Good afternoon, everyone. Thank you for joining the second quarter 2026 analyst briefing of Semirara Mining and Power Corporation. I'm Hannah Chan, Investor Relations Officer of DMCI Holdings . I'll be walking you through SMPC's financial and operational performance for the second quarter and first half of 2026 before we open the floor for your questions. Joining us today are members of SMPC's top management team, as shown on your screen, led by our Chairman and CEO, Mr. Isidro A. Consunji, and our President, Chief Operating Officer, and Chief Sustainability Officer, Ms. Maria Cristina C. Gotianun. Before we begin, just a few reminders. This session is being recorded, and questions may be sent through the panelist chat box. We will prioritize questions submitted in advance, but we'll try to cover as many as possible during the session.
Management may also make some forward-looking statements during the discussion, and these are based on current assumptions and expectations, and actual results may differ due to various risks and uncertainties. With that, let's begin. Let me start with the highlights. The Semirara Group reported net income of PHP 4.8 billion in the second quarter of 2026, 17% higher than last year as stronger power performance more than offset a lower contribution from coal. Power accounted for most of the group's earnings during the quarter, while coal results were weighed down by operational and cost pressures. For the first half, net income reached PHP 8.6 billion, up 2% year-on-year as record power earnings offset a 38% decline in coal contribution. The results reflect the benefit of SMPC's integrated energy portfolio, with power providing earnings support during a challenging period for coal operations.
Turning to the coal market, coal prices moved higher again in the second quarter. Newcastle Index averaged about $136 per ton, while the ICI4 was around $64 per ton, both up strongly from last year. The increase was supported by stronger Asian demand, tighter regional supply, and the indirect effects of the Middle East conflict as higher gas and LNG prices encouraged some fuel switching toward coal. Indonesia remains an important supply variable as production quotas and other government policies continue to evolve. Looking ahead, coal prices are expected to remain supported throughout the end of the year before stabilizing in 2027. Although supply developments, policy changes, and movements in competing fuel prices may continue to influence the market. On to the power market. Spot prices strengthened in the second quarter, averaging about nearly PHP 7 per kilowatt hour and even reaching PHP 8.54 in June.
The Middle East conflict affected the market mainly through higher fuel costs and supply concerns, which led to the temporary WESM suspension and modified pricing in late March and April. After normal market operations resumed in May, prices were driven mainly by stronger retail demand, plant outages, and tighter supply conditions. Looking ahead, prices may remain supported in the near term, although additional generation and battery capacity should help moderate the market tightness over time. Going back to our financial results. This quarter, this was our strongest quarter since the second quarter of 2024, with power clearly taking the lead in the earnings mix. Power contributed 96% of the Q2 and 70% of the first half earnings as coal remains under pressure from lower shipments and higher fuel costs. Despite the shift in earnings mix, return on equity reached double digits at 14% over the six-month period.
At the group level, revenues rose by 25% in the second quarter, supported by stronger coal prices, higher power sales, and improved dispatch. Cash costs grew faster, mainly because of higher coal production costs and increased power sales. This brought core EBITDA margin down to 39%, although core EBITDA still grew by 12%, and reported net income rose by 17%. Debt remains low at PHP 5.5 billion, while cash increased to PHP 18.3 billion, leaving the group with a net cash position of nearly PHP 13 billion. Overall, the balance sheet remains very healthy, with a debt-to-equity ratio of 0.25 times and a current ratio of 4.7 times, and this gives the group room to support operations and adjust to changes in the operating environment. Turning to coal, revenues were broadly stable as higher selling prices offset lower shipment volumes.
Fuel and mining costs increased significantly, bringing core EBITDA margin to 21% in the second quarter. Depreciation was flat due to the absence of major capital spending since the first half of 2026. At the standalone level, coal net income declined by 65% to PHP 782 million. After intercompany elimination, the segment contributed PHP 191 million to the group earnings, down 90% year-on-year. Despite the weaker results, the coal business remains in a net cash position, supported by operating cash flows and the loan availment and the dividends from the power segment. On to the coal operations, production declined by 55% to 2.5 million metric tons, and this was mainly due to stripping activities in Narra block and the limited production at Acacia because of water seepage conditions. Shipments also fell by 13% to 4 million metric tons.
