What you need to know:
Reason. The listing is meant to help the company raise funds.
Kampala. The Uganda Electricity Generation Company Limited (UEGCL) will list on the Uganda Securities Exchange within the next two years.
The listing is meant to help the company raise funds to develop more electricity generation plants, thus, stave off power rationing.
KenGen, Kenya’s government–owned power generation firm’s decision to divest 30 per cent of its stock in 2006, too, informed UEGCL’s plan.
“In the next one year or two, we want to raise funds, not to disturb the Consolidated Fund,” Mr Stephen Robert Isabaija, the board chairperson of UEGCL told the Daily Monitor in Kampala.
He added: “We want to identify funds to make our [electricity] market interesting. We believe we shall raise the funds and support the sector to bring the tariff down.”
High power costs
Mr Isabaija said many investors shun Uganda because of the high cost of electricity, a cost attributed to the depreciation of the Shilling against the US dollar, inflation and the cost of imported fuel used in power generation.
However, he did not say how much of UEGCL’s stock would be offered to the public since they are still discussing the issue.
In an interview with Daily Monitor yesterday, Mr Bukenya Matovu, the head of communications ministry of Energy, said the proposed listing is “one way of financial engineering”.
“It is one way of raising funds for your projects without going into public debt. If the business does well, the people who would have invested in the company will share the benefits; they will get dividends,” he said.
In case a company raises most of its funds from selling its stocks on the securities exchange instead of getting bank loans, it will not be burdened with high bank rates, which would mean its rate for energy could be lower than for those companies that have to repay the loans.
What the law says
UEGCL owns the Kiira and Nalubaale hydroelectricity stations located in Jinja, eastern Uganda.
The company plans to increase its power generation capacity from 380 megawatts to 563MW, over the next three years, to stave off power rationing.