I salute the team behind Geregu, they have accomplished an uncommon feat in the Nigerian capital market: “Geregu Power Plc, a major player in Nigeria’s electricity generation sector, continues to capture investor confidence, driving its market capitalization to an impressive N2.8 trillion in September 2024.” I mean, this was largely a dead asset, and just like that, it has a value close to N3 trillion.

In business and politics, leadership matters. Geregu has unlocked value for investors, with no excuses, that in the broken current Nigeria, alpha moments exist. Who knows…this could become the magic Nigeria needs to fix its electricity paralysis. I wish the team more wins.

Yes, take action, and do not just complain. Dangote has cement, Innoson has local cars, BUA has food, Ndubuisi has tech startups, …Geregu can take power; healthcare, roads, security, etc remain. #build.

From LinkedIn

Question: Is Geregu a Dead Asset?

My Response: Buying new computers for a primary school with poor teachers does not make it high performing. The Geregu Power Plant was constructed by the Federal Government of Nigeria and commissioned into service on the 16th February 2007 . It was nothing but dead until a new management came. In two years, that firm has appreciated from N250B to close to N3 trillion.  But before it got to the market, it was dead and worth nothing up to N50B. If you know what it means to unlock that kind of value, you will understand my thesis. Where have we ever experienced such in Nigeria?

Geregu Power Hits N2.8tn in Market Cap

Geregu Power Plc, a major player in Nigeria’s electricity generation sector, continues to capture investor confidence, driving its market capitalization to an impressive N2.8 trillion in September 2024.

This milestone highlights the company’s upward trajectory, underlining its domineering growth in the Nigerian energy market and reflecting strong bullish sentiment among investors.

Since the beginning of 2024, Geregu Power’s stock has been on a remarkable upward trend, with its market capitalization crossing the N1 trillion mark as early as January 15, 2024. This achievement was propelled by a 7.52% rise in its share price, marking the company’s entry into the prestigious “SWOOT” (Stocks Worth Over One Trillion) club.

Although it experienced a period of stagnation from April to August, Geregu Power’s stock regained momentum in September, posting a 7.7% increase in market cap, which ultimately reached N2.8 trillion.

Share Price Performance

Since its listing on the Nigerian Exchange in October 2022, Geregu Power’s stock has seen a stunning appreciation, driven by positive market sentiment and the company’s robust financial performance. By September 2024, the company’s stock had soared by over 700% from its initial trading price.

The year 2024 we witnessed some of the most significant price hikes for Geregu Power. In February, the share price surged 72%, jumping from N568 to N977, with a market volume of 17 million shares. Although the stock experienced a quieter phase between April and August, market activity picked up in September, with a 15% gain by the third week and 2.5 million shares traded.

Key Drivers of Investor Confidence

One of the most significant catalysts for Geregu Power’s strong market performance is its strategic partnership with Siemens Energy. The two companies signed a Memorandum of Understanding (MoU) in Berlin on May 29, 2024, aimed at expanding the capacity of the Geregu 1 power plant.

This partnership is designed to boost the plant’s operational capacity, ensuring more sustainable and efficient power generation. This partnership positions Geregu as a key player in driving Nigeria’s power infrastructure development forward.

This strategic collaboration has been noted as a major contributor to Geregu Power’s stellar financial performance. The company reported an impressive pre-tax profit of N30.2 billion for the first half of 2024, a 145% increase from the N12.3 billion recorded during the same period in 2023. Despite this remarkable growth, the market did not immediately react to the company’s positive results. However, by September, investor sentiment turned bullish again, pushing the stock up by 15%, with 2.5 million shares changing hands.

At Geregu Power’s 12th Annual General Meeting, Chairman Femi Otedola expressed optimism about the company’s future, emphasizing its focus on aligning with global energy trends.

He stated, “In 2024, Geregu Power aims to align our business operations with the global trend towards affordable, clean, and efficient energy systems.” This vision, combined with the company’s strategic moves, is believed to have further fueled investor confidence in Geregu’s long-term potential.

Another factor bolstering investor confidence is the company’s commitment to its shareholders. Geregu Power’s dividend policy has been praised by market participants for its generosity.

