Geregu Power’s N40.09bn Bond Not Originated by Current Owners – Lawyer

A Legal Practioner, Fanan Akya, says Geregu Power Plc’s N40.09 billion Series 1 Senior Unsecured Bond was issued before the company came under its current ownership.

Akya, in a statement on the controversy surrounding the bond, cautioned against attributing the origin of the debt directly to the present owners of the power-generating company.

He said the bond was issued on July 28, 2022, under Geregu Power’s N100 billion debt issuance programme, before the company’s current ownership structure came into place.

According to him, reports on the bond could create a misleading impression that the present owners originated the borrowing or that any reported difficulty in servicing the bond automatically indicated financial distress under the current ownership.

Akya explained that a company remains a separate legal entity from its shareholders, stressing that a change in ownership does not necessarily make incoming shareholders personally responsible for existing corporate liabilities.

He said existing liabilities are ordinarily considered during a change of ownership, subject to the terms of transaction agreements, including representations, warranties and indemnities.

 the key issues that should be examined include when the bond was issued, who controlled the company at the time, the purpose for which the funds were raised, the liabilities existing when ownership changed and whether the incoming shareholders assumed any personal responsibility for the debt.

Akya acknowledged that any failure by Geregu Power to meet scheduled bond payments would be a matter of concern to investors and regulators.

However, he maintained that the payment status of the bond should be distinguished from the question of who originally incurred the debt.

He also attributed part of the company’s recent financial performance to its N61.47 billion major turbine maintenance programme.

Akya said the reported decline in Geregu Power’s revenue and profit in the first half of 2026 should be assessed alongside the operational impact of the turbine overhaul.

He explained that major maintenance of power-generation equipment could temporarily reduce electricity output and revenue, without necessarily indicating financial mismanagement or permanent weakness in the underlying business.

According to him, the more important considerations are whether the maintenance programme will be completed successfully, generating capacity will recover and the company will subsequently restore its revenue and cash flows.

Akya also cited Geregu Power’s reported credit rating, noting that GCR Ratings had maintained the company’s national-scale long-term issuer rating at A(NG), with a Stable outlook.

He said the rating did not support a simplistic conclusion that the company had suffered an irreversible financial collapse.

He acknowledged the reported 88 per cent decline in profit after tax and 78.71 per cent fall in revenue, but said the figures should be considered alongside other financial information and the circumstances surrounding the turbine overhaul.

He also cautioned against using the company’s share-price decline as sole evidence of financial distress, noting that its share price reportedly fell from N1,141.50 at the beginning of the year to N825.70 on August 7, representing a 27.67 per cent decline.

Akya said share-price movements could be influenced by several factors, including market sentiment, liquidity and investor expectations, and could not by themselves establish the cause of a company’s financial or operational challenges.

He urged investors and regulators to assess Geregu Power’s position using its audited financial statements, regulatory disclosures, transaction documents, bond obligations and progress on the turbine maintenance programme.

Akya maintained that scrutiny of listed companies was necessary, but said it should be based on complete and verifiable corporate and financial records.

He stressed that historical corporate obligations, current operational challenges and the personal responsibilities of shareholders should be clearly distinguished when reporting on the company.

The Legal Practioner therefore called for accurate presentation of the history of Geregu Power’s bond, saying the N40.09 billion obligation predates the company’s current ownership arrangement.