MANILA, Philippines — Developers of renewable energy projects are questioning the Department of Energy’s (DoE) proposed provision in the template contract for renewable energy projects seeking reversion of project facilities to government at the end of their service contracts.
It specifically entails that at the end of the contract period, if the RE project developer would not be able to “remove” their assets in what are considered public domain, the government will automatically gain ownership of the remaining facilities in the site.
Section 8.2 of the template contract, stated in part that at the expiration of the service contract, “assets remaining on or in the contract area, if any, shall be owned by the Government.”
In the midst of a brewing skirmish, Energy Secretary Rene D. Almendras noted that his department will refer the matter to the Office of Solicitor General (OSG) to resolve such specific provision in the contract.
“We are not asking for the reversion. We are talking about public domain areas and we are talking with OSG on this due to Constitutional issues,” the energy chief stressed.
As of Saturday, it was gathered that the template contract has been revised anew and finally puts ownership of the facilities, post-service contract regime, to the RE developers.
The RE developers noted that there are technical limitations in the removal of power assets, especially in the case of hydropower facilities wherein the setting of facilities and equipment involve very complicated processes.
They opined that with how the DoE has designed the contract, the RE developers will be turned into scrap dealers at the end of their service contracts, and this will then negate whatever incentives are being offered by the government for RE projects.
Questions are also hurled against DoE’s way on what ground it has been latching on as to the reversion proposal since these projects will be implemented on “project finance basis”, and not with any guarantee from the government; while the subsidies under feed-in-tariff system are pass-through cost to consumers.
It has been further stipulated in the draft contract that “upon the written request of the RE developer, the department (in this case the DoE), shall approve an additional non-extendible period of one year within which to remove such assets in the contract area.” The term of service prescribed for RE contracts will be for 25 years, and renewable for another 25 years.
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By: Myrna M. Velasco
Source: Manila Bulletin, October 16, 2011
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