Umeme seeks Shs262b loan to fund final leg of concession

Friday June 14 2019

New power. Building capacity to supply new

New power. Building capacity to supply new geneated power will be a key agenda in Umeme’s next six-year plan. PHOTO BY EDGAR R BATTE  

By Christine Kasemiire

Umeme, has submitted a request seeking to get $70m (Shs262b) in debt financing from Internal Finance Corporation (IFC).
In documents submitted as disclosures for the loan application, IFC said the request for debt financing will be injected in investment expenditure for the period 2019-24.
“The total debt will amount to a maximum of $70m (Shs262b) that IFC is expected to arrange including a senior loan for up to $30m (Shs112b) from IFC’s own account and up to $40m (Shs150b) to be mobilised from other lenders,” IFC revealed in notes published by the lender.
The six-year expenditure programme, will mainly focus on network upgrades to enable load growth and additional connections to support uptake of new generation, mainly being evacuated from new dams such as Isimba and Karuma, among others.
It will also seek to enhance safety and boost the smart metering system to improve collection targets in order to reduce energy losses.
Umeme’s energy losses, which are compensated through tariffs, have been reducing over the years and are currently at 16 per cent.
However, efforts are being done to further bring them down, albeit with some government pressure.
Government has previously raised concerned why commercial losses continue to be high despite a number of improvements in both network upgrade billing systems, among others.
The project is expected to cost $325m (Shs1.2 trillion) of which $70m (Shs262b) will be acquired through debt financing while the $255m (Shs957b) will come from Umeme’s internal cash generation.
Umeme, which mainly earns through distributing power, has a network of 1.3 million customers, and has, according to its financial details, been improving collections, mainly because of the prepaid and smart metering system.
The loan request follows reassurance by Umeme officials including Mr Selestino Babungi, the company’s managing director committing to expand and improve the distribution network. During the company’s annual general meeting last month, Mr Babungi said they would seek funding from financiers to implement its last leg of the concession. The current concession will expire in 2025 but negotiations to renew it are underway.
IFC has in the past funded Umeme on numerous projects such the $25m (Shs93b) in 2009, $70m (Shs262b) in 2013 and $20m (Shs75b) in 2016, which was advanced to the company to support its 2013-2018 expansion plan.

Important

Cheap financing: During last month’s annual general meeting, Mr Patrick Bitature, the Umeme chairman, said it was critical to acquire cheap financing to enhance distribution network, especially with the anticipated increase power supply from new dams such as Isimba and Karuma.
Renegotiating concession: The Minister of Finance in April issued a directive instructing stakeholders in the energy sector to form a committee aimed at renegotiating Umeme’s concession.

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