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No dividends for shareholders as Umeme concession uncertainty persists

Umeme

Kampala, Uganda | THE INDEPENDENT | Electricity distributor Umeme has decided not to pay out any dividends to its shareholders despite the significant recovery in business over the last one year, according to the performance indicators.

The unexplained decision comes amidst what the company calls uncertainty created by the delayed government decision on the renewal of the company’s concession as well as the continuing start-stop measures on businesses affected by COVID-19.

The current 20-year concession comes to an end in 2025, and according to management, there is no progress so far to give them confidence that they will have it renewed. However, the Umeme board chairperson Patrick Bitature is hopeful of a positive outcome when the talks begin.

Earlier in April, the chairman revealed that the talks would resume as soon as the new government was fully assembled (after May) following the electioneering process that disrupted many government programs for almost a year. There is also uncertainty around the management of the electricity sector in the next few years following the plan to merge the government entities involved in the sector’s value chain.

They include Uganda Electricity Distribution Company Ltd (which gave the contract to Umeme), Uganda Electricity Transmission Company Ltd, Uganda Electricity Generation Company and the Rural Electrification Agency.

The Minister for Energy Ruth Nankabirwa has shown great support towards this move, saying capacity has been built over the last 20 years and that creation of the Uganda Electricity Company will help improve service delivery.

“The lack of clarity of the concession post-2025 limits significantly our ability to raise capital and make capital investments in the electricity distribution system to achieve the national electrification goals. We await further engagements with the government for an amicable settlement of the negotiations,” said the statement by Bitature and the Managing Director Celestino Babungi.

Umeme’s revenues increased by 9.3% to 928 billion Shillings in the six months ended June this year, compared to the Shillings 849 billion for the same six month-period in 2020, according to the half-year financial statements.

The growth is attributed to increased electricity demand across all consumer categories following reduced restrictions after the 1st wave of COVID-19. And Net profit more than doubled from Shillings 21.8 billion to Shillings 48.2 billion over the same period compared to Shillings 21.8 billion in the interim period to June 2020.

Despite this however, the directors do not recommend payment of an interim dividend.

The company reports increased revenue collection levels from 93.3 percent in the first half of last year to 99.1% in the six months ended June 2021, saying this has enabled the sector reduce reliance on government resources.

“Collection of billed electricity revenues is fundamental for the sustainability of the electricity supply industry, growth, and overall service delivery to our customers. The cash-flows enable the generation, transmission and distribution companies to meet their operating and investment obligations, without constraining the government’s fiscal resources,” the statements say.

But this improvement also comes amidst higher energy losses which are attributed to reduced surveillance during the lockdown periods. “Energy losses for the six months were 17.9% compared to 17.5% for 2020. The Covid-19 restrictions impacted our ability to execute our loss reduction programme during the period. We continue to note with concern the increased tendency of tampering and vandalising electricity infrastructure, including metering installations by some unscrupulous members of the public,” says Umeme.

They add that with the support of the Uganda Police Force, they have resumed the field operations. The company says it is getting back to its normal operations as the economic activities also pick up, including connecting new customers.

“We aim to clear the 87,500 connections by November 2021 as the government mobilises additional financing for the rest of the backlog that totaled 210,000 when the policy was suspended.” According to records, there are now 1,530,733 customers in total, of which 29,733 are still under the post-paid system.

The plan is to have all the customer meters converted to Yaka by the end of the year. Industrial and commercial connections were 98 and 751 respectively. There was also overall increase in demand, as sales for the six months to 30 June 2021 increased by 11.8% to 1,720 GWh up from 1,538 GWh for the same period in 2020 when demand was subdued by effects of the stricter first lockdown.

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URN

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