Udenna mocks claims gov't will lose from Malampaya takeover

Davao-based tycoon Dennis Uy's conglomerate Udenna Corporation refuted claims that the government will be financially disadvantaged after it acquired controlling stakes in the Malampaya gas-to-power facility off Palawan.

“There’s a misunderstanding from certain sectors of the business community. Saying there’s a lot for the government to lose if the government does not participate,” Udenna president Raymundo Martin Escalona told reporters at a virtual press briefing on Thursday.

A graft complaint filed against Uy, Energy Secretary Alfonso Cusi, and several officials alleged that the government’s monetary losses from the Chevron sale to Udenna is estimated at P21 billion, based on the average 45% gross share of Chevron, as member of the Malampaya consortium, for the years 2018, 2019, and 2020.

The complainants also said gross monetary losses could double to P42 billion a year if combined with Udenna's deal with Shell Philippines Exploration B.V., which also holds 45% in the Malampaya project.

In May, Dutch petroleum giant Shell disclosed that it signed a share purchase agreement with Uy’s Malampaya Energy for the sale of its 100% shareholding in Shell Philippines Exploration B.V. (SPEX), which holds a 45% operating interest in Service Contract 38 or the Malampaya gas field.

With the sale of Shell’s Malampaya stake to Malampaya Energy, Uy’s conglomerate will now hold 90% control of the gas field in offshore Palawan.

The Davao businessman’s group has already bought out Chevron Philippines’ share in the Malampaya Consortium last year, which had 45% participating interest in Service Contract 38 or Malampaya gas field.

Before Uy's planned takeover, the Malampaya Consortium was composed of SPEX, Chevron, and the Philippine National Oil Company-Exploration Corporation, which still holds 10% interest in the gas field.

Complainants are questioning why the state-owned PNOC-EC did not exercise its right to match bidders in the share sale transactions.

“Let me make this very clear, the government’s share in the Malampaya endeavor is from top revenues, top line, the government already enjoys 60% of all those revenues that’s before any expenses,” Escalona said.

“So the consortium is left with 40% of all those revenues. From those revenues they deduct all expenses operational, whatever that’s part of the business endeavor and are relegated to the net [income] at the end of the day. PNOC-EC still gets 10% being 10% owner,” he said.

The Udenna chief said that it is wrong to say that the government will lose potential revenues because PNOC-EC did not exercise its right to buy.

“First of all if they bid they will stand to lose more because now instead of getting from gross revenues, now they are the consortium owners they will be subjected to all those expenses now and after all those expenses that goes to the government,” he said.

“At the end of the day, without doing anything, the government enjoys 64% of Malampaya revenues to this day,” he added.

Political

Escalona said that Malampaya has already contributed 12$B to the Philippine government in revenues.

“All of these accusations, I think personally it's really political. Some people are trying to attack this administration and there's not enough for them to attack this administration and they try to attack anyone who are perceived to be close to this administration,” he said.

“I think it's unfair because we're a collateral [damage] and they don't realize there are livelihoods at stake,” he added.

According to GMA News Research, Uy was one of President Rodrigo Duterte's top contributors during the 2016 campaign with P30 million in contributions, while his wife, Cherylyn, gave P1 million.

Lawmakers have conducted several hearings on the matter, with Energy committee chairperson Senator Sherwin Gatchalian calling the deal “lutong makaw.”

“Lutong makaw” is a Filipino idiom which means a decision has been rigged or pre-arranged.

Escalona also reiterated that Udenna’s takeover of Malampaya was above board, as there are no laws requiring approval of transfer of shares of companies that have interest in the asset.

Uy’s planned takeover of the Malampaya facility is the subject of the graft complaint filed before the Office of the Ombudsman against Cusi, the Davao-based businessman, former and current officials of state-run Philippine National Oil Co.-Exploration Corp. (PNOC-EC), as well as officials of Chevron Philippines and Shell Philippines Exploration B.V. 

$191M capital, no ‘sweetheart’ deal

Likewise, the Udenna chief debunked claims that its subsidiaries which acquired 90% of Malampaya gas field have a measly $100 capital.

“The combined capitalization of the two companies now, UC Malampaya Philippines and Malampaya Energy XP that are acquiring the Chevron and Shell shares in SC38 is $191 million as we speak,” Escalona said.

“Both the Chevron and Shell transactions are private share sales conducted at parent company level with no change in the legal entities participating in the SC38 consortium,” he added.

He noted that the transactions were not “sweetheart deals” from the government, saying there were at least 25 bidders who competed for the Chevron and Shell stakes in the Malampaya consortium.

“Do you think Udenna, being the one with meager resources, will be able to coerce Shell and Chevron to make us the winner of the bid? The fact that we won the bid is testament that we provided and offered the best deals for the companies,” according to Escalona.

The accusations against Udenna’s takeover of Malampaya were “very destructive to the group,” he pointed out.

He went on to say that the issues thrown against the company are already Udenna’s ability to be able to financially close pending transactions.

“It's affecting livelihood as well... sorry.. It's affecting the livelihood of thousands of our employees who, Dennis [Uy], I swear we love with all our heart and it's not easy,” Escalona said. —LBG, GMA News