Geregu Debt Default Triggers Concerns on Utilisation of Proceeds of N40bn Bond Issued Under Previous Management

The corporate debt default by Geregu Power Plc has triggered concerns about how the proceeds of the N40 billion series one senior unsecured bond were used.

The bond, issued on July 28, 2022, has a seven-year tenor and is scheduled to mature on July 28, 2029, according to details published by the FMDQ.

At the time, the ownership structure of the company indicated that Amperion Power Distribution Company Limited directly held 2,489,995,020 shares, controlling 99.99 percent of the organisation.

Femi Otedola, Gereugu’s then chairman, had a direct shareholding of 1,245 units (0.0001 percent), as well as Olawunmi Christine Otedola, Akin Akinfemiwa, the firm’s chief executive officer (CEO), and Calvados Global Services Limited.

However, Otedola’s indirect shareholding stood at 2489,995,020 shares, giving him 99.59 percent control in the power generation company, according to listing records.

The N40 billion series one bond was issued under Geregu’s N100 billion multi-instrument issuance programme, with the proceeds expected to be “applied by the issuer for its general corporate purposes including expansion of the company’s current power generation capacity and the strategic acquisition of power assets in Nigeria and other African countries”.

Specifically, in its 2022 financial statement, Geregu said the net proceeds from the bond would be used to finance the “acquisition of one of the power generation companies which is currently in the final stage of bidding processes by the Bureau of Public Enterprises (BPE)”.

A review of its 2023 financial records showed that the organisation made a contractual commitment of “$4,000,000.00 Bid Bond for acquisition of Geregu II in favour of Bureau of Public Enterprises with validity period of May 23, 2024”.

But there are concerns that the acquisition objective was not achieved, raising questions about the deployment of bond proceeds.

Insiders are also worried that some of the bond proceeds may have been “diverted to other purposes or misappropriated by the previous management”.

According to a source, public reporting does not show a confirmed final award of Geregu II to Geregu Power Plc.

“If the acquisition did not close, what happened to the earmarked proceeds is a legitimate, documentable question,” the source said.

“If the bond’s stated purpose wasn’t fulfilled, where did the funds go? Logically, they should either have been preserved to earn interest or redirected to strengthen the business. Evidence has emerged suggesting neither happened.”

THE DEFAULT FIGURE AND WHY IT HAPPENED

The bond default, described as the first in seven years, came just eight months after Otedola sold his majority stake in Geregu for N1.088 trillion in December 2025, ushering in a new leadership led by Abdulaziz Yari as the company’s chairman.

Although the overall bond value issued in 2022 was N40 billion, Geregu defaulted “in the 8th coupon payment and 4th bullet principal repayment,” the FMDQ listing details said.

This means the interest has been paid for seven times, while the principal has been paid three times since the bond was issued.

Providing insight on the matter in an interview on Arise Television’s Morning Show, Farouk Yusuf, a financial expert and auditor, said the amount in default is N6 billion as at July 28, 2026 — not N40 billion.

He disclosed that as at December last year, the bond payable was N34 billion, which the N6 billion, which had fallen due, is part of.

“Why were the Geregu new owners unable to make this payment?  That will take us back to when the bond was taken in 2022,” Yusuf said.

“It was taken to acquire another power plant, and that failed. They couldn’t meet up with the BPE requirement, bureau public enterprise, so they were unable to buy.”

Yusuf, who is also the managing partner at Segun Sulaiman & Co., said a review of the company’s books indicated that the old management put that money (the N34 billion) in an escrow account since the acquisition plans failed.

“…We discover that yes, the bond payable is 34 billion and the restricted cash there is 31 billion,” he said during the interview.

“This 31 billion, since it’s an interest-yielding account, is where you will now go and liquidate a part when the liability of this 34 falls due.

“Now, 6 billion has fallen due as at 20 July, and the new management, as it were, had to go to where the backup call was, which is a restricted account, which is the escrow account where this money was kept, and unfortunately, they were told that that money had been utilized.

“Utilized by who? Yes, utilized by the former management, former owners that handed over to them.”

The corporate debt default has since stoked broader industry concerns about the financial strength of generating companies currently battling to recover a reported N6.5 trillion debt owed by the federal government.

However, in a statement on August 1, Geregu Power said it is engaging relevant stakeholders, advisers, and regulators to resolve the issues.