The Department of Energy (DOE) stressed it exercised due diligence and followed existing rules and regulations in the evaluation and approval of the $565-million transaction between Udenna Corporation’s UC Malampaya Philippines Pte. Ltd. and Chevron Philippines Ltd.
“When the DOE stretched the application of [DC 2007-04-0003] it affected, among others, the evaluation of our Financial Services. Based on the memorandum we submitted, you will find that there were two entities evaluated: UC 38, which is the new name of Chevron, and of course UC Malampaya,” DOE Energy Resource Development Bureau Director Cesar De La Fuente told the Senate panel.
The transaction, which took place in March 2020, was approved by the DOE last April.
De Ls Fuente stressed that although the parties to the deal took the position that the DC was not applicable, the DOE insisted on its power to review and approve it.
However, he admitted that the circular as well as Presidential Decree 87, which governs the country’s indigenous petroleum resources, “do not contemplate a situation that there will be a transfer of 100 percent shares of interest of the same entity.”
Based on documents obtained by the Senate, UC38 LLC had the financial capability, while UC Malampaya Philippines — which bought Chevron’s 45% stake in the gas-to-power project — had negative finances.
De La Fuente clarified that UC 38 submitted audited financial statements, required under the evaluation mandated by the 2007 DC for 2017, 2018, and 2019. As for 2020, UC 38 said their financial statement for that year had yet to be audited.
He explained further since the deal was already consummated the financial evaluation focused on the capability of UC 38 to honor its 45% commitment under the work program and budget of the Malampaya operation for the succeeding year.
In addition, De La Fuente said the Chevron-UC Malampaya deal also passed DOE’s technical evaluation.
“The basis of our evaluation recommending the approval of transfer based on our technical evaluation is because from top management there is no substantial change in the setup of UC38 or Chevron Malampaya since it’s the same entity from the officers down,” he said.