Geregu Power Plc, Nigeria’s first publicly listed power generation company, has released its financial results for the first nine months of 2024, showcasing a remarkable growth trajectory.
The company reported that pre-tax profits surged to N36.2 billion, nearly doubling the N18.1 billion recorded in the corresponding period of 2023.
This performance signals the company’s ability to maintain profitability, even amid significant operational constraints.
A deeper dive into the company’s financials reveals an impressive revenue increase of 102 per cent year-on-year, amounting to N112.5 billion.
The third quarter alone saw revenue grow to N31.9 billion, compared to N27 billion in the third quarter of 2023.
Key revenue drivers included energy sales, contributing N71.4 billion, and capacity charges, which brought in N41.1 billion.
Despite facing inflationary pressures and rising costs, Geregu Power maintained robust gross margins of over 41 per cent, slightly below its historical average of 50 per cent.
The company projects pre-tax profits of N16.8 billion for the fourth quarter of 2024, which would push full-year pre-tax profits to an estimated N53 billion, representing a 118 per cent year-on-year growth.
This growth potential remains despite Geregu Power currently operating at 50 per cent capacity due to grid limitations and market challenges.
Geregu’s performance is buoyed by positive developments within Nigeria’s power sector. Government reforms, including restructuring efforts at the Transmission Company of Nigeria (TCN) and increased private sector participation, have improved the operating environment for generation companies.
The Nigerian Electricity Regulatory Commission’s (NERC) approval of higher tariffs in 2023 has also boosted profitability, aligning costs with revenues. However, the likelihood of further tariff increases in 2024 has diminished due to political considerations.
Looking ahead, ongoing investments in grid infrastructure and the privatization of critical power assets are expected to further strengthen Geregu Power’s operations, allowing the company to unlock additional capacity.
Investor confidence in Geregu Power’s growth prospects is evident in its share price, which has surged by 188 per cent year-to-date, placing its price-to-earnings (P/E) ratio at 102x.
Although the company’s high P/E growth (PEG) ratio suggests overvaluation based on current earnings, its compounded annual growth rate (CAGR) of 23 per cent and potential for profit expansion continue to attract investors.
There are indications that Geregu Power is exploring acquisitions to increase capacity and revenue, which could further fuel its impressive earnings growth.
The company’s ability to double profits while operating at only half capacity underscores its significant future potential.
A consistent dividend payer, Geregu Power has maintained an average payout ratio exceeding 100 per cent over the last three years. With its strong 2024 performance, the company remains a favorite for income-focused investors.