SCC Skips Dividend to Build War Chest for Its ‘ABS-CBN Moment’

The coal and power producer is hoarding cash as the contract underpinning its mining business approaches expiration.

Semirara Mining and Power Corporation is doing something unusual for one of the Philippine stock market’s most dependable cash machines: It is keeping the money.

The coal and power producer declared no cash dividend during the first nine months of 2026, after declaring ₱8.50 billion over the same period last year. Instead, it allowed earnings to pile up on its balance sheet, cut capital spending to a fraction of its previous level and borrowed another ₱5 billion.

By the end of September, cash had ballooned to ₱20.18 billion, more than four times the ₱4.36 billion held at the end of 2025. The company generated ₱12.96 billion from operations, spent just ₱1.13 billion on property and equipment and received ₱5 billion from a new long-term loan.

For shareholders accustomed to receiving much of Semirara’s profits, the missing dividend is conspicuous. But the company’s restraint looks less like stinginess than preparation.

Semirara is approaching what might be called its ABS-CBN moment: the point at which a valuable business must confront the expiration of the government authority on which a central part of that business depends.

Its Coal Operating Contract No. 5, covering the company’s mining operations on Semirara Island, is scheduled to expire in July 2027. The Department of Energy is expected to conduct competitive bidding for the succeeding contract, and Semirara says it intends to participate. As of Oct. 29, however, the department had yet to announce the final bidding schedule or implementing guidelines.

The comparison isn’t exact. ABS-CBN Corporation depended on Congress to renew its broadcast franchise. Semirara expects to compete in a bidding process administered by the energy department. But the corporate tension is similar: A business long regarded as durable suddenly finds that a government-granted right underpinning its operations has a definite expiration date.

In such moments, profits matter less than permission.

The dividend that wasn’t

Semirara earned ₱11.02 billion in the first nine months of 2026, 11% more than a year earlier. Earnings per share rose to ₱2.59 from ₱2.33. Yet none of that year-to-date profit was declared as a dividend through Sept. 30.

Retained earnings climbed to ₱56.72 billion from ₱45.72 billion at the end of 2025. During the comparable nine-month period last year, the company declared ₱8.50 billion in dividends and paid ₱8.36 billion. This year, both figures were zero.

The decision substantially altered Semirara’s cash flows. In the first nine months of 2025, dividends and debt repayments consumed nearly all the cash produced by the business. This year, the company retained its operating cash, sharply reduced investment spending and added borrowed money to the pile.

Capital expenditure dropped 79% to ₱1.1 billion, largely because the coal business didn’t undertake another major equipment re-fleeting program. Semirara expects full-year spending of about ₱1.7 billion, down 81% from ₱5.9 billion in 2025. Management said it was pursuing prudent capital allocation and preserving financial flexibility.

That flexibility is already formidable.

Against ₱20.18 billion in cash, Semirara carried only ₱5.29 billion of interest-bearing debt, leaving it with roughly ₱14.89 billion in net cash. Its current ratio more than doubled to 6.51 times, while its ratio of interest-bearing debt to equity remained a modest 0.08.

The company could repay all its borrowings and still have nearly ₱15 billion left. That suggests the ₱5-billion loan wasn’t taken because Semirara lacked cash. It was taken to increase the company’s options.

A contract hanging over the mine

The urgency is visible in Semirara’s own accounting disclosures.

Management identified the scheduled expiration of Coal Operating Contract No. 5 in its assessment of whether the group could continue as a going concern. It concluded that the company had enough resources to meet its obligations and that its power subsidiaries could continue operating independently of the mining contract.

That is reassuring for the group. It is less reassuring for the coal business.

Semirara also identified the absence of a favorable response to its request for a contract-term adjustment, together with the launch of a bid round for the succeeding contract, as indicators that its coal-related assets might be impaired. Management had yet to complete that impairment review as of September and said it would finish the assessment before issuing the audited 2026 financial statements.

The company’s cash accumulation can therefore be read as a form of corporate insurance.

The money could help Semirara satisfy financial qualifications under the next bidding round, support commitments attached to a new operating contract, finance mine development or equipment purchases, or absorb a transition if the bidding process is delayed. If the company fails to secure the succeeding contract, the cash would give it room to reposition the business around power generation or other investments.

And if the contract is secured without requiring a large financial commitment, a portion of the war chest could eventually find its way back to shareholders.

