NEWS

By Myrna M. Velasco | Published Nov 3, 2026

Energy Secretary Sharon Garin

At least 10 coal blocks are being lined up for bidding in the Semirara coal mine, and billions in potential investments are expected. Yet one major, inconvenient question remains hanging in the air: Is the Department of Energy (DOE) preparing a fair auction, or simply asking prospective bidders to play a game where the rules remain a closed-door puzzle?

The DOE may demand that bidders put their money where their mouths are, but it must not keep its own cards hidden under the table. Before asking investors to wager billions on Semirara’s coal blocks, the agency must rake through its own records and prove that the auction does not have a preordained outcome dressed up as genuine competition.

A credible government auction must be an open book: no concealed information, no secret conditions, no mystery rules, no backroom maneuvers, and certainly no VIP lane for favored bidders. The only currency that should matter is a strong, fair bid enforced under rules applied uniformly across all parties.

The Semirara bidding has barely cleared the starting line, yet questions are already piling up. Recent media reports indicate that Semirara Mining and Power Corp. (SMPC) of the Consunji-led DMCI Group has raised concerns over the DOE’s conspicuous silence on legitimate queries regarding the planned auction. This is an ominous way to launch a multibillion-peso bidding process, especially while basic questions about the agency’s legal authority to require asset turnovers and the disclosure of sensitive operational data remain unanswered.

Based on previous disclosures to the Philippine Stock Exchange (PSE), the major points of contention escalated when the DOE issued a June 5, 2026 letter imposing an exceptionally compressed three-day deadline for SMPC to: (i) submit a detailed Schedule of Property, Plant, and Equipment, along with corresponding asset information; and (ii) facilitate a physical inventory verification of its mine site and power complex on Semirara Island.

These directives left SMPC with no viable recourse but to seek judicial intervention through a Petition for Declaratory Relief before the Makati Regional Trial Court. What began as an administrative imposition has turned into an adjudicative question, placing before the courts the need to resolve the legality, permissible scope, and far-reaching implications of the DOE’s directives.

The company principally seeks an authoritative and definitive determination of the nature, extent, and enforceable limits of its rights and obligations under Coal Operating Contract (COC) No. 5 covering the Semirara coal mine project—a contractual undertaking validly awarded pursuant to Presidential Decree No. 972 (The Coal Development Act of 1976).

At the core of this impasse lies a more consequential legal question: Whether the continued recognition, enforcement, and implementation of the rights and obligations vested under the existing COC remain legally tenable and consistent with the governing statutory framework, particularly in light of subsequent DOE issuances under Department Circular Nos. 2017-09-0010 and 2026-02-0004.

As explicitly stated, the petition seeks to ensure that the exercise of regulatory power remains firmly anchored in law, and that no administrative directive—particularly one imposed under exceptionally restrictive terms—be allowed to redefine, prejudice, or circumvent the contractual and statutory rights of the parties without a clear and lawful basis.

Decoding draft bid rules for the Semirara ‘coal war’

Well-placed sources from the DOE asserted that the proposed bidding requirements—particularly the stringent qualification criteria on coal mining experience and operational track record—effectively narrow the field of potential contenders for the Semirara coal blocks to just three: SMPC of the Consunji Group, the San Miguel Group of tycoon Ramon Ang, and potentially the state-owned Philippine National Oil Corp. (PNOC), should it show interest.

With such a tightly circumscribed field, the bidding is shaping up to be a head-to-head showdown between two corporate giants: SMPC and San Miguel, with PNOC as the only other potential participant.

Yet even as mounting questions cast a shadow over the DOE’s proposed bidding process, both SMPC and San Miguel have signaled a preference for transparency, procedural fairness, and an even playing field.

Both prospective bidders acknowledge that an auction process tainted by allegations of irregularity or systemic flaws could become vulnerable to costly, protracted litigation—jeopardizing the continued operations of the Semirara coal mine.

A draft Instruction to Bidders (ITB) exclusively obtained by the Manila Bulletin from government sources reveals an auction round with an aggressive timeline, predicated on Joint Administrative Order (JAO) No. 2026-01 jointly issued by the DOE and the Department of Environment and Natural Resources (DENR).

