SCC coal contract dispute deepens

From AB Capital's The Opening Bell: Three Moves

Event

SCC said DOE's auction rules effectively exclude it from rebidding for the Semirara coal mine, citing procedural gaps and a requirement to surrender mine assets as a condition for participation. Its existing coal operating contract expires in July 2027.

View

The latest statement reinforces our view that the process is likely to be contested and potentially litigated, with a higher risk that SCC loses the mine (see our latest report). Our downgrade to Neutral reflects a less favorable setup for SCC: the rules prioritize the size of the financial bid over mining experience, while requiring SCC to surrender its assets to participate.

Catalyst

DOE's response and the final auction mechanics will determine whether SCC can participate on viable terms. Even a favorable legal ruling on asset ownership may not secure the contract if the award remains based solely on price.

Action

We maintain Neutral, TP 14.8/sh. SCC looks inexpensive on power alone, but until the award process becomes clearer, we see limited near-term catalysts for the valuation discount to narrow.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.