Semirara allots $500 M for coal plant expansion

MANILA, Philippines - Consunji-led Semirara Mining Corp. will spend as much as $500 million for another expansion of its coal power plant complex in Batangas.

The power producer and coal miner is banking on tight electricity supply in the Luzon grid to ensure the profitability of its new 300-megawatt (MW) power plant, its top executive said.

In a briefing, Semirara vice chairman and CEO Isidro A. Consunji said the company will need $400-500 million for the second expansion of the Calaca coal-fired power plant in Batangas.

Construction of the 300-400 MW power plant, which will use the circulating fluidized bed or pulverized coal boiler technology, will start in the third quarter, Consunji said.

For the funding requirements, Semirara will stick to the industry benchmark of securing 70 percent through debts and 30 percent through equity.

“We might conduct a rights offering to do the phase two (expansion),” Consunji said.

The last time the company held a stock rights offering was in 2010, when it raised P4.39 billion to fund the acquisition of power producer Sem-Calaca Power Corp.

Consunji said the additional power plant will be operational after two and a half years of construction, or in 2016.

“The prognosis is when the new power plant comes online, there will be a shortage of power,” Consunji said.

Given robust demand, the Luzon grid needs another 600 MW of generating capacity to avert a shortfall in 2016. Meralco PowerGen Corp. is building a 600-MW coal-fired power plant at the Subic Bay Freeport Zone in Zambales in partnership with Aboitiz Power Corp. and the local unit of Taiwan Cogeneration International Corp.

To date, Semirara is putting up two 150-MW coal-fired thermal power plants in Calaca that will start selling additional electricity to power distributor giant Manila Electric Co. in 2015.

Semirara, through subsidiary Sem-Calaca, is also conducting the rehabilitation and upgrade of the two existing units of the Calaca power plant. The power plant, which was acquired in 2009 for $361.7 million, will operate at a capacity of 550 MW from 340 MW.

Semirara’s profit is expected to hit roughly P6.5 billion this year from a record P6.36 billion last year despite lower income of the coal mining operations in the first quarter, Consunji said.

For its coal mining venture, Semirara plans to retain its seven million metric ton (MT) per year coal production amid depressed selling prices.

“For this year, we target around 7.4 million MT,” Junalina S. Tabor, chief finance officer of Semirara, told reporters.

Tabor said capital spending for the coal production is at P1-P1.5 billion. Last year, Semirara produced 7.65 million MT of coal, up eight percent from 7.11 million MT in 2011.

On Feb. 13, a section of the Panian pit west wall gave way, prompting Semirara to stop its commercial operations until March 6. Semirara said it was still able to service its supply contracts given its coal stockpile.

Tabor said Semirara then shifted its coal operations to the northern part of the mining area.

At the current rate of seven million MT of yearly production, Semirara expects a mine life of another 25 years without conducting underground mining.

“We are going to China to see if underground coal mining is viable...In two to three years, we will send a study team to look at that to extend the life,” Consunji said.

Aside from the Semirara mine in Antique, the listed company has recently secured a coal contract area in Mindoro and Sarangani province, which have yet to be explored.