THE shell companies of Davao-based businessman Dennis A. Uy did not bring any value in their bid to acquire control of the Malampaya gas-to-power project, a lawmaker said, as he expressed disappointment over the government’s “lost opportunity” to take over a vital asset for the country’s energy security.

“The buyer did not shell out a single centavo in this case,” Senator Sherwin T. Gatchalian said during a virtual Senate hearing on Wednesday to probe the sale of the controlling stake in the deepwater project by its two consortium members that each own 45%.

He made the statement after Rozzano D. Briguez, president and chief executive officer of state-led PNOC Exploration Corp. (PNOC-EC), said that the approved sale of the first 45% in the Malampaya project was largely financed by loans.

UC Malampaya Philippines Pte. Ltd. has a 45% stake in Service Contract 38, which covers the Malampaya project. This was after Chevron Corp. subsidiary UC38 LLC completed the transfer of its shares to the Udenna Corp. unit. The sale was valued at $565 million.

PNOC-EC, which holds 10% in the project, waived its right to acquire the sold shares because of concerns about losing “operational flexibility” as well as its inability to secure banking support to fund the full acquisition amount.

“$375 [million] of the $565 [million] sale was done through loans from three major banks that executed their confirmed commitment to provide facility for the sale of Chevron-UC38,” Mr. Briguez said.

Of the remaining amount, $157 million was sourced through the gas field’s “net entitlements” while $33 million “probably” came from the buyer’s stock issuance, he said.

Mr. Gatchalian, who heads the Senate’s energy committee, said he understood that the $33 million “has not been issued.”

“In other words, the buyer did not issue a single centavo… What value did the buyer bring in? [The] financial [aspect] is not there. That’s why I was saying that PNOC[-EC] should have gone and purchased this because the buyer did not shell out a single centavo,” the senator said, as he asked whether the Udenna group brought in technical people.

Mr. Briguez, a retired lieutenant general who assumed his current post in February 2020, said part of the deal was to retain the technical people from the original consortium members.

Mr. Gatchalian said, “My point here is we lost opportunity.”

“You’re already there. You’re part of the operational entity so it’s a good opportunity for PNOC[-EC] to really become a true oil and gas company, not just a paper holding company,” he said.

Two months ago, Dutch oil and energy company Shell Petroleum N.V. said that another Udenna unit Malampaya Energy XP Pte. Ltd. would buy its entire interest in Shell Philippines Exploration B.V. (SPEx). SPEx, the project’s operator, holds a 45% stake.

Raouf Kizilbash, chief executive officer of Malampaya Energy XP, said during the hearing that the Udenna group had shown financial and technical capability in the Chevron deal.

“Coming in, we demonstrated the financial wherewithal to continue meeting all commitments. We came in from a technical perspective as a non-operator where we had to get involved [and] support the consortium to look at what’s next for this business, pushing ourselves to progress,” he said.

Based on an Energy department report, UC Malampaya had an available working capital of $137.16 million and bank balance of $39.17 million, as of January 2021.

“Based on this information, the Chevron share [sale] has been processed and found to be technically and legally and financially compliant,” Department of Energy Secretary Alfonso G. Cusi said in the hearing.

Mr. Gatchalian said that Malampaya Energy XP had a paid-up capital of $100 or around P5,000, based on figures from the Singapore Accounting and Corporate Regulatory Authority. He said that it would be impossible to run a rig with this amount.

Mr. Cusi said he would have to check the information, since an entity with only P5,000 will not be allowed to borrow billions of pesos to fund the deal.

Meanwhile, PNOC-EC’s Mr. Briguez said that his group had studied the possibility of matching buying Shell Petroleum’s Malampaya share, but decided against it.

“We learned if we buy more than half of that, the SPEx group will become a GOCC (government-owned and controlled corporation) and we know for a fact that when we buy half of that and it becomes a GOCC, part of the risk is for that to lose its operational flexibility in decision making,” he explained.

Data provided by Mr. Gatchalian’s office showed that the combined purchase price of the SPEx and UC38 share is $1.03 billion, and a net present value until 2024 of $1.36 billion.

During the hearing, Mr. Gatchalian also questioned the debts incurred by Mr. Uy’s Udenna and its subsidiaries as these tripled to P120.81 billion in three years ending 2019.

“Udenna Corp. incurred a lot of debt from 2016 to 2019. [It’s] almost double the next conglomerate, which is Metro Pacific [Investments Corp.] and the other well-known conglomerates. This high debt load is creating a lot of concern in the financial markets and those concerns were echoed through the news reports,” he said.

The senator called the firm’s liabilities as “telltale signs” of its financial situation.

“It seems to me that Udenna is encountering some financial challenges and this doesn’t speak well on the purchase of a very important asset, and this asset is not only important in terms of potential but also important in terms of energy security,” he added.

Natural gas from the Malampaya project contributed 26.92% of Luzon’s power generation mix in 2020. Its supply to gas-fired power plants serves 17% of the country’s households, he said, citing figures from Manila Electric Co. — Angelica Y. Yang