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Umeme’s net profit reduces 64% in first half of 2020

Company executives are optimistic the remaining half will see a surge in power sales, profitability as government relaxes COVID-19 lockdown

Kampala, Uganda | ISAAC KHISA | Uganda’s electricity distributor, Umeme, is now pinning its profit growth on the remaining six months of the reporting year following government’s move to ease Covid-19 restrictions nearly two months ago.

However, this will also depend on the company’s capability to keep its staff safe, improved operational performance, liquidity management and resolving regulatory bottlenecks.

Financial results released on Aug.17 shows that the company’s profit after tax reduced by 64% to Shs22bn for the past six months ending June 30 as a result of low electricity demand occasioned by coronavirus pandemic.

Electricity sales fell by 2% to 1,538GWh for the past six months compared with 1563GWh recorded in the same period last year as the April’s total lockdown saw demand  reduce to as low as 29% on a daily average.

Patrick Bitature, the chairman Board of Directors at Umeme said the lockdown’s impact on revenue as a result of reduction in sales volume was equivalent to Shs13bn.

“As the restrictions are being eased, we continue to note recovery in demand with daily average sales improving to 93% of pre-covid-19 daily average,” he said.

He said since businesses resumed operations, the outlook looks positive as electricity demand and collections have picked up whilst energy losses which had climbed to 17.4% compared with 16.9% during the same period last year, has drastically reduced.

Bitature said the company’s revenue collections, however, recorded a 93.3% decline compared with 98.7% during the same period last year.

Though statistics indicates that Umeme’s revenues for electricity sales as well as revenues from the recently connected customers under Electricity Connections Policy increased by 4% to Shs849bn, the cost of sales increased by 19% to Shs617billion during the same period under review.

Similarly, the company’s gross profit reduced by 22% to Shs232billion driven by distribution revenue shortfalls arising out of reduced electricity demand, increased energy losses and outstanding regulatory income recoveries.

Asset growth

However, Umeme’s assets increased from Shs2.54trillion in 2019 to Shs2.64trillion in 2020. The company’s outstanding interest-bearing debt decreased from Shs557billion in December 2019 to Shs502billion as at the end of June.30.

The company paid down debt amounting to Shs65billion in settlement of the long term facility with Standard Chartered Bank, Stanbic Bank, International Finance Corporation and a short term revolving facility with dfcu Bank.

In terms of customers, the electricity distributor experienced a 4% growth to 1.52milion, through connection of 54,779 customers in the period, with finance from government under ECP.

The company also converted 99,779 customers to prepayment metering system, with the balance of 94,779 to be converted by the end of the year.

In relation to the regulatory environment, Bitature said the company has applied to recover Shs48billion excluded from the 2020 tariffs by the Electricity Regulatory Authority, related to implementation of the revised regulatory targets for the six year to 2025.

“While the regulator has declined our application, we are appealing for reconsideration of the matter given the significant impact it has on our operational and financial performance,” he said.

He added that the electricity regulator has also approved US$83milion of capital investments for implementation during the year. Umeme had invested Shs78billion as at the end of June.30 compared with Shs29billion in the same period last year.

Financial analysts said Umeme is expected to record a rebound in profit growth in the next half of the year as the country continues to open up its economy and businesses strive to return to normal operations.

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