Power, electric utilities and energy have collectively evolved as the most dynamic industry over the past few decades in the Philippines having undergone major changes and transformation. Given the multifarious nature of this important sector, Philippine Congress and national government agencies have passed and issued numerous and far-reaching Philippine energy laws, rules and regulations to address the continuing development and complexity of the industry.
Along with this evolution, the corresponding legal matters and issues in the power, utilities and energy industry have become exponentially more complicated. Business ventures that engage in the exploration, development, production, storage, marketing, transporting and processing of energy resources for power generation are arguably one of the most capital intensive activities in the world. Power, utility and energy transactions involve high risks necessitating proficient and masterful counseling. The rapid growth and expansion of the power, utilities and energy sector has immensely contributed to the aggregate development of the Philippine economy.
Through its newly created Power, Utilities and Energy Department headed by former Deparment of Energy (“DOE”) Undersecrertary and Chairman of the National Renewable Energy Board (“NREB”), Atty. Jay Layug, and former DOE Assistant Secretary, Atty. Richie Pilares, and its energy lawyers (collectively, the “Energy Team”), the Energy Team is the dominant group of lawyers in the energy practice in the Philippines for the last ten years. The Energy Team enjoys a successful track record having been part of the most important milestones in the Philippine energy industry such as the implementation of Republic Act No. 9136, known as the “Electric Power Industry Reform Act of 2001” or “EPIRA” and Republic Act No. 9513, otherwise known as the “Renewable Energy Act of 2008” or the “RE Law”. DivinaLaw’s success in this practice is borne by the command of the Atty. Layug and Atty. Pilares of specific legal issues and their broad legal, commercial and technical approach in resolving difficult and novel questions of law.
The Energy Team has extensive local and global knowledge and experience in power transactions, and has been involved as counsel in all aspects of the power industry, such as power generation, transmission, distribution, trading and marketing, and in all forms of technologies, from coal, oil, natural gas, hydroelectric and geothermal power.
The Upstream Sector – Energy Resources Development
As a result of its unwavering dedication to exceed the expectations of its clients, the Energy Team has been the primary counsel of choice of upstream energy developers for their exploration, development and utilization of indigenous energy resources in the Philippines, including petroleum (oil and gas), coal, biomass, geothermal, solar, hydro and wind. The Energy Team has provided extensive legal guide and advice in various aspects covering this sector such as the review of petroleum (oil and gas), coal and renewable energy service contracts awarded by the DOE and the attendant fiscal and non-fiscal incentives applicable to these contracts.
In 2022, Atty. Layug and Atty. Pilares formed part of the World Bank team that completed and published the Offshore Wind Roadmap for the Philippines, which sets out the strategic analysis of the offshore wind development potential in the Philippines considering the opportunities and challenges under different, hypothetical growth scenarios.
The Energy Team is currently acting as project counsel for two petroleum service contract for the exploration, development and utilization of oil and gas in Cebu and Northern East Palawan.
The Midstream Sector – Power and Utilities
The Energy Team has played key roles in different capacities in the most significant power projects developed, privatized, acquired and financed to date in the Philippines. The Energy Team has also been extensively involved in the negotiations for power supply agreements and the conduct of competitive selection process of distribution utilities and electric cooperatives. The Energy Team has also counseled the distribution utilities and numerous electric cooperatives in the Philippines in their various projects, regulatory issues and legal requirements.
Atty. Layug and the Energy Team has been involved as counsel in the establishment and operations of the most critical renewable energy power plants for the last ten years or approximately 85% of the total renewable energy installed capacity in the Philippines. In different capacities as counsel for project developers, shareholders, lenders and creditors, EPC contractors, off-takers and fuel suppliers, the Energy Team has been at the helm of pertinent and necessary legal advice to energy projects and power plants running on different energy resources in: (a) Luzon, Malampaya Deep Water Gas-to-Power Project under Petroleum Service Contract No. 38 that supplies natural gas to 1,000 MW Sta. Rita Power Plant, 500 San Lorenzo Power Plant, 1,200 MW Ilijan Power Plant; 40 MW Laguna Geothermal Plant, 1,000 MW Batangas LNG Project; 182 MW Rizal Wind Farm; 70 MW Redondo Wind Farm; 100 MW Pilillia Solar Farm; 50 MW Bulacan Solar Farm; 22.3 MW Clark Solar Farm; and 20 MW Tarlac Solar Farm, among others; (b) Visayas, such as 132.5 MW Cadiz Solar Farm; 99 MW Camsur Wind Farm; 63 MW Bagasse-Fired Cogeneration Facility; 48.5 MW Bagasse-Fired Cogeneration Facility; 38 MW Integrated Solid Waste Management Facility; and 36 MW Wind Power Plant, among others; and (c) Mindanao, such as 20 MW Iligan Coal-Fired Plant and 2.3 MW Biogas Power Plant, among others.
Of these plants, the Energy Team boasts of serving as project counsel to the following milestone and key renewable energy projects in the Philippines: (a) 132.5-MW Helios Solar Plant, the largest solar farm in Southeast Asia; (b) 40-MW Maibarara Geothermal Plant, the largest geothermal plant since the passage of the RE Law; (c) the first joint crediting mechanism model biogas facility in Mindanao; (d) 38 MW Integrated Solid Waste Management Facility; (e) 182 MW wind farm; and (d) 25 GW offshore wind projects under 26 wind energy service contracts.