Aside from lower output, demand remains soft from the lower grade inventory available during the quarter. Acacia was expected to improve the product mix, but limited mining access reduced the availability of its better quality coal. On the pricing, average selling price increased by 27%, which helped cushion the impact of lower volumes and the higher operating costs. Turning to the power segment, the segment posted record revenues and net income in both the Q2 and first half periods, supported by better plant performance, higher dispatch, and improved selling prices. Depreciation and amortization declined by 27% to PHP 763 million after we reassessed the remaining useful lives of certain SLPGC assets. The reassessment took into account major plant modifications completed since commissioning and the enhanced asset management program now in place.
The segment also recognized a PHP 180 million non-recurring gain from the reverse charge from the additional depreciation booked in the first quarter before the reassessment was applied, effective January 1, 2026. At the balance sheet, the debt level of the segment halved over the six-month period following scheduled SCPC loan amortization, and the segment remained in net cash position as of the end of June. The segment is expected to be debt-free by year-end. In power operations, plant availability improved to 94% in the second quarter, while outage days were nearly cut in half from last year. This helped us deliver our best-ever quarterly generation and sales. Average selling price increased to PHP 5.81 per kilowatt hour, mainly because of higher spot prices. Looking ahead, our focus remains on maintaining operational continuity while preserving flexibility as market and regulatory conditions evolve.
As you recall from our previous briefing last May, we have revised our 2026 coal production target to around 12-13 million metric tons for the year. Achieving this will depend largely on expanding safe mining access at Acacia. Continuous pumping has kept water seepage under control, but production remains limited to areas where conditions are manageable. The pumping system is critical to Acacia's operability. Any prolonged interruption could lead to extensive flooding and materially affect access to the mine's reserves. Since Acacia contains roughly half of Semirara Island's recoverable coal reserves, maintaining reliable pumping capacity remains a key operational priority. We are also managing higher stripping requirements in Narra and elevated fuel costs. On the commercial side, we continue to broaden the market for our existing coal specifications, supported by firm benchmark pricing.
On domestic allocation, we continue to serve local customers where plant specifications are compatible with the coal grades available. Greater domestic utilization will also depend on the blending capability and technical requirements of local generators. On power, we will continue to improve plant reliability and efficiency while adjusting to our mix of contracted and spot sales based on market conditions. We are also expanding our customer base across wholesale and retail markets to diversify sales channels and improve our earnings visibility. Overall, our technical capabilities, operational experience, and healthy balance sheet provide flexibility to manage these challenges as we respond as the operating environment evolves. To wrap up, this quarter shows the growing contribution of the power segment to the group, helping offset weaker coal results. Power accounted for 96% of the second quarter earnings and 70% of the first half earnings.
Our healthy balance sheet and strong asset base also leave the group well-positioned to support operations and respond to emerging opportunities. As we participate in the COC bid round, we believe SMPC's decades of investment in Semirara, together with our technical expertise and operating track record, support a strong position in the process. This ends my presentation, and we open the floor to your questions. To open the floor to your questions, let's start off with questions sent in advance and we received via email. Our first set of questions are addressed to the coal segment. First off is addressed to Mr. Danny Tirona , our mining division head. Hi, good afternoon, sir DST. The question goes, what proportion of your first half coal production came from Acacia?
What is the status of water seepage at Acacia, and when do you expect to fully ramp up production there?
Good afternoon, Hannah. Good afternoon, everyone. For the Acacia production, out of the first half production of 8.4 million metric tons, about 26% or equivalent to about 2.2 million metric tons were sourced from Narra. Sorry, Acacia. At present, seepage discharge in Acacia is higher than about 30,000 cubic meters per hour. This prompted us to change our mining direction, initially from our northern blocks to our western blocks. The western blocks tend to generally have a higher stripping ratio. You've mentioned about the ramping up production of Acacia. Production in Acacia really hinges on two things: solving the seepage issue and the resolution of our Coal Operating Contract No. 5. If these issues are resolved, then we can ramp up production back at 16 million metric tons per year level or even more.
