The Department of Energy (DOE) is being urged to exercise ‘utmost transparency’ on its anticipated approval of the 45-percent Malampaya equity divestment of Shell Philippines Exploration B.V. (SPEX) to Malampaya Energy XP Pte. Lt., a subsidiary of Udenna Corporation owned by businessman Dennis Uy.
That was the call of Senate Committee on Energy Chairman Sherwin T. Gatchalian, following pronouncement by Energy Secretary Alfonso G. Cusi that the ‘documents’ relating to the sale had already been submitted to the DOE.
“That (Shell-Udenna sale purchase agreement documents) had been submitted to us and we are evaluating the financial, technical capability of the transaction. It’s in process actually right now, so we don’t have decision on that yet,” Cusi said.
When asked if the sale is already considered final, the energy chief qualified that “as far as the government is concerned, it’s not yet until they comply with the requirements.”
In Gatchalian’s view, that facet of the asset sale is not just an ordinary transaction because it will also involve the operatorship of the depleting gas field, to a buyer that has no track record or technical experience in operating a gas field.
Gatchalian thus prodded DOE to explain “what are the sets of criteria that (the department) will use in evaluating this transaction,” with him stressing that such metrics shall be made very clear to the public.
The Malampaya stake divestment of Shell had been valued at US$460 million – and as hinted by sources, the acquisition will be financed by four foreign banks — ING Bank, Australia and New Zealand Banking Group Ltd. (ANZ), Deutsche Bank and Farallon Capital.
Once this deal with Shell will be closed, Uy’s company will already the take over as the gas field operator and will also have controlling stake of 90-percent in the Malampaya venture.
The Davao-homegrown businessman first acquired the 45-percent shareholdings of American energy giant Chevron in Malampaya – in a US$565 million merger and acquisition (M&A) deal firmed up in March 2020.
Beyond the equity acquisition, it was indicated by sources that Uy’s company will likewise assume all the remaining obligations linked to Service Contract (SC) 38 of the gas field – including the ‘banked gas’ claim of state-run Philippine National Oil Company (PNOC); as well as the pending P146.8-billion tax case at the Supreme Court relating to income tax treatment on the revenue share of the field contractor as questioned by the Commission on Audit.
There is also a license extension application for Malampaya that is still pending with the DOE; and that is the one being depended upon to stretch the production life cycle of the gas field.
At this stage, there are also perplexing questions on ‘resource depletion’ at the field – given that ‘gas output restrictions’ already came too frequent this year, hence, affecting the level of generation of the country’s gas-fired power plants.
Gatchalian stressed “it’s important that we keep our lights on, that we have a constant supply of gas and in order to do that, we need to have very competent and financially strong operators.”
The lawmaker thus reiterated “the government, through the DOE, needs to evaluate the transaction and ensure that it’s legal and that the new operator is financially and technically competent and has the capability of running Malampaya and supplying electricity to our homes.”