San Miguel set to challenge Semirara’s coal dominance

Manila Standard Today San Miguel Corp. may not be saying it but it clearly has declared its intentions to become the biggest coal producer in the Philippines.Energy unit San Miguel Global Power Holdings Corp. plans to put up coal-fired power plants over a five-year period with a combined output of 3,000 megawatts, using its rich coal deposits in Daguma mines in South Cotabato province as fuel. Alan Ortiz, president of San Miguel Global, has implied that parent San Miguel will develop the Daguma coal mines to reach a production level that could probably eclipse the output of Semirara Mining Corp. Semirara, a unit of DMCI Holdings, is expected to produce 6 million to 7 million metric tons of coal from its Antique deposits this year, matching last year’s peak output. Semirara, whose output is blended with imported coal with higher heating value, mainly fuels the Calaca power plants in Batangas and exports part of the production. The combined output of San Miguel’s Daguma coal deposits are not yet known, but an industry source said the diversifying conglomerate needs to ramp up production soon if it wants to double its generating capacity to over 6,000 megawatts in five years. San Miguel also operates the 1,200-megawatt Sual coal-fired plant in Pangasinan province—a ready market—the 600-MW Limay thermal facility in Bataan and the 340-MW San Roque hydro facility, also in Pangasinan. Easy route Parent San Miguel appeared to have taken an easy route in the coal mining business with its acquisition of Daguma Agro, an upstart mining company that has rights over one of the country’s richest coal deposits. Despite Daguma Agro’s troubled past, San Miguel is about to develop the coal deposits in South Cotabato into full commercial operation. Daguma Agro is the same company that the late Edgardo “Ed” del Fonso, a former finance undersecretary and past president of Power Sector Assets and Liabilities Management Corp., haled into court in 2005, after the company’s board and officials kicked him and his investor-partners out and wiped out their 17-percent equity investment. San Miguel president Ramon Ang had gushed over the potential coal reserves of Daguma Agro’s concession area, which is close to picturesque Lake Sebu. Initial drillings had established that the coal deposits in the two blocks owned by Daguma Agro were in the magnitude of 50 million MT. Semirara, in contrast, started with estimated reserves of 20 million MT in Semirara Island off Antique. Lucrative business Coal production has become a lucrative business because fuel prices are tied to the movement of crude oil in the international market. Coal prices of late have shot up due to higher demand and amid flooding in Australian mines. Australia is one of the world’s largest coal producers. Semirara, meanwhile, is expanding its coal exploration to boost production in later years. It is exploring 24 blocks in Caluya and Sibay islands off Antique to address increasing demand. The company’s coal operating contract now covers an additional land area of 3,000 and 4,200 hectares in Caluya and Sibay islands, respectively. Semirara’s original coal contract covered just 5,500 hectares in Semirara Island. The company also obtained approval from the Energy Department to extend its coal operating contract in Antique by another 15 years from July 13, 2012 to July 24, 2027. The contract covers 13 blocks in Semirara Island, Caluya in Antique. E-mail: rayenano@yahoo.com or extrastory2000@yahoo.com