Higher coal prices seen to lift SMPC profit this year
SEMIRARA MINING and Power Corp. (SMPC) expects its full-year 2018 net income to remain positive, with coal sales offsetting the “downward pressure” on its power generation business, company officials said.
Junalina S. Tabor, SMPC chief finance officer, told reporters last Friday that growth this year would be driven by projections of higher coal prices at no lower than $80 per metric ton.
“With higher Newcastle index coupled with higher exchange rate with the depreciation of the peso, so [the price] expectation [ is] higher,” she said, referring to the international benchmark that dictates coal prices. “Then it also drives our local prices.”
Ms. Tabor said prices last year was around $60 per metric tons and even touching $50 in the first half. She also said the company’s assumption is for the peso to trade at around P52 per US dollar this year.
Coal sales account for more than half of integrated energy company’s revenues, with power generation making up at least 40% and cement contributing the rest.
Ms. Tabor did not give a profit guidance this year. As of the first quarter, SMPC posted a consolidated net income after tax of P4.57 billion, up 3% from P4.42 billion in the same period last year.
SUSTAINED GROWTH
Separately, SMPC said in a statement that it expects “sustained growth” this year despite the scheduled and unplanned shutdowns in the first quarter of its four power plants under Sem-Calaca Power Corp. (SCPC) and Southwest Luzon Power Generation Corp. (SLPGC).
“Even with the plant shutdowns, we are on track to deliver full year growth. We expect to offset our replacement power costs in the succeeding quarters from our insurance claim,” SMPC President Victor A. Consunji was quoted as saying in a statement.
Unit 2 of SCPC was offline for the most of the first quarter because of a scheduled preventive maintenance and technical inspection relating to its rehabilitation program. Unit 2 of SLPGC was closed for preventive maintenance.
The former resumed normal operations on March 17 while the latter was back online on April 16.
Unit 1 of SCPC and unit 1 of SLPGC were forced to go on unplanned shutdowns in early March as the former required the removal of slags from its boiler while the latter exhibited abnormal equipment vibration.
Unit 1 of SCPC went back online on March 17 but Unit 1 of SLPGC will remain offline for repairs until August this year.
With the protracted shutdown of SLPGC’s unit 1, SMPC said it has started buying replacement power from the Wholesale Electricity Spot Market in the last week of March, which had minimal impact on its first- quarter earnings.
SLPGC has business interruption insurance that covers the loss of business income as a result of damage to the insured asset, the company said.
“The final amount will still be determined by the insurance adjuster appointed by SLPGC’s reinsurers but SMPC expects that it will substantially reduce the impact of replacement power costs to SLPGC’s profitability,” it added.
Mr. Consunji said the generated output of SLPGC’s unit 2 is enough to serve its contracted capacity, except for a few hours during peak demand or as needed by its offtakers.
“We anticipate higher coal sales this year because of healthy demand from local and international consumers. The foreign exchange rate and strong coal prices will also prop up our bottom line,” Mr. Consunji said.
The company said a “bright spot” would be its newly formed ancillary service business.
SLPGC was issued a certificate of compliance in early March by the Energy Regulatory Commission for its 50- megawatt ( MW) modular gas turbine power plant.
SLPGC is now finalizing its contract with the National Grid Corporation of the Philippines, which will allow the SMPC subsidiary to provide ancillary services to the grid operator.
“While awaiting the ancillary service contract to take effect, SLPGC is bidding its gas turbine capacity in the electricity spot market,” the company said.