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Umeme shareholders face a 70 % dividend dip to Shs19bn

The electricity distribution company sees brighter days ahead owed to ongoing COVID-19 vaccination and the anticipated improvement in the economy

Kampala, Uganda | ISAAC KHISA | Shareholders of electricity distributor, Umeme, face a 70 % drop in dividends to Shs19bn for 2020 owed to a sharp drop in net profit as a result of tough economic environment occasioned by coronavirus pandemic.

The company’s financial statements shows that its net profit plunged by 69% from Shs139.2bn in 2019 to Shs43.1bn in 2020. Revenues which includes revenues from Electricity Connections Policy, fell by 7% from Shs1, 777bn to Shs1, 661bn during the same period under review.

Earnings per share fell by 69% to Shs26.5 while dividends per share fell with a similar margin from Shs41.3 to Shs12.2.

However, the company’s operating costs increased by 6% to Shs226bn driven by increase in repairs and maintenance costs and implementing COVID-19 Standard Operating Procedures (SOPs). Umeme’s assets grew by 5% to Shs 2,665bn while shareholders’ equity reduced by 4% to Shs 834bn during the period under review.

Patrick Bitature, on behalf of the company’s Board of Directors, said this year’s results were impacted by COVID-19 global pandemic that posed a challenging environment, and a regulatory lag in recovery of outstanding income.

“We noted a reduction in electricity demand, an increase in power losses due to lack of field activity and the suspension of the free electricity connections program due to lack of funding,” management said.

“On the positive note, we concluded by capital investment program of Shs279bn to improve the network distribution capacity, supply reliability and operational efficiencies.”

The investments included building and upgrading seven power substations, constructing distribution integration lines with transmission infrastructure, expansion of distribution transformer zones and conversation of 168,000 customers to prepaid metering, and which now covers 97% the domestic customer base contributing 30% of our revenues.

Management said the company’s electricity sales remained in line with the 2019 levels with regression in the commercial and medium industrial tariff categories, offset by the increase in demand by large industrial users.

Energy losses increased from 16.4% to 17. 5% on account of limited field activities due to the pandemic restrictions on movements and suspension of Electricity Connection Policy which led to increased illegal connections.

Last year, 59, 623 new customers were connected to the grid which was below planned target of ECP, leaving a back log of 210,000 pending connection applications.

“We are working closely with the government and funding agencies to source alternate funding and allow us to recommence the program and address the backlog,” Bitature said.

Bitature said the company has also automated the new connections process where customers can submit their applications through digital channels without physically visiting the service centers.

Future outlook

Looking ahead, Umeme’s Managing Director, Selestino Babungi said the company is optimistic that the utility would bounce back in 2021 given great projections in the economic recovery and improvements in the general operating environment.

“We shall continue to focus on safety, continuity of electricity supply services, resolution of regulatory matters, operational and financial performance,” he said.

“With the easing of restrictions, we have recommenced the implementation of our loss reduction plans under Operation Komboa. This is aimed at redeeming our network from illegal users and operators so that customers get safe and quality electricity.”

Babungi said resolution of the concession extension beyond 2025 is also fundamental in unlocking long term capital for investment in the distribution network to evacuate new loads, increase access, and improve the quality of supply and reduction of technical losses.

Umeme’s 20-year concession ends in 2025 and the company’s executives are already in talks with government through the Ministry of Energy in a bid to extend their concession for power distribution beyond 2025.  Currently, the company serves more than 1.52million customers countrywide.

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