Tuesday March 11 2014

Explain electricity generation financial report findings

On February 17, the management of Uganda Electricity Generation Company Limited published in the media their 2012 financial results. I found them quite disturbing and came up with the following observations.

According to the results, the company is perpetually making huge losses and the magnitude of the losses is increasing every year. For example, the loss in 2012 was Shs49b, despite a huge base of non-current assets of Shs481b. How can such valuable assets fail to make profits for years? If they are not productive, is it not possible to dispose them off?

The concession fees, the main source of income for the company, dropped to Shs5.4b in 2012 down from Shs24B or in 2011-a 78 per cent drop. Can management explain the cause of this huge drop?
Additionally, while income drastically dropped, staff costs and employee benefits almost doubled increasing to Shs3.4b (58per cent of total income) in 2012 up from Shs 1.9b (7.9per cent of total income) in 2011. Can management again explain this scenario?

The current portion of government loan(s) is increasing every year. Does this mean that the company is not servicing its loans whose amounts payable within succeeding years keep accumulating despite having fixed deposits in the bank or is the company acquiring fresh short -term loans every year or both?

There is a liability due to Electricity Regulation Company of Shs6b which has been carried on the balance sheet for the last three years. Why can’t this be settled when there is money in the bank account?
While management does acknowledge their responsibility to safeguard the assets of the company, they should also be reminded that they are also entrusted with the good stewardship of the company and also charged with the mobilisation, proper deployment and utilisation of the company’s resources.

Charles B. Muhumuza,