Semirara slashes capex to P1.9B

Semirara Mining and Power Corp. (SMPC) is scaling down capital spending by 68 percent this year as it puts major purchases on hold amid lingering uncertainties over its coal contract.

Semirara said that its capital expenditures (capex) might drop to around P1.9 billion from last year’s P5.9 billion.

In the first quarter alone, the firm’s investments were slashed by 79 percent to about P500 million against the P2.4 billion spending in the same period last year.

“[This] reflects the absence of major equipment re-fleeting, as management deferred certain investments in the coal segment pending the results of the bidding for the coal operating contract,” Semirara said in a disclosure.

“Management continues to exercise prudent capital management to preserve financial flexibility,” it added.

The firm accounts for more than 90 percent of domestic coal production. It has a 50-year contract with the government, which expires in July 2027.

As its petition to extend the deal for another 13 years got junked, the Department of Energy (DOE) is opening the industry to more players through a competitive auction.

Analysts saw this as a good development, with more coal blocks also up for bidding, which could make more coal sites available to Semirara.

However, this, too, is facing uncertainty as the DOE postponed the auction indefinitely.

Given this, Semirara’s coal business is getting only P800 million in capex, a huge 83 percent cut from last year’s P4.8 billion.

The capex for coal will be spent for expenses related to ICT for network and infrastructure, maintenance of its power plant generator on the island and mobile equipment support.

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Capex for Semirara’s power business is also down by 8 percent, to P1.1 billion from P1.2 billion.

Last week, the company reported that its net income in the first quarter decreased to P3.8 billion from P4.4 billion due to weaker power generation.

Revenues also went down by 7 percent to P15.43 billion from P16.51 billion.

During the January to March period, Semirara’s total power sales dropped by 22 percent to 1,120 gigawatt-hours (GWh) from 1,427 GWh. This was blamed on poor plant operations.

Semirara’s coal shipments also decreased by 4 percent to 4.5 million metric tons (MMT) from 4.7 MMT a year ago. While it saw a stable demand in the local market, the firm saw a decline in export volumes.