Atty. Ricardo Romulo and Teresita Villacruz

June 16, 1982 Atty. Ricardo Romulo and Teresita Villacruz Romulo, Mabanta, Buenaventura Sayos and de los Reyes 21F Corinthian Plaza 121 Paseo De Roxas, Makati Metro Manila 3117 Dear Atty. Romulo & Villacruz: This refers to your letters dated May 28, 1982 and April 26, 1982, requesting opinion/ruling of this Commission on the following: cdll (1) Whether or not Section 126 of the Corporation Code of the Philippines, requiring initially an investment of P100,000.00 in government securities and other equity instruments, should made applicable to existing branches already licensed to do business in the Philippines prior to the Corporation Code of the Philippines, including your client, the Philippine Geothermal, Inc. (PGI). (2) Assuming arguendo that said selection applied to existing branches, whether or not the Philippine Geothermal, Inc. (PGI) should be exempted from its application on the ground that PGI is engaged in the exploration, development, exploitation, or utilization of geothermal energy pursuant to R.A. 5092, as amended by P.D. No. 1442 entitled "An Act to Promote the Exploration and Development of Geothermal Resources," considering that geothermal energy is a substitute source of energy and is a high priority area of activity being promoted, encouraged and included in the energy development programme of the government similarly with P.D. No. 87 on oil exploration and production. With respect to your first request, please be informed that this Commission has earlier ruled that the provision in the "Guidelines for the Investment Requirement of Foreign Corporations under Section 126 of the Corporation Code of the Philippines" requiring "presently existing" foreign corporation to make the necessary deposit of P100,000.00 is in accordance with law. We refer you to SEC letter dated June 8, 1982 addressed to the Bito, Misa, Lozada Law Office ,a copy of which is hereto enclosed for your reference and guidance. With respect to your second request, a close study of Presidential Decree No. 1442, amending R.A. No. 5092, discloses that it is the policy of the Philippine Government to reduce our dependence on imported energy supplies and accelerate the development of geothermal resources which have been identified as a viable and untapped economical source of energy; and to achieve that purpose, to allow service contracts for financial, technical, management for other forms of assistance with qualified domestic and foreign entities, for the exploration, development, exploitation, or utilization of the country's geothermal resources as the same is necessary for the economic and industrial development of the country. To safeguard national interest, the said P.D. prescribes that the execution of the activities and operations of the service contract, including the implementation of the work program and accounting procedures agreed upon shall at all times be subject to direct supervision of the Government, through the Bureau of Energy Development. On the other hand, to encourage and promote the said industry, said P.D. also spells out the privileges of said service contractors, in addition to the other privileges provided in Section 12 of Presidential Decree No. 87 as may be applied to the geothermal operation. In the light of the foregoing, the imposition of the P100,000.00 investment requirement of the general law would be tantamount to an amendment of a special law, which imposition appears to be unwarranted and without legal basis. Rather than promote the economic development of the country, said investment requirement will definitely hinder the same. We therefor believe that the rationale for exempting service and geophysical contractors for the exploration, development or exploitation of oil and gas lands and indigenous petroleum resources of the country equally applies to service contractors for the exploration and development of the country's geothermal resources as well. Considering that the PGI is duly licensed to engage in the exploration, development and exploitation of geothermal energy and resources under a service contract with the National Power Corporation of the Philippines, we believe that the same need not comply with Section 126 of the Corporation Code of the Philippines. Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner