Domingo Rejects ITH To RE

Manila Bulletin
By BERNIE CAHILES-MAGKILAT
October 24, 2011, 2:22am


MANILA, Philippines — Trade and Industry secretary Gregory L. Domingo has categorically said that renewable energy (RE) projects will no longer be entitled to income tax holiday (ITH) being granted by the Board of Investments to its registered enterprises to avoid “double-dipping” of incentives, saying RE projects have feed-in-tariff (FIT), which is a guaranteed rate.


"There is no double-dipping on incentives. As long as you have guaranteed rate there should be no more income tax holiday," said Domingo, who is also chairman of the Board of Investments, the government’s premier investment generating agency and is tasked to assess investments whether they are entitled to government tax incentives or not.


The FIT is a government guaranteed rate that RE developers can charge to their customers. FIT is actually a form of subsidy to RE developers to encourage companies to invest in RE project, which requires huge capital expenditure.


Based on the general guidelines of the Investment Priorities Plan (IPP), it is provided that projects with sovereign guarantee or guaranteed rate of return are not entitled to income tax holiday.


Earlier, Cristino L. Panlilio, DTI undersecretary for investment promotion, said that projects with sovereign guarantees, government subsidies and FIT should no longer be entitled to BoI incentives.


These forms of guarantees are those being granted by PhilExim, sovereign guarantees, contracts with government that guarantee a certain return on investments, among others. The latest form of subsidy would be the FIT, Panlilio said.


Panlilio, however, said that if the RE project is using the WESM (Wholesale Electricity Spot Market) rate it could avail of BoI incentives.


“FIT is a new thing but it functions like a sovereign guarantee or a subsidy,” said Panlilio.


The FIT is the cost consumers have to pay extra for the use of green energy, RE developers would contend. If the FIT is set at very high rate it would further burden consumers considering the already very high power rate now. Setting the FIT at a very low rate could also discourage investors.


Investors in RE are closely watching the FIT because that would determine if it were worth investing considering the high cost of RE development.


Based on the BoI management committee assessment of the P5.676 billion 30-megawatt solar power project of wholly-owned Filipino firm ATN Philippines Solar Energy Group Inc., which proposed to sell electricity for P17.95 per kilowatt-hour, the agency failed to come up with a definite decision.