Transcorp Power Plc’s listing energises the stock market to a recovery in the aftermath of the selloffs occasioned by the recent jumpy increase in benchmark interest rate. In this report, Deputy Group Business Editor, Taofik Salako, examines the underlying dynamics behind the scramble for Nigeria’s leading power company
The stock market is riding the momentum of the listing of Transcorp Power Plc to moderate the adverse effect of the unexpected high increase in the Monetary Policy Rate (MPR). In the aftershock of the 400 basis points increase in the MPR, the benchmark interest rate, to 22.75 per cent by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), the equities market had suffered a heavy capital flight. With the relatively risk-free return substantially higher, investors scurried to realign their portfolios in favour of fixed-income securities.
The benchmark index for the Nigerian equities market suffered its heaviest loss in recent period penultimate week, dropping by 3.27 per cent. This dragged the average year-to-date return down to 32.07 per cent. The All Share Index (ASI)- the value-based, common index that tracks share prices at the Nigerian Exchange (NGX), dropped below its psychological 100,000 index mark to 98,751.98 points. For every three deals after the MPR announcement, two were closed below the price on the table. With the order book substantially tilted towards sales, most analysts expected the downtrend to continue.
Last Monday’s listing of Transcorp Power, a subsidiary of Transnational Corporation of Nigeria (Transcorp) Plc, has, however, changed the dynamics of the equities market. Transcorp Power listed by way of introduction 7.5 billion ordinary shares of 50 kobo each at N240 per share. It immediately got off to a rally, rising by the maximum daily allowable price change of 10 per cent throughout the trading week. The Transcorp Power’s rally also accentuated the scramble for its parent company, Transcorp.
Market performance
Official trading data released by the NGX at the weekend showed that Transcorp Power was the most-sought-after-stock during the week. It led the gainers with a gain of 46.38 per cent to close weekend at N351.30 per share. This implied a net capital gain of N835 billion in the first week of listing, from opening market value of N1.8 trillion to current market value of N2.635 trillion. Transcorp ranked fourth on the gainers’ list with net return of 19.05 per cent to close weekend at N17 per share, from N14.28 per share.
While the portfolio realignment occasioned by the MPR hike continued to drive selloffs, the overall market position has returned to the positive. The ASI closed weekend with average return of 2.61 per cent, equivalent to net capital gain of N1.41 trillion during the week. With nearly three out of every four deals closed below the price on the table, the market recovery was largely driven by the scrambles for Transcorp Power and Transcorp’s shares. The ASI regained its 100,000 index mark to close at 101, 330.85 points while aggregate market value of all quoted equities jumped from N54.035 trillion to close weekend at N57.293 trillion. The recovery strengthened Nigeria’s leadership atop world’s returns table with the nation’s average year-to-date return, for equities, rising to 35.52 per cent. Nigeria’s return is about 10 basis points above 25.7 per cent return by Egypt, the second highest year-to-date return, according to Bloomberg data tracked at the weekend.
The NGX report indicated that the momentum of activities at the equities market improved considerably. Total turnover rose to N2.157 billion shares worth N108.824 billion in 51,556 deals last week as against 1.882 billion shares valued at N34.149 billion traded in 48,464 deals two weeks ago.
The trio of Transcorp, Transcorp Power and United Bank for Africa (UBA) Plc were the most active stocks. They accounted for 1.056 billion shares worth N78.770 billion in 12,167 deals, representing 48.97 per cent and 72.38 per cent of the total equity turnover volume and value respectively. The three companies have a common cause- Mr. Tony Elumelu.
Elumelu factor
Elumelu’s Heirs Holdings is the controlling majority shareholder in Transcorp and UBA. Transcorp holds majority equity stake of 51.6 per cent in Transcorp Power, where Elumelu’s Heirs Holdings also has substantial stake. Market analysts were unanimous that the remarkable rally that greeted Transcorp Power and its related companies was driven by two pricing forces- the business outlook and the Elumelu factor.
