- The financial performance of listed power generation companies underscores the attractiveness of the sector.
- Geregu Power and Transcorp Energy, both listed on the Nigerian Stock Exchange (NGX), have shown promising financial results, consistently paying impressive dividends to shareholders.
A quiet but profound transformation is underway in Nigeria’s energy sector, as the nation’s traditional oil and gas exploration and production (E&P) firms, both international and indigenous, increasingly pivot towards the electricity generation market. This strategic diversification, fueled by success stories of early entrants and the burgeoning demand for reliable power, marks a significant evolution for these oil giants, positioning them as comprehensive energy providers rather than singular crude producers.
For over a decade, major players like Shell Petroleum Development Company of Nigeria Limited (SPDC), Eni SpA, and Mobil Producing Nigeria (now part of Seplat’s acquisition) have quietly been investing in power assets. Their success, coupled with the impressive growth of local power generation companies (Transcorp Energy and Geregu Power), is now inspiring a new wave of oil firms to explore this promising terrain.
One of the latest and most notable entrants is Seplat Energy. While already a crucial gas supplier to Nigeria’s electricity generation companies (Gencos) – providing 30% of their total gas needs – Seplat is now setting its sights on direct power generation, particularly for off-grid communities.
“At some point, when the time is right, we will take further steps into the electricity space,” stated Roger Brown, CEO of Seplat Energy. He emphasised the company’s long-term vision to deploy modular gas-to-power systems in rural areas, aiming to “play a key role in solving last-mile electricity access problems.”
This targeted approach reflects a deep understanding of Nigeria’s energy access gap, where millions remain unconnected to the national grid. Early negotiations with the federal and some South-South state governments suggest a model where generated power would be purchased for distribution to these underserved communities, indicating a collaborative effort to bridge critical infrastructure gaps. The success of this pilot phase could determine Seplat’s broader expansion into the power sector.
This current wave of diversification isn’t new. It builds on the foresight of pioneers:
- Shell’s Afam VI Combined Cycle Power Plant: Fully owned by SPDC, the 650MW gas-fired plant in Rivers State, commissioned in 2008, stands as a testament to an oil major’s successful foray into independent power generation. Its integrated gas supply from SPDC’s Okoloma Gas Plant showcases an efficient value chain.
- Mobil Producing Nigeria’s Qua Iboe Power Plant: The 540MW plant, transferred to Mobil Producing Nigeria in 2017, further illustrates the strategic importance of power assets to E&P firms, securing reliable gas off-take from their offshore facilities.
- Oando PLC’s Aggressive Expansion: Indigenous giant Oando has emerged as a significant force in the power sector. Its 2023 acquisition of controlling shares in the Okpai 1 and 2 Power plants (part of Eni’s onshore assets sale in the Niger Delta) elevated its presence considerably. With approximately 1GW of total capacity, the Okpai IPP is a “key asset for Oando and a strategic investment helping us shape the country’s energy landscape,” according to Wale Tinubu, Oando CEO. Tinubu emphasised the need to “create varied energy sources” to spur industrialisation in Africa’s most populous nation, committing to “uninterrupted power supply.” Oando’s earlier venture, the 12.15 MW Akute Power plant in Lagos (commissioned 2010) to supply the Lagos Water Corporation, demonstrated its long-standing interest.
This shift is driven by several factors:
- Domestic Demand: Nigeria’s burgeoning population and industrial growth create an insatiable demand for electricity, offering a more stable and growing market compared to volatile global oil prices.
- Gas Monetisation: Oil firms often have access to significant natural gas reserves, which can be efficiently converted into electricity, providing a direct route to gas monetisation and reducing gas flaring.
- Diversification & Resilience: Expanding into power generation diversifies revenue streams, making these companies more resilient to fluctuations in the crude oil market.
- Addressing the Power Gap: By investing in power, these firms align with national development goals, contributing to closing Nigeria’s significant energy access gap and improving the ease of doing business.
The financial performance of listed power generation companies underscores the attractiveness of the sector. Geregu Power and Transcorp Energy, both listed on the Nigerian Stock Exchange (NGX), have shown promising financial results, consistently paying impressive dividends to shareholders. Geregu has maintained an N8.50 per share dividend with a high payout ratio of 78% over the last three years, while Transcorp Energy boasts a 79.43% dividend yield, indicative of the sector’s profitability and potential for investor returns.
The growing interest and investment by Nigeria’s oil and gas E&P firms in the power sector signals a profound transformation. These companies, once solely focused on extracting hydrocarbons for export, are evolving into integrated energy players, actively contributing to solving Nigeria’s domestic power crisis. As more firms follow the lead of Shell, Mobil, Oando, and Seplat, Nigeria’s energy landscape is set to become more diversified, resilient, and, hopefully, capable of providing reliable electricity to every corner of the nation.
Will this trend accelerate, truly making Nigeria a self-sufficient energy powerhouse, or will it remain a strategic sideline for these oil giants? Only time will tell, but the foundations for a new era are clearly being laid.