The Philippines now allows for 100% foreign ownership of renewable energy projects for the first time following its signing of a circular amending the implementing rules and regulations (IRR) of the Renewable Energy Act of 2008.
Before the Department of Energy (DoE) amended the rules, foreign developers were limited to a 40% cap on their ownership of renewable energy projects.
The Philippines is now able to directly carry out the exploration, development, production and use of renewable energy, or sign contracts for renewable energy services or operations, such as solar and wind, with Filipino or foreign nationals or Filipino or foreign companies or associations with no foreign ownership limit.
Share of renewable energy in the country’s energy generation mix is now at 22%.
The relaxation of foreign restrictions will help the country achieve its target to raise the share of renewables in the energy mix to 35% by 2030 and 50% by 2040, according to Energy Secretary Raphael P.M. Lotilla.
The change to the IRR now puts on a legal footing the Department of Justice earlier opinion that distinguished kinetic energy from the constitutional restriction of potential energy. This move is to be welcomed as it now enables the Philippines to access a larger pool of capital to assist the Republic meet its net zero target,” said John Yeap, a renewables expert of law firm Pinsent Masons.
However, the appropriation of waters direct from the source will continue to be restricted by the foreign ownership restrictions in the Water Act. The IRR of the Renewable Energy Law also state that “the exploration, development, production and utilization of natural resources shall be under the full control and supervision of the state”. Such activities continue to be permitted only if undertaken with Filipino citizens or companies or associations with at least 60% of their capital owned by Filipinos.
“This change will be welcomed by foreign investors who are interested in developing large scale renewable energy projects, but who were frustrated by the historic 40% cap. We expect to see an increased uptick in foreign investor interest in the Philippines with these changes,” renewables expert William Stroll of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons said.
In October, the Philippines Department of Justice (DOJ) said that foreign investors in renewable energy projects in the Philippines should not be subject to be 60:40 foreign equity limitation.