As Local, Foreign Investors Jostle for Stakes in Geregu Power

Power

Barely three months after being listed on the Nigerian Exchange, Geregu Power Plc has not only sustained its impressive showing as one of the most traded stocks for the period, but the company is also attracting institutional and strategic investors who are taking stakes in the company, writes Festus Akanbi

In a challenging environment like ours, where many companies have to cut corners to make ends meet, analysts said it takes a lot of gut for a private utility player to open itself to public scrutiny by listing in the capital market.

However, for the handlers of Geregu Power Plc, which is owned by serial investor and billionaire businessman Femi Otedola, listing the company’s share on the Nigerian Exchange on October 5, 2022, was the best way to give the power company the clear advantage it needed to make a significant difference in the  sector in which it operates. 

Raising Shareholders’ Appetite

In barely three months after listing, Geregu Power Plc has become the eighth most valuable stock on the NGX with a market capitalisation of N813 billion, about 2.67% of the Nigerian Stock Exchange equity market.

Shareholders have continued to identify with the company’s share, which closed at N325 per unit on Wednesday, March 8, 2023, on the Nigerian Stock Exchange (NGX). Geregu Power began the year with a share price of N149.00  and has since gained 118% on that price valuation, ranking it third on the NGX in year-to-date performance. 

Market watchers attributed the shareholders’ enthusiasm to the fact that the stock has accrued an outstanding 59% over the past four weeks—the third best on NGX. 

Interestingly, Geregu Power is the 16th most traded stock on the Nigerian Stock Exchange over the past three months (December 7, 2022 – March 8, 2023), and it has traded a total volume of 209 million shares—in 3,606 deals—valued at N31.1 billion over the period, with an average of 3.32 million traded shares per session.

Investment analysts said with the current standing in the stock market and the company’s audacious moves to increase capacity, it is not surprising that foreign investors are fighting head over heels for stakes in the company. Geregu Power Plc was founded on November 10, 2006, and operates in the utility sector, specifically, the electricity industry.

Analysts believe that one masterstroke decision taken by the board of Geregu Power was the initiative to approach the capital market. And so the company last year became the first power-generating company in the country to be admitted into the Mainboard of the Nigerian Exchange Limited (NGX) by way of listing by Introduction (LBI).

The company’s 2.5 billion ordinary shares of 50 kobo each at N100 per share were admitted on the Exchange.

Consequently, listing Geregu’s shares added N250 billion to the market capitalisation of NGX, further boosted liquidity in the Nigerian stock market, and provided opportunities for wealth creation.

 As Foreign Investors Jostle for Stakes in Geregu Power

Some institutional and strategic investors began to show interest in the company no sooner after the company entered the Nigerian stock market. Today, the Fund for Export Development in Africa (FEDA), an impact development unit of the Africa Export and Import Bank (Afreximbank), and the State Grid Corporation of China (SGCC), a Chinese state-owned electric utility corporation, are two formidable strategic investors in Geregu Power. 

In a recent interview, the company’s Chief Executive, Akin Akinfenwa, spoke on the company’s planned expansion and explained why FEDA has decided to acquire 5% equity.

According to him, adherence to world-class corporate governance and practices, which is driven by good leadership at the board and the management level, is the first reason.

He gave the second reason as the FEDA’s firm belief in the company’s short, medium, and long-time goals towards becoming a power company of choice in Nigeria and the West African sub-region. He said the third one, which he considers very significant, is FEDA’s belief in the Nigerian electricity supply industry as a key driver for structural transformation for trade on the African continent. “These are the three broad messages responsible for these transactions.”

“If you may recall, FEDA is also joining the state grid corporation of China as an additional investor, and they have been here before FEDA; when you look at it, yes, it opens the door for  institutional and administrative investors  that may want  to be part of the growth  of the power  plant and its success story.”

Capacity Building

The company is determined to boost its capacity and increase shareholders’ returns to ensure the sustained positive momentum gains are not wasted. This was the confidence exhibited by Akinfemiwa, who unveiled Geregu Power’s robust expansion plan in another interview with the Arise News Channel.

Already the company management said it is determined to ramp up generation to 1,300 megawatts within the next two to three years. It plans to achieve this after it must have run combined circle operations based on the two existing plants in Geregu.

The company already has an existing plant that generates 435 megawatts. In addition, it is also planning to acquire a nearby plant with an installed capacity of 440mw.

“After this is achieved, we would run a combined circle operation based on the existing plants to ramp up capacity to 1,300mw,” Akinfemiwa said.

Speaking on what to expect, Akinfemiwa stated: “Our expansion goals are very, very, ambitious, and what I will say is that in short to medium term, we are trying to take advantage of our immediate environment, that is, Nigeria as a net exporter of fossil fuel. This means our short and medium-term goals will be based on thermal generation.”

Going down memory lane, Akinfemiwa said: “You may recall in 2013, at the start of the privatisation process and when we acquired Geregu Power Plc, the installed capacity was 414mega watts at a time. But the effective capacity was less than 100 megawatts. We ramped up capacity not only to 414 but also we increased it to 435mw. So today, we are producing 435 megawatts, of which 70 to 80 per cent goes to the grid because of grid constraints.”

On the delayed energy transition plans by the federal government, Akinfemiwa stated: “Again, we must accept that Nigeria is in a delayed energy transition plan, particularly when it comes to renewable sources on the grid. So what we are going to do in the interim is to ensure we maximise the hydrocarbon potential of capability for a nation to ensure that we can contribute our quota to the national grid.”

Actualising Vision of World-class Standards

The purpose of the listing of the company was captured by Otedola, who stated that “the listing of the company was the actualisation of a vision to bring world-class standards in governance, sustainability, and business processes to the company and the Nigerian electricity sector.”

He added that “listing on the Main Board of the Exchange will ensure that the company’s long-term growth is assured and its benefits will be passed on to our esteemed shareholders.”

In his comment, the CEO of Excredite Consulting Limited, and a former commissioner at the Nigerian Electricity Regulatory Commission (NERC), Mr. Eyo Ekpo, reportedly said: “I have looked forward to seeing the first listed electricity company in Nigeria. I hope there will be much more shortly because I believe the democratisation of ownership in the sector is vital to its growth.”

Confirming the fear that the energy sector in Nigeria remains plagued by issues that limit investment into a sector in dire need of a sustainable upgrade, Ekpo said, “The electricity sector requires competent management that adheres to standards of corporate governance and respects regulatory rules.

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

Otedola’s Midas Touch

Analysts in the power sector attributed Geregu Power’s record-breaking achievements to Otedola’s determination, a savvy businessman who clearly understands virtually all of the sectors he invests in.

They contended that the National Assembly’s recent vote of confidence in Geregu Power for meeting performance targets speaks volumes about the company’s character. 

At the end of the recently concluded three-day investigative hearing on the power sector recovery plan, the lawmakers blamed the power sector hiccups on the lack of coordination among players responsible for power administration in the country. However, the committee singled out two of the six privatised GenCos-Geregu Power and Transcorp Power for meeting the performance targets.

This was reinforced by another vote of confidence from the Director-General of the Bureau of Public Enterprise (BPE), Alex Okoh,  who stated, “Geregu Power met its minimum performance target in 2013, whereas the other four GenCos did not for a variety of reasons. It increased its output from 414mw at handover to 435mw.”