Dennis Uy funding Malampaya takeover with foreign loans

If everything goes as planned for Davao City businessman Dennis Uy, he will control 90% of the gas field in offshore Palawan.

His company Malampaya Energy XP Pte. Ltd. is buying Shell Philippines Exploration B.V. (SPEX) for $380 million and up to $80 million in more payments from 2022 to 2024.

SPEX holds 45% operating interest in Service Contract 38 or the Malampaya project.

Malampaya Energy already bought out Chevron Malampaya LLC from the Malampaya Consortium in March last year for $565 million.

Chevron Malampaya LLC, now UC38 LLC, holds the other 45% stake in the gas-to-power project.

How did Dennis Uy, one of President Rodrigo Duterte's top campaign donors in 2016, afford these acquisitions worth several hundred million dollars?

“The acquisition is 100% funded by our existing lenders,” Belinda Racela, top executive of Malampaya Energy, told GMA News Online.

Racela said the foreign lenders are the same banks which bankrolled Uy’s acquisition of Chevron’s Malampaya stake last year.

“These are international financial institutions of repute who are current lenders to the UC38 LLC stake which was purchased from Chevron,” she said.

The Malampaya Energy executive, however, refused to disclose the identity of the foreign lenders.

“However, as respect to our lenders, we cannot say who they are,” she said.

Nonetheless, she said the lenders were agreeable to provide additional acquisition financing “based on their knowledge and comfort with the robust business model, healthy financials and contracted cash flows of Malampaya.”

“As importantly, they have a high degree of confidence in Malampaya Energy’s ability to safely and reliably operate the business,” Racela said.

“Malampaya Energy has a significant level of technical and operational expertise of the Shell and Ex-Chevron staff that will remain with the business as well as the scale of support that will be provided by professional sub-contractors and technical authorities, both local and international,” she added.

The Malampaya gas-to-power facility fuels three gas-fired power plants with a total generating capacity of 2,700 megawatts (MW), providing up to 30% of the power generation needs of Luzon.

Connected to onshore gas plants in Batangas, the Malampaya offshore facility in Northern Palawan was inaugurated in 2001.

The project has also provided a crucial source of income for the government with a total net national government share amounting to 261,681,610,752.59 since it began commercial operations in 2002 until 2019.

Taking control

Since Duterte assumed the presidency in 2016, Uy has expanded his empire through several acquisitions and ventures, including the takeover of the Malampaya facility, which supplies a third of Luzon’s power requirements.

Dutch petroleum giant Shell Petroleum N.V, last week, announced it inked a share purchase agreement with Malampaya Energy, a subsidiary of Uy’s Udenna Corp., for the sale of a controlling stake in the Malampaya gas field.

The Shell-Uy transaction, which is subject to partner and regulatory approval, is targeted to be completed by the end of 2021.

The deal might not need to secure the green light from the Philippine Competition Commission as the Bayanihan to Recover as Once Act or Bayanihan 2 exempted mergers and acquisitions (M&As) with transaction value below P50 billion.

Energy Secretary Alfonso Cusi, however, said that once the transaction has been completed at the consortium level, it will still be submitted to the DOE for its review and approval in accordance with Presidential Decree No. 87, otherwise known as the Oil Exploration and Development Act of 1972 (PD87).

Prior to Uy’s planned takeover, the Malampaya Consortium was composed of SPEX, Chevron, and the state-owned Philippine National Oil Company-Exploration Corporation, which still holds 10% interest in the gas field.

Expansion, acquisitions

In 2017, Uy went on buying binge, acquiring several companies such as Familymart, Conti’s, and Enderun.

Global Gateway Development Corporation (GGDC), a Udenna subsidiary, currently holds a 177-hectare leasehold in Clark Freeport Zone in Mabalacat, Pampanga.

In 2019, Uy's Phoenix Petroleum and partner China National Offshore Oil Corporation (CNOC) were given the green light to proceed with their liquefied natural gas (LNG) project in Batangas.

Uy’s Udenna further diversified by entering Mislatel Consortium—now DITO Telecommunity— with Chelsea Logistics, Mindanao Islamic Telephone Company Inc., and China's state-run China Telecommunications Corporation.

The consortium was officially declared as the country’s new major player in the telecommunications industry last November.

Late last year, Uy's Chelsea Logistics also secured the approval of the National Economic and Development Authority -Investment Coordination Committee (NEDA-ICC) to modernize the Davao International Airport (DIA).

Uy’s legal counsel and spokesperson for several of his companies Adel Tamano has stressed that Uy has been a wealthy businessman for decades.

“So all this talk … ‘Why is he buying this and that?’ Well, he’s buying businesses because he sees the opportunity and because he already has the base,” Tamano said. —NB, GMA News