Semirara bid risks power cost spike

Electricity rates could come under pressure if the government’s bidding rules for the Semirara coal mine lead to a production halt by July next year, Semirara Mining and Power Corp. (SMPC) warned as it weighs legal options to challenge the auction terms.

In a regulatory filing on Wednesday, SMPC said a new operator may not be able to take over the highly complex mining operation immediately, potentially disrupting the supply of Semirara coal used by power plants for baseload generation.

The company warned that the risk is heightened by bidding rules that make the highest financial offer the main basis for awarding the mine, while prospective operators are not required to have mining experience.

“Semirara is no ordinary mine. We are mining in the sea, deeper than the height of the highest building in Makati. We have to pump out the equivalent of 12 Olympic-size swimming pools or the Pasig River’s torrent every hour just to get to the coal”, SMPC said.

According to SMPC, a winning bidder would have to procure hundreds of pieces of heavy equipment and large mining trucks, hire and train thousands of workers, and secure billions of pesos needed to operate the mine by July.

SMPC warned that failure to complete those requirements in time could bring Semirara coal production to zero once another operator takes over.

Such a disruption could also spill over to consumers through higher electricity rates, the company said, as Semirara coal is used to fuel baseload power plants.

Energy Secretary Sharon S. Garin, however, downplayed concerns that the expiration of SMPC’s contract could threaten the country’s coal supply, noting that about 95 percent of the Philippines’ coal requirements are imported.

“Semirara is not substantial enough to affect our supply, but our coal is coming from Indonesia,” Garin said.

She also stressed that SMPC’s existing contract remains valid until the middle of 2027 and that its production obligations remain in force until then.

“The coal will still be there, whether the contract expires or not. There's still production. And the current contract is up to the middle of next year, 2027,” Garin said.

“The obligation or the responsibilities to mine that, reduce a certain number of quantity of coal is still there. So it will only expire after the contract expires, not before that,” she added.

Garin said the Semirara coal operation is scheduled to be auctioned within the year, possibly in November or early December.

With the Philippines heavily dependent on imported coal, the DOE is also coordinating with Indonesia over its export policies for next year.

Garin said she had traveled to Indonesia twice to discuss coal supply with officials, who are expected to issue their final guidelines in the first quarter of next year.

“So as far as our conversation, our ask from Indonesians is to, if the supply will be maintained and hopefully the price also, and we have been assured that valid contracts, especially long-term contracts, will be honored,” Garin said.

SMPC also questioned a provision requiring it to list its complete assets and surrender them to the government if it participated in the bidding.

“We are the only company covered by this rule. This is unfair and basically bars us from bidding. To require us to surrender ownership of our assets as a condition to bid is against Presidential Decree 972, a special law on coal mining, which clearly says that such assets are ours and we can remove them within one year from the expiration of our operating contract”, SMPC said.

The company said the shift from selecting the most capable mining operator to prioritizing the highest financial bid is puzzling, particularly given the operational requirements of the Semirara mine.

Apart from the potential impact on power supply, SMPC warned that zero coal production would also mean zero royalty payments to the government, undermining the bidding process’ objective of raising more state revenues.

SMPC paid P43.4 billion in government share and P3.7 billion in taxes from 2021 through the first half of 2026.

The company also raised concerns that the values leading to the award would be kept confidential under the bidding rules.

To recall, the DOE terminated the 2026 Coal Bid Round covering three areas to revise the bidding rules and secure bigger, measurable economic returns for the government from commercially viable coal resources.

The review will also consider water seepage at Semirara Island and a legal dispute with the current operator over coal operation assets, which the DOE said created uncertainty for prospective bidders.