UDENNA Corp. defended on Thursday its acquisition of the controlling stake in the Malampaya deep-water gas-to-power project, saying similar transactions in the past never went through the same scrutiny nor were imposed the same requirements.
“The government approval was never obtained,” said Udenna President Raymundo Martin M. Escalona in a virtual media briefing to explain why the holding firm of Dennis A. Uy’s diverse investments is poised to become the big-gest shareholder in a vital asset for the country’s energy security.
Mr. Escalona was referring to previous arrangements in which ownership of the Malampaya project changed hands.
“Neither [has] PNOC-EC (Philippine National Oil Co. Exploration Corp.)… exercised their right to first refusal. They never tried to exercise their right to match,” he said, adding that prior government approval and other measures were “simply not necessary nor required.”
State-led PNOC-EC holds 10% of the offshore gas platform. Before the Udenna group’s entry, the local units of two foreign entities held a combined 90%.
In May this year, Shell Petroleum N.V said it had forged a deal with Udenna unit Malampaya Energy XP Pte. Ltd. for the sale of its 100% shareholding in Shell Philippines Exploration B.V. (SPEx), owner of a 45% operating interest in Service Contract 38, or SC 38, that covers the Malampaya gas field.
The deal — valued at a base consideration of $380 million plus additional payments of up to $80 million — is in line with group’s upstream portfolio transition, Shell Petroleum said. The transaction’s effective date started on Jan. 1, 2021.
Udenna unit UC38 LLC also holds 45% of SC 38. UC38 acquired its stake in March last year from Chevron Malampaya LLC.
“Both the Chevron and Shell transactions are private share sales conducted at parent company level with no change in the legal entities’ participating in SC 38 consortium nor any transfer of any rights or obligations,” Mr. Esca-lona said.
He said because of the nature of the deal, the Energy department’s approval is not required. He also said that the transactions followed “highly competitive bidding processes” and “rigorous due diligence.”
He also denied that the transactions were “sweetheart” deal from the government.
“This is certainly not the first time where share sale transfers are done,” Mr. Escalona said. “Prior to moving hands from Shell and Chevron, there were many share transfers in the past.”
Last month, the Philippine Competition Commission (PCC) said it was not notified of the deal between the Udenna and Shell groups. But the PCC said it “found no competition issue” in the Chevron deal.
Mr. Escalona’s defense of the two deals comes a day after Senator Sherwin T. Gatchalian on Wednesday once again described these as “lutong makaw” — referring to a fixed arrangement — “because we have rules and laws that govern this type of transaction.”
“And from the documents that I have seen, the rules were not followed, it was in fact bent towards approving this transaction and this is not in line [with] protecting the interest of the Filipino people,” Mr. Gatchalian said in his office’s transcript of his comments delivered in a forum.
The lawmaker, who chairs the Senate energy committee, described the deal as a “dangerous precedent because Malampaya is only one of its kind and it should be only run by highly qualified [people] in [a] very stable entity.”
Mr. Gatchalian in September said in a Senate hearing that the Malampaya project serves 3.7 million households and supplies 27% of Luzon’s power generation.
Also on Wednesday, the Department of Energy (DoE) came out with a statement on PNOC-EC move not to match the offer of the Chevron and Shell groups.
“Rather than being fixated on PNOC-EC’s decision… we must instead look at the bigger picture,” said DoE Assistant Secretary Gerardo D. Erguiza in a statement.
“There are crucial questions that are being overlooked, and we must not be remiss in asking them. These are: Why did Chevron sell their interest to begin with? Why did Shell choose not to match the offer of Udenna, and why did Shell decide to sell their shares as well,” Mr. Erguiza said.
He said there is double standard in calling Shell’s decision as “prudent” while that of PNOC-EC as “foolish.”
“For PNOC-EC to pounce on Chevron’s shares actually runs counter to their mandate. If acquiring the Chevron shares was so financially lucrative, then why didn’t Shell grab at them at the first opportunity,” Mr. Erguiza said. — Victor V. Saulon
