Energy

March 13, 2024

Transcorp Power Plc creates opportunities for investors, impact Nigeria’s economy

Electricity

•Firm records sustainable growth

•Listing boosts market capitalization by N1.8 trillion — NGX

•We anticipate revenue expansion — Experts, Analysts

•Improved generation to boost economy

•Good corporate governance, others

•CSR Projects impact communities

By Udeme Akpan, Energy Editor

Despite efforts of the federal government and others to improve performance in the power sector, Nigeria’s power generation dropped by 14 per cent, month-on-month, MoM to 3,475 megawatts, MW in March 2024, from 4,043MW in February 2024, due to prolonged problems, especially limited funding, low investment, inadequate capacity to generate, transmit and distribute adequate and stable supply to consumers.

Data obtained from the National System Operator, a unit in the Transmission Company of Nigeria, TCN, indicated that except for occasional attainment of 5,000MW, supply remains relatively low, thus impacting negatively households and businesses nationwide.

But the situation would likely record an improvement following the recent listing of 7.5 billion shares of Transcorp Power Plc, at N240 per share to its Main Board in Nigerian Exchange Limited, NGX for some reasons. First, the listing is targeted at providing a platform for new investors (from the public) to be admitted into the company and diversify the existing shareholder base. Second, it aims at positioning the company access to a larger pool of capital-raising options and enhancing brand visibility and awareness. Third, it is also targeted at generating revenue to enhance the growth of the NGX in particular and the Nigerian capital market in general.

Firm records sustainable growth

The advent of Transcorp Power Plc, a subsidiary of Transnational Corporation Plc is symbolic as the operator of the Ughelli Power Plant in Delta State, with an installed capacity of 972MW. At the time of acquisition, the plant had only 160MW capacity. Transcorp Power invested and increased the available capacity to 680.83MW (a 227% increase) within four years, surpassing the 5-year target of 670MW set by the Bureau of Public Enterprises, BPE.

Before the recent listing, Transcorp Ughelli Power Limited (TUPL) had emerged as the preferred bidder for Ughelli Power Plc (UPP) during the privatization of the national electricity assets by the Federal Government of Nigeria in 2012. Transcorp Power Limited, TPL took over the Power Plant on November 1st, 2013 and doubled available capacity within six weeks of takeover from 160MW to 324MW and by 2017 when it joined the West African Power Pool, output had risen further to 701MW. With the merger of Transcorp Ughelli Power Limited and Ughelli Power Plc, it went ahead to signed the bilateral contract for the supply of power to the Republic of Benin in 2020. Between 2021 and 2022, the company became the first Power GenCo to be awarded the ISO Integrated Management System (IMS). It received post privatization discharge certificate from the federal government, thus demonstrating the government’s confidence that it can run its operations without intervention.

Listing boosts market capitalization by N1.8 trillion —NGX

Commenting on the listing, the NGX, stated: “The leading power generation company’s listing boosts the overall NGX market capitalization by N1.8 trillion, just as its shares rose by 10% on the first trading day. Following its listing on NGX, the company made its Facts Behind the Listing presentation and showcased its performance and strategy to stakeholders.”

Similarly, the Chief Executive Officer of Transcorp Power, Mr. Peter Ikenga, said: “This is a testament to our unwavering dedication to powering Nigeria’s growth. We embark on this new chapter with a sense of purpose, innovation, and a commitment to continue to deliver sustainable energy solutions in Nigeria and beyond.”

He said that the company had witnessed the transformation in its ownership, through the takeover of a government-owned asset into a leading private sector-led organization, adding that Transcorp Power presents a unique opportunity in Nigeria’s power generation sub-sector, which is pivotal to the country’s economic growth.

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According to him, “Through effective maintenance and upgrading programmes, Transcorp Power has continued to ensure optimal performance of its turbines, irrespective of the section of the Plant in which they are located.”

“Whilst installed capacity has remained the same in the past few years, Transcorp Power has been able to steadily improve on its capacity utilization rate. In 2023, the Company’s utilization rate stood at 78 per cent.”

Strong value proposition

However, as a major thermal power generating company in Nigeria, TPP accounts for 7% of Nigeria’s power generation capacity, yet currently generates 10% of Nigeria’s power with existing assets, with capacity to contribute further. It has a robust Board composition and highly experienced and stable management team experience of 250+ years, with high level of commitment to delivering on the company’s vision and long-term objectives. Also, the company has a strong and consistent Compound Annual Growth Rate, CAGR of 20% and 42% in revenue and Profit Before Tax, PBT respectively over the last five years.

