Billionaire businessman Femi Otedola has finalized a significant deal, selling his controlling interest in Geregu Power Plc for approximately $750 million. This strategic divestment marks a major shift in his investment portfolio, moving away from the energy sector after successfully listing the company on the Nigerian Exchange in October 2022. The transaction saw Otedola, who previously held a majority stake of 95.5 percent through Calvados Global Services and Amperion Power Distribution Company, offload a substantial portion of his shares.
Industry insiders report that the deal was facilitated by a consortium of lenders, with Zenith Bank leading the group, and BlackBirch Capital serving as the financial advisor. This move signifies a calculated exit from a key player in Nigeria’s electricity generation landscape. While Otedola’s direct involvement in Geregu Power is now significantly reduced, the company itself continues to demonstrate financial resilience.
Geregu Power reported a net profit of N25.1 billion for the first nine months of the year, reflecting a 3.8 percent increase. Its revenue has also seen growth, even amidst rising cost of sales, indicating operational strength. The company’s total assets have reached N273.1 billion, showcasing a remarkable 60 percent expansion in the three years since its listing.
What is Geregu Power? Geregu Power Plc is an electricity generation company located in Ajaokuta, Kogi State, Nigeria. It was established in November 2006 and became operational in February 2007. The company was one of five thermal generation entities formed from the unbundling of the Power Holding Company of Nigeria (PHCN) during the privatization of the power sector.
The sale of Otedola’s stake, representing about 1.9 billion units or 75.8 percent of the company’s total issued shares, has generated considerable interest. Strategic investors, including Afreximbank’s Fund for Export Development in Africa and the State Grid Corporation of China, had previously acquired stakes, gradually reducing Otedola’s initial majority holding. His stake had decreased to 76.4 percent by September, with further offloading of 14.5 million shares through Amperion prior to this major transaction.
This divestment is not just about selling an asset; it’s about a strategic pivot. Sources close to Otedola indicate his intention to reinvest significantly in the financial sector, where he already holds a substantial stake in First HoldCo Plc. This focus on financial services signals a new chapter in his investment journey.
How to understand Femi Otedola’s investment strategy? Otedola’s approach appears to be a blend of identifying undervalued assets, driving their growth and value, and then strategically exiting to capitalize on profits and reinvest in emerging opportunities. His success with Geregu Power, from acquisition to a multi-million dollar sale, exemplifies this pattern.
The Geregu Power plant itself has a history tied to Nigeria’s power sector reforms. Acquired by Amperion in November 2013 for N20.5 billion, it has since been a significant contributor to the national grid. Its operational status and financial performance are crucial indicators of the broader health of Nigeria’s power generation infrastructure.
Why is Femi Otedola’s $750 million deal significant? This deal is significant not only for its sheer value but also for the signal it sends about investor confidence in Nigeria’s power sector and Otedola’s ability to create and realize value. It also highlights the evolving landscape of major business ownership in the country.
For those interested in the Nigerian stock market, understanding such large-scale transactions provides valuable insights into market dynamics and investment trends. The future performance of Geregu Power without Otedola’s majority control will be closely watched by market participants.
What are the implications for the Nigerian financial sector? Otedola’s stated intention to increase his investments in finance suggests a potential influx of capital and strategic expertise into this sector. This could lead to increased competition and innovation, benefiting the broader economy.
Is Geregu Power still a good investment? The company’s consistent profitability and asset growth, as evidenced by its financial reports, suggest it remains a robust entity. However, prospective investors should conduct thorough due diligence, considering the change in majority ownership and future strategic direction.
This transaction is a testament to Otedola’s business acumen and his ability to navigate complex deals. The $750 million sale of Geregu Power is a landmark event in Nigerian corporate finance, underscoring the potential for significant returns in well-managed infrastructure assets.
