Udenna denies taking cash from Malampaya to pay for Chevron acquisition

Published November 18, 2021, 4:08 PM

by Myrna M. Velasco

The Udenna Corporation of Davao businessman Dennis A. Uy strongly denied accusations that the company took out cash from the Malampaya revenues, which in turn, was allegedly used to pay for its acquisition of the 45 percent shareholdings of US firm Chevron Corporation in the Philippine gas field asset.

“I heard an accusation where they say that even prior to closing the Chevron deal — that we already took money out from the Chevron space to pay for the transaction cost of that transaction, that’s absolutely not true,” said Udenna Corp. President Raymundo Martin M. Escalona during a joint briefing with the business sector and the media.

He narrated that the divestment of Chevron shares in Malampaya became legally binding on Oct. 25, 2019 and the final closing of that $565 million transaction and the shares transfer were sealed on March 11, 2020.

“It’s a very complex transaction and if you’re familiar with corporate finance, there’s a lock-box where prior to any financial closing, all of the free cash of the company are put in a ‘lock-box’ prior to any finalization of a pending shares sale transaction. Certainly, Udenna would not have any access to that until financial closing,” Escalona stressed.

Thus, he lamented that “to be accused of getting money from the transaction to pay for a transaction is absolutely not true.”

The Udenna executive explained that for the Chevron stake purchase, “the equity injected for that acquisition was a combination of direct capital, at exact $40 million coming from us, and shareholder loans also obtained because of our meager resources of $136 million.”

He pointed out “the shareholder loans were subsequently converted to capital and the paid-up capital of UC Malampaya Philippines Pte. Ltd. currently stands at $176 million, and this is registered with the business registry in Singapore.”

Escalona further conveyed “the document was certified by the Philippine Consulate in Singapore and has been shared with relevant Philippine authorities; and I was made to understand that this has also been shared to the Senate body that investigated the transaction.”

On the second transaction, the $460 million Udenna asset purchase of the 45-percent equity of Shell Philippines Exploration B.V. (SPEX) in the Malampaya venture’s Service Contract (SC) 38, Escalona qualified that the capitalization of their acquiring corporate vehicle – Malampaya Energy XP Pte. Ltd., was not $100, but $15 million.

“The Malampaya XP Energy, which is acquiring Shell’s share in SC 38 consortium, has a current capitalization of $15 million for the business registered in Singapore. This has also been certified by the Philippine consulate in Singapore and shared with the relevant authorities in the Philippines, including the Philippine Senate,” he said.

He underscored that “the $100, which was being used against us, was the initial sum paid to the register when we established the newly formed Malampaya Energy XP in Singapore; ahead of the Shell transaction.”