On Monday, January 19, Geregu Power Plc once again lived up to its reputation as the first listed company to publish audited financial results on the Nigerian Exchange. However, unlike previous years, the numbers tell a far less comforting story.
The company’s 2025 audited accounts reveal a business grappling with thinner margins, weaker cash generation, and rising working capital pressure. Yet, against this backdrop, Geregu Power has proposed a N9 per share dividend, translating to a total payout of N22.5 billion. This represents a 6 percent increase from the N21.5 billion paid for the 2024 financial year.
For analysts and investors, the question is no longer about dividend generosity. It is about sustainability.
A closer look at Geregu Power’s cash flow statement suggests that the proposed payout is not supported by underlying cash generation. Net cash from operating activities for 2025 stood at N19.6 billion, while free cash flow declined to N18.2 billion. Both figures fall well short of the N22.5 billion earmarked for dividends.
This mismatch implies that the company may need to either draw down cash reserves or resort to additional borrowing to fund shareholder returns. This is a move that would materially weaken balance sheet resilience at a time when operating risks are rising.
Indeed, Geregu Power’s cash position already shows signs of strain. Cash and cash equivalents declined by N13.5 billion year-on-year. This underscores the pressure from working capital demands and weaker cash conversion. In effect, the company appears to be stretching its balance sheet to sustain a dividend policy that no longer aligns with operational reality.
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What makes the situation more striking is that the proposed dividend increase comes on the back of what can reasonably be described as Geregu Power’s weakest financial performance since its listing.
Revenue rises, margins and cash flows weaken
While revenue rose sharply, profitability failed to keep pace. The company reported N184.9 billion in revenue for 2025, a 35 percent increase from N137.1 billion in 2024. Gross profit also improved, rising 18 percent to N74.2 billion from N62.7 billion.
However, margins told a different story. Gross margin declined from 46 percent in 2024 to 40 percent in 2025, reflecting higher gas supply costs and elevated operational expenses. The company acknowledged that major overhaul costs also weighed on cost of sales during the year.
At the bottom line, Geregu Power posted a net profit of N27.3 billion, marginally lower than the N27.4 billion recorded in 2024. While the decline appears modest in absolute terms, it signals a more concerning trend beneath the surface. Net profit margin fell sharply, from 20 percent in 2024 to 15 percent in 2025, pointing to sustained margin compression.
Cash flow performance reinforced this deterioration. Cash generated from operations declined by 33 percent to N21 billion, down from N31.3 billion in the prior year. This weakening occurred despite a surge in revenue and was compounded by a sharp rise in credit sales, which increased by N89.9 billion during the year.
The strain is evident in the company’s payables position. Geregu Power’s debt to gas suppliers ballooned to N122.9 billion in 2025, up from N80.9 billion at the start of the year. This suggests that revenue growth is increasingly being funded through supplier credit rather than cash inflows, a red flag for a capital-intensive power generation business.
Against this backdrop, the decision to raise dividends appears misaligned with financial realities. While higher payouts may excite income-focused shareholders in the short term, they raise uncomfortable questions about capital discipline and long-term value creation.
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Balance sheet strain deepens after Otedola’s exit
The timing also invites scrutiny. The dividend decision follows the exit of founder and billionaire investor Femi Otedola, who sold his stake in Geregu Power for an estimated $750 million. While there is no evidence of causality, the optics are difficult to ignore: a weakening cash profile, rising liabilities, and a more aggressive dividend stance post-exit.
For the new majority shareholder, Abdulaziz Abubakar Yari, the proposed dividend raises additional concerns. With a 77 percent stake, Yari would receive about N17.3 billion of the N22.5 billion payout.
To some analysts, this signals a cash extraction at a time when the business is already under strain. They argue that a capital injection, rather than a withdrawal, would better support operations and strengthen the balance sheet.
Ultimately, Geregu Power’s 2025 results highlight a growing tension between shareholder distributions and financial sustainability. Without a rebound in operating cash flows or a reduction in working capital pressures, maintaining elevated dividends could prove unsustainable. It would likely come at the cost of higher leverage and increased balance sheet risk.
For investors, the numbers suggest that the dividend story may now be running ahead of the fundamentals.