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Umeme concession talks limits capital mobilization efforts

The utility company saw its net profit more than double to Shs48.2bn

Kampala, Uganda | ISAAC KHISA | Lack of clarity on renewal of Umeme’s operating licence in 2025 is limiting its ability to raise more capital and make capital investments in the electricity distribution network.

The utility company, which more than doubled its net profit from Shs21.8bn to Shs48.2bn for the six months ending June 30, said the inability to raise capital is hindering its ability to achieve the national electrification goals.

“We await further engagements with the government for an amicable settlement of the negotiations,” said the company’s Chairman Patrick Bitature and CEO Selestin Babungi.

“We remain committed to driving Uganda’s electrification agenda through efficient and safe operation of the electricity distribution system.”

Umeme has been in deep negotiation with the government over renewal of its concession licence upon expiry of the current one in   2025. However, the government has been undecided, with President Yoweri Museveni accusing the electricity distributor of failing industrialisation due to high electricity tariffs.

“They went behind and then brought something called Umeme. What is this for? A private company, looking for profits, you make it a middleman between the generation of electricity and the final consumers, including the factories which you want to create jobs. What’s this, what are you looking for?” President Museveni said during this year’s Labour Day celebrations at State House Entebbe.

Museveni, instead, said industrial parks will be powered directly from generation and not through Umeme, a move that would deny the utility company billions of shillings in revenues.

Umeme has fully drawn down and utilised the debt raised in late 2019 to bolster its investment programme over the past 18 months; with its long-term gross debt at the close of June this year now standing at US$120.3m, down from US% 144.3milion in December 2020.

Revenues up by 9.3%

Umeme recorded a 9.3% increase in revenue to Shs 928bn citing increased electricity demand across all consumer categories following reduced restrictions after the first wave of coronavirus pandemic. These included industrial and commercial customers that each recorded a 13% increase in electricity demand and domestic customers that recorded a 5% increase in electricity demand.

Overall, the electricity sales for the six-month’s period increased by 11.8% from 1,538 GWh to 1,720 GWh for the same period in 2020.

Similarly, the company’s operating costs increased by 12% to Shs 123 billion compared to the same period last year due to increase in overall business activities to comply with Covid 19 directives, repairs and maintenance of the network and impairment of receivables.

Finance costs, meanwhile, declined by 15.4% due to decrease in interest rates on the long-term facilities. This development comes at the time Umeme’s share prices has fallen from as high as Shs528 in 2016 to Shs214 as a result of uncertainties around concessional renewal.

The company executives said Umeme has since June this year connected 8,907 customers of the government’s free connection of 87,500 customers of the backlog of 210,000 customers. Moreover, the company has added 31,722 customer funded connections, bringing the total for the period to 40,629.

‘We aim to clear the 87,500 connections by November 2021 as the government mobilises additional financing for the rest of the backlog,” the company said, adding that its customer base now stands at more than 1.53million, of which 29,733 are under the post-paid system.

Equally, Umeme converted 8,864 of the post-paid customers to Yaka (pre-paid system), with the balance of 20,869 to be converted by the end of the year. Pre-paid sales contribute 31% of the total revenues.

The company said the rollout of the online new applications platform has simplified and improved the customer connections experience, new applicants under the self-funded program now connected within an average of 3 days.

“We also connected 98 and 751 industrial and commercial customers respectively,” the company said. However, energy losses was up 17.9% compared to 17.5% for 2020 as Covid-19 restrictions impacted  ability to execute its  loss reduction programme during the period.

Umeme recorded increased tendency of tampering and vandalising electricity infrastructure, including metering installations by some unscrupulous members of the public.

Last year, Umeme posted the lowest ever profit in nine years, resulting in depressed dividend per share. The company’s net profit dropped from Sh139.2bn in 2019 to merely Sh43.1bn, translating into lower earnings per share of Sh26.5 compared with Sh85.7 during the same period under review.


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