Semirara expects profit to recover this year

MANILA, Philippines — Listed integrated energy company Semirara Mining and Power Corp. (SMPC) expects some profit recovery this year, mainly driven by better coal and power demand and prices.

In the company’s virtual stockholders’ meeting yesterday, SMPC chairman and CEO Isidro Consunji said the management expects improvements in the firm’s bottom line as the coal and electricity markets recover from last year’s historic lows.

“To take advantage of the upswing, we will capitalize on our COVID-19 resiliency and adaptation strategy of focusing on our people, finances, and execution skills. However, given our operational headwinds and until our country reaches herd immunity, it is unlikely that we will return to our pre-pandemic profit level this year,” he said.

The company closed 2020 with a consolidated net income of P3.3 billion, a 66 percent drop from the previous year’s P9.6 billion.

Revenues slumped by 36.2 percent  to P23.3 billion as coal production, sales and prices plunged, while electricity sales fell due to low power rates and the planned and unplanned outages of Southwest Luzon Power Generation Corp. (SLPGC).

To drive this year’s recovery, SMPC’s coal segment and SLPGC plants will be the main drivers of growth.

The coal business is seen to hit 13 million metric tons roughly, with remedial measures implemented in Molave North Block 7 (NB7), SMPC president and COO Maria Cristina Gotianun said.

“This year, we expect our coal business to perform better on the back of recovering consumption and prices. The remedial measures we have been implementing since December have also allowed us to steadily normalize production. Now that the water seepage at NB7 has gone down to manageable levels, we expect annual production to hit 13 million metric tons,” she said.

In early December, SMPC deferred mining activities in Molave NB7 because of excessive water seepages, which reduced coal production by 13 percent to 13.2 million metric tons.

For its power business, SMPC expects revenues to be driven by SLPGC due to churn out higher sales, but Sem-Calaca Power Corp. (SCPC) will deliver weak results.

SCPC owns the 2x300-megawatt (MW) Calaca coal-fired power plant in Batangas which it acquired from the government in 2009 with its bid of $362 million.  SLPGC runs the 2x150-MW coal power facility also in the same area.

“For this year, we expect uneven results from our power subsidiaries. SLPGC is set to stage a strong profit recovery because of higher plant availability and better spot market prices. Unfortunately, SCPC is likely to deliver disappointing results because of the forced outage of its Unit 2 beginning Dec. 3 last year,” Gotianun said.

SCPC’s outage was caused by the breakdown of its seven-month-old generator stator. Gotianun said negotiations with generator supplier GE are ongoing for repairs.

“While they have agreed to cover majority of the costs related to fixing the equipment, we are intent on making them shoulder all the necessary expenses. We expect to complete our negotiations within the year,” she said.

“In the meantime, we are doing our best to fast track the repair of the generator. If all goes well, Unit 2 can be up and running by third quarter of this year,” Gotianun said.

SMPC is spending P4 billion this year to recover from last year’s slump. Of the total amount, P2.9 billion will be used to purchase mining and support equipment for the coal business while the balance will be split between SCPC and SLPGC for their preventive and maintenance programs.

Last year, the company decided to defer P3.7 billion of its capex to this year as part of its cash preservation measures as the COVID-19 pandemic put a strain on the company’s liquidity.