Philippines: foreign investors ask for clarification on ownership issues

Alexander Richter 9 Sep 2009

Foreign investors are currently urging for clarification regarding foreign ownership in renewable energy companies and particularly on the classification of geothermal energy.

A recent article by the Manila Bulletin from the Philippines discusses current discussions regarding foreign ownership in renewable energy companies and the classification of geothermal energy.

The article talks about that “Foreign ownership on companies that shall engage in geothermal development and exploitation has been raised following the resource’s re-classification as renewable energy (RE) under Republic Act 9513.

It was gathered that discussions on this policy direction was proposed to be elevated to the Department of Energy’s attention, through a position paper by investors affiliated with the Joint Foreign Chambers of Commerce.

The foreign investors’ argument was anchored on the fact that other RE resources, like wind and solar, are open to 100 percent ownership. Given that, it has been inferred that the same treatment may be extended to other RE sources, which may also include hydro.

Premised on contentions then that geothermal and hydro are considered natural resources; legal opinions have been rendered previously stating that the utilization thereof cannot be opened fully to foreign nationals.

However, with the passage of the RE Law which re-classified them as RE resources similar to wind and solar, the investment entitlements of foreign nationals are being hoisted as matters to be clarified under the policy.

For some investor groups, they noted that “one may interpret that since the RE Law classified geothermal as minerals, then 100 percent ownership may be allowed…but then again, that raises a Constitutional issue.”

It must be noted that a previous legal opinion issued by the Department of Justice (DoJ) allowed 100-percent foreign ownership on geothermal power plants; but reserved the rights to exploit and develop geothermal resource (i.e. steam) to corporations which have Filipino partners taking on 60 percent of the corporate vehicle’s equity.

Applying the same reasoning, it was reckoned that “when a geothermal power plant utilizes steam to generate power, the act of converting the steam to geothermal energy could not be considered as falling within the Constitutional inhibition since the steam has to pass man-made structures, such as scrubbers and pipelines, before it is utilized by the geothermal power plant.”

Source: Manila Bulletin