Geregu Power Plc Q3 - Sustained Profitability Amid Liquidity Tightness and Sector Headwinds

Geregu Power Plc delivered another period of solid earnings performance in 9M 2025, maintaining strong profitability and robust operating margins despite rising costs and working capital pressures. Revenue increased 17% YoY to ₦131.5 billion, reflecting higher energy generation and improved operational efficiency. However, cash flow constraints driven by receivable build-up and debt repayments remain a critical watchpoint.

Geregu continues to showcase resilience in Nigeria’s challenging power sector, leveraging its efficient plant operations and disciplined cost structure to sustain profitability. The company’s long-term fundamentals are underpinned by its dominant market share, strong asset base, and growing investor confidence following its successful public listing.

That said, short-term risks linked to liquidity strain, sectoral receivable bottlenecks, and rising finance costs could limit near-term valuation upside.

Financial Performance Overview

Revenue and Gross Profit

Revenue rose to ₦131.47 billion (9M 2024: ₦112.58 billion), driven by increased energy output from the Geregu I and II plants and improved dispatch levels. Cost of sales climbed 35% YoY to ₦78.47 billion, reflecting higher gas costs and maintenance expenses. Consequently, gross profit expanded to ₦53.0 billion, though the gross margin moderated slightly to 40.3% (from 48.5% in 9M 2024) as cost inflation offset revenue gains.

Operating Profit

Administrative expenses and impairment charges rose moderately, reflecting inflationary effects and prudential provisioning on receivables. Despite this, Geregu reported an operating profit of ₦42.23 billion, up marginally from ₦42.0 billion in 2024, highlighting operational efficiency.

Operating margin stood at 32.1%, underscoring management’s cost discipline and ability to maintain profitability even amid sector inefficiencies.

Earnings and Profitability

Finance income dropped to ₦5.30 billion (9M 2024: ₦6.58 billion) due to lower yields on cash placements, while finance costs rose to ₦10.07 billion, driven by higher interest rates and bond obligations.

Nevertheless, Geregu maintained strong profitability, posting a Profit Before Tax (PBT) of ₦37.46 billion, marginally up from ₦36.26 billion in the prior year. After accounting for tax expense of ₦12.36 billion, Profit After Tax (PAT) came in at ₦25.10 billion, representing 3.8% YoY growth.

Earnings per share (EPS) rose to ₦10.04 from ₦9.68 in 9M 2024, affirming consistent shareholder returns.

Balance Sheet Strength and Capital Structure

Geregu maintains a strong asset base totaling ₦243.47 billion (vs ₦273.15 billion as of Dec 2024), reflecting efficient capital allocation and modest leverage.

• Total equity increased to ₦56.41 billion from ₦52.56 billion, driven by retained earnings growth.
• Borrowings and bond liabilities declined to ₦57.7 billion from ₦65.1 billion, demonstrating proactive debt repayment.
• However, trade and other payables surged to ₦119.7 billion, reflecting deferred payments to suppliers and unsettled transmission obligations within the sector.

Current ratio stood at 1.14x, slightly lower than FY2024 (1.19x), indicating tighter short-term liquidity conditions.

Cash Flow Performance

Operating Cash Flow

Operating cash generation remained positive at ₦24.38 billion, although it declined from ₦31.57 billion in 2024, largely due to a ₦53.22 billion increase in trade receivables — a recurring issue across Nigeria’s power sector due to delays in NBET payments.

Investing and Financing Activities

Geregu maintained disciplined capital expenditure, investing only ₦1.17 billion in plant and equipment, reflecting a conservative reinvestment approach. Interest income (₦4.34 billion) supported net cash from investing activities of ₦3.13 billion.

Conversely, significant cash outflows were recorded in financing activities — ₦39.33 billion — due to ₦21.25 billion in dividend payments, loan repayments, and bond redemptions.

Net cash and equivalents declined to ₦28.10 billion from ₦39.94 billion as of December 2024, reinforcing the need for tighter liquidity management.

Strengths

1. Resilient Profitability: Consistent double-digit profit margins despite rising costs.
2. Strong Operational Efficiency: Sustained generation uptime and disciplined expense control.
3. Reduced Debt Burden: Ongoing deleveraging enhances financial flexibility.
4. Attractive Dividend Policy: Regular payouts reinforce investor confidence.
5. Efficient Asset Base: Low CapEx intensity supports cash retention.

Weaknesses / Risks

1. Liquidity Pressure: High receivables and sector payment delays strain working capital.
2. Gas Supply Dependence: Fuel cost volatility poses recurring margin risk.
3. Interest Rate Sensitivity: Elevated borrowing costs affect net interest income.
4. Regulatory Risk: Dependence on NBET and policy reforms within the power sector.
5. Declining Cash Balance: Persistent financing outflows may tighten liquidity further.

Strategic Outlook

Looking ahead, Geregu’s outlook remains fundamentally stable, supported by:

• Consistent dispatch performance from its 435MW Geregu I plant.
• Ongoing efficiency improvements through technology and maintenance optimization.
• Strong backing from key shareholders and credible corporate governance.

Medium-term growth could stem from expansion projects or renewable diversification, although current sector liquidity challenges may delay aggressive capital deployment.

Management’s focus on receivable recovery and cash flow optimization will be key to sustaining dividend policy and balance sheet strength into FY2026.