Dennis Uy-led Udenna Group’s acquisitions of the Malampaya gas-to-power underwent intense scrutiny at the Senate’s hearing on Wednesday, with the Department of Energy (DOE) taking much of the heat.
Senate energy committee chairman Sherwin Gatchalian questioned Energy Sec. Alfonso Cusi about Udenna subsidiary Malampaya Energy XP’s capability to operate the gas platform when it only had $100 (around Php5,000) in capitalization, as revealed during the inquiry.
Udenna announced in May that Malampaya Energy bought Shell Philippines Exploration B.V. (SPEX) for $460 million. SPEX, Malampaya’s operator, currently owns 45% of the Service Contract 38 consortium.
Cusi affirmed that the Uy-led firm had funders, adding that how the buyer and seller come to terms is beyond their control. The secretary had also said in separate instances that the Shell-Udenna transaction isn’t final yet, as Udenna has yet to prove its technical and financial capability.
He added that the DOE is now looking into Malampaya Energy’s capitalization to be able to continue the gas platform’s operations, development, and further exploration work. The department has required the Udenna firm to come up with a three-year program to make sure it has funding.
Nonetheless, Gatchalian emphasized that Udenna’s working capital base is deficient. In response, DOE Energy Resource Development Bureau director Cesar De La Fuente said they will countercheck on the capitalization data the senator presented at the hearing.
De La Fuente pointed out that the department’s job is to ensure that management and technical operations are technically qualified based on the Malampaya consortium’s submitted workforce or management.
PNOC-Exploration Corporation (PNOC-EC) President Rozzano Briguez also revealed in the hearing that $157 million of Udenna’s $565 million payment for the acquisition of Chevron’s 45% stake in March 2020 came from the “net entitlement of Udenna” from Malampaya revenues dating from June 2019 to June 2020. Briguez’s data was a result of the government-owned firm’s due diligence into the transaction. PNOC-EC owns ten percent of the Malampaya consortium.
Briguez’s revelation prompted Gatchalian to remark that the public was bamboozled in the process of the transaction.
Briguez further specified that of the $565 million payment to Chevron, nearly $375 million came from loans secured from foreign banks ING Bank and Australia New Zealand Banking Group (ANZ). Meanwhile, $33 million should have come from Udenna’s equity payments, which was supposedly targeted for funding via a proposed issuance of shares worth Php11 billion. Other foreign banks reportedly financing Udenna’s purchase of SPEX are Deutsche Bank and San Francisco-based Farallon Capital.
But the committee noted that the planned shares issuance of Udenna have yet to materialize, leading to Gatchalian’s belief that the firm may have had no cash infusion in acquiring Chevron’s stake.
The DOE formally approved the Chevron-Udenna transaction last April.
Gatchalian, then, told Cusi that the panel wasn’t satisfied with their explanations. The senator was even disappointed that the DOE wasn’t able to give straight answers to questions on Udenna’s financial and technical capability to run the project.
