Geregu Power Faces Questions Over ₦31.7bn Restricted Cash
- Geregu Power faces scrutiny over ₦31.7 billion in restricted cash after new management takeover
- Financial expert claims previous management utilized funds before the handover, raising further questions
- Investors seek clarity on the handling of bond proceeds amid concerns over transparency and accountability
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Geregu Power Plc is facing fresh questions over ₦31.7 billion recorded as restricted cash in its financial records, following concerns over the availability of the funds after the company’s new management assumed control.
The issue has drawn attention after the company reportedly faced a ₦6 billion coupon and principal obligation that fell due in July, with questions emerging about the restricted funds previously reflected in its accounts.
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Restricted cash generally refers to money set aside for a specific purpose or obligation and separated from a company’s funds available for general use.
The ₦31.7 billion figure is contained in Geregu Power’s financial records and has become a major focus following reports that the funds were not available when the new management sought to meet the company’s bond-related obligation.
Financial expert Farouk Yusuf, who reviewed the company’s books on Arise Television’s Morning Show, said the restricted account had already been drawn down before the handover to the new management.
Yusuf described the funds as having been “utilised” by the previous management.
The development has raised questions about the movement of the money, particularly when it was withdrawn or transferred and how it was subsequently applied.
How the bond proceeds were intended to be used
The issue is linked to Geregu Power’s ₦40 billion Series 1 bond, issued in July 2022 under the company’s ₦100 billion multi-instrument issuance programme.
The bond was issued for general corporate purposes, including expanding the company’s power generation capacity and acquiring power assets in Nigeria and other African countries.
Geregu’s 2022 financial statement provided additional information on the intended use of the proceeds, stating that the funds would support the acquisition of a power generation company that was then at the final stage of a Bureau of Public Enterprises (BPE) bidding process.
The company involved was understood to be Geregu II.
By 2023, Geregu’s records reportedly showed that a $4 million bid bond had been committed in connection with the proposed acquisition, with the commitment valid until May 2024.
However, there is no confirmed final award of Geregu II to Geregu Power Plc in the available public record.
This has prompted questions about what happened to the bond proceeds after the proposed acquisition did not materialise.
The funds could have remained in an interest-bearing account or been redirected towards another disclosed corporate purpose, with the relevant transactions reflected in the company’s records.
“The focus is therefore on establishing how the money was managed after the proposed acquisition failed to progress under the previous management.”
Questions over the restricted funds
The situation has generated questions about when the ₦31.7 billion was recorded as restricted cash, when the funds were subsequently moved or used and what they were ultimately applied to.
A clear account of the transactions would help establish the movement of the funds from the time the bond proceeds were received until the present.
Such an account would include the amount raised, where the proceeds were initially kept, when the funds were classified as restricted cash, subsequent withdrawals or transfers and their eventual use.
What investors and regulators need to know
The matter also raises questions about the information provided to investors and relevant market institutions concerning the bond proceeds and their use, when the former management of the power plant sold its shares to the new owners.
Attention is likely to focus on what was disclosed to the Securities and Exchange Commission, FMDQ and bondholders regarding the restricted funds and the proposed acquisition.
It would also be important to establish whether there were subsequent updates concerning the status of the acquisition or any changes in the use of the bond proceeds.
Any available disclosures could provide further clarity on the circumstances surrounding the funds.
Geregu says it is engaging stakeholders
Geregu Power said in an August 1 statement that it was engaging stakeholders, advisers and regulators to address concerns surrounding the repayment of the bond.
The company’s engagement with the relevant stakeholders is expected to provide further information on the repayment situation and the status of the funds.
For investors and stakeholders in the power sector, the key issue remains understanding the movement of the ₦31.7 billion recorded as restricted cash.
A detailed account showing how much was raised, when the funds were restricted, how much was subsequently used and what remains would help provide clarity.
Until more information is made available, questions will continue to surround the ₦31.7 billion recorded as restricted cash in Geregu Power’s financial records.
Source: Legit.ng
