‘Red flag’ raised in Udenna’s capacity to acquire Malampaya
By Myrna M. Velasco – October 15, 2021, 5:03 PM
from Manila Bulletin
‘Red flag’ is being raised anew by Senate Committee on Energy Chairman Sherwin T. Gatchalian on the financial capacity of cash-strapped Udenna Corporation to acquire the 45 percent stake of Shell Philippines Exploration B.V. (SPEX) in the multi-billion Malampaya gas-to-power venture.
The Malampaya gas production platform
The lawmaker questioned for yet another time the pecuniary standing of Udenna, being the holding firm of businessman Dennis A. Uy, that will be purchasing the Malampaya interest of Shell for US$460 million – that’s following reports that a subsidiary of the company, PH Resorts Group Holdings Inc., had to suspend its casino project in Clark due to debt and cash problems.
As conveyed, the capitalization of PH Resorts Group is reportedly in deficit of P1.2 billion; while its liabilities have already swelled to more than P7.2 billion as of June this year – and the Uy firm’s biggest lender, China Banking Corporation, had already given it until September 14 this year to agree on bailout arrangements.
Gatchalian highlighted “this is a red flag! How can we trust a company that is buried in debts?”
He narrated that in the first acquisition of Udenna for the 45-percent stake of American firm Chevron in Malampaya, “that was largely financed by loans,” – and on its purchase of the shareholdings of Shell, the buyer-firm which is another subsidiary of Udenna (Malampaya XP Energy Pte Ltd) is also targeting to fund the asset buy with more borrowings.
Senate investigations on the Chevron-Udenna deal also uncovered that the company of Uy was already securing ‘net entitlement’ or share of revenue from Malampaya since June 2019 – even prior to the March 2020 closing of their merger and acquisition (M&A) transaction– and Udenna utilized that cash to partly fund the Chevron shares’ purchase.
As stated by Philippine National Oil Company-Exploration Corporation President and CEO Rozzano D. Briguez in a Senate inquiry, on Udenna’s US$565 million payment for the Chevron shares, the bulk of US$375 million came from loans from three major foreign banks; while US$157 million accounted for ‘net entitlements’ it had drawn from the gas field project; while the balance of U$33 million had been from the buyer-firm’s stock issuance.
The Department of Energy (DOE) already approved the first 45-percent shareholdings acquisition of Udenna in Malampaya, even if there were pressing concerns interposed that the Uy company had ‘negative working capital’ when the sale transaction was scrutinized by the government.
Gatchalian reiterated that the Malampaya gas field “is no ordinary asset,” thus, he emphasized that “we have to make sure that any transaction should go through a thorough review and due diligence by the government.”
That way, he stressed, the State can give its guarantee to the Filipino consumers that “whoever is going to step in is highly qualified, competent and can deliver electricity.”
The production of the Malampaya field is crucial in sustaining the electricity generation of the country’s gas plants – especially the electric generating facilities that will still have gas sale and purchase agreement (GSPA) with it until the expiration of the project’s service contract in 2024.
