The Senate Energy Committee will continue to probe the deals sealed by Udenna Corp. (UC) with Chevron Malampaya and Shell Philippines Exploration B.V. (SPEX) even if the Department of Energy (DOE) has already cleared one of the two deals.
“We will continue to evaluate. My view on the Chevron deal is that it should also be reviewed by the committee because of the same logic that in the end it would still be Udenna Corp. that will be the decision maker. Despite their argument that operations will be left untouched, the decisions would still be elevated to the board level.
But when we evaluate UC, there are a lot of red flags,” committee chairman Sherwin Gatchalian said in a phone interview.
UC Malampaya Philippines Pte. Ltd. (Udenna), which bought Chevron’s 45-percent stake in the Malampaya Gas-to-Power Project, justified to the DOE its financial, technical and legal qualifications.
Based on an unaudited financial report it submitted to the DOE, UC Malampaya has $177.421 million in available working capital. Also, UC Malampaya said it would not be involved in the operations since the deal only involved the sale of shares of stock while the manpower, the technological, and operational framework remained the same.
“With a transaction such as this you have to be prudent. There is a big difference between unaudited and audited. Unaudited can be changed. If the decision is based on something that can be changed then that decision is risky and it becomes compromised. It should have required audited over unaudited. There is no reason to hasten the decision.
The DOE cannot justify and it just gives little pieces of answers. How can we have a comfort level if the agency is not ready and prepared to answer the committee? The DOE has to justify its approval of the deal,” Gatchalian added.
The DOE assured the committee that it would continue to exhaust all measures in thoroughly evaluating the legal, financial, and technical aspects of the transaction despite its approval.
Another UC subsidiary, Malampaya Energy XP Pte Ltd., bought the 45-percent stake of Malampaya operator SPEX.
Gatchalian questioned Malampaya Energy’s financial capability, given its paid-up capital of P5,000.
“It’s pointless to evaluate a shell company. We will only go back to UC whose subsidiaries are also losing money. They admitted that the purchase is going to be all loans. Prior to that purchase, they are already having financial problems which, for me, is already a red flag.”
In a statement on Monday, Malampaya Energy said its acquisition of SPEX is supported by international reputable financial institutions which saw Malampaya Energy’s capability to meet its obligations and to deliver value.
“Precisely. That’s the reason why the committee is looking very closely. They admitted that the purchase is through loans. Prior to the purchase, the mother company is already being scrutinized by banks because of its financial capacity,” said Gatchalian.
Malampaya Energy, however, said that the capitalization is only one element of a capital structure and is not on its own a reflection of the company’s ability to fund the deals.
“The acquisition of SPEX is 100 percent underwritten and funded via bank loans from our existing lenders. These full facility agreements have been provided to the relevant decision makers,” it said, adding that Malampaya Energy is willing to proceed with the development and rejuvenation of Malampaya.
