Geregu Power ’s Bond Default: GCR Flags Governance, Treasury Control Lapses

GCR Ratings (GCR) has downgraded Geregu Power Plc national scale long- and short-term issuer ratings to D(NG) from A(NG) and A1(NG), respectively, following the company’s failure to make the scheduled principal and coupon payment on its ₦40 billion Series 1 bond. The bond’s rating was also downgraded to D(NG).

The downgrade comes after Geregu Power failed to meet its bond payment obligations within the timeframe stipulated by the Trust Deed and related transaction documents. GCR confirmed that the payment remained outstanding even after the grace period expired on 6 August 2026—an event of default under its rating definitions, triggering a mandatory downgrade, irrespective of the company’s reported liquidity position as at 30 June 2026.

GCR clarified that the default does not appear to be the result of underlying liquidity problems. At its latest review, the agency had assessed Geregu’s debt-servicing capacity based on reported cash balances and projected operating cash flows, which included about ₦100 billion in proceeds from the Federal Government of Nigeria via NBET Finance Company Plc in June 2026 (₦53 billion in cash and ₦49 billion in non-cash consideration).

As at 30 June 2026, Geregu’s cash holdings stood at ₦56 billion (₦27 billion net of restricted cash earmarked for bond payments)—a position GCR considered sufficient to meet bond service obligations. While earnings were affected by the ongoing overhaul of the company’s power plants, the receipt of ₦53 billion in cash from legacy receivables helped offset this impact.

Based on financial information available during its last rating affirmation and subsequent surveillance, GCR found no evidence of deterioration in free cash flow, liquidity, or funding access that would have impaired Geregu’s capacity to service the bond.

However, GCR emphasised that the circumstances of the default raise serious concerns about the company’s treasury management, internal controls, and governance processes. While the full details are still under investigation, management information points to weaknesses in the monitoring, verification, safeguarding, or governance of funds designated for debt service.

GCR also reviewed the bond trustee’s performance report as at 10 August 2026, which confirmed the default. The agency reiterated that the default was not due to a lack of liquidity or insufficient cash flow, but instead highlights deficiencies in payment execution, treasury administration, internal controls, or management oversight—factors that weigh heavily in GCR’s assessment of corporate governance.