Patrick Ajudua, President of the New Dimension Shareholders Association, lauded the company’s decision to pay dividends above its earnings per share (EPS). He highlighted that despite an EPS of N6.25, the company will pay N8.00 as a dividend, demonstrating its commitment to rewarding shareholders.

Looking ahead, Geregu Power’s recent earnings forecast for Q4 2024 projects revenue of N61.46 billion, a 103% increase from Q2 2024. Additionally, the company anticipates a pre-tax profit of N11.07 billion, up from N8.25 billion recorded in Q2.

A Bright Future in Nigeria’s Energy Sector

With ongoing challenges in the country’s electricity generation and distribution, Geregu Power’s expansion plans and strategic partnerships with global players like Siemens put the company in a strong position to help bridge Nigeria’s energy gap. This means, that as the government looks to improve power supply and attract investments into the sector, the company’s leadership role is becoming increasingly critical.

Energy experts have noted that Geregu Power’s strategic initiatives, including its capacity expansion and commitment to delivering shareholder value, will likely keep it at the forefront of Nigeria’s energy transformation.

HP acquired Compaq, a largely IP-less company, and in the process ran itself down the drain. General Electric (GE) spun out GE Capital,  the company’s one oasis,  and  the nucleus of its large ticket business, and in the process lost its mission. Yes, GE failed to understand that some of the reasons people bought those turbines and machines were partly because GE Capital was funding the acquisition. But when GE Capital was out of the conversation, the core business of GE dried up; I wrote against the spinoff before it was concluded.

Now, we’re reading that Qualcomm was going after Intel: “Qualcomm recently made a move toward acquiring struggling chipmaker Intel, sources cited by CNBC confirmed, marking a potential mega-deal in the technology industry. This news, initially reported by the Wall Street Journal, caused Intel’s shares to jump by 3%, while Qualcomm’s stock fell by a similar margin. If this deal were to materialize, it could become one of the largest technology mergers in history, given Intel’s current market capitalization of over $90 billion.”

Goodness me – that would be an ecclesiastical business marriage. But I am not sure the US regulators would allow such to happen. While everyone wants to save Intel,  this conversation is not wholly about Intel. Yes, TSMC, China and Taiwan are right there on the table, and the US government will decide if Qualcomm can actually run and manage the Intel Foundry business which is strategic for America. 

More so, AMD, and to a large extent Nvidia, may file briefs against that combination. Qualcomm + Intel will be a lethal combo which can rattle many competitors considering the position of Intel in the desktop world and Qualcomm in mobile. The US Government may not want one company to control those two worlds.

Intel is not dead yet, and its position is still better than where AMD was about 18 years ago. With one design, AMD is back and strong. Intel should be fine if it goes ahead to spin out the foundry business so that it can focus on design. The problem with Intel Foundry staying inside and serving only Intel is that if Intel does not have a great design cycle, triggering product demand, the foundry becomes under-utilized. Also, no matter the governance, companies like AMD and NVIDIA may not risk sending their designs to a foundry within Intel. In other words Intel Design + Intel Foundry will not work as I have pointed out for years. There are limited incentives for Nvidia, Apple, AMD, and others to move their businesses from TSMC to Intel Foundry within Intel Corp.

An independent contract foundry is a better business model since statistically you have a higher probability of getting orders since any company which wins on design is your customer. Unlike an internal foundry that is serving only  its internal design unit,  and which can have a poor design cycle, a contract foundry business goes with any winner, and can win head or tail, all the time!

Intel must not sell. Rather, it must spin out Intel Foundry and focus on design. The successes of Nvidia and Broadcom should not make the giant panic; it needs to go back to transistors and craft better designs, because design is where the wins come! But it has to part ways with the foundry business as quickly as possible.

LinkedIn News: Qualcomm has initiated acquisition talks with chipmaking competitor Intel, but an agreement is “far from certain,” The Wall Street Journal reported, citing anonymous sources. With a market value of $93.2 billion, an Intel takeover would be one of the largest tech pacts ever, and the deal would almost certainly draw antitrust scrutiny. Qualcomm’s overture comes at a turbulent time for Intel, which has embarked on turnaround initiatives, including cutting 15% of its workforce. Earlier this week, Intel announced it would create an AI chip for Amazon and spin off its foundry business.

