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Umeme’s profit drop threefold to Shs 35bn

Umeme MD, Selestino Babungi (L) breaking down company’s 2017 financial results in Kampala on March 29. Looking on are other company officials.

Company managers say recent concession talk not threat to its future 

Kampala,Uganda | JULIUS BUSINGE | Uganda’s power distributor, Umeme Limited, has recorded a surprise performance in the year ended December 2017, with the net profit dropping threefold to Shs 35bn compared with the previous year.

The less than expected performance was attributed to the disclosures made in the half-year results of last year where the company reported an impairment provision in the amount of Shs 115.2 bn as a result of the changes made in its license by the industry regulator – Electricity Regulatory Authority – regarding Amendment 5 that denied the company of extra income from the sale of extra units of electricity sold beyond the set target. The amount started accumulating since 2012.

The company also experienced an increase in financing costs from Shs69bn in 2016 to Shs97bn last year driven by increased borrowings and related interest rates. Currently, the company’s outstanding long term debt as at the end of last year stood at US$ 181 million.

On a positive note, its total assets marginally grew from Shs 2.2 trillion to Shs 2.3trillion and so was the revenue collection from 98.4% to 100.2%, respectively, during the same period under review.

Similarly, energy losses reduced from 19% to 17.2% while energy sales increased from 2, 567 (GWh) to 2, 760 and customer numbers went up from 951, 000 to over 1.1 million.

Also, ccustomers on pre-paid metering increased to 75.3% of the total customer base compared to 65.0% at end of December 2016 while pre-paid revenue as a proportion of total revenue stood at 21.1%, up from 16.3% at end of December 2016.

As a result, the company has approved Shs 12bn (Shs 7.6 per share) as dividend payable to shareholders in July this year.

This proposed dividend, however, is lower than Shs 18.8 that was paid out for each share for the year in the previous year.

The results came amidst President Yoweri Museveni’s authored letter addressed to the Energy Minister Irene Muloni dated March 21 expressing his dissatisfaction about the company’s performance in relation to tariffs.

According the letter, the President said the company was cheating power users – a vice that began with fraud of inflating the magnitude of technical and commercial losses – which he blamed on some officials in the Ministry of Energy.

“I am now directing you to furnish me with the explanation on all these matters,” Museveni wrote. In the same letter, he stressed that there should be no question of renewing Umeme’s concession.

The harsh directive from the big man prompted company officials including its Chairperson of the Board Patrick Bitature and the Managing Director, Selestino Babungi, to hold a special meeting with the President to iron out issues regarding tariffs and its entire operations.

While details from the meeting remain scanty, observers say it was a good step forward for courting the President to reverse his directive especially on not renewing the company’s contract that is set to expire in seven years.

Meanwhile, amidst this good and bad news, the company’s counters on the Uganda and Nairobi Securities Exchange remain muted with the share price settling at Shs 410 per share on the USE and Kshs 12.2 on the NSE since March 21 when different events about the company unfolded.

Key to note is that many shareholders are selling significant number of shares but few are interested in buying – this was in particular observed on the USE in the period leading up to Easter season holiday.

 Big is big

 Joseph Kibuuka, the second in command and head of investment banking at a brokerage firm, Crested Capital, told The Independent on April 03, that basing on the company’s experience in the sector and investment infrastructure in addition to its strong balance sheet, the company remains strong and one to side with on matters electricity distribution.

“With or without the concession Umeme remains a strong company other factors like political remaining constant,” Kibuuka said, adding “The future of the company is not in the hands of the President.”

On the company’s future trading, Kibuuka said investors are yet to decide on the next course of action in line with current news regarding its concession and financial performance for the year 2017 – that were released ahead of Easter season celebrations.

Going forward

Marie Nassiwa, the company’s chief financial officer and Selestino Babungi (MD) told reporters in Kampala on March 29 the company is committed to continue employing the appropriate technology to bring down energy losses, sustain a rigorous safety regime and invest in strengthening the network to improve the quality and reliability of supply. Babungi said they were engaging government on having the company’s contract extended.

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