For now, keeping the cash gives Semirara more choices than paying it out.

Power keeps the lights on

Semirara’s transformation into a cash fortress comes as the source of its earnings is shifting away from coal.

Power contributed ₱8.44 billion, or about 78% of the group’s first nine-month earnings, compared with 57% a year earlier. Its profit contribution rose 48%, helped by higher electricity prices, improved power-plant performance and lower depreciation.

Coal’s contribution fell 44% to ₱2.51 billion. Net of intercompany eliminations, the coal segment recorded a ₱110 million loss in the third quarter, reversing a ₱187 million profit a year earlier.

That reversal occurred despite a 22% increase in the average coal selling price during the quarter.

The problem was volume and cost. Coal shipments dropped 25%, while exports plunged 75%. Water seepage at the Acacia mine limited access to better-quality coal, and the coal the company had available didn’t always match customers’ technical requirements.

By the end of September, Semirara was sitting on 5.6 million metric tons of coal, double the year-earlier stockpile. Commercial-grade inventory more than tripled to one million metric tons.

The physical inventory buildup offers an uncomfortable counterpoint to the cash buildup. Semirara has more money in the bank, but it also has more coal that it hasn’t been able to move.

Power has masked that weakness.

Third-quarter electricity revenue rose 32%, while the segment’s standalone net income increased 65%. Average electricity selling prices climbed 26%, driven by an 83% surge in spot-market prices. Plant availability improved to 85% from 82%, supporting higher generation and sales.

Power now provides Semirara with something ABS-CBN Corporation largely lacked when its franchise expired: a profitable second engine that management believes can operate independently of the disputed or expiring government right.

That makes Semirara’s predicament less existential at the group level. Losing the coal contract wouldn’t necessarily bring down the entire company. But it would still reshape a business that built its identity and competitive advantage around having the country’s largest coal-mining operation connected to its own power plants.

Stronger earnings, softer engine

At first glance, the nine-month results looked robust.

Revenue increased 8% to ₱46.66 billion. Net income rose 11% to ₱11.02 billion. Third-quarter profit surged 66% to ₱2.44 billion.

But operating momentum was less impressive than the headline numbers suggested.

Cash costs grew 12%, faster than revenue. Core earnings before interest, taxes, depreciation and amortization increased just 2% to ₱17.28 billion, while the core EBITDA margin narrowed to 37% from 39%.

Reported profit was helped by lower depreciation, ₱412 million in credits related to government-share overpayments and a ₱180 million nonrecurring reversal of depreciation tied to revised useful-life estimates for certain power-plant assets.

Semirara is therefore building its war chest at a time when its coal operation is under pressure and its power earnings are benefiting from unusually strong spot electricity prices. Management expects spot prices to moderate in 2027 as new generating and battery-storage capacity enters the market.

The cash may be arriving just in time.

Cash has become a strategic asset

For years, Semirara’s appeal was straightforward: It mined coal, generated electricity and returned a significant portion of the resulting cash to shareholders.

The 2026 strategy is different. Cash itself has become the product.

Every peso withheld from dividends strengthens the company’s position as it approaches the coal bidding process. Every peso of deferred capital spending adds flexibility. Even the new long-term borrowing, seemingly unnecessary for a company already awash in cash, widens the buffer before the strategic decision.

This doesn’t mean Semirara has permanently abandoned its dividend culture. It means management appears to have decided that the value of cash held today exceeds the value of cash distributed before the government reveals the rules for tomorrow.

That decision asks shareholders to wait. It also shifts the investment case.

The question is no longer whether Semirara can afford a dividend. With ₱20.18 billion in cash and less than ₱5.3 billion in debt, it clearly can.

The question is whether management knows something about the approaching bidding process that makes it unwilling to pay one.

Semirara enters its ABS-CBN moment better prepared than most companies would. It has a profitable power business, little leverage and a rapidly expanding cash reserve. But balance-sheet strength can only buy time and options. It can’t guarantee the government contract around which the coal business was built.

Until the Department of Energy publishes the rules, Semirara’s missing dividend is likely to remain where management believes it is worth the most: inside the company.

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Disclaimer: This is for informational purposes and is not investment advice. Figures come from company disclosures and exchange data; valuation ratios reflect the author’s calculations based on cited inputs.