Umeme sees record-breaking Private Equity inflows in 2018

Umeme sees record-breaking Private Equity inflows in 2018
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The amount of money invested or committed by private equity firms in Uganda will reach an all time high in the first nine months of 2018, Umeme Ltd, the country’s main private power supply company has said.

Not surprisingly, the year will see the completion of Isimba and Karuma dams — two of the country’s most ambitious energy projects double the power output, Umeme’s managing director Selestino Babungi explained while presenting financial results of Half Year 2017 as well as prospects for the rest of the year to media in Kampala.

Investors will be counting on the increased returns on electricity because of the projected demand and generation of power from the two dams.

“Crucially, the completion of the 183MW Isimba hydropower dam next year will be a game changer,” Mr. Babungi said.

“This will attract more direct foreign investment especially in the power sector. As evidenced for years, Umeme has provided a platform for international investors to have a look at Uganda’s Stock Exchange,” he added.

In March 2005, Umeme under main foreign investor, Actis — a private equity firm focused on emerging markets was awarded a 20-year concession, becoming the first significant private electricity distributor in sub-Saharan Africa.

“We are working on our concession tenure review because it ends in around 7 years so if Uganda is looking to have more foreign investors, we need more years,” Mr. Babungi implored.

Already, big buyers on the Uganda Securities Exchange counter are said to be keen on increasing their holdings of energy stocks even after the midyear reporting season came out.

The financial reports

Babungi noted that the company invested sh99.1b during the first six months of the year to expand the electricity distribution system, make new electricity connections, and cut energy losses.

Umeme’s financial reports also indicate that customers have increased by 19% to 1,019,453. Of these, 70.1% are using a pre-paid electricity plan. Umeme notes that the efficiency of the electricity distribution subsector is at  83%, high up from 50% in 2005, when the Umeme concession started. Today, it distributes 97 per cent of the electricity generated in Uganda.

Electricity distribution firm Umeme has released its half year financial results which indicate an after tax loss of sh47.5b for the six months ended June 2017. Source: Umeme Ltd

Umeme accessed a short term bridge facility of $20m (about sh71.9b) from Standard Chartered bank during the first six months of the year.

However, even as the amount of money invested continues to rise, Umeme the first significant private electricity dispenser in sub-Saharan Africa is also losing money.

This is because Umeme’s supply license was amended by the Electricity Regulatory Authority (ERA) on 12th May 2017. Subsequently, the company made provisions of sh115.3b for taxes and appeal costs, which greatly dented its impressive revenue growth.

“We will recover that money from government and trust me there are better prospects for the last half of 2017 and coming year.”

Despite the financial set backs due to amendments to Umeme’s supply license, the company registered a 6.9% rise in revenues to sh704.4b, due to a hike in sales to large industrial and domestic household consumers.

This is higher as total sales rose by 20.3 per cent to Ush658.7 billion ($180.9 million) at the end of June 2016 but net profit declined to Ush54.5 billion ($14.97 million) from Ush67.6 billion ($18.6 million) during the same period, on account of higher financing costs.

NSSF is now cementing its position as the single largest investor in Umeme, after purchasing an additional 121million shares in the utility company for Shs59.4bn last year. Source: Umeme

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