Nine Chinese energy companies are set to move into the Philippines with a total investment pledge of $13.7bn, the Philippine government announced on January 9, as the country opens up to foreign investment in green energy.
The Chinese energy companies include state-owned China Energy Group and wind turbine manufacturer Mingyang Wind Power. The nine companies will focus on renewables development, energy storage systems and off-grid power systems, according to the government statement.
The $13.7bn investment follows an easing of regulations in November to allow for 100% foreign ownership in solar and wind projects. Historically, foreign ownership was capped at 40% in key sectors, including energy telecommunications, airlines and shipping. The OECD ranked the country the third most restrictive to foreign direct investment (FDI) worldwide in 2020.
In 2022, the government resolved to scrap FDI restrictions in several sectors.
William Stroll, partner at law firm Pinsent Masons, tells fDi that it is “not surprising that Chinese investors are among the first to invest in the Philippines, following the loosening of foreign ownership restrictions”.
There are multiple reasons for this, he says; some of the named Chinese investors are already familiar with the country and are “less risk-averse” than their European counterparts, he notes. China is a renewables powerhouse and dominates the supply chain for solar photovoltaic cells. and is therefore “able to source panels at competitive prices”, he adds.
The Philippines has outlined an ambitious target of 35% renewables in its power generation by 2030 and a 50% share by 2040, while it forecasts that the share of coal — its currently dominant source of power generation — will fall to 24% by 2040.
The country’s renewables account for 21% of the country’s electricity generation, according to latest statistics from the International Renewable Energy Agency. Wind and solar total a mere 2%, while geothermal, hydro power and bioenergy make up the rest.
In its announcement, the Philippine government cites the role that certain Chinese companies, namely Mingyang and China General Nuclear Power Group, will play in the country’s offshore wind development,
“We know that [China] has the technical ability and skills required for offshore wind. Having said that, we know that other large wind developers are looking with interest at the Philippines, with some already securing projects ahead of this announcement,” Mr Stroll says. “We think that the market is big enough for [other] foreign developers, as well as Chinese [companies].”
The Philippines has potential to install 21 gigawatts of offshore wind power, according to a roadmap co-authored by the Philippine government and the World Bank.
There was only one project tracked by fDi Markets into the Philippines in the renewable energy sector last year.
Nicolás Daher, lead energy analyst at the Economist Intelligence Unit (EIU), and Fung Siu, principal economist for Asia at the EIU, expect an increase in FDI in renewables, in the wake of foreign ownership restrictions being loosened.
“The Philippines could benefit from a wave of investments in its energy sector as firms try to capitalise on the new regulations and different powers try to keep the Philippines closer to their camps,” they say.
On top of the $13.7bn investment in energy, Chinese investors have also pledged $1.7bn in agribusiness and $7.3bn in strategic monitoring for electric vehicles and mineral processing, according to a government announcement on January 5.
The arrival of Chinese capital comes as the Philippines finds itself between Asia’s biggest economy and its historic defence ally, the US.
In January, its new president Bongbong Marcos made a state visit to China on January 3 and signed 14 bilateral agreements, including deals on agriculture, infrastructure, and maritime security.
This follows a US government statement issued in November outlining its support to the Philippines in energy security, sustainable developments, defence, food security and the digital economy.