UEGCL plots to list on securities exchange

Uganda Electricity Generation Company Limited (UEGCL) has plans to list on Uganda’s stock exchange to access funds.
In its strategic plan 2018-2023, UEGCL says: “One of the key milestones envisaged is the preparation for listing on the securities market.”
Listing is one of the options the company foresees to realise its goals in light of the undertakings, both investment and operational over the next five years.
Some of the goals include raising its generation capacity to 1,300MW installed capacity and attain 5 US cents generation cost. Therefore, patient capital as opposed to high interest loans will be essential.
Expounding on the listing, UEGCL head of communications and corporate affairs, Mr Simon Kasyate, explained on the weekend that the move is slated as a long-term plan for the power generation company.
However, for any action to be taken in listing Uganda’s power generation company, Mr Kasyate says some things ought to be accomplished.
“This is a long-term plan which shall hopefully be accomplished based on how the cash flows are realised from full operation and maintenance of Isimba and Karuma dams,” he says adding that improvement of the company’s balance sheet is very vital.
UEGCL has for a while engaged the regulator to permit billing depreciation and return on equity of the Nalubaale and Kiira dams currently under Eskom management.
This is reflected in the impairment of UEGCL’s assets under concession, which impacts on the company’s performance.
Once addressed, he says UEGCL will look attractive to list on the stock market from which private capital can be acquired, putting an end to the recurring government borrowing for energy based infrastructure.
When government unbundled Uganda Electricity Board, it formed Uganda Distribution Company Limited, UEGCL and the transmission arm.
Later, government through UEGCL, signed a 20 year operational, management and maintenance concession of Nalubaale dam with Eskom Uganda in 2002.
Eskom has been faulted on numerous occasions for failing to invest enough in maintaining the 180Megawatt (MW) dam, prompting impairment of the asset.

Listing
Worth noting, adjustments by the electricity regulator to allow billing of depreciation and return on equity by UEGCL is feared to increase power tariffs.
At a point where President Museveni is pushing for industrialisation pegged on lower power tariffs, UEGCL billing might never be realised.
UEGCL in 2015 bounced back from a Shs9b loss to make Shs13.5b profit against an asset base of Shs1trillion.
The company’s solvency in 2015 came after government converted Shs106b debt to equity. UEGCL shareholder equity is owned by Ministry of finance.
Government needed to convert Shs106b loan from International Development Association to UEB into equity to meet concerns of China EXIM bank about government’s ability to pay back the loans for Isimba and Karuma dam development.
In that same year, the auditor general’s report noted that financial reporting requires Shs138b impairment loss as at March 2015 which were left out of the records to be recognised when the recoverable amount of the asset is below its carrying amount.
Carrying amount is the value of an asset after depreciation.
This means that the Shs1 trillion assets were overstated since some assets value is lower than indicated in the books.
UEGCL books of accounts still need a lot more intervention to get in order for the stock market since Eskom’s licence expires in 2023 which will then give a clear image of UEGCL assets value.
Government has been piling loans to grow the country’s generation capacity which need to be paid by money from UEGCL.
Karuma and Isimba dam with capital investment of $1.7b and $567.7m respectively and government footing 15 per cent of each loan will require to be paid by UEGCL.

Repayment
In addition, the strategic plan 2018-2023, indicates UEGCL’s plan effective 2020 to implement its finance agreement by fully complying with its debt repayment schedule.
In spite of Uganda’s growing generation capacity, demand is moving at tortoise pace.
Asked about the source of the funds to repay the loans next year, Mr Kasyate says the financing agreement gives Uganda a grace period of a year after project completion to start payment on the principal loan.
“Government continues to pay interest on the concession loans from China EXIM bank ... Isimba, commissioned in March is still within its period while Karuma is still in project development,” he says.
In the event of failure of projected cash flow materialisation by UEGCL and low power demand, Kasyate says, government as the guarantor of the loan bares the risk and will pay.

Capacity
According to Electricity Regulatory Authority, UEGCL generated 4,084gigawatt hours in 2018 of which 4,078GWh was bought by Uganda Electricity Transmission Company Limited.
Uganda’s maximum demand including power exports as at February 2019 stood at 656.2MW.