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20 firms pick interest in Umeme

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Ms Florence Nsubuga, the Umeme chief operations officer, while conducting a presentation in Kampala yesterday. Actis announced its intention yesterday to sell part of its stake in Umeme Uganda Limited. PHOTO BY NELSON WESONGA. 

By NELSON WESONGA

Posted  Wednesday, May 7  2014 at  01:00

In Summary

Sell out. Actis, on Tuesday announced it would sell part of its ownership in Umeme. However, the percentage of sale is yet to be known.

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Kampala.
Following Umeme Holdings Limited’s announcement to sell part of its stake to potential investors, at least 20 companies have expressed interest in buying Actis’ stake in the electricity distribution company (Umeme Limited), Mr Patrick Mweheire, the Actis lead transaction advisor, has said.
The number, he said, shows that investors still have confidence in the prevailing economic and political conditions in Uganda.

“It allows for deeper-pocketed investors to come together into Umeme. We have interest from more than 20 investors in the region and internationally. I can’t share the investors with you,” Mr Mweheire said yesterday in Kampala at a meeting between Umeme officials and journalist.
However, he did not disclose how much of 60 per cent stake in Umeme, Actis would sell. “But Actis will remain the second largest shareholder,” he added.

Contract termination
Actis’s announcement comes against a backdrop of Parliament’s advice to the Executive in March to terminate the 20-year concession, which should naturally end in 2025.

Parliament argued that the Attorney General’s Chambers had not drafted the agreements as required by law.
The House said it was transaction advisors who drafted the agreements, an omission members claimed resulted in the concession being “skewed in Umeme’s favour”.
But Ms Gertrude Wamala Karugaba, a partner at Ssebalu & Lule Advocates, said the decision to divest had nothing to do with Parliament.
“Umeme Holdings had informed the board that it intended to negotiate with certain institutional shareholders in order for them to come and participate in the company.”

“For the company, the interest is to have credible shareholders because when you have credible shareholders, you will have everything needed to get financing,” said Ms Wamala.

Mr Henry Rugamba, Umeme’s head of communications, said Actis’s decision to divest is not because of pressure.
“We are not under pressure. It is business as usual. As you can see, the performance of the company continues to grow,” said Mr Rugamba.
The government is yet to pronounce itself on Parliament’s recommendation to terminate the Umeme concession.

It had, however, said terminating the agreements would scare away investors, who would consider Uganda a high-risk investment destination.
Mr Mweheire said potential investors are betting on government making the right decision – not to terminate the concession agreement as advised by Parliament in March.

Curbing energy loses
Meanwhile, Umeme has earmarked $100 million (Shs251 billion) to connect 863,000 electricity users to prepaid billing by 2018.
This is one of the measures the company is deploying to ensure people pay for the electricity they use beforehand to mitigate commercial energy losses.
“We intend to retrofit over 800,000 connections by 2018. We are starting with Kampala. However, we have also gone up to Masaka. We intend to extend to Mbale,” Ms Florence Nsubuga, Umeme’s chief operations officer, said in Kampala yesterday.

Energy losses – commercial and technical – are partly the reason electricity tariffs are high because the Electricity Regulatory Authority factors them in the end–user tariffs.

This means, Umeme being a public company, ERA has to approve the money to be invested since it would have a bearing on the electricity tariffs.
According to Umeme’s trajectory, the company will reduce energy losses from 21 per cent (2013) to 15 per cent by 2018.
Besides installing prepaid meters, it will re-conductor and re-configure transformer zones to reduce technical losses.

Umeme’s general manager, corporate and regulatory affairs, Mr Sam Zimbe, said by reducing energy losses from 28 per cent to 20 per cent (2013), the company had saved Uganda $516 million (Shs1.2 trillion) between 2005 and 2013.
The two were speaking at a meeting between Umeme officials and journalist on the developments in the electricity distribution sub–sector.
ERA last month issued various electricity distribution companies with guidelines for the rollout of prepayment metres.