Revised ownership rule on RE projects

Foreign investments in renewable energy (RE) projects in the Philippines are exempt from the nationality provision of the Constitution.

That, in a nutshell, is the opinion the Department of Justice (DOJ) rendered recently in connection with the issue on investments or stock ownership in RE-related businesses in the country.

Prior to that opinion, the rule was that RE projects are covered by the Constitutional provision on “the exploration, development and utilization of natural resources” which limited foreign investments in Philippine companies engaged in those activities to not more than 40 percent.

This time, the DOJ had said that provision applies only to natural resources that are susceptible of appropriation and therefore excludes the sun, the wind and the ocean.

It stated that “the intent of the Constitutional foreign ownership restrictions was to preserve to Filipinos limited and exhaustible resources.” Thus, since the sun, the wind and the ocean are inexhaustible, they are outside the coverage of the ownership restriction.

The DOJ’s opinion on that issue is considered the “law of the land,” unless a court of competent jurisdiction says otherwise or Congress enacts a law that modifies it.

By making a distinction between exhaustible and inexhaustible natural resources to justify full foreign ownership of RE projects, the DOJ made a creative, but legally defensible, interpretation.

Noticeably, it neither exploited a gray area in that provision nor stretched its wording. Instead, it cited the context in which it was written and its underlying objective as the legal basis for its opinion.

It helps that the opinion does not step on the toes of vested commercial or political interests and so the possibility of it being questioned in court or becoming the subject of a Congressional investigation is nil.

And more importantly, there is no argument that in light of the country’s current tight financial situation and the need for affordable energy, the opening of RE-related businesses to foreign investors is a step in the right direction.

Furthermore, the DOJ’s opinion is consistent with the legal principle that the Constitution is meant to be a “living document” or a framework of governance that adapts to the times.

Note that when the Constitution was adopted in 1987, the concept of RE, in particular, the use of solar energy to generate electricity, was only at its early developmental stage.

Not anymore.

With the advances in science and technology and the traditional sources of energy, i.e., coal, oil and other fossil products, getting a bad rap for their adverse effects on the environment, the sun has become a viable source of sustainable energy for homes and businesses.

In light of the DOJ’s opinion, all existing rules and regulations relating to the organization, management and operation of RE projects would have to be modified accordingly.

The liberalization of ownership in RE projects, however, is no assurance that foreign investors would soon come in droves to offer to provide that alternative source of energy.

Since RE projects are capital-intensive and their period for returns on investments taking years, it would take some time before foreign investors would take a close look at the Philippines as a viable site for RE-related businesses.

Incidentally, there are several Philippine-based companies that are presently actively engaged in RE projects here and have drawn substantial investment interest.

After Solar Philippines Nueva Ecija Corp., which is headed by young entrepreneur Lean Leviste, successfully launched its initial public offering last year that drew billions of pesos in investments, other solar energy companies had taken the same route to fund their operation.

The future looks bright for RE projects in the Philippines. INQ