Thank you. Thank you for the clarification, Sir DST. Now we move on to questions on the commercial side of the coal segment. First question, the next set of questions are addressed to Sir Mark Bentayo, our Head of Coal Marketing and Product Delivery. Sir M. Lab, our question goes, why does the management think that the ICI4 coal price will plateau in the third quarter, considering increased demand for coal arising from reduced supply of LNG to the region?
Good afternoon, Hannah. While the reduction in LNG supply in the region is forcing power plants in the region to burn more coal, let's remember that these LNG-switching power plants require higher-grade coal. So the effect is on ICI 1, two, and three, and not on the ICI4. Also, these big importers like China and India have enough stock, so they don't need to panic buy. So the result is there's not much movement on the ICI4. The earlier recovery, there will be a loss in the momentum, and we think that this will all be up to by the third quarter or fourth quarter of this year.
Thank you, sir. Next question: Are you seeing increased demand for coal imports that are tightening their domestic coal regulations?
Well, in the Philippine setting, there will always be a demand for coal, considering that we are only producing around 16 million -20 million metric tons a year, and the majority of that is from Semirara. While the domestic requirement is around 40 million-42 million. Even without a DOE pronouncement that we need to maximize the use of indigenous coal, there will always be a demand for export, and most of these have already been contracted a long time ago by these power plants. For Semirara's side, we are ready to support this pronouncement by DOE, and we are ready to support the domestic requirement. Unfortunately, only a handful of plants can really use Semirara coal because of some technical limitations. If there is none, then we are ready and want to maximize the domestic sales.
Thank you. Thank you, sir M. Lab, for the clarifications. Now, moving on to finance-related questions. These are addressed to Miss Carla Levina, Vice President and CFO. Hi, ma'am CTL. What is the latest update on both Narra and Acacia Mine's income tax holidays?
Okay. Good afternoon, everyone. For the income tax holiday, our ITH for Acacia Mine has officially ended on May 14 of this year. It means that after that, Acacia Mine sales are already subjected to income tax of 25%. Starting last year, we attempted to include or add a category for exploration and development of resources in the draft SIPP for 2026 onwards under the category of energy. However, in the final SIPP that was issued by BOI this June, they did not include that category on which we were supposed to apply income tax holiday for Acacia Mine. To make it short, it means that Semirara does not have an income tax holiday for now for both Acacia and Narra Mine. Thank you.
Thank you, ma'am. Next question: What percentage of your total mining cost is attributable to diesel and equipment?
Okay. Our diesel and our equipment parts and materials account for a little bit more than half of our production cost. Therefore, the impact of elevated diesel prices, especially this second quarter, really increased our production cost and affected our earnings, despite efforts, of course, of our mine site to have cost savings in terms of reducing the cost for the fleet maintenance and parts. Thank you.
Thank you so much, ma'am. Now we move on to questions addressed to the power segment. The first type of questions is addressed to Mr. Charlie Robles, Vice President and Manager for the Calaca Power Complex. Hi, good afternoon, sir. CVR. What are the estimated lives of SLPGC and SCPC as of the end of 2025? What do you think will be the extension once the assessment is over?
Good afternoon, everyone. Thank you, Hannah. For SCPC, we did not conduct an assessment, as the most recent review was completed in 2020, following the implementation of the life extension program for both units. On the other hand, SLPGC concluded its reassessment in June 2026, approximately 10 years from plant commissioning and upon completion of various plant modifications and enhanced asset maintenance programs, with the remaining useful life of the plant estimated at 12 years from 2025. Moreover, any further extension of useful life will depend on the effectiveness of our ongoing asset maintenance initiatives, engineering improvement projects, operating conditions, and the overall technical and economic viability of continued operations. Thank you, Hannah.
