Uncertainty over concession deal affecting Umeme - CMA 

The delay to conclude Umeme’s concession renewal and recent public pronouncements by the President have created anxiety amoung investors with some opting to exit the stock. Photo | Courtesy 

What you need to know:

  • According to Capital Markets Authority (CMA), some institutional investors have exited the Umeme counter due to uncertainty surrounding concession renewal, which is due to expire in 2025.  

The uncertainty surrounding the renewal of Umeme’s concession has impacted performance of the company at the Uganda Securities Exchange, according to Capital Markets Authority. 

In details contained in the Quarterly Bulletin, CMA said Umeme’s share price, for the period ended September continued to fall due to low investor appetite resulting from uncertainty surrounding the renewal of its concession. 
“Supply [of shares] is out striping demand owing to the challenging regulatory environment and uncertainty on the timing of renewal of its contract with government, notes published in the CMA third quarter bulletin, read in part.

The delay to renew Umeme’s concession, which is expected to expire in 2025, has created anxiety among institutional investors, resulting into an increase in Uganda Securities Exchange’s  equity turnover, which during the period ended September grew by 20.8 per cent from Shs5.9b as of June to Shs7.2b. 
“The increase in turnover on the Umeme counter can be attributed to exits by some institutional investors due to the company’s challenging regulatory environment and uncertainty on the timing of the renewal of its contract with government,” CMA noted. 

Umeme, despite being one of the most active counters on USE, has seen its share price oscillate falling by 5.6 per cent in the last one year to September. 
Quarterly price movements at the USE from the third of quarter 2020 to date indicates that Umeme share price has fallen from Shs222.4 in the quarter ended September 2020 to Shs210.

Daily Monitor could not immediately get details on the progress of concession renewal as calls to Mr Selestino Babungi, the Umeme managing director went unanswered by press time.
However, Mr Patrick Bitature, the Umeme chairman, while speaking during the company’s May annual general meeting, told shareholders that the tone of the negotiations for renewal of the concession by government was more cordial than the public pronouncements. “We are continuing to engage government on an early concession renewal post the 2025 concession. We are optimistic we shall reach a mutually beneficial agreement,” he said then. 

President Museveni has previously lambasted Umeme for its role in failing to bring down tariffs, which has created uncertainty for the concession renewal. 
There is little that has been shared about the negotiations, which some government officials have previously said, were disrupted by Covid-19 related restrictions.    
 

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