Semirara allocates P5 billion to add coal production capacity

SEMIRARA Mining and Power Corp. (SMPC) has earmarked a total of P5 billion for the next two years to expand its existing mining infrastructure as the Consunji-led coal miner aims to maximize its allowed production capacity to 16 million metric tons (MT) by 2018.

 “(The) maximum last year was 12 million MT. We got permission to do 16 million MT, siguro (maybe) in two to three years’ time,” Isidro A. Consunji, SMPC chairman and chief executive officer, told reporters in a briefing after the company’s annual stockholders meeting on Tuesday at the Manila Polo Club in Makati City.

The 16 million MT is the maximum that the company is allowed under its environment compliance certificate, although the full capacity is not expected to be reached this year.

To reach full capacity, Mr. Consunji said SMPC would be putting up an additional conveyor system, mining equipment and coal storage while expanding its pier. He added that the existing infrastructure is already maximized for an output of 12 million MT.

However, the company would need to amend its work program submitted to the Department of Energy from a capacity of 12 million MT, to 14 million MT and eventually to 16 million MT.

Junalina S. Tabor, SMPC chief finance officer, said the company has existing infrastructure for the production of 13-13.5 million MT of coal.

“This year, we allotted around P2 billion for the expansion of the pier and the conveyor line,” said Ms. Tabor. “In terms of mining equipment, that’s around P3 billion (for next year).“

Victor A. Consunji, SMPC president and chief operating officer, said the company was aiming for an output of 14 million MT this year.

“If we do 13 million (MT), we should be happy because the weather is also projected to be a little bit wet,” he said.

Ms. Tabor said the company’s expansion comes at a time when coal prices are expected to rise.

“Our assumption is on the average, effective price both local and export in terms of peso, that’s around P2,200 (per metric ton for 2017). Last year, (it’s) less than P2,000, around P1,970,” she said, adding this was “conservative.”

On export prices alone, she said the assumption is between $45 and $50 per MT, compared with $40 last year.

In 2016, higher coal and power sales fueled the 42% rise in SMPC’s net income to P12.04 billion, from P8.47 billion in the previous year.

The company president earlier said SPMC delivered “a solid 2016 performance despite market headwinds and operational challenges.”

More than half or P6.6 billion of the consolidated income came from the power segment, of which P2.9 billion came from Sem-Calaca Power Corp. and P3.7 billion from Southwest Luzon Power Generation Corp.

Southwest Luzon started commercial operations in the second quarter of 2016, offsetting the decline in the availability and downtime of the Sem-Calaca plants. The new plant allowed the company to post a 3% increase in generation capacity to 4,292 gigawatt-hours (GWh) from 4,170 GWh in 2015.

SMPC said that its coal segment recorded P5.4 billion in net earnings, or 86% higher year on year, despite the weak global prices in the first half of last year.

Mr. Consunji, SMPC chairman, said the company expects higher profit this year, although he declined to give a figure.

He told stockholders that the company had supplied 5.8% of the total system demand of the Luzon and the Visayas grid last year, while delivering 25.35% of the requirements of the country’s coal-fired power plants.

On Tuesday, shares in the company closed higher by 1.41% to P151.10 each.

Source: <a href="http://www.bworldonline.com/content.php?section=Corporate&title=semirara-allocates-p5-billion-to-add-coal-production-capacity&id=144581">BusinessWorld Online</a>