Energy security: DoE or don’t

When the government bids out the country’s only coal mine, one would expect clear rules, an open process and a winner who at least knows how to dig up coal.

At Semirara, the current operator says the opposite is happening, and the odd turns the bidding process has taken is causing many to wonder who it is being shaped for.

Semirara Mining and Power Corp. (SMPC), which currently runs the mine, said the auction breaks established bidding rules by pushing the incumbent out of the race.

“There were no bid bulletins, no pre-qualification to screen the unqualified, no official reply to questions raised, no reply to all the letters sent by the current mine operator, no model contract, no minutes, but complete secrecy on how the award would be reached,” SMPC said.

The terms add to the puzzle. Early this year, the sole ranking factor was technical capability, which made sense, since the winner must actually produce coal. Then, without explanation, the factor was flipped and the prize would go to whoever offered the highest price.

A change like that matters because a high price is easy to promise but hard to deliver. A company with no mining experience can put up a huge number, win the auction and then find that it cannot get a single ton out of the ground.

SMPC put it bluntly: “The highest bidder with zero mining experience will most likely produce zero coal output and zero government share.”

It is also unclear what would happen if that bidder fails. The winner is due to take over the mine in July next year, but no one has said what penalty it would face if no coal comes out then.

Zero coal means zero income for the government, the opposite of what the Department of Energy (DoE) says it wants, which is to raise more money.

The DoE canceled the bid round last September, but it did not answer any of the concerns raised. Instead, it issued a joint administrative order as the basis for a second round.

Under that order, SMPC may join the bidding only if it hands over its assets to the DoE.

“In other words, the DoE is telling us not to bid,” SMPC said.

This followed letters the DoE sent this year, asking SMPC to turn over its equipment and its proprietary know-how.

SMPC refused, pointing to Presidential Decree 972, which it says gives it ownership of the equipment. Meanwhile, SMPC says it never got a reply to its own letters about the bidding problems, even though it sent several.

SMPC says it has invested more than P55 billion, using hundreds of heavy machines to reach the coal some 350 meters below sea level, along with giant haul trucks with tires nearly nine feet tall.

A new winner would have to buy all of this in just a few months and also hire and train around 4,000 workers if it hopes to produce coal at all.

Then there is the water.

“It also must know how to pump out seawater that is one skyscraper deep per hour to get to the coal, something SMPC learned to do through years of trial and error,” the company said.

No one learns that in a few months. A newcomer, no matter how rich, would start at the bottom of a very deep hole.

This leads to a question the DoE has yet to answer: the rules, as written, favor whom?

The bid requirement is hard to ignore. The one company that can do the work is told to give up its assets before it may bid. The test of skill is dropped for a test of price.

Yet the rules stay quiet, while the letters go unanswered and the penalties for failure are not listed.

When a road is paved this way, it is fair to ask the DoE who is meant to walk it.