Qualcomm Moves to Acquire Intel, Pushing Its Shares Up

In January 2023, when Elon Musk’s SpaceX’s Starlink satellite internet began operation in Nigeria, the news sent a ripple of jittery and excitement across the country’s telecom market. For internet subscribers, it was exciting to have an alternative to local internet providers whose services have been judged as poor over the years.

Nigeria ranked 99th in the world for mobile speeds and 132nd for fixed broadband speeds in August 2024, with a mobile download speed of 20.19Mbps and 30ms Latency. The fixed broadband download speed was 21.59Mbps while its latency was 26ms. Against this backdrop, the launch of Starlink with a download speed between 25 and 220 Mbps and a latency range between 25 and 60ms, was a cause for concern for local internet providers, whose market share is believed to have come under threat.

More than a year after launch, Starlink has become Nigeria’s third largest Internet Service Provider (ISP) by subscriber number and is setting up ground stations across the country to secure more market share. This development has boosted the discussion around the influence of Starlink in Africa, especially Nigeria, the continent’s largest telecom market.

In this interview with Tekedia’s Samuel Nwite, Diseye Isoun, an African broadband development expert, offers valuable insights that enrich this subject.

Isoun was instrumental in introducing satellite connectivity to the Nigerian government and helped establish key components of the Ministry of Communications (et al.), including Galaxy Backbone and Nigcomsat. He works at Content Oasis, with a focus on delivering connectivity to underserved areas and securing a USTDA grant for broadband feasibility studies.

Among other things, Isoun believes that although Starlink has the upper hand, the road to being the dominant internet provider in Africa is littered with cramps – keeping the market open for everyone.

QUESTION 1: What are the potential implications of Starlink’s ground stations in Nigeria for the country’s internet connectivity, particularly in underserved regions?

ANSWER: In the case of the ground stations, the whole idea I think is that Starlink has seen an opportunity in Nigeria that I think that they are quite hopeful on and to that end now that they’ve started to provide service and gather data on the opportunity, they see and are able to attempt to forecast demand and also want to ensure that the users continue to get the best service possible. To that end, they’re deploying ground stations to ensure the quality of service and perhaps, over time, to ensure they can step up to demand.

QUESTION 2: Do you see the entry of Starlink, with its ground stations, impacting the market share of traditional ISPs like Spectranet and FibreOne in Nigeria?

ANSWER: Sure, I mean I had this conversation earlier with a friend and I think I used the cliché or the well-known framing to say that the ISP market is small in Nigeria as compared to the ways in which most Nigerians access the Internet. Most Nigerians access the Internet over mobile networks and by doing so mostly by phones.

Now by many definitions in the West or in developed countries, this would not be broadband but at the end of the day, it is the way most people can connect to the Internet whether that is at 1megabyte or 10megabyte or unreliable or reliable. 98% of folks connect to the Internet that way. MTN, Airtel, and Glo are basically their ISP. Now, traditional ISPs like Spectranet, Smile, and FibreOne make up about 2% or less of the total number of people accessing the Internet.

And yes, in some ways, that Internet access is better than what you get on your phone but at the end of the day, it’s 2%. So when you hear about Starlink being the third highest provider of Internet all of a sudden in Nigeria, it is the third highest of 1% to 2%. So they are a large fish in a small pond and they will probably go to number one within that small ISP quite quickly but once again they’ll be a big fish in a small pond and the opportunity still exists to deepen the penetration of broadband not necessarily taking from the mobile operators because they’re not providing true broadband anyway. True broadband does not truly exist and the opportunity is still there for some to take that with some strategies I have discussed and can discuss it again.

QUESTION 3: Starlink is collaborating with Equinix following the acquisition of MainOne, how significant is this partnership in strengthening Starlink’s position in Nigeria’s telecom industry?

ANSWER: It will continue strengthening and ensuring that they have a good presence and a good service in Nigeria but there are still quite a few unanswered questions about how this service will expand in Nigeria over the next 2 to 5 years. Regardless of these kinds of partnerships, we are more about ensuring service and providing service to the richest of Nigerians, that’s currently where we are.

