How Foreign Energy Firms Can Own 100% of Philippine Renewable Projects

Introduction: why 100% foreign ownership in renewables matters now

Foreign participation in Philippine renewable energy has historically been constrained by constitutional limits on natural resource utilization and the statutory limits reflected in the Foreign Investment Negative List (FINL). In recent policy direction, however, the government has signaled greater openness to foreign equity in certain renewable energy (RE) activities, particularly where the activity is treated as power generation rather than the exploitation of natural resources. For investors, the difference between “generation projects” and “natural resource utilization requiring a service contract” affects whether a project can be 100% foreign-owned, how the project company should be structured, and which approvals are needed.

This article explains the applicable legal framework, the main constraints that still matter, and a road map for establishing a wholly foreign-owned Philippine subsidiary for eligible RE projects—while flagging areas where careful project classification remains essential.

Governing legal framework

Foreign ownership in RE projects is shaped by three intersecting layers: (1) investment admission rules under the Foreign Investments Act, (2) the Renewable Energy Act and related regulatory rules, and (3) constitutional concepts on national economy and patrimony, including how “capital” and control are measured for nationality-limited activities.

• Foreign Investments Act (FIA): Republic Act No. 7042, as amended by Republic Act No. 8179 (1996), which allows up to 100% foreign ownership of domestic market enterprises except where restricted by the Constitution, specific laws, or the FINL.
• Renewable Energy Act: Republic Act No. 9513 (2008), which establishes incentives and mechanisms to accelerate RE development (including the Feed-in Tariff and Renewable Portfolio Standards).
• Jurisprudence on constitutional limits and nationality compliance: The Supreme Court’s interpretation of ownership requirements for nationality-restricted sectors, particularly on what counts as “capital” and how beneficial ownership is tested.
• Regulatory opinions and SEC guidance: SEC-OGC opinions and SEC rules applying the two-tier test and (when needed) the grandfather rule in assessing compliance for restricted activities.

Where the restrictions come from: natural resources vs. energy generation

Many RE projects involve natural resources (wind, solar, hydro, geothermal, biomass). Under the Constitution’s framework on natural resources, the State retains ownership and control, and private participation is typically via State agreements subject to nationality requirements.

SEC-OGC Opinion No. 19-24 (2019) expressly links RE development to the constitutional rule on natural resource exploration, development, and utilization, stating that RE development may be undertaken through an RE Service/Operating Contract, subject to Article XII, Section 2 of the Constitution and the related FINL limitation (with foreign equity generally capped at 40% for activities treated as natural resource utilization).

At the same time, not every activity in the RE value chain is necessarily classified as “exploration, development, and utilization” of natural resources in the constitutional sense. In certain structures, the activity may be treated as power generation (i.e., producing electricity for sale), which can change the foreign equity outcome.

What changed: policy direction toward greater foreign equity participation

Investors often hear that “foreign equity restrictions have been lifted” in the RE sector. In practice, eligibility for 100% foreign ownership depends on the project’s legal characterization and the licenses/agreements it requires.

Two important reference points help clarify the environment:

• Investment admission is the default; restrictions are the exception. The FIA, as amended by RA 8179 (1996), broadly allows up to 100% foreign ownership except where the Constitution, specific laws, or the FINL restrict the activity.
• RE policy is pro-development. The Supreme Court has upheld the legality of mechanisms designed to accelerate RE build-out (such as FIT and RPS), recognizing these as valid police power measures tied to energy security and environmental objectives (Foundation for Economic Freedom v. ERC, 2024).

However, the continuing relevance of the FINL and the constitutional treatment of natural resources means that “100% foreign-owned RE” is usually achieved through careful selection of the project category, project scope, and corporate structure—rather than by assuming all RE activities are unrestricted.

Legal road map: how to structure a wholly foreign-owned RE project company

Step 1: classify the project correctly (this determines whether 100% foreign ownership is viable)

The first step is determining whether the proposed undertaking is:

• (A) An activity treated as natural resource utilization (often requiring an RE Service/Operating Contract and typically triggering the 60/40 constitutional limitation discussed in SEC-OGC Opinion No. 19-24, 2019); or
• (B) An activity treated as power generation / project development that is not reserved to Philippine nationals, allowing 100% foreign equity under the FIA framework (RA 8179, 1996), subject to sector licensing and other compliance requirements.

Typical scenario: A foreign sponsor proposes to build and own a solar PV plant and sell electricity to offtakers (through bilateral contracts or market mechanisms). The feasibility of 100% foreign ownership depends on whether the approvals and contractual framework treat the undertaking as restricted natural resource utilization (service contract) or as generation/project development within an unrestricted category.

Step 2: incorporate a Philippine subsidiary with foreign ownership (where permitted)

If the activity is not restricted, the usual approach is to incorporate a domestic corporation in the Philippines with 100% foreign shareholders. This is consistent with the FIA’s general rule allowing full foreign equity, unless the activity is restricted by the Constitution, specific laws, or the FINL (RA 8179, 1996).

Typical scenario: A multinational energy developer sets up “ABC Renewables Philippines, Inc.” with 100% foreign ownership, which then applies for sector permits, secures land use arrangements, and contracts with EPC and O&M providers.

Step 3: ensure the activity does not drift into nationality-restricted scope

Even when the project is initially planned as unrestricted, investors should avoid structuring the project in a way that later requires a nationality-restricted authorization (or a contractual instrument treated as a natural resource utilization agreement). If the project falls into a restricted bucket, the corporate nationality requirement may become determinative, and restructuring late in the process can be costly.

