Razon to acquire controlling stake in Malampaya project from Dennis Uy

Ports and casino tycoon Enrique Razon Jr. is acquiring a controlling stake in the Malampaya gas-to-power project from Davao-based tycoon Dennis Uy.

In a statement, Razon’s infrastructure arm Prime Infra Holdings Inc. announced that the “acquisition process has kicked off and will close subject to the consent of various parties including the Department of Energy (DOE) and the Philippine National Oil Company Exploration Corporation (PNOC-EC).”

“The transaction will also go through other regulatory and lenders’ approvals within that period,” Prime Infra said.

Uy’s — a close associate and top campaign donor of outgoing President Rodrigo Duterte — planned takeover of the Malampaya facility is the subject of the graft complaint filed before the Office of the Ombudsman against Energy Secretary Alfonso Cusi, the Davao-based businessman, and officials of Chevron Philippines and Shell Philippines Exploration B.V.

Uy and Cusi even filed libel cases against the journalists and media outlets, including GMA News Online, who reported about the filing of graft charges against them.

In May 2021, Dutch petroleum giant Shell disclosed that it signed a share purchase agreement with Uy’s Malampaya Energy for the sale of its 100% shareholding in Shell Philippines Exploration B.V. (SPEX), which holds a 45% operating interest in Service Contract 38 or the Malampaya gas field.

Should this transaction push through, Uy’s group will hold 90% control of the gas field in offshore Palawan after it already bought out Chevron Philippines’ share in the Malampaya Consortium last year, which had 45% participating interest in Service Contract 38 or Malampaya gas field.

The PNOC-EC, however, withheld its consent for the divestment of SPEX’s shares in the Malampaya gas field to Uy’s group, thereby delaying its gain of 90% control of the gas field.

Prior to Uy's planned takeover, the Malampaya Consortium was composed of SPEX, Chevron, and the PNOC-EC —which still holds 10% interest in the gas field.

Prime Infra did not disclose how many percent of the Malampaya gas-to-power project it is poised to acquire from Uy.

Nonetheless, the company said its entry into the natural gas industry aligns with its “purpose to create better lives and resilient economies through critical infrastructure coupled by its aspiration to help its customers transition to cleaner energy resources to fuel the economic growth of the Philippines.”

The company noted that Malampaya’s service contract is set to expire in 2024 “making it critical for Prime Infra’s entry to be able to continue operating the project while applying for an extension so it can invest in its expansion, which will sustain the economic and social benefits that Malampaya is providing for the country.”

The transition of the operations of Malampaya is critically urgent, it said.

“Prime Infra and Udenna, as the new operators taking over from Shell Philippines, will need to immediately plan for the expansion to ensure the continuity of the production as long as the reserves support it,” the company said.

The Malampaya deep-water gas project ushered the natural gas industry into the Philippines.

The gas-to-power project supports up to 20% of the country’s electricity requirements using indigenous resources of natural gas, the cleanest-burning hydrocarbon, and reduces the need for imported oil, according to Prime Infra.

“Natural gas is a critical transition fuel and the modern, state-of-the-art infrastructure built to harness this valuable transition fuel attracted us to pursue this deal – all aspects of the project ticks off our environmental, social, and governance (ESG) check list that will allow us to contribute more to the country’s transition from expensive and volatile coal and imported fuel prices to affordable cleaner and domestic energy resources like natural gas,” said Razon.

“Also, there is a sense of ownership to achieving national energy independence when you bring in Filipino companies to handle the reins of a critical power infrastructure and this is what Prime Infra aims to do with our participation in Malampaya. We will invest and sustain the development and production of domestic gas as long as the terms of the operating license and the natural resources permit,” he added.

Prima Infra said that Udenna Corp. is optimistic about the participation of Razon Group in Malampaya, further strengthening the capability of Filipino-run companies to meet the power demand that picked after COVID-19 restrictions were lifted resulting to the resumption of economic activities.

“We look forward to this opportunity to partner with Prime Infrastructure and PNOC EC, as we explore more ways to fulfill our common vision to make Malampaya sustain its capability to meet the urgent energy security need of the Philippines,” Uy was quoted as saying in the news release.

Since President Duterte assumed the presidency in 2016, Uy has expanded his empire through debt-funded acquisitions and ventures, including the takeover of the Malampaya facility, establishing the third telco DITO, and acquiring several companies such as Familymart, Conti’s, and Enderun.

A report by Reuters said Uy is considering the sale of billions worth of businesses including the Malampaya facility he acquired from Chevron and Shell.

In a separate statement, Udenna Corp. confirmed that it “always remained open to exploring different opportunities” and that “there has been renewed interest in discussing partnership and strategic alliance opportunities with the Group.”—AOL, GMA News