MAKATI CITY, 2 February 2021 – The Philippine Energy Efficiency Alliance (PE2) met with the Board of Investments (BOI) earlier today to seek energy efficiency (EE) guidelines issued under the policy framework of Executive Order No. 226 (Omnibus Investment Code of 1987) and Republic Act No. 11285 (Energy Efficiency and Conservation Act) which could effectively help the economy mobilize EE capital beyond the capacities of facility owners and financial markets.

PE2 president Alexander Ablaza reiterated its position that EE fiscal incentives should be effective in mobilizing a huge portion of the P 8 trillion capital mobilization through off-balance sheet modalities such as energy service company (ESCO) performance contracts, public-private partnership transactions, and large-scale Government retrofit programs. “The EE guidelines should be able to mitigate the capital investment, technology, financing and credit risks associated with ESCO investments in EE equipment assets installed in premises that the ESCOs neither own nor lease.”

PE2 made it clear that ESCO investments should not be likened to BOI-registered modernization projects implemented by manufacturers and agribusinesses. “Income tax holidays for ESCO investments should clearly exceed the number of years wherein the ESCO projects remain in the red with net operating losses. For this reason, the 4-year income tax holiday would clearly be inadequate.”

On a pre-CREATE policy scenario, PE2’s call for a fixed 6-year income tax holiday, regardless of whether the employed technology is pioneering or not, and coupled with duty-free importation of capital equipment is expected to help improve the commercial viability of ESCO and third-party investments in EE equipment assets installed in commercial, industrial, transport and government facilities.

Ablaza said, “The final EE guidelines should be able to attract local and foreign investments in this new asset class called energy efficiency. It is vital that portfolio investors of EE projects are able to gain long-term certainty on the magnitude and availability of tax-based fiscal incentives.”

PE2 likewise expressed hope that the post-CREATE scenario would provide alternative incentives that would be effective in enabling ESCO investments.