The prospective new operator of the Semirara coal mine would likely need to spend at least P55 billion on equipment to sustain large-scale output — a cost that may prove difficult to recover given the mine's remaining life, according to Semirara Mining and Power Corp. (SMPC) Chairman Isidro A. Consunji.

"If you want to produce 16 million tons a year, you have to spend at least P55 billion in equipment alone. And the mine is good for maybe eight years. So hindi mo mababawi [you won't be able to recover it]," Mr. Consunji told reporters late Monday.

SMPC's coal operating contract, which the company has held for nearly 50 years, is scheduled to expire on July 14, 2027. The contract is expected to be put up for auction after the company failed to secure a renewal. A competitive award would place the mine behind nearly all of the Philippines' coal output under a new operator for the first time in close to 50 years.

The auction, initially targeted for April, has been postponed while the Department of Energy (DoE) finalizes the terms of reference.

SMPC President and Chief Operating Officer Maria Cristina C. Gotianun flagged the company's concerns in a Sept. 4 letter to Energy Secretary Sharon S. Garin, regarding proposed rules being prepared by the DoE and the Department of Environment and Natural Resources for the evaluation and award of contracts covering natural resources.

One of the company's principal objections is a proposed requirement that bidders commit their entire coal production to the domestic market. SMPC argued that Presidential Decree No. 972, the Coal Development Act of 1976, relies on demand-side tax and fiscal incentives rather than mandatory supply quotas, and that imposing such a requirement would exceed what the government is authorized to require under the law.

"Prohibit the introduction or material amendment of domestic-supply volume, duration, priority, off-taker, and pricing requirements after the commencement of the competitive-selection process," the company said in the letter.

SMPC also objected to a proposed bidding structure that would treat technical, operational, and environmental qualifications as pass-or-fail criteria, while ranking qualified bidders primarily by the size of their financial offers. Under that design, the company said, operating experience and technical capability could be underweighted in what is a complex mining operation.

"This design selects for the most optimistic price view — the highest bidder is the one with the most aggressive forecast or least concern about deliverability," SMPC said.

The company further raised concerns about proposed asset-turnover provisions, which would require contract holders to transfer cost-recovered or depreciated equipment and property to the government upon contract expiration. SMPC argued that cost recovery represents an expense deduction rather than a government purchase, and that mandatory turnover could discourage operators from investing in equipment and maintenance during the final years of a contract.

"The operational effect runs against the Implementing Agency's own interest," the company said. "An operator facing asset turnover has no incentive to invest in the closing years of a contract — maintenance is deferred, renewal stops, and mine-management decisions favor extraction over sustainability."

For its part, Ms. Garin said on Tuesday that the DoE was finalizing a circular setting out the terms and procedures for the coal auction.

"We want to make sure that the coal is being sold in the Philippines. That optimization of our resources for energy security. Learning from our experience with the Middle East conflict, we need to secure our resources," she said.

The final terms of reference, once issued, will determine when the auction proceeds and show how the department has weighed SMPC's objections.

SMPC is the Philippines' largest coal producer, accounting for 97% of domestic output, and produced a record 19.9 million metric tons last year. — Sheldeen Joy Talavera

Source: Bworldonline