Consunji-led Semirara Mining and Power Corp. (SMPC) is setting aside P4 billion for its capital expenditure (capex) program this year after it deferred last year’s capex due to the impact of the Covid-19 pandemic on its business.
Of the P4 billion, SMPC will utilize P2.9 billion to purchase mining and support equipment for the coal business. The rest will be split between Sem-Calaca Power Corp. and Southwest Luzon Power Generation Corp. for their preventive and maintenance programs.
SMPC earmarked a capex of P3.7-billion for 2020 but later on decided not to push through with its capex program as the year presented a more challenging business environment because of historically lower coal and energy prices.
“2020 was a tough year for us because our coal and power businesses were hit by pandemic-induced market weakness. We are determined to stage a recovery this year,” said SMPC President and COO Maria Cristina C. Gotianun.
SMPC also deferred last year the hiring for non-core positions, reduce non-essential business expenses and dispose of non-core assets as part of its cash preservation measures. Implementing these measures allowed the company to preserve and generate cash.
“However, the magnitude of our recovery will largely depend on how demand and prices will behave following the vaccination rollout, Covid-19 infection rates and loosening of quarantine restrictions,” she said.
To support its recovery plan, SMPC is targeting to produce 13 million metric tons (MMT) of coal this year, roughly equal to its actual production volume in 2020 because of ongoing remedial measures in Molave North Block 7 (NB7).
In December 2020, the company voluntarily deferred mining activities in the said area to allow its technical consultants and mining personnel to implement remedial measures to manage the water build-up in the sump of NB7.
SMPC reported in August last year that it posted a 61-percent drop in earnings in the first half of 2020 due to the decline in coal and power prices.
From P5.7 billion, SMPC’s net income fell to P2.2 billion at end-June, of which P1 billion was recorded in the second quarter.
Earnings contribution from the coal business fell 59 percent to P1.8 billion due to weak coal sales and average selling price.
From January to June last year, coal sales contracted 27 percent from 7.9 million metric tons (MMT) to 5.7 MMT, while average selling price per MT fell 21 percent from P2,229 to P1,765.
The government-imposed lockdown dragged down coal demand and average selling price, the company said.