The 'hotness' of the Philippines for renewable energy investments may be losing its sizzle. Some foreign investors are now quietly slipping out the back door, leaving behind whispers of uncertainty, a trail of unanswered questions about what went wrong, and a half-empty plate of missed opportunities.

The grapevine is buzzing that one big-ticket foreign investor, now stealthily selling its stake in the floating solar space, was once paraded as a headline deal from President Marcos’ 2023 state visit to an ASEAN neighbor-country.

"They are already negotiating with the buyer, and the agreement is expected to be signed soon. The buyer-company is led by a former executive of a subsidiary of a giant power utility in the country," a source revealed.

One major European investor in the offshore wind sector, despite the massive-scale service contracts it cornered from the Department of Energy (DOE), is now actively hunting for buyers. Insiders say it's not just an internal organizational shake-up driving its exit, but mainly growing frustration over the Philippines’ unpredictable policy game.

In fact, even other RE players who were once eager to go all-in under the 100 percent foreign ownership policy for solar and wind are now backing down and unloading shares. They are troubled by grid integration concerns and the maze of red tape at local government permitting, which has turned the investment landscape into a bureaucratic obstacle course.

Ease of doing business?

At a recent solar industry technical workshop, the real talk at the lunch table wasn’t about RE technologies — it was about survival. Both foreign and local investors bluntly admitted that navigating the Philippine investment terrain means playing by the rules imposed by most local government units (LGUs) — where unreceipted 'facilitation payments' are business as usual, some local officials moonlight as land brokers, and developers are tactically manipulated into sourcing materials from politically-connected subcontractors or suppliers just to keep projects moving.

"Sadly, that’s the real ‘ease of doing business’ in this country — grease or get stuck," one industry source frustratingly said. They added that foreign investors, bound by strict anti-bribery laws back home, often bail out the moment they spot the red flags waving across the Philippine investment scene.

Another multinational European investor also judiciously walked away from its offshore wind ambitions last year. While the local partner dressed it up as a "shares acquisition," sources from the foreign firm divulged that "we pulled out because we’ve already assessed that the project’s environmental impact on biodiversity would be a dealbreaker."

To this day, the Department of Environment and Natural Resources (DENR) still hasn't finalized the 'no-go zones' for offshore wind, despite repeated warnings that several DOE-awarded service contracts may overlap with protected and biodiversity-rich areas in the Batangas-Mindoro corridor, leaving investors in the dark about where they can build and where they're not even supposed to set foot.

Fundamentally, the ‘no-go zones’ should be incorporated into the marine spatial planning (MSP) for the offshore wind industry. These will demarcate prohibited zones due to safety, environmental, technical, or regulatory reasons, including those on shipping lanes or navigational channels, protected marine areas, fishing zones, military zones, and sites with extreme seabed conditions that would make construction unfeasible.

Given that even some green-lane certified RE foreign investors are already eyeing exit, the incoming Energy Secretary — who is highly expected to be Undersecretary Sharon Garin — faces a ticking clock and immediate heavy load: act fast or watch the country bleed the investment dollars that the Marcos administration had largely brandished as accomplishments of his previous state and working visits.

Regulatory gridlock

Apart from the tricky concerns of permitting, RE investors live and die by return on investment (ROI). That’s the reason why most of them shunned the 2nd green energy auction in 2023 — as the reserve prices set by the Energy Regulatory Commission (ERC) were seen tanking hopes of hitting the returns investors demand.

At its core, the message of the investors has been loud and clear: poorly designed green energy auction reserve (GEAR) tariffs would be the deal-killer because they don’t only undermine investor confidence, they could choke financing. And when that happens, investors would have no choice but to turn away and place their money somewhere else.

In the preliminary GEA-4 price calculations released by the ERC in April, prospective bidders are already howling over dead-on-arrival returns, especially for floating solar and IRESS. This is already prompting an early signal for them to back off on planned capital injection.

Beyond permitting nightmares and ROI headaches, adding to the investors’ jitters is the 'bold reset' on the Cabinet reshuffle currently being enforced by the Marcos administration, because this could suddenly change policy actors and may also rewrite industry rules overnight.

Even the ERC chief had been sent a Palace memo to quit her post, although it is widely talked about in industry circles that Chairperson Monalisa Dimalanta has not submitted her resignation yet, because she’s asking all the other Commissioners to also tender their respective resignations along with her.

These chaotic developments – including apprehensions on whether or not leadership at the ERC shall also be replaced — have been placing investors on edge. So don’t be shocked when the floodgates open and they start bailing in droves, because when confidence cracks, the smart money doesn’t just wait around.

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