Energy & Resources

Grid locked

State Grid’s Manila dilemma

Grid locked

As long as war does not occur between China and the Philippines, the State Grid’s Rmb10 billion investment in the Philippines is not likely to be wasted.” That was the rather chilling verdict from Time Weekly on State Grid’s investment strategy in its southeast Asian neighbour. Nor is it alone in its view. According to Investor Journal, State Grid insiders have been briefing reporters on their concerns about the increasingly strained relations between Manila and Beijing.

State Grid is one of China’s biggest investors in the Philippines and the single largest shareholder of National Grid Corp of the Philippines (NGCP). It purchased its 40% stake in 2009 with a view to diversifying outside China. It also bought stakes in transmission grids in Brazil and Portugal.

Company bosses may not have considered political risks like the squabble over the Scarborough Shoal when it made the purchase, the Chinese media has speculated. Worse, Time Weekly says State Grid’s return on investment on its Philippine play has been barely adequate. The last full year of accounts released publicly (for 2009) suggest $48.6 million in profit, although the Chinese firm also sold Rmb50 million worth of power equipment to the Philippines.

Despite such slim pickings, State Grid bosses won’t want the brewing storm in the South China Sea to short-circuit its nearby Philippine operations.

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