Thank you, sir. Sir, last question. Can you already provide guidance on the plant maintenance outages of your plant in 2027?
Yes. With respect to the plant maintenance outages, adjustments will be implemented to accommodate the recent forced outages and the resulting changes in major maintenance activities. The 25-day outage for SLPGC 1, originally scheduled on August 25 this year, will be rescheduled to start on January 2 next year. Similarly, the 60-day plant outage for SCPC 2 will be moved to October 23 this year, a month later from the original date. SLPGC Unit 2, on the other hand, will have its 25-day plant maintenance outage on February 5, 2027. These schedule revisions are intended to optimize plant availability while ensuring the completion of critical maintenance work. SCPC 1 and SCPC 2 will have its 20-day plant outages on September 1, 2027, and November 20, 2027, respectively. Thank you, Hannah.
Thank you. Thank you very much, CVR, for the guidance. For the commercial side, may we address the questions to LHR, Vice President for Power Market and Commercial Operations. Hi, good afternoon, LHR. First question. Could you please explain why BCQ prices fell by 9% in the second quarter despite the higher thermal coal indices?
Yeah. Good afternoon, everyone. Good afternoon, Hannah. The decrease in BCQ prices was mainly driven by the new contracts that we were able to sign, which were priced and negotiated before the Iran conflict. Coal indices and market conditions were still high or were still stable at that time. If you compare these contracts to the ones that were closed last year, we were able to negotiate that at fixed prices when coal indices were still high during the Ukraine war.
Thank you, ma'am. Next question. Can you give guidance on the power segment sales volume and mix BCQ versus spot for Q2 and if possible for the second half of 2026?
Okay. For the second half of the year, we are able to close a few, approximately around 200 MW, which are currently under different stages of negotiations. We have already made offers to some customers, total demand of around 191, and prices already reflect the current coal indices.
Thank you, ma'am. Given the elevated energy prices, can you tell us your contracting strategy and how negotiations are developing? What is the management's level of optimism about securing long-term and favorably priced contracts?
Our view has always been a balanced contracting approach. We try to find that mix that will allow us to optimize when spot prices are high and still have that flexibility when it comes to our positions in the short and midterm. That said, we continue to actively pursue contracts that will offer us decent margins and support long-term value. Based on our recent negotiations, we are confident that we can secure some of these contracts by end of this year, probably around quarter four of this year, that would provide us with stable revenue until end of next year and even stretch it up to 2028.
Thank you, ma'am. Last question. Can you share your thoughts on the bid terms of Manila Electric Company's ongoing 900 MW competitive selection process? Are you qualified to bid for this contract?
We see it as an opportunity for us to secure a long-term contract. While we have already signified our intent to bid, we are still evaluating the details of the CSP requirements and how these will be aligned with our existing portfolio, our operational and technical capabilities, and our long-term strategy.
Thank you very much, Ma'am LHR and Sir Reg. Now we move on to the questions addressed to SMPC's corporate side. First question is addressed to Ma'am CTL, a finance-related question. Ma'am CTL, what would Q1 net income have been if the average fuel price for the period was as high as it is today?
Okay. If in case the average diesel prices today would be applied to the Quarter 1 2026 coal segment results, the coal segment net income would have been lower by around 8%-10% because of its direct impact on their production cost, which would consequently affect our cost of sales and also take into consideration the related effect of that cost to our government share expenses. Thank you.
Thank you so much, ma'am. The next set of questions are addressed to our President and COO, Ma'am Maria Cristina C. Gotianun . Hi, Ma'am CCG. First question is about St. Raphael Power Generation Corp. What is the read-through on the higher capitalization of St. Raphael? Can you update us on this project, including the estimated cost, plant capacity, funding structure, and expected construction timeline? Do you plan to secure contracts prior to build-out?
