Batangas Gov Mandanas found to be behind firm that stands to profit from natural gas boom

Batangas Gov. Hermilando Mandanas. Photo by JOHN RYAN BALDEMOR

BATANGAS, Philippines — An influential politician in the Philippines, who has been a cheerleader for natural gas power, is behind a company that planned to make a fortune from it, an Associated Press investigation of thousands of pages of documents has found.

Gov. Hermilando Mandanas of Batangas province and his late wife stood to profit from a buildout of liquified natural gas power — he owned the largest share in a real estate firm that soared in value as energy companies moved in, while he promoted the expansion in media interviews and public events. The firm also launched its own natural gas project.

Experts in government ethics deplored the scenario, with one environmental law advocate calling for an investigation into Mandanas. In an interview with the AP, Mandanas denied his associated businesses were involved with the buildout and called natural gas the best choice for the country.

The major commitment to natural gas comes at a time when many countries are ramping down the use of the fossil fuels that cause climate change. Scientists say that to avoid profound disruption from climate change, no new fossil fuel infrastructure that emits carbon dioxide can be built. Some analysts say all the Philippines' future electricity growth could be met with clean renewables.

Filipinos will likely pay more for electricity than if the country went all in for wind and solar power, because in many places renewable energy is now the cheapest form of new electricity.

The construction also is happening in an ecologically vibrant zone with coral reefs and communities that depend on their fish. The AP previously reported that both could be harmed by the planned power stations.

Gerry Arances, who heads up the Center for Energy, Ecology and Development, a Philippine nonprofit, said natural gas was not the path the country should have chosen.

"There's only one reason" it became the Philippines' energy priority. "That is greed and self-interest."

Promoters of the gas plants see the Batangas region, about two hours south of Manila, as a new energy center for the country. Four gas power plants sit along the coastline already and four more are planned. Six new terminals for importing chilled, liquefied natural gas are also on the way in Batangas or have started operating.

The government says it wants the Philippines to become an LNG hub for the entire Asia-Pacific region.

"It is needed very much for development," Mandanas told the AP in an interview in the white-columned regional capitol. The electricity will attract other industries, he said, which benefits the entire country.

Mandanas is well known in the Philippines for winning a landmark Supreme Court case that increased local government funding nationwide.

The governor said he was "very conscious" that what he referred to as the "center of marine biodiversity of the entire world" needed to be protected, and his administration is taking such action. "We have to balance the need of the environment and development," he said.

Alleged conflict of interest

Not only did companies affiliated with the governor own coastal real estate where gas developments are happening, the family firm, AbaCore Capital Holdings Inc., launched its own gas power project in Batangas.

Legal experts said these dealings violated the Philippine law on ethics in public office and very possibly the nation's law on local government. Philippine politicians are not allowed to own major stakes in companies with goals that could be at odds with their official duties. Governors must also maintain a balanced ecology and conserve marine resources.

Michael Henry Yusingco, a lawyer and fellow at the Philippine Institute for Autonomy and Governance, called the situation a clear conflict of interest that could merit Mandanas's suspension or removal from office. He said there was a strong case that the governor is not meeting his legal responsibilities to the environment or residents, which would be a dereliction of duty.

Mandanas led a takeover of AbaCore in the 1980s, building it into a real estate behemoth beyond its original interests in mining and gaming.

When voters returned him to the governor's seat in 2016 after an absence, Mandanas stepped down from the CEO position at AbaCore. His wife Regina Reyes took over the post.

In the Philippines press, AbaCore is frequently referred to as a Mandanas family company. Documents filed with the Philippines Securities and Exchange Commission shows as of last fall, Mandanas still owned almost 30 percent of it through a complex structure involving three layers of Philippine companies.

In 2019, Reyes said publicly that her husband's policies would benefit the family company. Addressing shareholders, she said the infrastructure buildout in Batangas "implemented and led by its current governor" would boost AbaCore, increasing property values, cash flow and revenue.

The energy industry moving in, she said, would help AbaCore grow, continuing, "We expect land values to increase exponentially." In a separate interview with Philippine TV, she agreed the gas expansion meant the value of surrounding areas rose, benefiting shareholders.

Reyes died of natural causes in May 2022, and Mandanas recently remarried.

San Miguel Corporation, one of the Philippines' biggest power providers, affirmed in an email to the AP that its LNG projects there "led to a substantial increase in local property values." They rose more than 13-fold, it said.

Mandanas was in Beijing during a deal signing in 2019 that involved an AbaCore sister company in which he now holds a large stake. The AbaCore affiliate and three Chinese firms agreed to build a $3 billion LNG complex, including a power plant, in the fishing village of Simlong in Batangas.

According to filings with Philippine authorities in December 2018, four properties including the land in Simlong, where the power hub will be built, were valued at $6.2 million. Shortly after that deal was struck, they were revalued at more than $30.6 million. The vast majority of AbaCore's income has come from land revaluations in recent years, its filings show.

Asked in an interview whether the Simlong energy hub was a conflict of interest, Mandanas suggested AbaCore's role was limited to selling land.

"Probably one of the subsidiaries sold a piece of property" to the developers, indicating a distance from the transaction. "That would be probably the involvement of AbaCore."

"AbaCore is not in any energy business here in Batangas," he said.

Yet that conflicts with AbaCore statements in official documents from 2021 that its then-renamed AbaCore Energy Hub would result in "huge recurring revenues."

Mandanas did not reply to followup questions via email.

Call for an investigation

Elizabeth David-Barrett, director of the Centre for the Study of Corruption at University of Sussex, England, reviewed the AP's findings and agreed with Yusingco, the Philippine governance attorney, that they amount to a conflict of interest and the "abuse of entrusted power for private gain which harms the public interest."

A professor in political science at the University of the Philippines, Maria Ela Atienza, said Mandanas may also be violating a Philippine law on conduct and ethics. She cited a ban on favors being granted to relatives.

Yusingco called it "a sad, tragic aspect of Philippine politics. Political dynasties thrive because of their business interests, and their business interests thrive because of their positions in government."

"The really tragic result (is) fisherfolks suffering, the environment suffering."

Barnaby Pace, at the nonprofit Center for International Environmental Law, said evidence of Mandanas's business interests in the LNG buildout was "deeply concerning" and demanded authorities investigate.

"LNG projects should be reviewed in light of this information," he said. "The local population has a right to know what's behind the push for LNG facilities."