First GENCO on the NGX
Geregu Power PLC gets listed on the Nigerian Stock Exchange
Last week we had a newcomer on the Nigerian Stock Exchange (NGX), GERGU Power PLC.
Geregu Power PLC is a power generation company (GENCO) which was acquired in 2013 by Amperion Power Distribution LTD. The company generates power and sells to the Nigerian Bulk Electricity Trading (NBET) who then sells to power distribution companies (DISCOs) in Nigeria. Geregu Power PLC had a 32.3% y-o-y revenue growth in 2021 and an after-tax profit increase of 45.2% to the tune of 70.9 billion naira and 20.5 billion naira, respectively. The company has shown continuous improved growth since its acquisition in 2013 despite liquidity challenges in the industry.
The company’s decision to direct list (not to be confused with an IPO) its 2.5 billion shares on the stock exchange was to promote better liquidity and give the company visibility to local and global investors. This listing would also provide an avenue for long term capital for the business from investors. The shares were listed at 100 naira resulting in a market capitalization of 250 billion naira. After the listing, the shares closed last week at 120.9 naira raising the market cap to 302 billion naira.
Major risks that may affect investor confidence post listing excitement include but are not limited to foreign exchange volatility since it heavily relies on gas supply and pays for them in US Dollars and macroeconomic conditions like inflation and interest rate as well as the probability of NBET defaulting payments.
The listing is a good sign for the energy generation industry and would serve to raise cash for the sector plagued with a liquidity crisis, the listing would also increase transparency, improve operations and with the right set of policies, increase investments in the sector. However, it still remains that two of the biggest challenges facing the industry which are the wheeling capacity (the capacity to transmit energy) of the national gird and the reparation of funds to GENCOs for energy supplies would need to be addressed to unlock the true potential of the sector.