The Semirara coal war

Sleepless nights, the kind that leave you tossing and turning in bed long after the world has fallen into a deep slumber and well past the witching hour, have become familiar to Energy Secretary Sharon Garin.

But it’s not just because we are in an energy emergency.

It has more to do with the fact that the fate of the country’s largest coal mine hangs in the balance, its future as murky as a cloud of coal dust.

Thus, the sleepless nights. Sec. Garin said so herself.

Months ago, at the University of the Philippines Alumni Association Awards ceremony, Sec. Garin, one of the distinguished alumni awardees, said with a mix of humor and seriousness that the Semirara bidding was keeping her awake at night.

I’m not surprised to hear this.

Joking or not, Sec. Garin successfully drove home the point. While she didn’t explain it, it’s obvious that it’s because this is no ordinary auction.

And depending on what happens, the Semirara coal mine in Antique, currently operated by Consunji-led Semirara Mining and Power Corp., may continue operating, be at the center of a legal battle or go on temporary shut down.

No coal by July?

And because the whole process has been delayed, we may end up having no coal from Semirara by July next year.

This all depends on how the Department of Energy (DOE) proceeds with the whole process.

Here’s the situation:

SMPC’s 50-year contract will expire on July 14, 2027. The DOE will bid out a new contract, but a proposed framework for awarding mining and other natural resource projects poses complications.

According to the proposed joint administrative order of the DOE and the Department of Environment and Natural Resources, the financial bid will determine the winning bidder, with the highest offer expected to deliver the greatest economic benefit to the country.

It also requires existing contract holders and operators to surrender covered assets to the government upon the expiration of their contracts.

Not surprisingly, the Japanese Chamber of Commerce and Industry of the Philippines Inc. (JCCIPI), other mining companies and SMPC have opposed the new framework, warning that the order could create regulatory uncertainty and undermine investor confidence.

JCCIPI, for one, said existing operators should not be placed at a disadvantage simply because of investments they made under their current contracts.

It likewise urged the government to clarify how the JAO would interact with the laws and contractual arrangements governing different resource agreements, including Presidential Decree 972, the Coal Development Act of 1976.

The final framework has not been issued. As the government continues to finalize the guidelines, the auction is further delayed.

The bidders

So far, we’re hearing of two contenders – the incumbent SMPC and San Miguel Corp., although the Ramon Ang-led conglomerate has not officially made any announcement on the matter.

A source said a third player, the Philippine National Oil Co., may also be qualified to bid.

It’s complicated

Ideally, the bidding should have concluded by now and the winner, if it is a new player, should have already been preparing for a smooth transition.

According to my former energy beat mate, Myrna Velasco of Manila Bulletin, the Notice of Qualification is slated for Dec. 23, 2026, followed by the Notice of Award on Jan. 15, 2027. The signing of the Development and Production Coal Operating Contract is slated for Jan. 19, 2027.

With this, there’s just roughly eight months left before the contract expires. This means a new player would be racing against time to make sure there’s no disruption in coal production.

The Consunjis themselves took years to get into the rhythm of running the coal mine.

As Myrna said, winning the contract is one thing; knowing how to run the mine from day one is another.

This, after all, isn’t as simple as taking over a power plant and just switching on the green light. It’s a sprawling and complex mine site which has taken years for SMPC to study, understand and establish a system to run, making it no doubt an industrial success.

A new operator would need a battalion of mining engineers and technical people to operate the mine the way the incumbent has. Or even better.

And this new team would need months, maybe even years, to feel its way through an unfamiliar and complicated process.

For me, the ideal setup is for whoever wins to partner with incumbent SMPC to operate the coal mine, which I heard has just seven to eight years of remaining life. The new player may bring something new to the table while the incumbent knows the ins and outs of the coal island – literally, and otherwise. A win-win, for sure.

But sources said that just won’t happen with the two main contenders. A coal war, it is.

What makes the situation even more dizzying is that Semirara’s coal output accounts for a substantial portion of the country’s coal supply for industry and power generation.

SMPC accounts for 95.4 percent of Philippine coal production, according to DOE data.

Thus, while a new player may offer the government a better deal, the delays and complexities surrounding the bidding could put the continuity of coal production at risk.

Come July, Semirara, once touted as an island of black gold, may no longer be able to supply coal. That’s a frightening prospect for a country already grappling with energy security concerns.

Sec. Garin, it seems, will have more sleepless nights ahead.

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