Merkado Barkada | PhilStar | November 2, 2021 8:29am

Semirara Mining and Power‘s [SCC 26.00 0.19%] Q3/21 profit of P4.0 billion, up 435% from Q3/20 profit of P0.7 billion, and up 1% from Q2/21 profit of P3.9 billion. SCC is an integrated coal mining and electricity generation company, meaning that it both mines for coal and uses some of that coal in its coal-fired power plants to generate and sell electricity.

Despite a huge 39% coal production drop caused by heavy rains, SCC attributed its massive profits to a tag-team of record-high international coal prices and high sales volume.

SCC was able to make up for the loss of 1.3 million metric tons of production by selling over 1.8 million metric tons of its pre-existing inventory in Q3.

While the coal-selling side of the business was experiencing its finest hour, the electricity-selling side was struggling due to unplanned plant outages.

Total electricity sales fell 34%, due to 75% of SCC’s power plants have been offline at some point during the period.

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The profits are insane, but reading the management discussion and analysis section, it’s hard to give the SCC team too much credit for the windfall that it’s received.

Global prices of coal skyrocketed and allowed the group to sell coal out of inventory for a huge profit, and that massive profit will probably help suppress questions about the lost production and plant outages that marred SCC’s operations in Q3.

The Molave open-pit mine continues to struggle with water seepage problems that have caused considerable lost production over the past few years, and may have contributed to at least one fatal accident at the site. SCC’s coal-fired power plants were offline way too often, but again, SCC’s disappointing operations uptime was partially relieved by an uptick in the spot-price of the commodity.

Now that the price of coal is in free-fall after China increased its output, imagine if neither the coal price spike nor the electricity price spike had happened?

Commodity prices are not within SCC’s control, so conventional wisdom would say that it shouldn’t worry about that; but what about the uptime of its power plants, or the work stoppages at its open-pit coal mine? Will a convenient price spike save next year’s dividend from the wasted production caused by continued outages, too?

Source: PhilStar