Share prices of Consunji-led stocks Semirara Mining and Power Corp. and DMCI Holdings Inc. plunged Monday after the Department of Energy announced plans to auction the coal operating contract for Semirara Island.
Shares of Semirara plummeted 21.4 percent to P26.10, while the stock price of parent firm DMCI dropped 14.6 percent to P9.20.
The DOE decision came after the Department of Justice ruled that the existing agreement could not be renewed following its 50-year expiry. The bidding process for the nation’s largest coal producer is expected to take place within the year to ensure continuity of operations.
Semirara, however, said it remains confident about the possible bidding of the coal operating contract, noting it can still participate in the auction process.
“Management believes that SMPC’s decades of experience in managing complex engineering projects, coupled with its established operations, technical expertise, and extensive equipment fleet … provide a strong competitive advantage, which we have communicated to the DOE,” Semirara said in a disclosure to the stock exchange.
April Lee-Tan, head of research at COL Financial, said the steep decline in Semirara’s stock price is not an overreaction since coal mining accounts for 55 percent of the company’s profit. It also supplies the company’s power generation plants.
Semirara accounts for 49 percent of DMCI’s profits.
“For bidders, we can’t discount the possibility that other power generation companies might be interested to participate because that would help them become vertically integrated and help reduce costs,” Tan said.
Semirara was granted its coal operating contract in 1977 under Presidential Decree No. 972. While the DOE approved an extension in 2008 that pushed the current term to July 14, 2027, the DOJ recently determined that the 50-year constitutional limit on such contracts prevents further renewals.
