Umeme: Will Babungi score where Chapman failed?

Tuesday April 14 2015

 

By Nelson Wesonga

Congratulations upon being appointed managing director.
Thank you.

Did you see it coming?
From the time I was appointed chief finance officer, I could see it coming, it could have been within Umeme or outside Umeme. The CEO [chief executive officer] aspect of a job is part of the career aspirations of any manager. When Chapman notified the board he would be retiring, the board started the search for the next CEO.
It looked for candidates within and outside Uganda. It interviewed them. Ultimately, I came out on top. I feel good about it.

What does a managing director’s position entail?
As managing director, I drive the implementation of the company’s corporate strategy and agenda. I must ensure that customers, suppliers and regulatory needs are met and their expectations addressed.
I must also ensure that I drive the company to return shareholder value as well as working with other people to drive the company forward.

Now that you are at the helm, what are Umeme’s plans?
We want to reduce energy losses from 21.3 per cent to 15 per cent by 2018 as well as improving customer service in terms of faster services and simplified processes, reliable power supply.
To achieve this, we have to train our staff to serve the customers’ priorities but also invest in extending distribution lines and electrical substations.
We also want to increase access to electricity. Currently, access stands at 15 per cent but we have been incentivised to increase it to 40 per cent by 2025.
Last year, we invested about Shs288b ($96m) in the areas I have highlighted but between 2013 and 2018, we plan to invest about Shs1.3 trillion ($440m).

How has the depreciation of the shilling against the dollar impacted on your investments?
It means we need more shillings to buy a few dollars. If you look at the bulk of the items we use in the distribution network, such as transformers, cables, meters and electrical substations, they are imported and they are dollar–dominated.
The good news is our funding for Capex (read capital expenditure), the term loan we have, is dollar–dominated.
We have loans in dollars. So we use those dollars to buy dollar–dominated equipment, which insulates us from structural imbalances.
In 2014, the sector regulator introduced quarterly tariff adjustments; when the foreign exchange variable moves, that is passed on to the end–users through tariffs.

Many times when lightning flashes through the clouds, when the air rumbles and rain starts pouring, the distribution network is shocked, so to speak. Power goes off! Does it bother you that this happens often?
Even in America [the most technologically advanced country in the world], storms can wipe out an entire network.
Yes, our network is not fully in good shape. But it has improved. The number of outages has reduced because we have refurbished many lines.
If there is fault Umeme’s engineers will rectify it within a short time.

What is your take on claims that Umeme invests in old capital assets; that is why there are many unplanned outages?
That is not true. We should acknowledge that Umeme inherited a rotten network. So the breakdowns are because of the old network.
But in areas we have refurbished, power supply is has been reliable.

When it comes to collection rates, Umeme is surpassing targets. Why can’t it surpass the loss reduction targets initially set by the regulator?
We look at the regulatory targets in totality. If the large consumers are paying you, that is a given, you look at how to improve collections from the domestic consumers.
The good news is that 30 per cent of the domestic consumers are on prepayment. We intend to convert all from postpaid to prepaid metering.

Some Umeme customers claim the prepayment meters are calibrated to run faster than they should. How true is this?
We’ve heard about that. And we have gone out to educate the public about how the prepayment meters work.
The Uganda National Bureau of Standards and the Electricity Regulatory Authority have independently certified our meters for accuracy and reliability. For consumers who are moving from postpaid to prepayment, if one loads Shs5,000, depending on his or her consumption pattern, it could take you a day or a week.

Some postpaid customers say Umeme exaggerates their bills.
Our bills are not exaggerated, they reflect people’s consumption patterns.
Should we find that the customer’s consumption was over estimated for one reason or another there are measures to correct it.
The billing system looks at one’s consumption for the last six to 12 months and notes the pattern.
When it is doing the estimate, it will estimate basing on your average usage patterns. It will be within the bounds of your consumption patterns.

What are some of the challenges Umeme faces?
Vandalism. But the vandals do not target only Umeme. They vandalise pylons belonging to the transmission company as well as telecommunications network equipment.
Vandalism cost us about Shs6b ($2m annually) with close to 200 transformers vandlaised of their oil, which results into transformers blowing up.

Why would someone steal your transformer oil?
One theory is that the oil is used to manufacture lotions. Other people claim it is mixed with diesel for use in vehicles. There are even claims that it is used for wielding.
It intrigues me why someone would steal transformer oil. The old transformers had copper for conductors. Some vandals have been targeting the transformers, looking for copper. As the demand for copper has been increasing, so has its price.
Now that we are aware that vandals target the copper, we are switching from copper to aluminium.

Last year, Parliament recommended that Umeme’s 20–year concession be terminated. What is your take on this?
It is at the discretion of the Executive to implement. As far as I know, nothing has come to our attention with the view of starting the termination process. The central government is very supportive of Umeme given what we have so far delivered.
Thank you for your time, Mr Babungi Welcome.

Profile
Selestino Babungi, umeme managing director
Age. 37
Background. He is married with three children.
Education. He is a graduate of Makerere University. He majored in statistics, a Fellow of the Association of Certified Chartered Accountants (UK) and a Certified Public Accountant - Uganda (CPA).
Work experience. Before joining Umeme in 2006, Babungi had worked with Ernst & Young, between 1999 and 2006. Prior to the promotions, he has been the chief finance officer of Umeme. pHOTO by Geoffrey sseruyange.

chapman exited umeme at the end of march

Last month, Umeme announced Charles Chapman would exit the company after serving the company for close to seven years. Chapman joined Umeme in February 2009 as the chief operating officer. Three months later, he was elevated to managing director replacing Paul Mare, the first managing director of Umeme.
In an interview, Chapman told Daily Monitor he had to the best of his abilities, achieved his role and will be remembered for having stirred Umeme through one of its hardest times during the 2011 when power outages were a regular.

RELATED STORIES

Umeme gets new chief executive officer

I was called the prince of darkness, Chapman says

Advertisement