Geregu Power’s steady earnings growth masks margin pressure and liquidity strain amid sector bottlenecks

By Seun Ibiyemi

Geregu Power Plc’s nine-month (9M) 2025 performance reflects a power generation company balancing resilient revenue growth with mounting cost pressures and working-capital challenges within Nigeria’s electricity market.

While higher capacity utilization and improved grid dispatch lifted topline earnings and sustained profitability, rising gas costs, growing receivables, and tighter liquidity continue to temper the outlook.

The results tell a familiar sector story: operational strength remains intact, but structural market inefficiencies are weighing on cash flows and balance-sheet flexibility.

Nigeria’s power sector in 2025 remains constrained by legacy challenges—weak liquidity across the value chain, delayed settlements by market operators, and rising input costs, particularly gas.

Although generation capacity has improved and grid dispatch has become more stable, pricing distortions and payment backlogs continue to limit cash conversion for generation companies.

Against this backdrop, power producers with scale, efficient plants, and strong sponsors such as Geregu have fared better than peers, though none are immune to sector-wide liquidity stress.

Operating performance: capacity utilisation drives revenue

Geregu’s operational performance benefited from higher plant availability and improved grid offtake.

Revenue rose 16.78 per cent year-on-year to ₦131.47 billion, underpinned by stronger energy dispatch and capacity payments.

Energy sales accounted for 65.05 per cent (₦85.52 billion) of turnover, while capacity charges contributed 34.95 per cent (₦45.95 billion), reinforcing the importance of guaranteed capacity revenues in stabilising earnings.

However, operating efficiency gains were partly offset by rising input costs. Total costs increased 35.46 per cent to ₦78.47 billion, largely due to higher gas prices, leading to a 3.02 per cent decline in gross profit to ₦53.00 billion and visible margin compression.

Profitability 

Despite cost escalation, Geregu preserved bottom-line growth. Profit before tax edged up 3.31 per cent to ₦37.46 billion, while profit after tax increased 3.76 per cent to ₦25.10 billion.

Earnings per share rose to ₦10.04 from ₦9.68, reflecting steady shareholder returns.

Yet beneath the surface, financing dynamics are becoming more demanding. 

Finance income fell 19.45 per cent, while finance costs surged 37.38 per cent, mirroring a sharp 77.09 per cent increase in borrowings to ₦24.74 billion. 

This suggests a growing reliance on debt, potentially linked to capacity expansion and working-capital funding.

Balance sheet 

Geregu’s balance sheet expanded meaningfully during the period. 

Total assets rose 23.55 per cent to ₦273.15 billion, driven primarily by a 60.87 per cent jump in trade and other receivables to ₦170.35 billion.

The rise reflects delayed payments from market counterparties, notably the Nigerian Bulk Electricity Trading (NBET) company, and highlights a structural weakness in sector cash flows.

Shareholders’ equity increased 14.33 per cent to ₦56.41 billion, supported by higher retained earnings, indicating internal value creation despite rising leverage.

Liquidity tightens amid cash decline

Liquidity remains a key pressure point. Cash and cash equivalents fell 30.62 per cent to ₦28.10 billion, down from ₦40.50 billion in the prior period, pointing to slower collections and higher funding needs.

The combination of rising receivables, increased borrowing, and lower cash balances underscores a growing working-capital strain that could limit financial flexibility if sector payment issues persist.

Geregu Power’s share price remained largely range-bound over the past year, trading between ₦1,141.50 and ₦1,150.00.

This tight range signals low volatility, strong institutional ownership, and a defensive stock profile. 

A modest downward adjustment in March 2025 was followed by sustained price support, suggesting investor confidence anchored in predictable earnings rather than speculative momentum.

A minor share sale by majority shareholder Femi Otedola in September 2025 marginally reduced his stake to 76.39 per cent, but control remains firmly intact, easing concerns about strategic disengagement.

Outlook

Geregu Power Plc delivered a balanced but cautious 9M 2025 performance. Revenue growth and stable profitability reaffirm its position as a leading player in Nigeria’s power generation space.

However, margin compression, rising leverage, swelling receivables, and declining cash reserves pose material risks to long-term sustainability.

To maintain investor confidence and unlock further value, the company must improve receivables collection, manage gas-cost exposure, and contain leverage growth.

Until sector liquidity challenges ease, Geregu is likely to remain a fundamentally solid but cash-constrained utility appealing to investors seeking stability, yet constrained by systemic inefficiencies beyond its control.