Geregu Power, Chaired by Femi Otedola, to Raise N40bn Bonds
GCR Ratings has assigned an indicative long-term Issue rating of A (NG) (IR) to Geregu Power Plc.’s Series 1 Senior, according to its latest ratings note. The rating comes at the heel of a plan by the power company to raise N40 billion from the local debt market.
Geregu Power Plc has filed an application with the Securities and Exchange Commission to issue bonds into the Nigerian capital market under a N100 billion Bond Issuance Programme, according to GCR Ratings.
Acquired in 2013, with generating plants in Ajaokuta, Geregu is one of Nigeria’s leading electricity generation companies (GENCOs) that uses gas turbines as a clean energy source to generate power.
While pulling out investment from Forte Oil, the billionaire investor, Femi Otedola, joined the board of Geregu Power Plc as Chairman of the Board of Directors in November 2013.
In 2019, Otedola made a very strategic decision to sell his majority stake in Forte Oil Plc and invest in developing the power industry in Nigeria through the acquisition of a majority stake in the 435MW Geregu Power Plant, via an investment vehicle called Amperion Power Distribution Company Limited.
The Plant is owned and operated by Amperion Power Distribution Company Limited holding an 80% stake and 20% retained by the Federal Government of Nigeria On the strength of the company’s fundamentals, the emerging market rating agency added that the stable outlook reflects GCR’s view that the issuer’s earnings will materially increase on the back of capacity expansion.
This is expected to result in sustained low gearing metrics as a reasonable level of dividend payment is maintained, according to the rating note.
“The company is in the process of raising an initial N40 billion through the issuance of Series 1 Senior Unsecured Bonds”, GCR stated in the report. It said the Series 1 Bonds shall constitute senior, direct, irrevocable, and unsubordinated obligations of the Issuer.
The bonds shall rank parri passu without any preference among themselves, and with all unsecured and unsubordinated indebtedness and monetary obligations of the Issuer, present and future, but in the event of insolvency, only to the extent permitted by applicable laws relating to creditors right, according to the rating note.
“The indicative long-term Issue rating of A (NG) accorded to Geregu Power Plc.’s N40 billion Series 1 Bonds is underpinned by the fact that the Series 1 Bonds are direct, unconditional, senior, unsecured obligations of Geregu Power Plc, and therefore bear the same default risk as to the Issuer.
“As such, the national scale long term Issue rating of the Bonds will be equalized with the national scale long term Issuer credit rating of Geregu Power Plc”, GCR stated.
The emerging market focused rating agency note stated that the Issuer was recently accorded a long term national scale of A(NG) by GCR, which reflects its position as one of the major power generating companies in Nigeria, with strong revenue progression and conservative leverage position.
However, it said this is balanced against the high levels of receivables due to the general illiquidity in the Nigerian electricity supply industry, and working capital pressures on the back of large dividend upstreaming amid high capital expenditure to debt issue plans. # Geregu Power, Chaired by Femi Otedola, to Raise N40bn Bonds
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