Temasek comes to Nigeria with Seven Energy Deal

Bloomberg reports that Singapore’s state-owned investment company, Temasek Holdings Pte, plans to buy a stake in Seven Energy International Ltd. for $150 million.

This follows an announcement in November of a $1.3 billion investment in three gas blocks offshore Tanzania by Temasek’s liquefied natural gas unit Pavilion Energy Pte.

Song Seng Wun, a Singapore-based economist at CIMB Group Holdings Bhd. (CIMB) said “It(the deal) ticks all the right Temasek boxes as it is an investment in a fast-growing emerging economy and it is an investment in resources.”

Temasek joins other investors including Carlyle Group LP and Robert Diamond’s Atlas Mara Co-Nvest Ltd. (ATMA) that are seeking to profit from Africa’s development.
“We are interested in investment opportunities in Africa where they fit our investment themes; in particular, around the transformation of economies and the demand for consumption by growing populations,” Temasek spokesman Stephen Forshaw said.

Ahead of the most recent investments in Africa, Temasek’s assets in the continent, central Asia and the Middle East accounted for just 2% of its total holdings as of March 31, 2013, according to its latest annual report published in July. That’s on a par with investments in Latin America and compares to 13% in Australia and New Zealand, and 12% in North America and Europe.

Investing as little as $150 million in a Seven Energy makes sense as Nigeria is still politically unstable, Song said.

“One has to have a very high-risk appetite to invest in a failed state like Nigeria,” Friedrich Wu, an adjunct associate professor at Nanyang Technological University in Singapore said in an e-mail. “After the BRIC economies, investors are chasing the next frontier markets to pour their money in. Africa has been talked up by various analysts and the media, but it could turn out to be a nightmare or quagmire.”

Founded in 2004, Seven Energy focuses on the emerging Nigerian domestic gas market.

Apart from Temasek, International Finance Corp., a unit of the World Bank will invest $75 million and the IFC African, Latin American and Caribbean Fund $30 million.