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No dividends for shareholders as Umeme concession uncertainty persists

Despite a substantial improvement in business over the previous year, according to performance metrics, electricity distributor Umeme has chosen not to issue any dividends to its stockholders

Despite a substantial improvement in business over the previous year, according to performance metrics, electricity distributor Umeme has chosen not to issue any dividends to its stockholders.

The inexplicable decision comes amid “uncertainty” caused by the government’s delayed decision on the firm’s concession renewal, as well as the ongoing start-stop measures on enterprises affected by COVID-19, according to the company.

The existing 20-year concession expires in 2025, and management claims there has been no progress to far that gives them confidence that it will be extended. When the negotiations begin, though, Umeme board chairperson Patrick Bitature is optimistic about a favorable conclusion.

Following the electioneering process, which interrupted numerous government initiatives for over a year, the chairman stated earlier in April that the negotiations would begin as soon as the new government was completely constituted (after May). Following the proposal to consolidate the government agencies engaged in the industry’s value chain, there is considerable ambiguity about how the energy sector will be managed in the next years.

Uganda Electricity Distribution Company Ltd (Uganda Electricity Transmission Company Ltd), Uganda Electricity Generation Company, and the Rural Electrification Agency are among them. Ruth Nankabirwa, the Minister of Energy, has expressed strong support for this initiative, stating that capacity has been created over the previous 20 years and that the establishment of the Uganda Electricity Company will assist enhance service delivery.

“The lack of certainty around the concession after 2025 severely restricts our capacity to acquire funds and invest in the energy distribution infrastructure in order to meet our national electrification ambitions. “We look forward to continued contacts with the government in order to reach an acceptable conclusion to the negotiations,” Bitature and Managing Director Celestino Babungi stated in a joint statement.

According to the half-year financial statements, Umeme’s sales grew by 9.3% to 928 billion Shillings in the six months ended June this year, compared to Shillings 849 billion in the same six-month period in 2020.

The rise is attributable to increasing power consumption across all customer segments following the first wave of COVID-19 limitations being lifted. And, compared to Shillings 21.8 billion in the interim period to June 2020, net profit more than quadrupled from Shillings 21.8 billion to Shillings 48.2 billion.

Despite this, the board of directors does not propose that an interim dividend be paid.

Revenue collection rates improved from 93.3 percent in the first half of last year to 99.1 percent in the six months ending June 2021, according to the firm, allowing the industry to lessen its dependency on government resources.

“Collecting billed power revenues is critical for the electricity supply industry’s long-term viability, development, and overall service delivery to our consumers. The cash flows allow the generating, transmission, and distribution businesses to satisfy their operational and investment responsibilities without putting the government’s fiscal resources under strain,” according to the financial statements.

However, this improvement comes at the expense of increased energy losses, which can be linked to lower supervision during lockdown periods. “Energy losses during the first half of the year were 17.9%, compared to 17.5 percent in 2020. During the period, the Covid-19 limitations hampered our ability to carry out our loss reduction strategy. We continue to be concerned about the growing inclination of certain unscrupulous members of the public to tamper with and vandalize energy infrastructure, particularly metering installations,” adds Umeme.

They go on to say that they have begun field activities with the help of the Uganda Police Force. According to the firm, it is returning to normal operations as economic activity picks up, including connecting new consumers.

“We plan to complete the 87,500 connections by November 2021, provided the government secures more funding to finish the remaining backlog of 210,000 connections that existed when the program was suspended.” According to statistics, there are 1,530,733 total subscribers, 29,733 of whom are still on the post-paid system.

By the end of the year, all customer meters will have been changed to Yaka. There were 98 and 751 industrial and commercial connections, respectively. Overall demand grew by 11.8 percent to 1,720 GWh in the six months ending June 30, 2021, compared to 1,538 GWh in the same time in 2020, when demand was suppressed by the tougher initial lockdown.


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