Nigeria’s largest gas-fired power generating company, Transcorp Power, generates more than 10 per cent of the country’s power. The company plans to achieve annual revenue growth of more than N500 billion by 2031, with a target to power a quarter of the country’s households and industries. Transcorp Power is seen by the investing public as another example of Elumelu’s transformative touch. From the rubbles of an underperforming government-owned asset in 2012, Transcorp Power has emerged as one of the nation’s most efficient power companies. Founded on September 24, 2012, as Transcorp Ughelli Power Limited (TUPL), having emerged as the preferred bidder during the privatisation of the national electricity assets by the Federal Government, Transcorp Power is the owner of the 972MW installed capacity Ughelli Power Plant (UPP) at Ughelli, Delta State, (Ughelli Power Plant). In 2023, the company became the first power generation company to be discharged from post-privatisation monitoring by the National Council of Privatisation, having met and surpassed set targets. Subsequently, in December 2023, the company converted into a public limited liability company, following which its name was changed to Transcorp Power Plc.
Elumelu, Group Chairman of Transcorp, said the subsequent listing of Transcorp Power was part of the group’s goals of creating values for all Nigerians.
According to him, the milestone listing reflects Transcorp’s commitment to catalysing economic growth and prosperity.
“We invest in strategic sectors within the economy, transform, expand businesses, and consciously seek ways to share value. Our track record is evident with Transcorp Hotels Plc and now Transcorp Power Plc. We are focused on improving access to electricity for all, creating lasting value for our shareholders and contributing to our nation’s development,” Elumelu said.
Managing Director, Transcorp Power, Mr. Peter Ikenga explained that Transcorp Power has 18 gas turbines of different capacities comprising 12 Hitachi H25 gas turbines of 23.8MW capacity each and six Frame 9E General Electric (GE) gas turbines of 105MW capacity each.
He outlined that Transcorp Power’s Plant has three major sections respectively referred to as Delta II, Delta III and Delta IV. Each ‘Delta’ has gas turbines (GTs) of different capacities.
He noted that 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.
“Through effective maintenance and upgrading programmes, Transcorp Power has continued to ensure optimal performance of its turbines and balance of plant. Whilst installed capacity has remained 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,” Ikenga said.
Presenting the financial highlights, Chief Finance Officer, Transcorp Power, Evans Okpogoro said the company’s revenue has grown impressively over the past five years, driven by a surge in energy delivery and capacity charge.
He said the company has sustained and grown its profit margins while exploring new growth opportunities in lucrative international markets.
He pointed out that international customers contributed about 18 per cent of the company’s turnover in 2023.
He outlined that the company’s turnover had grown from N55.94 billion in 2019 to about N142.12 billion in 2023, underlining the successive improvements in operations and expansions.
Analysts’ views
Chairman, Nigerian Exchange Group (NGX Group) Plc, Alhaji Umaru Kwairanga, said the listing of Transcorp Power was a milestone that highlighted the significant transformation of the company and the energy sector.
According to him, the listing was a testament to the resilience, innovation, and excellence within the company and the Nigeria’s power sector.
“With a market capitalization exceeding N1 trillion, Transcorp Power’s entry into the public market represents a significant milestone, highlighting the increasing confidence and maturity of our capital market. It is a clear signal of the transformative journey our energy sector has embarked upon, thanks to the Electric Power Sector Reform Act and subsequent market liberalization,” Kwairanga said.
Acting Chief Executive Officer, Nigerian Exchange (NGX), Mr. Jude Chiemeka said the Exchange recognizes its responsibility in supporting the government’s privatisation efforts, particularly within the energy sector.
“The listing of Transcorp Power exemplifies our belief that the NGX serves as a viable platform for the privatization of energy companies, driving efficiency, innovation, and sectoral growth,” Chiemeka said.
Group Managing Director, Vetiva Capital Management Limited, Mr. Chuka Eseka, said the listing was a rare and significant opportunity for Nigerians to be part of Transcorp Power’s growth.
Eseka said a listing like Transcorp Power “doesn’t happen very often”.
“The listing of Transcorp Power’s shares by introduction on the NGX represents a significant milestone for Nigeria’s power sector as well as the capital markets.
“The company’s listing further deepens the capital markets, particularly the electric power generation sub-sector. This listing strengthens the foundation that the company has laid in the last decade since privatization, and offers the investing public an avenue to be part of the company’s growth story,” Eseka said.
Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said the listing by way of introduction was a perfect fit for a company like Transcorp Power as such listing provides a win for all.
“Listing by introduction provides a corporate looking for public quotation without needing to raise capital an avenue to do so without needing to issue or sell new shares to the public. It also provides existing shareholders looking to sell their shares a platform for better price discovery and a larger pool of interested investors to sell to.
“Of course, listing now means the company will be more transparent with its information and will have to endure more scrutiny. This actually works to the advantage of the power companies because the investing public will become more familiar with their operations and able to assess their strengths and weaknesses which ultimately makes it easier for them to raise much needed capital to expand and improve their operations. There is also the wealth redistribution angle of hitherto government-owned enterprise that is now own by the citizens themselves directly,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS) said.
Managing Director, HighCap Securities, Mr. David Adonri said listing brings a lot of benefits to companies, especially giving them visibility and access to mobilisation of long term capital that is low in cost and adequate in volume.
“It is very apparent that dearth of long term capital is the major challenge preventing Nigeria’s electric power industry from expanding capacity required to close the huge supply gap. With recent changes to the electric power industry’s legal framework, access to capital by industry participants can serve as tonic that will energize the industry into production. This justifies the listing on the stock exchange.
“The recent listing of Transcorp Power is quite significant because of its size in the industry and the opportunity it offers the investing public to share in the wealth it is creating. The future prospects of Transcorp Power and the intrinsic value it possesses have attracted a lot of investors’ interest in it such that demand for it continues to drive price appreciation. The momentum it has generated since listing has become the major factor propelling the equities market in recent times,” Adonri, a senior active trader at the stock market, said.
Investors’ confidence
Shareholders were unanimous at the weekend that Elumelu factor was a major driving force for the newly listed energy company. According to them, Elumelu won’t ditch the investors.
President, Ibadan Zone Shareholders Association, Mr. Eric Akinduro, said Elumelu was “an entrepreneur with a difference”.
“His ability to attract, evaluate, and forge strong working relationships with investors often means success to us. What he did for us as investors of UBA during unbundling of the company where he gave us three companies-United Capital, Africa Prudential and Afriland Properties for free is a sign of his belief in good corporate governance and love for investors. Today, those companies have grown into profitable investments to us in terms of appreciation and dividends payment.
“One of his qualities is that he is always clear to investors about what the company will and will not do. Today, look at all the companies he listed, he has made many investors that believed in his ability richer than ever, particularly in the last two years,” Akinduro, who represents the largest and most active shareholders’ zones, said.
President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr Faruk Umar said investors were scrambling for the new power company’s shares because of their experience with previous companies under the Elumelu Group.
“You can see clearly a trajectory that speaks to investors’ experience. Investors are happy with him as well as the future of the company. His ability to spread wealth based on previous experience in his companies is one driving factor behind what you have seen,” Umar said.
National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Mr. Moses Igbrude said with seven listed entities under his control, Elumelu has demonstrated his belief in spreading wealth and empowering the generality of people.
“Elumelu is a believer of a greater Nigeria and a pan-Africanist. A man who believes in creating wealth for all, a builder of leaders, a motivator, he is a real son of Africa. He was the only one who unbundled and unlocked his bank, UBA, to create values for shareholders and jobs for people while others looked at the other side. He has started unbundling and unlocking Transcorp again, he is a master strategist in ‘acquired, built and unlocked value for the benefit of all’, he is not selfish in his business strategy rather a good soul who believes others should benefit from his talent and skills,” Igbrude said.
National Coordinator, Pragmatic Shareholders Association of Nigeria, Mrs Bisi Bakare, said the listing of the power company has been a reaffirmation of trust and confidence in Elumelu and his belief in the stock market as an engine of growth.
“The listing bears testimony to his level of integrity, trust and collectivity. His level of transparency, accountability and commitment to return on investment have continued to serve as morale booster to investors in their interactions with him. We hope others will emulate him,” Bakare said.
With analysts unanimous that Transcorp Power’s pricing trend is biased to the upside, the newly listed power company may continue to hold back the bears, providing the much-needed breather for the market to absorb the shocks from the interest rate hike.
