Financial offer to decide Semirara coal bid?

Notes on the beat

If the auction for the country’s largest coal mine were a Netflix series, the plot would definitely be thickening.

The latest plot twist? The bidder with the best financial offer could end up securing the new coal contract on Semirara Island in Antique, a site operated for decades by the Consunji Group.

This comes as the Department of Energy (DOE) and the Department of Environment and Natural Resources propose new guidelines and procedures for evaluating and awarding contracts and other rights involving the country’s natural resources.

The proposed rules, dubbed the national interest evaluation framework, call for the government to select the financial bid that delivers the highest economic benefit to the country, with returns that match the value of the contract area. 

If adopted, the guidelines can make the financial offer the “sole ranking factor” among qualified bidders in the Semirara coal auction. 

That will contradict Energy Secretary Sharon Garin’s pronouncements that the auction would not hinge on financial bids but on the technical qualifications of bidders. 

And just when the bidding appeared to be leaning toward Consunji Group’s Semirara Mining and Power Corp. (SMPC), given its decades of experience operating the site, the storyline took another turn when the DOE put the auction on hold in April. 

The postponement, first reported by The STAR, was meant to address clarifications raised by prospective bidders.

Garin later said in multiple media interviews that the bidding could not yet resume because the government was still finalizing the auction terms.

The STAR has sought clarification from the DOE on how the proposed guidelines would affect the Semirara coal auction but has yet to receive a response. 

Beyond financial offers, the proposal will also require existing contract holders and operators that intend to join the auction for sites they currently operate to properly account for all assets, equipment and facilities covered by their contracts. 

For the Semirara auction, this would mean SMPC would have to submit a detailed inventory of its assets and equipment, whether movable or immovable.

That subject is already at the center of SMPC’s pending petition for declaratory relief before a Makati court. 

Last month, the company asked the court to stop the DOE from requiring it to disclose proprietary information that could be shared with other bidders in the auction.

SMPC said the government may take ownership of the assets only if the company fails to remove them from the production and exploration area within one year after its current contract expires in July 2027.  

“SMPC believes the bidding process is best served when each participant undertakes its own technical studies and develops its own approach, rather than relying on information generated through SMPC’s decades of investments and expertise,” it said. 

Two-stage evaluation

If the government pushes through with the proposed guidelines, the Semirara coal auction would follow a two-stage evaluation process to determine the winner.

The first, or pass-or-fail stage, would determine whether bidders meet the eligibility requirements, including legal standing, technical capability, financial capacity, national security and integrity clearances, and a commitment to dedicate all or a defined portion of their production to the domestic market.

Only bidders that clear the first stage would advance to the ranking stage, where their financial offers would be evaluated and the best bid would rank first.

“To be credited, a financial offer must be firm and unconditional and expressed in monetary terms or objectively measurable,” the proposal states.

Such offers could include the government’s share in proceeds; royalties; signature, discovery and production bonuses; and fixed or minimum annual payments accruing to the government. 

When the Semirara coal auction was launched in February, the rules focused on whether a bidder had the financial capacity to carry out its work program.

With the proposed guidelines, however, the focus would be on which bidder is willing to offer the most to the government in return for the contract.

The current Semirara coal contract requires SMPC to remit 30 percent of its net proceeds as royalties to the DOE.

Energy Undersecretary Alessandro Sales earlier told The STAR that the government was likely to maintain its share of proceeds, noting that the contract was already structured and royalties were legally defined. 

For now, the auction remains on hold, and the rules have yet to be finalized. The field of bidders is also still unclear.

And if the Semirara coal auction were indeed a Netflix series, market watchers may have to wait a little longer for the next episode when the bidding hopefully resumes later this year.