Brent Bilsland: Well, it changes the forward power curves will tell you, hey, look, we see people out here willing to contract for a megawatt hour in July that might be a very different price than what they would do in April, right? And so when you say, well, what price are you indifferent? That is a calculation between what are we seeing in the power markets and what are we seeing in the coal market. So for example, we had announced in February that of 2022 that we would acquire the Merom generator. And we felt we had a very high probability of closing on that transaction, even though it was subject to various government approvals, right, FERC being the slowest our longest lead time of those approvals. So during that period of time, we saw the coal markets, we saw multiple customers willing to pay an average price of $125, that was an average price.
They were different prices in that range or 2.2 million tons primarily in the 2023 year. So we felt that, that pricing on that day was very close to or exceeded the value that we thought we could forward contract for on the power side. So, we chose to sell a lot of tons to third parties and reduce the amount of tons that we plan to take to the Merom Power Plant in 2023. I can’t — there’s no set number, right? It was just look at both markets in that snapshot at time in which one has the highest risk-adjusted return and on that particular day, it was the coal market. I expect the coal markets to win that analysis one out of 10 times maybe. It could be more like one out of 50 times. I don’t know. Going forward, we really think that, again, the majority of the time is going to be the power plant that wins that argument because there’s a value add, right?
I would argue that it was a panic pricing, but yet panic pricing in the energy markets is created by disruption, right? So we still have this ongoing issue with the Russian invasion of Ukraine. Could that be further escalated? I mean we saw Russian planes have a collision with U.S. drones here last — earlier this week, that could escalate things. What would that do to energy markets. We’re seeing saber rattling to some degree between the United States and China. I personally, as a U.S. citizen, I hope that cools down, but those are the type of things that can be very disruptive to energy markets and lead to that, what I would call panic pricing that may lead to our coal markets exceeding the value of our power energy markets. I don’t think that will happen the majority of the time, but we just saw that happen.
So we’ll see what happens going forward. That being said, we’re just seeing more and more events that lead to extreme pricing. We, again, think that the Ukraine — the energy crisis that went on to Europe last summer, the Ukraine invasion revealed that, it was there all along. We saw demand increasing for BTUs and supply not increasing. Look at the — it’s kind of telling, if you look at the Illinois Basin response to this extreme pricing, right? We really haven’t seen a huge production response by the industry. right? I mean I think production came up 10% as an industry to prices quadrupling. So we think that, that — because that response isn’t there like it’s been in the past. We think we could see more times of a significant increased pricing power.
