Geregu listing signals transparency in Nigeria’s power sector

By Temitayo Lawal

Posted on Wednesday, 2 November 2022 14:25
High-tension electrical power lines are seen on the outskirt of Benin City in Edo state, Nigeria June 13, 2018. REUTERS/Akintunde Akinleye

Nigeria's first private power generation company (GenCo), Geregu Power Plc, has become the first of its kind to list on the main board of the Nigerian Exchange Group (NGX), signalling the start of more transparency in the sector and potentially cheaper access to long term capital, say some experts.

Geregu Power Plc listed 2.5 billion ordinary shares at N100 each in October this year, with the value of the stock rising by 10% on the first trading day amid high investor demand. The company is owned by Nigerian billionaire Femi Otedola.

“I have looked forward to seeing the first listed electricity company in Nigeria,” says Eyo Ekpo, CEO at Excredite Consulting Limited, and a former commissioner at Nigerian Electricity Regulatory Commission (NERC).

“I hope there will be many more in the near future because I believe the democratisation of ownership in the sector is vital to its growth,” he says.

Transparency and financing

The energy sector in Nigeria remains plagued by issues that limit investment into a sector in dire need of sustainable upgrades.

“The electricity sector is in need of competent management that adheres to standards of corporate governance and respects regulatory rules,” Ekpo says.

“Being publicly listed brings with it the obligation to be more transparent and more responsible in the delivery of services,” he says.

But while the public listing is not the silver bullet to the power sector financing woes, it is a significant step in the right direction, Ekpo says.

Since privatisation, several government bailouts to prevent a collapse of the electricity supply in the country have drained government coffers. In 2014, the federal government granted a N213bn ($488m) loan to privatised companies just a year after the sector was privatised.

In 2017, the federal government issued a N701bn fund to settle the cost of the electricity generated by GenCos for two years. In 2019, another N600bn loan facility was extended to the sector.

Being publicly listed brings with it the obligation to be more transparent and more responsible in the delivery of services.”

More recently, in July this year, banks took over five of the 11 distribution companies over non-payment of loans issued to acquire power assets during the privatisation phase in 2013.

“The more that ownership of licensed electricity companies is democratised, the more transparent the sector will become. We will ask questions about why things are done in a certain manner.

“When this happens, we will accept the discipline of the market and see better management, real growth and better services.”

Ekpo explains that although stakeholders will wait to observe the aftermath of this, he hopes electricity and capital markets regulators will bring more companies, at least in the generation sector, to the NGX.

Geregu outlook

Geregu Power Plc isn’t the first company run by Otedola to be listed on the NGX. Forte Oil which he acquired in 2007 and exited in 2019 was also listed, meaning he is familiar with the terrain.

“Geregu is well-primed to deliver outstanding results. We expect the company to maintain a strong trajectory over the near term,” says Abiola Gbemisola, assistant manager of equity research at FBNQuest.

Gbemisola says the company’s revenue has grown by 18% per annum over the past five years to N70.9bn in 2021 and profits at an impressive rate of 11% per annum to N20.6bn.

The company’s robust capital base of N59.9bn also shows it has strong buffers against headwinds.

The company’s good performance shows the power sector business can be profitable and its recent listing also shows what is possible in cracking the sector’s financing issues when there is greater transparency.

“We may witness additional listings of GenCos but likely not DisCos. I believe Geregu’s listing is driven by its majority shareholder,” says Gbemisola.

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