Umeme to distribute Karuma, Isimba power

Wednesday March 23 2016

Umeme's Selestino Babungi

Umeme's Selestino Babungi 

By Mark Keith Muhumuza


Umeme has revealed it will be supplying the power generated from the 180MW Isimba Power dam and 600MW Karuma Hydropower Station, once complete in 2018 and 2020, respectively.

“As part of the financing arrangements for the 183 MW Isimba hydropower project and the 600MW Karuma hydropower project, the company (Umeme) entered into two supplemental power sales Agreements with Uganda Electricity Transmission Company Limited and Uganda Electricity Distribution Company Limited,” Mr Patrick Bitature, the chairman Umeme revealed in the company financial report released on Monday.

Adding, “pursuant to which power generated from the two hydropower plants is to be made available to the company as part of the overall pool of electricity supplied by UETCL under the existing power sales agreement between the Company and UETCL dated 17 May 2004.”

Distribution sector
In 2014, members of Parliament (MPs) recommended that government open up the power distribution sector to competition but the generation companies and lenders were not convinced. Umeme distributes at least 90 per cent of all electricity generated in the country.

The Chinese government, through the Export and Import Bank of China, provided 80 per cent of the funding totalling Shs5.6 trillion for both projects.

One of the terms for the loan – to ensure they recover the loans – was for the government to ensure that electricity from the two dams is distributed by Umeme. “They (Chinese) want to secure their access to a stable cash flow and Umeme can guarantee that with our record,” Mr Selestino Babungi, the managing director said at an investor briefing on Monday at the Uganda Securities Exchange.

He, however, warned that once some of this power comes on board – Isimba (2018) and Karuma (2020) – it nearly triples the current 650MW power generated and will require the country to build up demand.

“If we don’t create demand for people to invest in Uganda, then we will remain net importer with redundant power supply,” he said.
Umeme’s concession runs out in 2025 and this has been a concern for investors that bought shares in the utility company.

However, the signing of Karuma and Isimba agreements could change the outlook. “The worry for investors has been that there are nine years left on the concession. After the nine years, there is uncertainty over the future but these power sales agreements will now boost investor confidence that the concession will be renegotiated after 2025,” a stock market analyst told Daily Monitor on the sidelines of the investor briefings.

In 2014, MPs had wanted the Umeme contract terminated due to gross illegalities and manipulation at the signing of the concession in 2009.

However, that was not adopted by Cabinet as it was not a binding decision on government.
The Umeme board of directors has, meanwhile, recommended a dividend payout of Shs24.4 per share, up from Shs19.5 per share in 2014.

Umeme top shareholders
National Social Security Fund, Uganda – 15.7%
Umeme Holding – 14.3%
Investec – 9.5%
Kimberlite Fund Managers – 5.5%