SMPC shares fall on coal contract renewal uncertainty

By Sheldeen Joy Talavera, Reporter

CONSUNJI-LED Semirara Mining and Power Corp. (SMPC) saw its shares decline by 21.39% on Monday following reports that it failed to secure government approval for the renewal of its coal operating contract covering Semirara Island.

At the local bourse, the company’s shares slid to a session low of P25.40 before closing at P26.10, lower than Friday’s close of P33.20.

Energy Secretary Sharon S. Garin earlier said SMPC could not renew its 50-year operating contract after the Department of Energy (DoE) sought a legal opinion from the Department of Justice.

The DoE said the contract will instead be offered through a competitive bidding process this year.

SMPC said it has yet to receive formal notice regarding the decision but noted that its long experience operating on Semirara Island gives it a competitive position.

“SMPC’s decades of experience in managing complex engineering projects, coupled with its established operations, technical expertise, and extensive equipment fleet developed through its long-standing operations in Semirara Island, provide a strong competitive advantage, which we have communicated to the DoE,” the company said in a disclosure.

The coal operating contract, originally issued in 1977 for 35 years, granted SMPC exclusive rights to explore, develop, and mine coal on Semirara Island until July 2012.

The DoE later extended the contract by 15 years, allowing operations at the site until 2027.

With the contract nearing expiration, the company had sought approval from the DoE to extend the agreement by another 13 years.

Although coal deposits are located across the country, the largest is on Semirara Island, making SMPC the country’s largest coal producer and accounting for about 97% of domestic output.

SMPC, the Consunji group’s power generation and coal-mining unit, recorded coal production of 12.9 million metric tons in the first nine months of 2025, driven by exports and deliveries to its own power plants.

Coal revenues, however, declined by 18.7% year on year to P24.73 billion due to lower average selling prices.

Earnings from the coal segment accounted for nearly 45% of SMPC’s nine-month core net income, which fell by 37% to P9.89 billion.

Analysts said uncertainty over the contract renewal could weigh on earnings given the coal business’ contribution to overall profitability.

“Failing to secure the contract will be a major setback for [SMPC], as this forces them to source coal elsewhere or pivot by coming up with an entirely new business model if they choose to avoid the margin squeeze that comes out with running the operations as usual,” Shawn Ray R. Atienza, an equity research analyst at AP Securities, Inc., told BusinessWorld.

George Ching, an analyst at COL Financial, Inc., said failure to secure a new contract could increase power generation costs at the Calaca power plants, which rely on Semirara coal.

If SMPC wins the bid, analysts said the company’s long-term outlook would still depend on factors such as contract duration, allowable output, royalty levels, taxes, and other bid terms.

“Without a replacement for the coal operations, we see a massive drop in [SMPC’s] valuation, which investors will likely reflect in its share price,” Peter Louise D. Garnace, an equity research analyst at Unicapital Securities, Inc., said via Viber.

Mr. Garnace added that SMPC remains a strong contender for the contract given its operational experience and existing capabilities.