QUESTION 4: What advantages do Starlink’s ground stations offer in terms of latency and overall internet performance compared to the existing infrastructure used by traditional ISPs?

ANSWER: Again, I think I would say not just ground stations. I would tilt the question a bit to simply say, what are the advantages of Starlink service over the traditional ISPs and the Telco internet? Indeed higher speed, low latency, increased reliability. Once again, Starlink reduces its reliability when there’s heavy rain just like we’re used to it through our DSTV and we’re watching the football and they are about to score and it will go off. But like I always make the distinction, downtime that you expect is much better than downtime that you cannot explain. So even though there will be moments when our heavy rain will affect the performance in general, it is far and beyond a better service from any number of variables than what exists today.

QUESTION 5: How might the construction of ground stations influence the pricing dynamics in the Nigerian ISP market, especially given Starlink’s premium pricing compared to local providers?

ANSWER: Again, I think that some of the little details are important, I mean Starlink’s one-time fee is about N456,000 including shipping fees. Smile or Spectranet may give you a module for N50,000. With MTN you can use your smartphone if you have one and you don’t have to pay for any equipment (quote on quote). You can buy a plan and you can tether that to your laptop and you’re on but the benefit that Starlink has over the traditional ISPs is ubiquitousness. Starlink is everywhere in Nigeria, just put up your dish and you’re on, whereas Smile and Spectranet and all these fiber-to-the-home folks like FibreOne are in only specific markets because their models don’t allow them to build out that way.

So the one-time fee is much more for Starlink but it’s everywhere in the country and then although MTN is kind of in a lot of places in the country, the speed cannot be compared to that of Starlink. The recurring fee of Starlink is competitive to the Smile and the Spectranet of the world, they are about on par. So in my own opinion, there’s really no price gain or change by virtue of Starlink’s entry because they’re quite in their own niche in that matrix of cost, quality of service, and availability across the country.

QUESTION 6: In what ways could Starlink’s local ground stations reduce Nigeria’s reliance on international data centers, and what are the potential benefits for end-users?

ANSWER: The reduction of reliance on international data centers will come from a few places but certainly to the extent that ground stations ensure that data stays local. I think that will assist and reduce the reliance on international data centers but in addition, increase the number of data centers locally, and improve intra-city fiber (middle mile as they call it) such as the 90,000-kilometer projects that have been discussed by the minister, etc. This will also have a lot of positive impact on that.

QUESTION 7: What challenges do you foresee for Starlink as it seeks to expand its presence in Nigeria, particularly in terms of regulatory hurdles or competition from established ISPs?

ANSWER: I think regulatory hurdles shouldn’t be a big issue because they’ve already gotten their licenses. They require a gateway license, ISP license, and installation license and they have done their homework there. They may eventually provide what we call backhaul to last mile folks or even Telcos ISPs. So they may need to have a little bit of consideration regulatory-wise that way. But I don’t see any major hurdle for them there and in terms of competition from established ISPs, again, I see Starlink coming into a niche where nobody is playing currently. So it’s not a question of competition.

The equipment for Starlink is currently 400-450,000 Naira. And it’s not going to go down, if it goes down they are subsidizing and our Naira is also not getting much better. So, let’s just assume that’s a pretty reasonable price, 400-450,000 Naira. Now, let’s put it this way – how many Nigerians are making 400,000 Naira a month? It is a low number and if they made 400,000 Naira a month how many of them would want to spend that one month’s salary on a Starlink kit?

So, you have to really think about the fact that there’s only a niche – I mean, there are some businesses, of course, that can also use it, but there is only a very small niche of Nigerians that can afford to buy a Starlink kit. And by the way, being good Nigerians, there’s a very healthy secondary market where a lot of people are buying the kits and reselling them at an even higher price than the official price.

So you may be talking about 100- 250,000 kits that can be ruled out at that price relatively easily after which the purchasing power of Nigerians is then challenged for growth above and beyond that. So in that context, if you are a Nigerian that cannot afford N400,000 up front, you then are looking at different ISPs that they’re not competing against anyway.

