Geregu Power suffers decline in profits over weak revenue, hike in finance cost
By Philemon Adedeji
Geregu Power plc in its unaudited nine months ended September 30, 2022 has reported drop in profit amid weak revenue and interest rate on Interest expense on bank loan and Interest expense on medium term bond.
The results showed revenue of N39 billion in nine months of 2022, compared with N54 billion in the corresponding period of 2021.
The decline, according to the company is a result of a nationwide force majeure (FM) declared by Shell Petroleum Development Company Limited on the Forcados oil terminal pipeline, gas supplies to the plant by Its primary gas supplier was largely impacted in the 3rd quarter.
The company however adopted an effective cost-saving strategy that saw administrative costs reduced from N10.9 billion to N2.9 billion in 2022.
Consequently, operating profit stood higher at N16 billion, up from N15.1 billion in the nine months of 2021.
However, an increase in finance cost, largely attributable to the medium term bond of N40.085billion issued by the company in 2022 for its planned acquisition, moderated the Profit Before Tax (PBT) and Profit After Tax (PAT) to N13.9 billion and N10 billion respectively.
Earnings per share recorded for the period dipped by 11.5 per cent to 4.01 Kobo in nine months of 2022 from 4.53 Kobo in nine months of 2021.
The Vice Chairman of Highcap security, David Adonri, said the nine months 2022 turnover of Geregu Power declined massively when compared to nine months of 2021 but profit only declined marginally, indicating that cost effective measures were taken to protect the bottom line, but total assets rose because of the bond they issued.
The company’s audited result and accounts showed an impressive increase in profit, driven by a significant increase in the company’s revenue and cost effectiveness of its operating expenses.
The newly listed energy company on the Nigerian Exchange Limited (NGX) announced its full year ended December 31, 2021 results that revealed about 42.9 per cent and 45.5 per cent increase in Profit Before Tax and Profit After Tax, respectively over 32.2 per cent growth in revenue.
From the profit & loss figures, Geregu Power reported N70.96billion revenue in 2021 from N53.7billion in 2020 as energy sold and capacity charge soar in the period under review.
The breakdown of revenue showed a 31.1 per cent increase in energy sold to N45.7billion in 2021 from N34.84billion in 2020, while capacity charge rose by 34.1 per cent to N25.26billion in 2021 from N18.84billion in 2020.
Revenue in the past five years has witnessed a trajectory growth. Revenue in 2017 was N36.6bbillion but it dropped to N35billion in 2018. However, in 2019, it gained 20.44per cent to N42.16billion.
Revenue from energy sold and capacity charge are measured on monthly basis using the regulated rates in the Multi-year Tariff Order II, 2012-2017 (MYTO II) and the minor rate reviews of the Nigerian Electricity Regulatory Commission (NERC), net of energy and capacity import and the grid Transmission Loss Factor (TLF) of 8.05per cent of energy sent out.
Energy generated in addition to the associated available capacity are sent out through Transmission. Company of Nigeria (TCN) represented by the Operator of the Nigerian Electricity Market (ONEM) also known as the Market Operator (MO).
The Market Operator in turn will issue monthly settlement statements for energy and capacity delivered. The final settlement statements issued by MO are used to invoice the bulk purchaser, the Nigerian Bulk Electricity Trading Plc (NBET).
The energy company reported 22 per cent increase in Cost of Sales (CoS) to N37.6billion in 2021 from N30.84billion in 2020, driven by growth recorded by gas supply and transportation.
Geregu Power grew its Gas supply and transportation by 24.4 per cent to N33.19billion in 2021 from N26.68billion in 2020, while Plant depreciation rose by nearly seven per cent to N4.43billion in 2021 from N4.15billion reported in 2020.
Consequently, the proportion of CoS/Revenue dropped to 53.01 per cent in 2021 from 57.45per cent in 2020.
The interplay between revenue and CoS positioned the company’s gross earnings at N33.34billion in 2021, representing an increase of 46 per cent from N22.84billion reported in 2020.
On this, the gross profit margin closed 2021 at 47 per cent from 43 per cent in 2020.
Non-core business transactions grew by 140.4 per cent to N1.65billion in 2021 and it was impacted by foreign exchange gain realised and Income from disposal of scraps, used oils and gas condensates.
In terms of expenses, Geregu Power reported N5.47billion administrative expenses in 2021, representing an increase of 24 per cent from N4.42billion in 2020. Personnel cost, Directors’ fees and allowances, among others were the contributing factors the Geregu Power increase in administrative expenses in the period under review.
Other hands of expenses showed that Interest expense on bank loan accounted for N959.1million in 2021 from N26.95million in 2020 as finance income closed 2021 at N948.06million in 2021 from N16.43million in 2020.
In all, Profit before income tax stood at N29.5billion in 2021 from N20.65billion in 2020. The company paid a tax expenses of N8.96billion in 2021 from N6.5billion in 2020, to announce profit after tax of N20.55billion in 2021 from N14.13billion in 2020.
Stronger balance sheet
Geregu Power’s total assets closed 2021 at N114.82billion from N123.06billion in 2020.
As non-current assets dropped by 9.2 per cent to N39.99billion in 2021 from N44.02billion in 2020, current assets also dropped by 5.3 per cent to N74.83billion in 2021 from N79.04billion reported in 2020. Total liabilities grew by 19.1 per cent to N54.88billion in 2021 from N46.09 billion in 2020.
In addition to balance sheet is total equity stood at N59.94 billion in 2021 from N76.97 billion in 2020.
Key ratios on an impressive growth
The turnaround growth in profit & loss figures played a critical role in key ratios in the period under review.
Take for instance, the company’s Return on Equity (ROE) moved to 34.3 per cent in 2021 from 18.35 peer cent in 2020, while Return on Assets closed 2021 at 25.7 per cent from 16.78 per cent in 2020. The debt-to-equity ratio moved to 0.92x in 2021 from 0.6x in 2021.
The company was admitted into the main board of the NGX by way of listing by Introduction (LBI) with the admittance of 2.5 billion ordinary shares of 50 kobo each at N100 per share on the Exchange.
The leading power generation company in Nigeria, is the first GenCo to be listed on the NGX Main Board, a listing segment for well-established companies with demonstrable records of accomplishments.
The listing of Geregu’s shares has added N250 billion to the market capitalisation of NGX, further boosting liquidity in the Nigerian capital market and providing opportunities for wealth creation.
They had notified the NGX and the Investing public that the Company has obtained approval to list the N40.09 billion Series 1 Fixed Rate Senior Unsecured Bond on the FMDQ Securities Exchange.
According to a notice signed by Akinleye Olagbende, Company Secretary, “Arising from the foregoing, the Bond will be added on the FMDQ’s daily quotations and Listings Page on the FMDQ Exchange website after which the Bond shall be admitted for trading.”
