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Transcorp Power: From strategic acquisition to billion-dollar valuation

I have closely followed the recent listing of Transcorp Power Plc on the Nigerian Stock Exchange with great interest and immense pride.

The year 2012 was a pivotal moment in my career, as I held the position of President/CEO of Transnational Corporation of Nigeria Plc (Transcorp).

At that time, the privatization of the nation’s power sector was in full swing, with the government selling off its power generation and distribution companies.

Guided by our Board’s directives, I spearheaded a team of skilled and dedicated staff, alongside numerous partner companies—both local and international—to assemble a consortium aimed at acquiring the Ughelli Power Plant (UPP). These were indeed exciting times.

Our efforts involved five months of rigorous data collection, intensive strategic planning, negotiations, meetings, and travel. This exhaustive process ultimately led to our consortium submitting a bid of $300 million for the plant.

Transcorp Plc led the consortium with a 51% stake in what was then known as Transcorp Ughelli Power Limited, which today has been rebranded as Transcorp Power Plc.

The bidding process for the power assets was conducted live on national television, and our bid emerged victorious for UPP. However, that was just the starting point. It took an additional 11 months before we formally assumed management of the plant on a cloudy day in August 2013.

When we took over, UPP was characteristic of a typical government-operated entity. The plant’s output was merely 164MW, significantly below its installed capacity of 972MW. Many of the turbines were in varying states of disrepair, with some even cannibalized for parts to repair others.

We inherited a bloated and ageing workforce, entrenched in outdated operational practices, and minimal accountability. This was evident in the stark disparity between power production revenues and the cost of production. Despite these challenges, we were driven by a vision to establish an integrated power company that would contribute to national development and generate value for our shareholders.

Although I departed from Transcorp in 2014, I have keenly observed its impressive progress under the leadership of Tony O. Elumelu and my successors.

The recent listing of Transcorp Power has cast a spotlight on the significant achievements stemming from the foundations we established nearly a decade ago, simultaneously opening new avenues for potential investors to join in on this success story.

With the company now valued at $1.1 billion, Transcorp and its collaborating entities have generated over $800 million in value within ten years. This remarkable growth is evidenced by the surge in power output from an initial 164MW to a peak of 670MW in 2017, and a current stable capacity of approximately 500MW.

Moreover, the transformation includes a streamlined and skill-enhanced workforce alongside notable improvements in operational efficiency.

A stock market listing serves as a strategic exit route for early backers like Transcorp and its local and international partners, who have collectively contributed to this substantial value creation.

Here’s the fascinating aspect – the Nigerian Stock Exchange (NGX) mandates that listed companies offer 20% or N20 billion (in value) of their shares as free float.

However, the shareholders of Transcorp Power have exceeded this requirement threefold, contributing well beyond the N20 billion mark, amidst a significant overflow of demand from investors eager to partake in the company’s success narrative.

However, the shareholders of Transcorp Power have exceeded this requirement threefold, contributing well beyond the N20 billion mark, amidst a significant overflow of demand from investors eager to partake in the company’s success narrative.

Transcorp Plc’s shareholders are witnessing the fruits of their investment, as Transcorp maintains its majority stake of over 50% in Transcorp Power. Consequently, all the benefits stemming from the growth of Transcorp Power are set to continually flow back to Transcorp shareholders in the form of dividends, ensuring a sustained reward for their investment.

The appreciation in Transcorp Plc’s share price reflects investors’ recognition of the synergy between the market capitalizations of both companies. Moreover, Transcorp Plc’s retention of a majority stake exceeding 50% ensures its continued influence over the operations of the power company, reinforcing a commitment to sustained corporate governance practices and robust profit growth.

Witnessing the realization of our vision to transform Transcorp into a powerhouse in the energy sector fills me with immense satisfaction. This vision was shared with investors during a presentation at the NGX in December 2012.

Today, Transcorp Plc is not only the core investor and majority owner of Transcorp Power Plc but also holds significant stakes in the Abuja Electricity Distribution Company and Afam Power Limited, positioning it as a leading entity in a sector crucial for the nation’s meaningful development.

So, here I am, beaming with pride like a delighted uncle, thrilled to have contributed to this success story. I extend my congratulations to my mentor Tony Elumelu, as well as the Board and staff of the Transcorp Group of companies, for reaching this remarkable milestone.

Obinna Ufudo was the former president of Transcorp Group Plc.

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