Good afternoon to everyone. Thank you, Hannah. SMPC is increasing the authorized capital of the capital stock of St. Raphael Power Generation Corp. because we see that this is a way of expanding, this is project expansion for us. As part of the expansion program, we are preparing for the site development work of the project. This is a project that is 2 by 350 megawatts, and the estimated cost is around $1.2 billion - $1.3 billion, and the funding structure is about 30% equity and 70% financing. We see that this is an opportunity for us because we have been monitoring the construction of the transmission line, and we see that there is progress in that aspect. We believe that there is need for the country to have additional baseload capacity. That is why we are entertaining this project.
Thank you so much, ma'am. Next question. Can you share your thoughts on the implications of the government's plans of requiring operator of Semirara Mine to allocate 60%-70% of production to the domestic market? Would this mean that you will not be able to maximize the 20 million metric annual production limit of your ECC?
Yes. The ECC pertains to the maximum annual production that Semirara can mine. We can sell more than that, depending on our production, on the beginning inventory of the previous year, of the current year. We are aligned with the government to prioritize selling coal to the domestic market. As what Mark Bentayo has explained earlier, there are technicalities which the generators or the users of coal have to consider because this is a different spec than what they might need to burn as fuel. Even if we want to sell to them, because they have some technical constraints, then they might opt to import the coal. But we give priority to selling the coal to the domestic market.
Thank you, ma'am. Ma'am, speaking of ECC, last question for today. Is this ECC or environmental compliance certificate for Semirara Island tied to Semirara Mining, such that a new operator would need to secure its own ECC if it wins the bidding?
Our ECC is coterminous to the COC of Semirara. Anybody who will be the bidder will have to secure its own ECC. If Semirara will be the winner, then we will have to extend the present ECC that we have.
Thank you, ma'am. Thank you very much, Ma'am CCG. Now we move on to questions addressed to our Chairman and Chief Executive Officer, Mr. Isidro A. Consunji. Hi, sir. Good afternoon. The first question, your net cash position is quite large at PHP 12.8 billion. What will be your capital allocation strategy once the coal contract bidding is over?
Good afternoon, everyone. Yes, we have to scale.
Down or some of that.
CapEx for Semirara Mining for about, what, 1.5 years or no?
Yes.
About 1.5 years. We will be retreating, but instead of buying Japanese trucks, we will probably be going for the Chinese hybrid, which will save 15%-30%, or maybe the new hybrid that the Japanese have a prototype in Indonesia, which we are going to visit later part of this month. Anyway, as usual, right now, Semirara is virtually not that cash-rich. We think we can be able to do CapEx and declare dividends after the bidding is over. Unless the situation deteriorates, which I do not know what is going to happen because we have, as mentioned earlier, a technical problem on the CPH. We want to know what is going to happen with the COC bidding, because if it does not bided, end of this quarter, I think prudence dictates that we have to scale down our operation prior to the term-
Renegation?
Term limit of our contract. That is it. What is the next question?
What are your dividend relation expectations moving to the second half of 2026?
Same as before. Whatever we have cash, we have been giving back to our stockholders. We have been doing that for the last 10 years. Same. No change in strategy. Thank you.
Thank you, sir. Actually, we have come to the end of our list of questions. Before we close, may we ask our Chairman and CEO, Sir I.A.C., for your closing remarks.
Good afternoon again. Thank you for joining our analyst briefing. This year is unusually challenging because our technical challenge of the CPH and significantly of the uncertainty caused by this COC bidding. It is very frustrating that we have to comply with all the legal requirements for an extension. However, the Department of Justice has not acted on our request formally, so the DOE has decided to bid it out. The original bid schedule was April this year. But for one reason or another, up to now, the DOE has not come up with the terms of reference, bid dates, model contract, and so many other elements that normally standard in a bid this big. This uncertainty is really causing us a lot of anxiety.
But anyway, despite that, the management of Semirara has been very productive and has produced financial results which is quite unusual considering the conditions we have today. Again, thank you very much for joining our analyst briefing. Maraming salamat and good afternoon.
Thank you everyone for joining us today. We would also like to thank all of our panelists and guests, as well as everyone who worked behind the scenes to make this briefing possible. The final presentation materials will be uploaded within the day in our website. Thank you and have a good afternoon.