RISK MEMO. Prepared for: Institutional Investors, DFIs, Pension Funds and Asset Managers.
EXECUTIVE SUMMARY.
Financial distress among a number of Nigerian Generation Companies (GENCOs) has raised concerns about the ability of the sector to service outstanding debt and refinance maturing obligations. The immediate concern is credit exposure to individual generation companies. The larger concern, however, is the possibility that weakness in the power sector could transmit into Nigeria’s banking system, capital markets, foreign-exchange market, and public finances.
The central investment view is therefore cautious.
New unsecured GENCO naira and dollar bonds should be approached with significant caution until the electricity market’s tariff, collection, gas-supply, and payment mechanisms become more predictable.