They are trying some credit rules and spreading out the costs in Kenya so that you can pay over a period of time. Regarding credit structure, although Kenya is not so great either, our credit structures here are not great too and people don’t have a culture of paying back. So you also have a system where they’re not paying, you have to be able to go and collect your Starlink kit without getting rabies from dog bites, so these are the realities on the ground.

QUESTION 8: Do you think Starlink’s satellite-based technology will address the connectivity challenges faced by rural and remote areas in Nigeria?

ANSWER: Yes, I think they can but they will need to address the high cost of the kits and that can be done through certain kinds of collaboration and additional value-added technologies that will allow their equipment to be used by multiple users. So, there are ways around or ways in which that can be done, but it will need to go via collaboration.

QUESTION 9: With Starlink rapidly gaining customers since its 2022 entry, how do you think the traditional ISPs can adapt to maintain their competitiveness in the evolving market?

ANSWER: Yes again, traditional ISPs are fine in the sense that they don’t charge 400,000 Naira for equipment, they charge 30 to 50,000 Naira. So they may lose the very high-end customers, but they can still target customers that cannot afford that while they can also partner ultimately, with Starlink, if Starlink will allow for that kind of model so that they can do certain kinds of point-to-multipoint services and leverage Starlink as a kind of backhaul. So, I think those are possibilities that may exist in the future.

QUESTION 10:The cost of Starlink is undoubtedly high and unaffordable for most underserved areas in Nigeria, do you see a possibility of subsidy from USTDA, or is the organization focused on ISPs when it comes to internet access?

ANSWER: Yeah. I mean I can simply bring to our attention, the Universal Service Provision Fund which is mandated to assist in connectivity in underserved areas, especially areas where telecommunication companies may not roll out due to the lack of economic viability. And yes, it is possible that certain kinds of agencies and initiatives like that may be subsidized. They come up with a program where they subsidize Starlink services in some ways so that at least the initial costs can be reduced, and ensure that the service can get out to underserved parts of the country.

QUESTION 11:  Starlink just announced that its satellites will have an advanced Evolved Node B (eNodeB) modern onboard that will act like a cellphone tower in space, allowing network integration similar to that of a standard roaming partner. This “Direct to Cell” will handle the radio interface with mobile devices, connecting directly with ordinary, unmodified 4G LTE devices.

Do you think this will provide leverage for ISPs and foster sustainable growth for the telecom market given that Starlink will need to forge partnerships with existing telcos who will provide the needed LTE spectrum for satellite signals?

ANSWER: There definitely would be the structure as they try to play it out. In the US, it does indeed involve partnering with the equivalent of our MTN and Airtel – T-Mobile, AT&T, etc. But at this point, the revenues that come from that kind of service are quite low, because this direct-to-cell is simply for things like texting, emergency connectivity, and very low bandwidth so there’s not a lot of revenue. It is a nice to have service, not a need to have so I don’t see any major revenue benefits in the short to medium time on this.

At the 2024 Access Corporate Forum held in Lagos, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, made a significant declaration regarding the federal government’s fiscal management approach. He announced that the federal government had ceased relying on the controversial “Ways and Means” financing mechanism, a form of borrowing from the Central Bank of Nigeria (CBN) that involves printing money to cover the government’s deficit.

Edun’s statement at the forum, themed “Nigeria’s Economic Rebirth: Hopes and Implications,” disclosed that the federal government is now focused on managing its debt obligations without resorting to Ways and Means.

He explained, “We have exited Ways and Means. What does that mean? It means that the government, when it has to pay domestic debt service or foreign debt service, does not go to the central bank to debit the consolidated revenue fund of the government, which means just printing the money.”

This announcement marks a departure from a practice that had been heavily criticized by economists and financial experts. Under former President Muhammadu Buhari’s administration, the government borrowed over N22 trillion from the CBN through Ways and Means, compounding inflationary pressure and impacting Nigeria’s macroeconomic stability.

Edun’s claim signals that the current administration, under President Bola Tinubu, aims to exercise greater fiscal responsibility by ending this controversial practice. The minister also noted that the government is putting in place a “world-class treasury and liability management system” to ensure better financial management.

