Semirara Mining and Power Corp. (SMPC) has slashed its capital expenditures (capex) by 68% this year, reducing the budget to approximately P1.9 billion from P5.9 billion in the previous year, as the company adopts a cautious stance due to lingering uncertainties over its coal operating contract.
In the first quarter alone, the firm's investments plummeted by 79% to about P500 million, compared to P2.4 billion in the same period last year. The significant reduction reflects the absence of major equipment acquisitions, as management has deferred investments in the coal segment pending the outcome of the bidding process for the coal operating contract.
Semirara, which accounts for over 90% of domestic coal production, holds a 50-year contract with the government set to expire in July 2027. After the Department of Energy (DOE) rejected its petition for a 13-year extension, the agency is now opening the industry to more players through a competitive auction. However, the auction has been postponed indefinitely, adding to the uncertainty.
Given these developments, Semirara's coal business is allocated only P800 million in capex, an 83% cut from last year's P4.8 billion. The remaining funds will be used for ICT network and infrastructure, maintenance of its power plant generator on Semirara Island, and mobile equipment support. Meanwhile, capex for the power business also decreased by 8% to P1.1 billion.
The company's first-quarter net income dropped to P3.8 billion from P4.4 billion, attributed to weaker power generation. Revenues fell 7% to P15.43 billion, while total power sales declined 22% to 1,120 gigawatt-hours due to poor plant operations. Coal shipments slipped 4% to 4.5 million metric tons, as stable local demand was offset by lower export volumes.
Semirara said it continues to exercise prudent capital management to preserve financial flexibility amid the ongoing uncertainties.