probably permanently as U.S. energy companies and Western energy companies leave that country, that’s got to be replaced.
And those markets will turn back to the U. S. So, I think there’s a temporary downturn here in those markets. To be fair on the coal markets people ask, what’s the price of coal, there’s no transactions really happening right now in the coal market. That’s one of the advantages of us having the power plant is the electricity market is a very liquid market. It trades every day and big volumes. So it definitely — we’ve improved the liquidity of the revenue stream of our company by having the Merom asset. So we will continue to evaluate what is the best way to price electrons in a risk-weighted fashion so that we don’t put our shareholders at risk. And one of the ways we play defense on that is you’re going to see our balance sheet very much delever over the next 12 months.
We already went from at the end of the third quarter to like 3.5 something to 2.05 at the end of Q4. At the end of Q1, we drop off our Q1 2022 quarter and replaced — which was lousy, and we replaced that with our first quarter of 2023. We expect that to further significantly deleverage our balance sheet and as we continue to pay down debt. So that’s one of the ways to play defense is to have very little debt on our balance sheet, and that’s a position that we’re trying to get ourselves in.
Kevin Tracey: Okay. And the last question, can you give us a sense of what the capacity factor of Merom was in the fourth quarter during the period which you own the plant and what you expect there going forward?
Brent Bilsland: So we had some scheduled outage in the fourth quarter. So I don’t know that, that would be a very leading statistic. And this year, again, what months are we talking about. Right now, both units are running at Merom. So we’re operating — what will happen later this year remains to be seen. It really kind of comes down to how much heat will we see in July and August if we had this plant last year in July and August, it would have been incredibly profitable. So we’ll see what the market brings.
Kevin Tracey: Yes. Thank you very much.
Brent Bilsland: Yes, thank you.
