Transcorp to list N1.8 trillion power subsidiary

Adebayo Obajemu

Transnational Corporation of Nigeria, the country’s largest conglomerate by market value, has given notice to list the shares of its spinoff power generating arm Transcorp Power by way of introduction in Lagos on Monday, the Nigerian Exchange Limited said in a statement on Friday

The idea is for 7.5 billion shares to be quoted at N240 per unit, putting its valuation at N1.8 trillion.

Meanwhile, Transcorp which also has hospitality, agribusiness and real estate among its subsidiaries, and which is the parent company under which Transcorp Power operates, is valued way below the power-generation arm at just N580.5 billion.

Analysts say that makes Transcorp Power appear overvalued, at N1.8 trillion, and its share price somewhat bloated.

There’s no clarification on how the corporation arrived at N1.8 trillion valuation and whether it considers the N240 as fair value.

With a total installed capacity of 2000 megawatts, Transcorp Power runs the 972-MW Ughelli plant, 966-MW Transafam Power Limited, according to information on its website.

The potential value of Transcorp’s power generation business has drawn increased interest from two of Nigeria’s most prominent billionaire tycoons last year, prompting a botched bid by Femi Otedola, the majority owner of rival Geregu Power and chair of FBN Holdings, to become the company’s top shareholder.

One big boost to its prospects in recent years was the proposal in 2021 to develop nuclear power plants as alternative power generation for Nigeria, the first of its kind in the electricity-starved nation.

“We are delighted to see this innovation and appreciate Transcorp for leading the charge in the industry with this initiative,” former Minister of Science & Technology Ogbonnaya Onu said at the time.

“The approach by Transcorp to use small scale nuclear plants is catalytic for achieving the national goals on science and technology,” he added.

Rival Geregu Power, which listed its shares less than two years ago, has returned 145 per cent this year alone, making it the second top-performing stock of the 153 equities quoted on the NGX, a likely motivation for Transcorp to spin off its power-generation division and list it as a separate entity in order to unlock value.

Last year, Mr Otedola had purchased Transcorp shares in piecemeal off-market transactions summing up to 2.6 billion units or 6.3 per cent, pushing into the shade the 2.07 per cent interest held by Tony Elumelu, Transcorp’s top shareholder until that time.

That triggered a wild rush for the company’s shares within days during which Mr Elumelu raised his stake to more than a quarter of the entire conglomerate’s total shares.

Mr Otedola offloaded his stake to the Transcorp chair in the days that followed after negotiations between the two.

Just as Mr Otedola is the biggest shareholder of Geregu Power and chairman of one of Nigeria’s biggest five banks, Mr Elumelu is the biggest shareholder of power-focused Transcorp and chairman of United Bank for Africa, also one of Nigeria’s biggest Banks.

The scramble was a big boost last year for Transcorp, whose valuation accelerated seven times over, making it Nigeria’s fourth best-performing stock.