The original timetable called for a bid notice launch on Oct. 26, 2026—a deadline that has already slipped. After that, targets were set for a Nov. 6 pre-bid conference and a Dec. 10 bid submission, with the completeness check scheduled to begin at 1:00 p.m. sharp on the same day.

From there, the process is expected to move at breakneck speed as Energy Secretary Sharon Garin affirms the highest-rated qualified bidder. 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 (DP COC) is slated just four days later, on Jan. 19—interlocking the final stretch of the auction into a narrowly framed sequence of decisions and tight deadlines.

The trap of the ‘highest bid wins’ rule

Section 3.10 of the draft ITB subjects financial proposals to a formal ranking process, directing the Review and Evaluation Committee for the Joint Administrative Order (REC-JAO) to assess and rank only the bids that survive preliminary review, strictly against the financial evaluation criteria set down in the bidding rules.

According to DOE sources, the proposed composition of the REC-JAO includes: Energy Undersecretary Alessandro Sales; Assistant Secretaries Myra Fiera Roa, Maria Lethel Mejia, and Augustus Cesar Navarro; Directors Clarita Garcia and Demujin Antiporda; and OIC-Director Rowena Joyce Delos Santos.

The draft ITB sets forth that “the REC-JAO shall submit the summary of the financial proposals of the qualified bidders to the DOE Secretary,” after which the energy secretary “shall declare the highest-rated qualified bidder and cause the issuance of a notice of qualification for the post-submission requirements within the prescribed period.”

The central policy question the DOE cannot sidestep is this: Does squeezing the highest possible bid out of the Semirara coal mine truly serve the national interest when Filipino consumers already pay some of Asia’s highest electricity rates? At stake is whether the government prioritizes maximizing auction proceeds or safeguarding the country’s broader energy security and rate affordability.

The Semirara coal mine is no ordinary asset auction; it is a make-or-break resource development decision with direct implications for the country’s power supply and the monthly bills of millions of Filipinos. Every peso squeezed out through an aggressive bidding markup could ultimately feed into higher coal supply costs, raise the cost of coal-fired generation, and leave consumers footing the bill for an auction designed to maximize government returns.

With this, the DOE faces an unavoidable policy test: Will it chase maximum auction proceeds, or put the brakes on a bidding premium that could translate into additional costs for struggling consumers?

Power industry experts rightly caution that the biggest check does not automatically translate into the greatest public good—especially when the asset being auctioned fuels the country’s power generation system. The government’s responsibility must extend beyond extracting an upfront financial windfall; it must ensure the deal delivers lasting national value, protects energy security, and avoids turning a high bid price into an added cost burden for the public.

As a former energy secretary explained: “The danger with that kind of auction parameter is that what the government celebrates as a winning bid could eventually become a losing proposition for Filipino consumers. A bidder may offer the highest upfront payment to secure the coal resource, but that financial commitment does not simply disappear; it may be recovered through higher coal prices, increased fuel supply charges, or higher power generation costs, with the burden passed down to ratepayers. In effect, the government may walk away from the auction table with a lucrative win, but the bill for that victory will land on Filipino households and businesses, disguised as another hike in their monthly electricity charges.”

The fundamental distinction is brutally simple: The highest bid reveals how much a bidder can afford to pay the government, not how much the country can afford to bear. A deep-pocketed offer is no guarantee of an economically sustainable deal, especially when consumers are left absorbing the costs long after the auction ends.

The country’s long-running fight to bring down electricity rates is not merely about easing consumer outrage over punishing power bills; it is equally about restoring the Philippines’ competitiveness as an investment destination, as persistently high electricity costs remain a major deterrent to capital influx.

Beyond that, the economics of the proposed auction raise another critical red flag: A higher upfront bid inevitably creates greater pressure on the winning bidder to recover its investment. That friction becomes even more pronounced given that the active producing blocks (Acacia and Narra) at Semirara are estimated to have only about five years of productive life remaining. Compounding that uncertainty is the fact that other blocks up for auction have yet to have their commercial viability validated—including the Himalian block, which has an estimated potential of 80 million metric tons (MMT) and could prospectively lengthen the field’s productive life by about eight years.

To reiterate, the fallout of an expensive coal auction will not stop at the mine gate. Higher acquisition costs could translate into steeper fuel expenses for power plants, directly hitting generation charges—the single largest component of electricity bills, accounting for over 50 percent.

