The Department of Energy (DOE) has admitted that it used an unaudited financial statement of a subsidiary-company of Udenna Corporation as the government’s basis in evaluating the firm’s financial capacity as well as in approving the latter’s acquisition of the 45-percent stake of American energy giant Chevron Corporation in the Malampaya gas field venture.
In a statement to the media, the DOE specified that “UC38 LLC submitted unaudited financial statements as of September 2020 with available working capital amounting to US$177.421,” which as the department reckoned “appeared to meet its commitment of US$64.45 million for calendar year 2020.”
UC 38 LLC has been the corporate vehicle used by Udenna of businessman Dennis Uy to purchase the interest of Chevron in the Malampaya project via a transaction worth US$565 million that was closed March last year.
Given questions on approval bestowed by the DOE on that merger and acquisition (M&A) deal, Senator Nancy Binay flagged Energy Secretary Alfonson G. Cusi during a Senate hearing that “the unaudited financial statements should not have been accepted (by the department) in the first place.”
The DOE emphasized that “in view of the unaudited financial statements, UC 38 LLC was required to submit bank balances as of December 2020,” adding that “UC 38 LLC complied and submitted a bank balance summary of US$72.283 million.”
The department similarly stated that the Udenna subsidiary-company “submitted a bank balance of UCMPPL in the amount of US$39.17 million.”
The DOE is under extreme scrutiny on the parameters it has been employing in giving its go-signal to Uy’s acquisition of the majority of Malampaya shares – including the 45-percent stake divested by Shell Philippines Exploration B.V. (SPEX) that is due to be consummated by yearend.
In that second batch of acquisition, Udenna used a shell company with a microscale capitalization of US$100 — and that also raised questions as to why the bidding terms of Shell did not even require “earnest money” to the prospective buyer of its Malampaya shares.
While being punched with slew of questions, Cusi indicated that “I have instructed our DOE officials to provide justifications of our legal, technical and financial evaluation with regard to the approval of transfer of the participating interest of Chevron to Udenna pursuant to petroleum Service Contract (SC) 38,” – that is in reference to the Malampaya project’s license.
The DOE qualified that it greenlighted the transfer of Chevron shares to Udenna based on the prescriptions of its Department Circular No. DC2007-04-0003; as well as the provisions of Presidential Decree 87 or the Oil and Gas Law.
The department reiterated it required Udenna “to submit documents in compliance with the financial, technical and legal requirements benchmarked by DC2007-04-0003.”
Cusi stressed “we will continue to exhaust all measures in thoroughly evaluating the legal, financial and technical aspects of the transaction.”