Gov’t opens full foreign ownership to integrated geothermal projects

Energy Secretary Alfonso G. Cusi

The Philippine government has opened full foreign ownership in the geothermal segment of the energy industry, but under the condition that investments must be done in integrated steam resource development and power projects.

Energy Secretary Alfonso G. Cusi said he signed a Department Circular this month which will allow foreign investors to bid in the new geothermal blocks being tendered by the Department of Energy (DOE) under the third Open and Competitive Selection Process (OCSP3) in the awarding of renewable energy (RE) service contracts.

The energy chief said “from an investment perspective, OCSP3 allows for 100-percent foreign ownership in large scale geothermal exploration, development and utilization.”

As classified by the energy department, large scale geothermal projects are those that will have initial investment of roughly US$50 million, and for the foreign investors’ entry, this must be underpinned by the Financial and Technical Assistance Agreements (FTAAs).

Cusi said “FTAAs may be entered into between foreign contractors and the Philippine government for the large-scale exploration, development and utilization of natural resources, and are signed by the President.”

National Renewable Energy Board (NREB) Chairperson Monalisa C. Dimalanta explained that since geothermal is classified as a mineral resource under the Renewable Energy (RE) Act, “the Constitution allows FTAA for exploration, development and utilization of petroleum, mineral and mineral oils…so it (foreign ownership) is allowed in geothermal as long as integrated operation for upstream (which is the exploration part) to downstream (which is the power generation segment).”

She nevertheless admitted that it remains a grey area if a foreign investor can just do upstream investment – which shall be exploration and development of geothermal steam resource; and for it not to be part of the power generation component of the venture.

“The policy is for integrated power operations, at least under the RE Act, and not sure on just the upstream part. Because even the government share is based on energy sales. But we can study that for non-power applications,” Dimalanta said.

This early, however, former Congressman and InfraWatch Convenor Terry L. Ridon is questioning the legal basis of the DOE policy that is now permitting full foreign ownership, especially in the resource exploration part of the venture.

Ridon forthrightly told Cusi: “you are wrong. Geothermal energy cannot be considered as a mineral resource.”

He stated that under the Mining Act of 1995, geothermal energy is excluded from the list of substances defined as minerals, including coal, petroleum, natural gas and radioactive materials.”

Ridon added the Mining Act remains the specific statute governing “the exploration, development and exploitation of mineral resources, not the RE Act on which the energy department policy is based.”

The former lawmaker also noted that under the 1987 Constitution, “a distinction is made between minerals and forces of potential energy, which is what geothermal energy essentially is.”

Ridon primarily quizzed the DOE as to when geothermal turned into minerals – either as oil or water, hence, he reckoned that “even the legal basis for the department’s geothermal policy is shifty at best.”