Meralco weighs options in Nigeria

The Manila Electric Co. (Meralco) is proceeding with caution on its option to raise its investment in a power firm in Nigeria, where ethnic and religious unrest is seen to escalate into rampant labor strikes next year.

Meralco has a 5-percent equity in Lagos-based Integrated Energy Distribution and Marketing Ltd. (IEDM) – worth about $31,500 – and has the option to raise its stake to as much as 20 percent.

“We have 24 months to study whether to take option,” Meralco president and CEO Oscar S. Reyes said.

Both Meralco and IEDM are part of a consortium that secured deals to take over two firms privatized by the Federal Republic of Nigeria: Ibadan Electricity Distribution Company Plc. and Yola Electricity Distribution Co. Plc.

“Meralco is participating in the power privatization project mainly to gain international exposure, although the company will also earn from fees as the technical partner in the consortium,” he said.

A growing number of Philippine firms, like Meralco, are expanding overseas after building experience and financial strength in the Philippines’ fast-growing economy. Before Meralco’s Nigeria project, the Philippine utility and its controlling stockholder, First Pacific Co. Ltd. of Hong Kong, sealed a $488-million deal to acquire a 70-percent stake in a natural gas-fired power plant in Singapore.

First Pacific is also seeking opportunities in such markets as Burma (Myanmar).

Most Philippine corporations tend to be cautious—one of the lessons of the Asian currency crisis of 1997—but stable and overseas expansion is a way for them to grow further, according to ING’s Manuel Salak III, the Singapore-based managing director for clients and corporate finance for Asia.

Asian companies that plan to expand outside their immediate region of origin are looking at Africa as a target area for growth, aside from China and emerging markets in Asia, according to a survey by global consulting firm Towers Watson. Understanding cultural differences and the challenges of managing a global company are the key globalization challenges, the company said. “Overall, the stage is set for an interesting period of intense activity as Asian companies efficiently leap across various stages of globalization and go head-to-head with their well-entrenched and strongly established counterparts from other regions,” the company said in its “Asian Trailblazers” report.