We anticipate revenue expansion — Experts, Analysts

However, in her assessment, Vetiva Research analysts, including Victoria Ejugwu, noted that with the positive track record of the company, there is a possibility to record stronger growth in the future, especially as its operations cut across many segments of the power sector value chain.

They said: “We initiate coverage of Transcorp Power Plc (TPP) with a BUY recommendation and a target price of N288.36. Our valuation utilises the discounted cash flow methodology and reflects our belief in TPP’s immense growth potential, driven by several key factors including favourable market dynamics and possessing existing infrastructure to capitalize on opportunities within the market.

  “With five years for projected free cash flows to firm and sustainable long-term growth of 9 per cent, we estimate a discounted terminal value of N1.9 trillion in 2027, taking enterprise value to N2.2 trillion. After accounting for a net debt of N27 billion, we value Transcorp at a one-year target price of N288.36.”

Increased generation will impact economy

However, there are strong indications that the expected increased generation and possible delivery to consumers would impact positively on Nigeria’s economy.

Already, Transcorp Power Plc, has generated commercial megawatts of power into the nation’s national grid, according to the progress report, obtained by Vanguard.

As of 2022, over 29,574,447MWh, 29TWh, of energy was sent to the national grid for transmission and distribution to many homes and industries in Nigeria and West Africa.

The progress report, stated: “Transcorp Group has been investing in the power sector for 10 years, with its first investment in the Ughelli Power Plant through Transcorp Power Limited.

“Transcorp Power Plc had a stellar performance in November 2023 sending out an average of 438MW and was ranked 2nd only behind Egbin. For the year 2023, YTD TPL is ranked 4th. TPL currently has a generation capacity of 500MW and can generate enough energy to power 1.6 million homes daily.

“Since the privatization of the power sector in November 2013, TPL has generated over 29,574,447MWh (29TWh) of energy to the national grid powering countless homes and industries in Nigeria and West Africa.

“Transcorp Power Plc was the first power generating company to be awarded 3 ISO Certification for Quality, Environment, and Occupational Safety Certifications. Transcorp Power Plc exports power to the Benin Republic. When Transcorp invested in the Ughelli Power Plant in 2013 it had a generation capacity of 160 MW of the total installed capacity of 972 MW.   Transcorp took the generation capacity from 160MW to 680MW within 4 years.”

Impressive facts, figures

According to the report – Facts behind the listing – obtained by Vanguard, “TPP was founded on September 24, 2012, as Transcorp Ughelli Power Limited (TUPL), having emerged as the preferred bidder during the privatization of the national electricity assets by the Federal Government of Nigeria. TPP is the owner of the 972MW installed capacity Ughelli Power Plant (UPP) at Ughelli, Delta State, Nigeria.

“The Company emerged from the merger of TUPL and UPP in November 2015. The merger unified the administration and operations of Transcorp’s power division for increased efficiency. TPP went ahead to surpass the five-year performance target of 670MW set for it in 2013 by the Federal Government of Nigeria through the Bureau of Public Enterprises (BPE), by increasing the available capacity of Ughelli Power Plant from 160MW to 701MW within four (4) years of taking over the Plant.

The Company joined the West African Power Pool (WAPP) in November 2018, and since then, has remained an active member of the regional electricity body, to explore and maximise the opportunities that abound in the market.

“In 2023, the Company became a member of WAPP’s Executive Board. In 2023, the Company became the first power generation company to be discharged from post-privatization monitoring by the National Council of Privatization, having met and surpassed set targets.”

Good corporate governance, others

The company has attracted the admiration of stakeholders because of its commitment to good corporate governance. In its report obtained by Vanguard, weekend, the company, stated: “We Maintain the highest standards of ethics and integrity throughout all levels of our business, and in our working relationships with all stakeholders while ensuring compliance with all applicable laws and regulations. Investing in proactive measures to strengthen our internal controls and adopting best-practice technologies and employee training to monitor for and prevent data breaches.”

CSR projects impact communities

In the area of Corporate Social Responsibility, Transcorp Power created a Vocational Skills Training and Entrepreneur Empowerment Program at Ughelli, Delta State, to empower women and the youth with entrepreneurial skills and improve the quality of life in the community.

According to the scorecard of the company obtained by Vanguard, “During the programme, trainees receive a monthly stipend and upon graduation, trainees receive working tools and a capital grant to kick start and support their journey to starting and growing their businesses. This program has led to over 130 indigenes of the community completing the skills training program so far.”

Vanguard Newspaper