Umeme: We need more time to improve

Mr Selestino Babungi speaks during a press briefing in Kampala recently. PHOTO BY RAINHER OJON

What you need to know:

  • For much of this year, discussions from different quarters over the renewal of Umeme’s concession have been at the centre stage.
  • Both Parliament and the Executive have been in deep reflections probing claims of exaggerated investments and higher end user tariffs. Rainher Ojon spoke to Selestino Babungi, the Umeme managing director to understand the claims and what the future holds for the power distributor.

This threat of terminating your concession; does it come as a surprise to you?
Part of the engagement process with government is that we continue to invest. Government also understands that with the nature of investments we are currently undertaking is worth hundreds of billions of shillings.
We need an extended period beyond the remaining seven years of our running concessions to ensure that the shortages such as load shedding which we experienced as a country before does not re occur.
This will also allow for appropriate spread of our investments and automatically much lower tariffs to end users.

So both industrial and domestic consumers are paying higher tariffs?
The net price of power is drawn from many variables. Generation, transmission and distribution costs alone account for 70 per cent of the net tariff. Factoring our own investments and actual delivery of electricity to the consumer, we are at 30 per cent. But we appreciate that given the current times, the consumer will ultimately enjoy lower tariffs once the country stabilises with supply of much cheaper power from Karuma and Isimba at under six cents of a dollar. Several other mini hydro plants that are under construction across the country, will enable over 1600 megawatts of renewed supply into the national grid.

But when does that translate into affordable tariffs for millions of cash stripped consumers?
Our challenge going forward will be expanding connections to more consumers of all shades. We have todate installed 11,000 transformers up from about half that figure over the years. In order to provide stable power supply to consumers.
Last year alone, nearly 200,000 new customers were connected on the national grid.
The running transmission network to convey electricity is at 45,000 kilometres. Increased affordable supply and connections of more users onto the network are critical in driving tariffs down due to economies of scale.

Your investments are said to be exaggerated and that this feeds into the approved end user tariffs?
Establishing a single substation alone is worth billions of shillings, upgrading the network in the respective transmission phases is a very costly investment.
Domestic suppliers in our business can confirm our uptake of cables. Uganda Revenue Authority can attest to the imports of transformers and metres among others that we spend on. It is possible to verify our capital investments by whoever is interested.

You have indicated that Umeme invested nearly $100m or approximately Shs360b in 2017, in what areas exactly?
We have built a new substation at Nyakesi in Tororo. We expect this to satisfactorily drive demand by the large new cement factories in that district such as Simba Cement, Hima and Tororo Cement.
These industries have expanded their operations thus they require more electricity supply.
Apart from, that we have rehabilitated 21 substations across the country and more related infrastructure.

What about this concern over energy losses and its roll back effect on consumer tariffs?
Energy losses is another issues that we believe we have successfully worked upon and we still continue to do so.
In this current year of the financial 2017 results, our sales nearly doubled from 4.4 per cent in 2016 to 7.5 per cent.
This actually delivered a lower energy loss rate of 17.2 per cent down from 19 per cent. Will continue to bring these rates downwards.

But how far have you moved with the regulator in as far as modifying your license for supply of electricity No: 40?
Our engagements with the regulator always reaches logical conclusions. This particular aspect is meant to allow us deploy the reconciliation amounts for year-on-year energy purchases towards investment into the distribution network to the benefit of the end users which is about $115m.

Your profits came down from Shs138.8b in 2016 to just Shs35.5b, is the business still profitable?
The business continues to be attractive to investors and it will even be more profitable in the very short run.
Our investments are going to pay off. The demand for power is growing by the day. The light and large industrial sector is in need of more electricity supply.

What is the outlook?
We are engaging with government to align our network investment plans with the electricity sector targets while supporting increased access to electricity for businesses and households.