NSSF turns to smaller power plants after acquiring major stake in Umeme
Mr Richard Byarugaba, the managing director National Social Security Fund, taking a selfie with members during the 4th Annual Members Meeting at the Kampala Serena Hotel in October. He says the Fund plans to invest more in power. PHOTO BY RACHEL MABALA
What you need to know:
In talks. NSSF managing director says the Fund is currently in talks with several producers in order to increase their energy mix in the country
Kampala.
After increasing becoming the majority shareholder in power distributor, Umeme, the National Social Security Fund (NSSF) is now planning to invest in other power plants. Mr Richard Byarugaba, the managing director NSSF told reporters on Wednesday that the Fund was engaging several Independent Power Producers (IPPs) in order to acquire a stake through their private arm.
“We are currently in talks with several IPPs in order to increase our energy mix in the country. Obviously, we are looking at proper corporate governance structures and a proper plan for an exit strategy,” he said during the lifting of the Umeme trading suspension by the Uganda Securities Exchange.
However, Mr Byarugaba did not reveal the IPPs they were negotiating with but he said they would be the smaller power producers.
In 2015, NSSF revealed plans to set-up a private equity firm that would invest in several sectors of the economy, including SMEs. Private equity is where an investor deploys capital in a company with the intention of growing the business and finally exiting. After the given period, the private equity firm can exit the company by listing its shares on the stock exchange for other people to buy. Actis has done this with Umeme.
NSSF last week increased its stake in Umeme to 23 per cent after purchasing shares valued at Shs59.4 billion from Actis, making it the single largest shareholder in the power distributor. The intention to acquire stakes in IPPs indicates that NSSF is now looking at increasing its presence in the energy sector.
There is still potential for growth in the energy sector with coverage only at about 20 per cent. According to Mr Byarugaba, the growth would contribute to better returns for investors. If NSSF goes ahead to invest in the IPPs, it will be further diversification of its investment from fixed income assets.
With Karuma and Isimba power projects coming on board in the next two years, Uganda is expected to have a surplus of supply of about 400MW, which will need to be consumed.
“The effective power generation at the moment is 650MW with peak demand at 540MW. The extra 100MW is from thermal plants that are currently turned,” Mr Selestino Babungi, the managing director, Umeme, said.
Umeme trading suspension lifted
The Umeme counter on Wednesday also resumed trading, after a one and a half week trading suspension was lifted. Trading was lifted by the USE after the transaction between Actis and Umeme was completed. Actis, which has been the long-term investor in Umeme will by end of 2016 no longer hold any stake in the power firm.
Retail investors will also today be able to get their hands on the 37 million Umeme shares at Shs488 per share. An additional 63 million shares will be sold to institutional investors in Kenya and Uganda. By end of December, once all sales have been completed, Actis will have walked away with about Shs800b since 2012 when Umeme became a listed company. The amount excludes dividends earned.
“We are enormously proud of what Umeme has become,” Mr David Grylls, a partner at Actis, said.
Nssf investments
Involvement. NSSF has 23 per cent stake in Umeme; 20 per cent in Kampala Serena Hotel; 50 per cent in Housing Finance Bank; 33 per cent in Uganda Clays Limited;
20 per cent in Vision Group; 6 per cent in dfcu Bank; and 1.78 per cent in Stanbic Bank. Other interests are: 2.44 per cent in Equity Bank Kenya; shares in Bank of Kigali; Tanzania Breweries Ltd; PTA Bank, KCB Group and Safaricom; among others.
