“Executive discretion is the flip side to corruption.”
With the clock running down on this Administration there has been and will be a rush to sign midnight deals and appoint midnight persons who will have tenure beyond May 2022. In the COMELEC three seats just opened up with the the retirement of Commissioners Abas, Guanzon and Kho on Feb. 2 making all seven in the new Commission appointees of the President.
On the deal side we witnessed the recent award by the National Telecommunications Commission of the frequencies previously owned by ABS-CBN to the Manny Villar group. The NTC did not disclose what the Filipino would make from it but the answer is nothing. Communications frequencies are a scarce natural resource of a country and elsewhere are publicly auctioned for billions of dollars which money goes to the Treasury for social and economic relief. It is therefore sickening that we hand out our patrimony to businessmen for free when we do not have P5,000 to give in “ayuda” to the starving Filipino.
This is not a judgment necessarily on the Villar Group who is on the face of it just playing by the rules. Why pay the bill if the Government does not present an invoice? In the past the San Miguel group and its subsidiary Liberty Telecoms sold extremely valuable telecom frequencies to Globe and PLDT for I believe P70 billion which frequencies were originally awarded for free. That money should have gone instead to the national coffers but the Administration did nothing about it. In the meantime our country has racked up P11.8 trillion in debt and will run a budget deficit of P1.7 trillion this year. What can I say.
Another deal pending is the sale of Shell’s interest in the Malampaya gas field. That field was originally owned 45% by Chevron, 45% by operator Shell with a carried interest of 10% by the Philippine National Oil Company- EC, a Government agency. Two years ago, Dennis Uy, a business ally of the President, bought the minority interest of Chevron through his company Malampaya Energy for a reported $565 million after Shell and PNOC waived their rights of first refusal to acquire the shares. A short time later Shell offered to sell its stake in Malampaya for allegedly $460 million. Shell had since 2019 been requesting for a 10-15 year extension of its Service Contract to develop the field beyond its expiry in 2024 but Government has sat on that request for reasons that were never disclosed. It takes at least 5 years and billions of pesos to develop a field. With only a few years left on the current contract Shell must have decided to unload its stake before it lost its value when the contract expires.
There are many unanswered questions surrounding Dennis’ initial purchase of the Chevron stake some of which were unearthed in the Senate hearings led by Sen. Sherwin Gatchallian. For one why did PNOC not buy the stake, finance it like Dennis with loans, extend the service contract and recoup the investment in an Initial Public Offering? With natural oil gas prices now some 7 times higher than what they were then, Government would have hit a jack pot.
I imagine the Modus Operandi is to buy Shell’s interest at a fire-sale price (note Shell’s price is $100 million below Chevron’s) and then use one’s influence to extend the contract with Government which would add significant value to the investment. That sale looked to close until it hit a snag with the Senate calling out what was a suspicious transaction that endangered the national security of this nation. Dennis Uy has no experience in operating a gas field. He would have had to bring in an international operator most likely from China with whom Dennis is said to be closely associated. Dennis is allegedly tied up with the Mainland for Dito, his new telecoms company.
Malampaya supplies 40% of the energy needs of Luzon so for this cog of our economy to be ceded to a consortium with ties to China is existential. In case nobody noticed China invaded our Pacific islands and already controls a significant part of our national finances, our electrical transmission facilities, our communications spectrum and our politicians. Concerned citizens have reportedly sued DOE Sec. Cusi, Dennis Uy et al. to reverse the deal citing it will result in annual revenue loss of $42 million.
The approval of Government is necessary for the Malampaya deal to close. Many such contracts have “change of control” provisions which can be invoked if the national interest is at risk. Perhaps under pressure from the Senate hearings, the PNOC Board nixed the transaction but like all things in our beloved country anything denied can be restored with the right number and the right phone call.
(Shell has lately had a run of mishaps. Its subsidiary, Pilipinas Shell, just paid under protest over P3 billion in “back taxes” that it claims was a double assessment. That is what happens when you are unwilling to grease the skids.)
Under Art. XXII of the Election Code, Government agencies are prohibited from releasing monies for public works, etc. within 45 days from Election Day since this could influence votes. It is unclear whether there is a similar prohibition against the award of special concessions be it a franchise or special rights similar to what the Malampaya deal requires. If so Dennis will have to shop his Malampaya stake in the next Administration but without political support he should be ready to take a hair cut. The natural buyers would be the existing energy players – AC Energy of the Ayalas, Aboitiz Power and SMC Power – and MVP who had previously reportedly expressed an interest in the project. The key is the extension of the Service Contract but that needs a Palace connection. In a BBM Presidency I can surmise who that person might be.
Dennis whom say say is highly levered has not had much fun lately. In the last minute he had to abort a multi-billion rights offer for Dito, his telecoms company, perhaps because there was little interest in it and the underwriters got cold feet. The shine has come off.
Our legislators just passed the Public Service Act which liberalizes foreign ownership in previously restricted areas. Everybody is agog this will herald a flood of foreign investments. I would not get overly excited. As reported by Infrawatch, a foreign think tank, the deterrent to FDIs is not ownership restriction but corruption. The PSA gives the President (not just this one) the liberty to identify inclusions or exclusions to foreign ownership. There is now a new cookie jar to be raided.
What else is out there to plunder in the last two minutes? There must be a whole host of smaller deals that are being signed below the radar. On a bigger scale, the natural suspects will be in the infrastructure side – NAIA, water concessions, road contracts, special licenses.
Let me know if you can think of any.
Source: https://heneralunacy.wordpress.com/2022/02/05/last-two-minutes/