Geregu’s bond default triggers intense market scrutiny

…financials, ratings under spotlight

Nigeria’s corporate debt market has been rocked by an unexpected shock. Geregu Power Plc – one of the country’s premier listed electricity generators – defaulted on its N40.09 billion Series 1 Senior Unsecured Bond.

The missed coupon payment and scheduled principal repayment, flagged by the FMDQ Securities Exchange, mark a rare corporate default of this magnitude in seven years.

Coming hot on the heels of a sharp contraction in the company’s mid-year financials – including a steep drop in revenue and profit – this development has instantly pierced the market’s confidence.

The power generation giant recently pushed its balance sheet to the absolute limit, choosing to aggressively drain its cash reserves in its 2025 financial year to maintain a massive N22.5 billion dividend payout to shareholders despite a squeeze on its bottom line.

Surprisingly, at the company’s annual general meeting held in Abuja on Tuesday June 30, the Abdul-Aziz Abubakar Yari-led Board of Directors of Geregu Power Plc got shareholders approval to pay this massive dividend.

Geregu has 2.5 billion shares outstanding each trading at a 52-week low of N825.7 as against a 52-week high of N1,019.3. Yari, the current chairman of Geregu Power indirectly holds 1.921billion shares which implies that he got over N17 billion as dividend payout drawn from the company’s cash reserves.

While a marginal dip in net profit—from N27.43 billion in 2024 to N27.25 billion in 2025 —would typically prompt a conservative approach to capital preservation under Nigeria’s high-inflation macroeconomic climate, the utility firm defied the headwinds by committing to an audacious 82.5 percent payout ratio.

Like the bond holders, investors in the shares of Geregu Power have recorded capital loss of N315.80 per share or negative return of 27.67 percent since January 7. At N1,141.5 per share as at Wednesday January 7, Geregu Power Plc’s 2.5 billion shares outstanding were valued at about N2.85 trillion, but the same shares outstanding are valued at N2.064 trillion as they exchanged at N825.7 per share, according to August 10 trading data.

Agusto & Co. affirmed the “A-” (long-term) and “A1” (short-term) ratings it assigned to Geregu Power Plc, with a stable outlook. Agusto & Co said the ratings expire on June 30, 2027.

“The ratings reflect GPP’s strong earnings profile under the MYTO-II tariff framework with USD-indexed gas cost pass-through; resilient operating cash flow supported by the industry-standard proportional gas-settlement arrangement with gas suppliers; the full availability of GT12 and GT13 following their overhauls; the prospect of materially improved liquidity from the expected Nigerian Bulk Electricity Trading (NBET) settlement; and GPP’s strategic importance as a contributor of approximately 10 percent of Nigeria’s available grid capacity.

“The ratings are constrained by rising leverage, a high dividend payout that pressures liquidity and uncertainties linked to the ownership and governance transition following the acquisition by MA’AM Energy Limited,” Agusto & Co said.

Just recently, on July 30, GCR Ratings (GCR) affirmed Geregu Power Plc’s national scale long-term and short-term issuer ratings of A(NG) and A1(NG), respectively.

Concurrently, GCR affirmed the national scale long-term issue rating of A(NG) accorded to Geregu Power Plc’s N40 billion Series 1 bond. GCR Ratings revised Geregu’s outlook to stable, from positive which had been assigned previously in July 2025.

Geregu’s corporate bond default lays bare the underlying liquidity vulnerabilities plaguing Nigeria’s power sector and forces a harsh, analytical spotlight onto Geregu’s recent capital allocation strategies, cash-generating capacity, and operational health.

Based on Geregu Power Plc’s H1 2026 financials, the company faced severe short-term cash flow constraints that made meeting its immediate obligations difficult without external liquidity or restructuring.

The company’s half-year (H1) to June 30, 2026 financial highlights show revenue plunged by 78.70 percent (nearly N69 billion) to N18.66 billion, down from N87.63 billion in H1 2025. Gross Profit of N6.93 billion in H1’26 was down from N35.75 billion in H1 2025, representing 80.62 percent decline.

Geregu Power Plc is a 435MW gas-fired power generation company in Kogi State, operating three Siemens SGT5-2000E simple-cycle gas turbines of 145MW each selling all generated electricity to Nigerian Bulk Electricity Trading (NBET) under a long-term Power Purchase Agreement (PPA).

The overhauls of GT12 and GT13 were completed in August 2024 and March 2025 respectively, while GT11 was taken out of service in Q1 2026 following a transformer fault and is undergoing repairs; the unit’s major overhaul remains on schedule to commence in November 2026 in line with Equivalent Operating Hours (EOH)1 thresholds.

In December 2025, MA’AM Energy Limited became the new controlling shareholder of GPP through the acquisition of a 95 percent equity interest in Amperion Power Distribution Company Limited, GPP’s majority shareholder. MA’AM Energy Limited is an Abuja-based integrated energy company engaged in electricity generation, supply, trading and marketing, owned in equal 25 percent stakes by Abdulkarim Tsafe, Jari Jafar, Abdulaziz Yari and Abdulaziz Ahmad.

The half-year 2026 numbers confirm that the company lacked the liquid reserves to meet the bond terms independently during the height of its plant overhaul.

Geregu’s operating profit of N8.48 billion in H1’26 was down from N29.69 billion in H1 2025, representing as decrease by 71.45 percent. Profit Before Tax (PBT) of N3.57 billion was down by 86.49 percent, from N26.41 billion in H1 2025. Profit After Tax (PAT) of N2.50 billion was down by 87.65 percent from N20.28 billion in H1 2025. (BusinessDay)