The DOE must therefore abandon the dangerously simplistic notion that coal resource development is merely another type of public-private partnership (PPP) auction where the biggest financial commitment equates to the best deal.

In the final reckoning, the value of a coal resource cannot be reduced to an ill-conceived bidding war, nor should the country’s energy future be mortgaged to an offer that simply brandishes the largest financial pledge. The highest offer is not necessarily the wisest bargain, and the biggest commitment does not always yield the greatest economic benefit.

Unlike conventional PPP arrangements, coal mining already delivers a built-in revenue stream to the government and host communities through royalty payments. This makes it imperative for the DOE to look beyond the lure of a hefty upfront windfall and confront the more consequential question: How to extract the greatest long-term value from Semirara’s coal resources without turning the bidding price into an arbitrary burden on consumers.

Coal is no ordinary commodity to be knocked down to the highest offer; once it enters the power generation chain, its price becomes a direct cost driver in electric bills. Again, the government may pocket a massive one-time windfall from the bidding, only to have that gain dwarfed by years of elevated fuel costs that cascade into higher power rates.

Under Philippine electricity regulation, fuel expenses are passed through to consumers under applicable Power Supply Agreements (PSAs), subject to regulatory review. The Energy Regulatory Commission (ERC) has repeatedly underscored the need for distribution utilities to scrutinize generation companies’ fuel expenses, validate their legitimacy, and ensure that every charge passed on to consumers is reasonable and prudently incurred.

Therefore, the DOE must look beyond the winning bid and solve the larger equation: Secure the State’s fair share of resource wealth through an appropriate royalty scheme embedded in the contract, while ensuring that the awarded contract guarantees reliable, sustained mine production to support domestic power requirements.

Regarding the financial bid itself, the draft rules prescribe a minimum economic threshold. Offers must meet or exceed this threshold—derived from the valuation under Section 6.3 and the minimum domestic supply commitment—and any offer falling below it will be rejected regardless of its overall ranking.

While the draft rules require the disclosure of evaluation criteria, sub-criteria, formulas, and minimum thresholds before bids are submitted, the critical parameters underpinning the minimum economic threshold remain undefined, or at least unexplained to prospective bidders. This creates a troubling recipe for uncertainty, uneven expectations, and doubts regarding the fairness of the exercise.

The coal supply gamble

In coal mining, a massive war chest cannot compensate for a lack of technical expertise. Whoever wins the Semirara blocks must bring far more than financial firepower; they must demonstrate a proven mining track record, operational discipline, and the technical capability to navigate the site’s complex geological conditions—including reported water seepage problems—to sustain commercially viable production.

Why do technical expertise and a proven track record matter? Because even the highest bidder is worthless if it cannot deliver coal.

Furthermore, the draft bidding rules leave a gaping hole in contractual accountability. Without clearly defined penalty provisions, a winning bidder could fail to sustain coal yields after the existing Semirara contract expires in July 2027. That would leave the government facing a production shortfall without a clear financial mechanism to hold the winning bidder accountable.

At the very least, the government must not hand out a coal operating contract that allows a winner to walk away from its production commitments virtually unscathed—a principle that must apply regardless of who secures the contract.

Government and industry sources emphasize that losing Semirara’s coal output would not merely trigger a costly scramble for alternative supplies; it could expose the country to an estimated $400 million in additional costs for coal imports. That outcome would drain foreign exchange reserves, deepen the peso’s vulnerability against the US dollar, and force Filipinos to pay for a crisis they did not create.

Semirara’s coal output is deeply embedded in the country’s industrial and power generation backbone, primarily feeding the Sem-Calaca and South Luzon Thermal Energy Corp. (SLTEC) power plants while keeping cement factories and smelters running.

Compounding the risk, just as the Philippines would need alternative coal supplies most, Indonesia—its dominant foreign supplier—is introducing new uncertainties through changes to its export regime under state-owned PT Danantara Sumberdaya. Consequently, local coal-fired power plants could find themselves caught in an increasingly fragile supply situation as replacement fuel becomes harder, costlier, and more complex to secure.

Whether San Miguel and SMPC ultimately join the bidding remains to be seen, but their offers had better deliver progress, not a bill consumers will choke on. Development should power the people, not make them pay for government blunders.

(To be continued)