PHILIPPINES Law and Practice Contributed by: Maria Lethel C. Alburo-Mejia, Puno Law
also provides for the development of a strategic programme to increase the utilisation of such RE resources and institutionalise the development of national and local capabilities in the use of RE systems or energy systems which convert RE resources into useful energy such as electrical energy. The RE Act promotes the efficient and cost-effective commercial application of these RE systems by providing fiscal and non-fiscal incentives to developers of renewable energy facilities (RE developers). A developer intend- ing to utilise RE sources for power generation is required to secure a renewable energy service contract from the Department of Energy (DOE). 1.2 Principal State-Owned or Investor- Owned Entities Based on the latest available data from the ERC, the largest generation company in terms of generating capacity is Aboitiz Equity Ventures, Incorporated with 5,745.22 MW, represent- ing 22.47% of the total installed capacity. San Miguel Corporation and First Gen Corporation follow with generating capacities of 5,057.36 MW and 3,392.89 MW, respectively. The National Grid Corporation of the Philippines (NGCP) operates the country’s transmission sys- tem through a concession. Manila Electric Company is the largest distribu- tion utility covering 39 cities and 72 municipali- ties. These are all private entities. 1.3 Foreign Investment Review Process As mentioned previously, the transmission and distribution of electricity in the Philippines are public utilities. Section 11, Article XII of the 1987 Philippine Constitution states that no franchise, certificate, or any other form of authorisation for
the operation of a public utility may be granted except to citizens of the Philippines or to corpo- rations or associations organised under the laws of the Philippines, at least 60% of whose capital is owned by such citizens; nor may such fran- chise, certificate or authorisation be exclusive in character or for a period longer than 50 years. Republic Act No 11659 or the Public Service Act, as amended, reiterate that the transmission and distribution sectors are considered public utili- ties. The Foreign Investment Act of 1991 deems a corporation to be a “Philippine national” if it is organised under the laws of the Philippines and at least 60% of the capital outstanding stock and entitlement to vote is owned and held by citizens of the Philippines. The Securities and Exchange Commission (SEC) further explains that in deter- mining compliance with the required Philippine ownership, 60% of both: (i) the total number of outstanding shares of stock entitled to vote in the election of directors; and (ii) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors, must be owned and held by citizens of the Philippines or by Philippine nationals. Thus, the maximum foreign direct investment in the transmission and distribution sectors is 40% of both the voting stock and the total outstanding capital stock of a transmission or distribution utility. While the generation sector is not subject to foreign ownership limitations, the operation of a generation facility may require permits that can only be issued to Philippine citizens or Philippine nationals. Ownership of private lands and lease or utilisation of public lands are also reserved to Philippine citizens or Philippine nationals. A foreign shareholder is allowed to nominate and elect foreign directors in proportion to its
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