Saving Malampaya
The impending sale of the Malampaya gas-to-power project to billionaire Enrique Razon Jr. has lessened the uncertainty clouding the facility, which supplies a fifth of the country’s fuel needs. The acquisition by Davao-based businessman Dennis Uy, through his Udenna Corp., of the 45-percent stake each of Shell Philippines Exploration B.V. and Chevron Corp. in Malampaya had earlier raised lingering fears about the capability of the presidential friend to operate such a crucial energy venture.
It sparked a Senate investigation that centered on the Department of Energy (DOE) allegedly bending the rules to approve the sale to Uy, a known ally and the biggest campaign contributor of President Duterte. After several hearings, the Senate energy committee concluded in February this year that the DOE decision endangered the country’s energy security by allowing a company with no proven technical and financial capability to own and operate the facility. Lawmakers called on the Office of the Ombudsman and the Civil Service Commission to file criminal and administrative charges against Energy Secretary Alfonso Cusi and his subordinates for their allegedly anomalous approval of the deal.
According to Sen. Sherwin Gatchalian, chair of the Senate energy committee, Cusi and his DOE subordinates were liable for “gross neglect of duty and grave misconduct in evaluating and approving the transaction,” and alleged violation of the Anti-Graft and Corrupt Practices Act “for knowingly approving the transfer” of the Malampaya stake to Udenna Corp. Malampaya, the corporate vehicle used by Uy. “[UC Malampaya is] an entity that is clearly not qualified, and in so doing providing [it] an unwarranted benefit, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence in evaluating and approving the deal,” he said.
Article continues after this advertisementGatchalian had questioned the inconsistent position of the DOE on the applicability of existing laws requiring that any transfer of interest in the government’s energy assets needed prior government approval that should weigh the legal, technical, and financial capability of the buyer. “The [DOE] violated not only the law, but even its own department circular, in railroading the approval of the transfer of a substantial participating interest in Malampaya—our country’s single-most important energy resource—to a company that the DOE knew to be financially unqualified to own it,” he argued. During the Senate hearings, senators claimed the entire approval process showed how a company owned by an individual with close ties to Malacañang was allegedly favored to gain control of an important energy infrastructure.
While Udenna had insisted that the transaction with Chevron was a private sale of shares and “as such, [DOE] approval is not required,” it did not clear the doubts on its financial and technical capability to operate Malampaya, much so extend its operating life. Located off northwest Palawan, the Malampaya field fuels five power plants in Luzon with a combined capacity of 3,200 megawatts. The DOE had said the gas field’s reserves are expected to be commercially depleted by 2027.
This time around, however, Razon’s Prime Infra Holdings Inc., the company acquiring the Malampaya stake from Uy, has agreed to be scrutinized regarding its financial and technical capabilities to take over the energy asset. Razon’s capability to run large projects is evident in the billionaire’s business empire that stretches from ports operations worldwide to gaming and power distribution, being a former shareholder of the National Grid Corporation of the Philippines.
Article continues after this advertisementGatchalian, the outgoing chair of the Senate committee on energy, said the sale by Udenna of its interest over Malampaya was the “ultimate evidence” that it was incapable of running the power project. “It was already discussed in the committee. Its findings: It does not have financial capability to run Malampaya. So, they are forced to sell. The bottomline, they are not capable,” he said. Existing laws were crafted purposely to ensure stability, by being able to ascertain which party should have a controlling interest in a power asset. As Gatchalian noted, whoever buys it should follow the law and qualify in these criteria: financial capability, technical capability, and legal aspect. “All three should be complied with,” he emphasized. The senator said that they do not know if Prime Infra is qualified or not, “but the mere fact they are subjecting themselves to evaluation of the government is the right step. It gives us comfort that they themselves want to be evaluated; they are ready, and are not taking any shortcuts.”
Having a capable owner will ensure that Malampaya will be run efficiently, and Razon has signified his intention to work on extending the production life of the project, most likely by exploring for more gas in the vicinity of offshore Palawan. This, in turn, will eventually sustain the economic and social benefits that Malampaya is providing for the country.
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