In 2016, the Energy Team acted as project development counsel to six of the eight solar farms that were awarded feed-in tariff (“FIT”) certificates by the Philippine DOE and ERC, which comprise 278.62 MW of the 525.25 MW of FIT qualified projects.
In 2017-2018, Atty. Layug and Atty. Pilares played a critical role in the sale of 100% equity interest of Equis Energy to Global Infrastructure Partners. The sale is the largest RE generation purchase in history at US$5 billion. Atty. Layug and Atty. Pilares conducted a record 30-company extensive legal due diligence in 45 days. Atty. Layug and Atty. Pilares addressed difficult questions of law and prepared a final report that served as anchor for the acquisition.
Competitive Selection Process and Projects
Consistent with the requirements of the Request for Proposal for Legal Advisory Services for the Pangasinan Coal-Fired Power Plant dated May 2020, we list below the credentials of the Energy Team on handling different types of power plants with particular reference to independent power producer (“IPP”) projects. In addition to our services as project development and finance counsel to the following power plant projects, we also note that since the issuance by the Department of Energy (“DOE”) of Department Circular No. DC2015-06-0008 entitled “Mandating All Distribution Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply Agreements (PSA)” (the “2015 DOE CSP Rules”) and Department Circular No. DC2018-02-0003 entitled “Adopting and Prescribing the Policy for the Competitive Selection Process in the Procurement by the Distribution Utilities of Power Supply Agreement for the Captive Market” (the “2018 DOE CSP Rules”), Atty. Layug and Atty. Pilares have been involved in several negotiations with Manila Electric Company (“Meralco”) and other distribution utilities for power supply agreements covering power plants on various technologies. They were also involved in the drafting of the CSP rules for the Energy Regulatory Commission (“ERC”) in ERC Case No. 2018-002RM entitled “Rules Governing the Execution, Review and Evaluation of Power Supply Agreements entered into by Distribution Utilities for the Supply of Electricity to their Captive Market” (the “Draft 2018 ERC CSP Rules”). Between 2018-2020, the DivinaLaw Energy Team negotiated five power supply agreements with Meralco that were proposed to go through an unsolicited proposal process as recognized by the DOE.
1. Coal Projects
The Energy Team acted as project development counsel to PowerSource Philippines Energy, Inc. in connection with its 20 MW Circulating Fluidized Bed Combustor Boiler Coal and Biomass-fired power plant located in Iligan. The Firm negotiated two power supply agreements for this project.
The Energy Team acted as project development counsel to 1,200 MW coal-fired power plant proposed to be built in Tagkawayan, Quezon.
2. Natural Gas Projects
Atty. Layug was the Senior Counsel to Chevron Malampaya LLC, a member of the consortium for Petroleum Service Contract No. 38, the Malampaya Deep Water Gas-to-Power Project. Malampaya provides natural gas to five gas-fired power plants, including the 1200 MW Ilijan, 1000 MW Santa Rita, 500 MW San Lorenzo Natural Gas Power Plants, 414 MW San Gabriel Gas Plant and 97 MW Avion Natural Gas Plant. Atty. Layug’s extensive experience included negotiations for gas sale and purchase agreements and the power purchase agreements for these power plants.
Atty. Layug is currently advising a company in the development of its liquefied natural gas (“LNG”) storage and regasification project. Atty. Layug is advising on the regulatory requirements and assisted the project company in obtaining key permits from the Department of Energy.
Atty. Layug and Atty. Pilares acted as project development counsel to a foreign entity proposing to build an LNG project in the Philippines, which will include the development, construction, operation and maintenance of an onshore LNG regasification and storage terminal or an offshore or floating storage and regasification unit and a combined-cycle power generating facility fired on natural gas. The Energy Team has provided, among others, the following key legal services: (i) Overview of Legal Framework for Natural Gas Operations in the Philippines; (ii) List of Key Government Agencies Requiring Permits and Licenses; and (iii) List of Permits and Licenses for LNG Terminal, FSRU and Natural Gas Power Plant.
3. Renewable Energy Projects
From 2015 to date, the Energy Team acted as project development, transaction or finance counsel to the following renewable energy power plants qualified under the feed-in tariff (“FIT”) program or subject of power supply agreement (“PSA”) with Meralco or other offtakers:
182 MW Rizal Wind Farm of Island Wind Energy Corporation (PSA with Meralco):
The Downstream Sector – Transportation, Distribution and Electricity Prices
The Energy Team has acted as counsel to different power and energy clients involved in the perennial socio-political issue of downstream oil and gas and transportation sector. With all their economic, political and social ramifications, oil, gas and electricity prices in the Philippines have reasserted themselves at the core of Philippine consumer debates. Along this line, Atty. Layug and Atty. Pilares have actively represented many clients in monitoring rules and regulations affecting prices for oil and bioethanol.
Atty. Layug and Atty. Pilares are the legal advisers of the Sugar Alliance of the Philippines (“SAP”), an organization of sugar planters and millers. They also counseled SAP in preventing illegal smuggling of imported sugar and in preserving the framework for biofuels regulations issued by the DOE.
The Energy Team is currently representing a foreign client in securing the appropriate regulatory approvals for the distribution of LNG to industrial customers and for transportation purposes. The Energy Team is also representing several foreign clients in their various retail supply contracts to various industrial customers for their own-use or for sale to the grid.
With their broad-based experience and expertise, the members of the Energy Team have provided extensive legal services to energy projects of local and international clients, including: