Thursday May 21 2015

Umeme to borrow Shs1.1 trillion for expansion

Workers at a power substation in Lubowa, Wakiso

Workers at a power substation in Lubowa, Wakiso District. Umeme plans to borrow more money for network expansion. FILE PHOTO 

By Mark Keith Muhumuza

Kampala. Power distributor Umeme plans to borrow $400m (Shs1.1trillion) to expand its network ahead of completion of two mega dams of Karuma and Isimba.
The revelation was made this week by Mr Patrick Bitature, the Umeme chairman, on the sidelines of the company’s 2014 Annual General Meeting in Kampala.
He said Umeme was finding it easier to borrow because it had built a track-record. The power distributor plans to draw the loan in 2018.

“Once we had built a good track record, we borrowed at low rates and paid off the expensive debt. That is how we were able to borrow $190m (Shs570b) in 2013 for network expansion. We are now probably going back to the market to borrow an additional $400m (Shs1.1trillion),” he said.
In 2013, Umeme secured $190m (Shs570b) from International Finance Corporation, the World Bank lending arm, to boost its five-year capital expenditure programme. Mr Bitature said by the time Karuma and Isimba dam projects come on board, Umeme will be more than a “trillion shillings company.”
“Once these projects are completed, coupled with other generation initiatives, generation capacity is projected to triple in the next six years. As the primary distributors, the company projects significant investment requirements in the distribution sector to match the new generation capacity,” he noted.

If Karuma and Isimba go online, power generated is expected to rise from 650MW to at least 1700MW.
In its annual report, Umeme disclosed investment of Shs891b ($320.8b) since 2005. However Electricity Regulatory Authority (ERA) is yet to approve the Shs359.4b of the disclosed investment.
ERA has to verify all investments by Umeme before they can be approved.
Mr Selestino Babungi, the Umeme chief executive said the funds went into construction of substations, network upgrades and further roll-out of prepaid metering.

Umeme’s shareholders will receive dividend payout of Shs28.9 per share, which is a 16.5 per cent increment from 2013.
The company made a net profit of Shs70b in 2014, down from Shs84b in 2013 a reduction attributed to the depreciation of Shilling. Last year, MPs overwhelmingly supported an ad hoc committee report recommending the termination of Umeme’s concession.
The concession remains intact with Mr Bitature telling shareholders “it is not the intention of government to reconsider its contractual obligations”.

Financial results
Umeme’s financial performance in 2014 has been described as positive despite the fall in profit due to a weaker Shilling. The company made a net profit of Shs70b in 2014, down from Shs84b in 2013.