HARRISON EDEH

Geregu Power Plc’s latest financial statements show that its recent bond default is not simply a case of weak cash generation.

Instead, the company’s debt obligations are coming under pressure from a front-loaded maturity profile, heavy dependence on collections from customers and a narrow accounting cover for finance costs.

The company’s unaudited results for the six months ended June 30, 2026, reviewed by the Advocate Times, show that Geregu generated ₦85.58 billion in net cash from operating activities, more than enough to cover the ₦10.37 billion it spent on interest and principal repayments during the period.

However, the company’s liquidity position remains tight, with ₦48.67 billion in obligations due within the next year and ₦38.04 billion of contractual cash flows due within six months or less.

The figures provide a more complex picture of Geregu’s financial position as the company engages stakeholders following its default on the eighth coupon payment and fourth principal repayment of its ₦40.09 billion Series 1 senior unsecured bond.

Strong cash flow masks a tighter debt position

Geregu’s operating cash flow improved sharply in the first half, reaching ₦85.58 billion.

This was more than eight times the ₦10.37 billion spent on debt servicing, comprising ₦3.58 billion in interest and ₦6.79 billion in principal repayments.

However, the strength of the cash flow was largely linked to working capital movements rather than profit. Profit after tax stood at only ₦2.50 billion, while the company recorded a ₦135.34 billion reduction in trade and other receivables.

This means the strong cash generation was supported significantly by the collection of previously unpaid bills, making the sustainability of the cash position an important issue for the company as it faces upcoming obligations.

Geregu had ₦65.59 billion in cash and cash equivalents at June 30, compared with total current liabilities of ₦179.82 billion. Of this, ₦96.40 billion was trade and other payables, including ₦80.31 billion owed for gas.

Debt maturities are becoming more concentrated

Geregu’s total borrowings increased from ₦33.94 billion at the end of 2025 to ₦36.24 billion by June 2026, despite repayments during the period.

The company’s bond payable fell from ₦34.15 billion to ₦29.86 billion after principal repayments. But ₦10.99 billion of the bond is classified as a current liability, meaning it is due within the next 12 months.

The remaining contractual cash flows on the bond amount to ₦36.28 billion, including interest. About ₦5.81 billion is due within six months, while another ₦7.30 billion is due between six and 12 months.

The pressure is not limited to the bond. Geregu has ₦48.67 billion in borrowings, bonds and other obligations due within one year, against only ₦25.18 billion classified as non-current.

Finance costs leave little room for error

The company’s earnings also show limited protection against rising financing obligations. Finance costs increased to ₦7.41 billion in H1 2026 from ₦6.81 billion a year earlier, while operating profit stood at ₦8.48 billion.

That gives an operating profit-to-finance-cost ratio of just 1.14 times. Although cash generation was considerably stronger, the narrow accounting coverage indicates that the company has little room for a significant deterioration in operating earnings.

The company also recorded a ₦3 billion interest expense on a discounted NBET bond, which offset the reduction in interest expense on its borrowings.

Geregu begins review as rating is withdrawn

The debt concerns have been compounded by uncertainty over the company’s financial reporting.

Agusto & Co withdrew Geregu’s ‘A’ rating following the bond default and management’s decision to subject previously issued financial statements to independent verification.

The rating agency said it no longer had “sufficient reliable information” to maintain its credit opinion, adding that Geregu’s management had informed it that previously issued financial statements were undergoing independent verification.

“Pending completion of this review, Agusto & Co is unable to rely on the current audited financial statements and, therefore, cannot provide an opinion regarding the Company’s creditworthiness,” the agency stated.

Geregu, in its August 12 statement, said its current board and management had undertaken a comprehensive review of its transactions, liabilities, operational commitments, financing arrangements and financial obligations.

The company said it was engaging relevant stakeholders and advisers to resolve the challenges.

“Discussions and engagements are ongoing, and the Company will continue to act in good faith in fulfilling its responsibilities,” Geregu said.

The immediate challenge is liquidity, not just debt

The financial statements suggest that Geregu’s immediate challenge is managing the timing of cash inflows against a concentrated schedule of debt and other obligations.

The company has demonstrated the ability to generate significant operating cash, but much of its financial strength depends on collecting receivables.

With ₦106.89 billion in net trade and other receivables at June 30, including ₦59.50 billion that was six to 12 months old and another ₦10.08 billion older than 12 months, the quality and timing of those collections remain critical.

At the same time, all receivables accounts are domiciled with First Bank as collateral for a term loan, further linking the company’s working capital to its financing arrangements.

The bond covenant also restricts Geregu from paying dividends while obligations to bondholders remain outstanding.

For investors, therefore, the key issue is whether Geregu can convert its receivables into sustainable cash generation while meeting its front-loaded debt obligations.

The company’s strong H1 operating cash flow offers some support, but the bond default and rating withdrawal show that liquidity alone has not eliminated the financial pressure facing the power producer.