Reminder: Where nationality limits apply, compliance is not just a matter of nominal shareholding. The Supreme Court has interpreted “capital” (for public utility nationality limits) to mean voting shares with beneficial ownership, emphasizing genuine Filipino control where required (Gamboa v. Teves, 2012). SEC guidance adopts a two-tier test, and may apply the grandfather rule when there is doubt as to beneficial ownership and control (SEC-OGC Opinion No. 19-24, 2019).

Step 4: check whether any part of the project implicates “public utility” or other restricted activities

While RE generation projects are often discussed separately from “public utilities,” investors should still verify whether any component of the undertaking requires a public utility franchise or falls under a restricted area listed in the FINL.

Gamboa v. Teves (2012) also underscores that the FIA’s Negative List framework gives notice to foreign investors about sectors reserved to Philippine nationals, including the “ownership and operation of public utilities” (as restricted under the Constitution and relevant laws).

Illustration: Constructing a facility may be treated differently from owning/operating a utility. SEC-OGC Opinion No. 09-23 (2009) explains that a 100% foreign-owned domestic corporation may engage in construction of power plants for energy companies, provided the activity does not fall under FINL restrictions or require a public utility franchise under the BOT Law.

Step 5: plan for investment screening and national security review (where applicable)

Foreign investments in strategic industries can be subject to national security review mechanisms under newer policy instruments. The Implementing Rules and Regulations of Republic Act No. 11647 (2022) describes a national security review mechanism that may allow the President to suspend, prohibit, or limit foreign investments that threaten national security, reflecting the State’s balancing of openness and security considerations.

Typical scenario: An RE facility with potential sensitivity (e.g., proximity to critical infrastructure) may draw heightened scrutiny, so investors should prepare documentation on ownership, governance, data handling, and operational security measures.

Compliance when restrictions apply: understanding the 60/40 rule and how it is measured

If the project is classified as nationality-restricted, investors should understand how regulators measure Filipino ownership and control.

Compliance topic	What the rule requires	Main authority
Meaning of “capital” for nationality limits (public utilities context)	“Capital” refers to shares entitled to vote in electing directors, with beneficial ownership; not simply total outstanding shares including non-voting	Gamboa, et al. v. Teves, et al. (2012)
FINL notice and reservation of restricted areas	Foreign equity in reserved areas is limited to the maximum percentage prescribed by the Constitution and specific laws; public utilities are reserved to “Philippine nationals”	Gamboa, et al. v. Teves, et al. (2012)
SEC approach to testing Filipino ownership	Two-tier test applies; grandfather rule may be applied when there is doubt as to beneficial ownership and control	SEC-OGC Opinion No. 19-24 (2019)
RE service/operating contracts and constitutional limits	RE development through RE Service/Operating Contracts remains subject to Article XII, Section 2 constitutional limitation; RE natural resource utilization may fall under FINL List A restriction	SEC-OGC Opinion No. 19-24 (2019); Renewable Energy Act (RA 9513, 2008)

Examples of common investor structures (with notes on where issues often arise)

• 100% foreign-owned project company for permitted generation activities: The foreign sponsor incorporates a Philippine corporation, capitalizes it, and contracts EPC/O&M; it secures permits and sells power to offtakers. This aligns with the FIA’s general allowance of full foreign ownership unless restricted (RA 8179, 1996).
• Hybrid structure where a restricted authorization is needed: The project requires an arrangement treated as natural resource utilization (e.g., a service/operating contract). The investor uses a Philippine national entity (60% Filipino voting shares with beneficial ownership) for the restricted layer, and a separate foreign-owned services company for construction or support functions (SEC-OGC Opinion No. 09-23, 2009; SEC-OGC Opinion No. 19-24, 2019).
• Financing-led structures: Foreign lenders or sponsors require security packages and step-in rights. If the project is nationality-restricted, corporate control rights must be reviewed to avoid undermining Filipino control requirements as interpreted under jurisprudential and SEC standards (Gamboa v. Teves, 2012; SEC-OGC Opinion No. 19-24, 2019).

Observations on the policy environment supporting renewables

The Supreme Court has recognized that the Renewable Energy Act’s mechanisms (such as FIT and RPS) serve public interests by reducing dependence on fossil fuels and insulating the economy from price volatility, and that the collection mechanism supporting FIT is a valid police power measure rather than a tax (Foundation for Economic Freedom v. ERC, 2024). This judicial treatment supports the stability of the broader RE policy framework, even as the foreign ownership analysis remains activity-specific.

Recommendations and final observations

• Start with a restriction diagnosis: Before incorporation and land acquisition, confirm whether the project will require an RE Service/Operating Contract or any authorization that places it under FINL List A restrictions (SEC-OGC Opinion No. 19-24, 2019; RA 8179, 1996).
• Design the corporate structure around the project’s licensing path: If the activity is unrestricted, a wholly foreign-owned Philippine subsidiary may be suitable; if restricted, build a compliant Philippine national entity and keep foreign participation in permitted layers (Gamboa v. Teves, 2012; SEC-OGC Opinion No. 09-23, 2009).
• Document beneficial ownership and control clearly: Where nationality matters, ensure share classifications, voting rights, and shareholder agreements do not undermine Filipino beneficial ownership and board control, applying SEC’s two-tier test and anticipating grandfather rule scrutiny when applicable (SEC-OGC Opinion No. 19-24, 2019).
• Plan for national security review considerations: For projects in sensitive locations or involving critical infrastructure, prepare governance and security documentation early (IRR of RA 11647, 2022).

In sum, 100% foreign ownership in Philippine renewables is feasible for certain project types, but it requires disciplined classification of the undertaking, careful scoping of permits and contracts, and a structure that stays aligned with the FIA’s general openness while respecting constitutional and FINL-based limits where they still apply.

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