Solar firms want more foreign equity stake

Move comes as DoE opens 100% geothermal projects to non-Filipinos

THE Energy department should craft a policy that removes the 40% foreign ownership cap on solar energy projects, developers said, after the agency announced on Tuesday that it is opening large geothermal development to foreigners.

“There has to be a clear policy on allowing 100% investments on solar so the country will benefit from inflow of foreign investments,” Tetchi Cruz-Capellan, chief executive officer of SunAsia Energy, Inc., told BusinessWorld in a Viber message on Thursday.

She was reacting to a policy change issued by Energy Secretary Alfonso G. Cusi in a speech that an upcoming round for renewable energy (RE) service contracts will allow full foreign ownership in large-scale geothermal plant projects. He defined large projects as those costing at least $50 million.

Ms. Cruz-Capellan described the existing 60-40 ownership rule in favor of Filipinos as a “stumbling block” for what she called the most “environmentally benign renewable resource that can compete with coal.”

James Carlos Buskowitz, the chairman and executive officer of solar energy developer Buskowitz Finance, Inc., agreed that 100% foreign ownership of solar projects is “fine, but the split between local and foreign investors could be different.”

“I definitely agree that it should be a different split, that foreign ownership shouldn’t be capped at 40%, but [foreign investors] should be made available to own up to 70 [or] 80%,” he said in a phone interview with BusinessWorld on Thursday.

“I think that’s very beneficial. I think that’s beneficial… in interest of the Philippines, and from the political and economic side,” said Mr. Buskowitz, whose company provides financing solutions for its customers who prefer solar power.

The Department of Energy (DoE) has yet to issue a circular on its new policy on geothermal energy development.

Solar Philippines Founder and Chief Executive Leandro L. Leviste said in an e-mail that his company will accelerate the development of its solar projects with its partners to meet the demand for solar energy brought about by the DoE’s latest policies.

On Thursday, Solar Philippines announced a “new strategic direction” as it will be starting a separate company that focuses on investing in provincial real estates covered by its solar projects.

MORATORIUM ON NEW COAL POWER PROJECTS
On Tuesday, the Energy department also announced a moratorium on new coal projects.

“The pronouncement of the secretary formalized the weakness of coal in terms of functionality, cost and sustainability,” said Ms. Cruz-Capellan.

She added that the country’s energy mix needed a flexible power system that can respond to a growing number of consumers in an increasing digital world.

“It’s a bold and progressive policy. Quite commendable as it demonstrates our government’s commitment to energy security and sustainability,” Eric T. Francia, president of Ayala-led AC Energy, Inc., said, expressing his support for the DoE move.

Meanwhile, Aboitiz Power Corp. in a statement said it remains committed to grow its renewables portfolio over the next decade.

“We support this initiative of DoE since it helps build a more competitive energy sector. We believe that encouraging healthy competition will lead to EPIRA (Republic Act 9136 or the Electric Power Industry Reform Act of 2001) realizing its full potential,” said Emmanuel V. Rubio, AboitizPower president and chief executive officer.

“Not only will this yield more private investments, particularly in the RE market, but will also further drive down the cost of power. Because of this, it is also important to ensure a level playing field as well as an effective and efficient regulatory environment. In the end, it will always be the consumers who will benefit,” he added.

As the DoE halts its endorsement of new coal projects, investors might become wary of holding their investments in companies with coal power profiles, analysts said.

“The move by the government may cause some uncertainty among investors over the stocks that will be affected by the moratorium,” said Darren Blaine T. Pangan, head of online trading at Timson Securities, Inc.

Listed utility Manila Electric Co. (Meralco), which is developing a 1,200-megawatt coal-fired power plant in Quezon province through a subsidiary, said it is safe from the endorsement ban.

“The moratorium will not affect our Atimonan project,” Rogelio L. Singson, president of subsidiary Meralco Powergen Corp., said in a message.

Given the change in the regulatory environment, power firms may have to adjust their outlooks and revise their guidance reports for investors, Mr. Pangan said.

“In the long-term, however, we may have to see how the regulatory environment unfolds for the whole sector,” he said.

Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., said he expects a change in investment flows in the energy sector in favor of the renewables.

“The expected gainers here are the ones who have already positioned or are positioning themselves in the renewable energy space,” he said.

“Meanwhile, the permitting of full foreign ownership of large-scale geothermal projects would open up new avenues for foreign investments, which in turn would help the economy of our country. It will also help our energy sector grow further while lessening our dependence from coal-based power production,” Mr. Tantiangco added. — Angelica Y. Yang and Adam J. Ang