This decision is framed as part of a broader effort to revamp Nigeria’s financial management system. However, while this move is being touted as a sign of fiscal discipline, it is notable that the government’s borrowing continues through other channels, raising questions about the sustainability of Nigeria’s debt profile.

The current administration continues to borrow both domestically and externally to finance critical infrastructure and budget deficits. Recent moves underscore the government’s continued dependence on loans, despite its claim to fiscal reform.

Nigeria is in discussions with several international lenders, including the African Development Bank (AfDB) and other financial institutions, to secure more loans for infrastructure projects, which raises concerns about the long-term sustainability of this borrowing spree.

Against this backdrop, Professor of Capital Market, Professor Uche Uwaleke, who was also at the forum, said the right instruments were not being deployed in the country’s debt market. He pointed out that the Sukkuk bond for infrastructure development constituted less than two percent of the federal government’s debt structure.

“If you look at the borrowings that have been done overtime, in my view, the right instruments have not been used in borrowing in the domestic market,” he said.

“When we borrow from the market, it is important that we use more of infrastructure bonds instruments because that is when we can be sure that the proceeds are tied to projects. My recommendation here is that we should choose to use more of infrastructure bonds.”

However, Edun expressed confidence that President Tinubu’s economic reforms were beginning to show positive results, citing evidence of improving macroeconomic stability, such as stable exchange rates, increasing government revenues, and positive trade balances.

The finance minister outlined key elements of the government’s economic stabilization plan, including the mobilization of 360,000 farmers to cultivate 360,000 hectares of land to produce essential crops like maize, wheat, and cassava. This agricultural push, according to Edun, is designed to make Nigeria self-sufficient in food production and reduce dependency on imports. While such initiatives are laudable, they require significant funding, much of which may come from further borrowing.

He also noted the government’s plan to simplify the tax system, reducing the number of taxes businesses must pay to a single digit, and exempting foods, pharmaceuticals, and health products from VAT, are designed to boost investment and ease economic pressure on the private sector.

Corporate Leaders Weigh In

During the forum, prominent business figures like Aliko Dangote and Roosevelt Ogbonna also voiced their views on Nigeria’s economic trajectory. Dangote, the President of Dangote Group, stressed the importance of supporting local manufacturing as a more effective strategy than seeking foreign investments abroad. He argued that creating an enabling environment for domestic businesses is key to attracting foreign capital.

“What attracts foreign investment is domestic investment. No domestic investments, no foreign investments! So, we have to make sure that we support our domestic investors,” Dangote said.

He also pointed out a glaring issue with Nigeria’s import reliance, noting that even simple products like biscuits were being imported from China, thereby creating jobs abroad while contributing to poverty at home.

Mr. Bismarck Rewane, Managing Director of Financial Derivatives Company Limited (FDC), and co-lead speaker at the forum, offered a sobering assessment of Nigeria’s power sector, urging the federal government to write off the existing debts of Distribution Companies (DISCOs) and pursue reforms that could enhance electricity supply. Rewane emphasized that sustained investments in telecoms infrastructure and power are essential to driving economic growth.

He warned that without such investments, Nigeria would face significant setbacks.

“If Airtel, Glo, and MTN shut down their systems, there will be no e-transactions in the financial and aviation sectors; no INEC’s elections, no BVAS and people will riot immediately,” Rewane remarked.

He also projected that Nigeria’s economy would grow to $400 billion by 2026, up from its current size of $368 billion, but stressed that growth should be the government’s top priority.

“Revenue is necessary but not sufficient. Growth is both necessary and more sufficient,” he said.

Other key business figures at the event raised concerns about policy implementation and its impact on business growth. Dr. Chinyere Almona, Director General of the Lagos Chamber of Commerce and Industry (LCCI), highlighted the plight of small and medium-sized enterprises (SMEs), arguing that government policies often stifle business rather than support it.

“Sometimes the policies are great, but their implementations are zero,” Almona said.

Similarly, Mr. Segun Ajayi-Kadir, Director General of the Manufacturers Association of Nigeria (MAN), criticized the government for its inconsistent support of the manufacturing sector. He noted that the sector was operating at less than 50 percent of its installed capacity due to inadequate government policies and the unresolved issue of foreign exchange (FX) forward contracts with the CBN.