Umeme makes record revenues in Half Year Results

Kampala, Uganda | THE INDEPENDENT | With barely 18 months to run out its 25-year concession, power distributor, Umeme Ltd has made a 49 percent growth in operating profit for the first half ended June 2023. The company attributed the profit before amortisation and impairment, tax, and interest of 243,530 billion Shillings to the increase in revenues from customers including new connections and sales, boosted by the revived economic activity.

The new connections to the grid have translated into an 8.3 percent increase in electricity demand for the six months to 30 June 2023 compared to the same period in 2022, according to the unaudited financial results for the period. The highest increase in sales was 11 percent to the large industrial customers, followed by 9 percent in medium industrial and commercial customers, while sales to domestic consumers grew by 8 percent.

The company adds that the reduction of connection charges and the introduction of the Uganda Development Bank-funded hybrid loan financing scheme has led to an increase in new customer applications and connections.  Consequently, the period saw 72,411 customers connected to the grid, compared to 56,547 connected in the same period of 2022 representing 28 percent growth.

The total number of connections now stands at 1.8 million.

The revenues were also helped by improved distribution and collection efficiency, following a further reduction in distribution losses from 17.1 to 16.7 percent of the power the company distributed.

The revenue collection efficiency has increased to 98.9 percent, meaning that the company failed to collect only 1.1 percent of expected revenue.  During the period, some Shillings 41.9 billion was invested in the distribution network for projects approved by the Electricity Regulatory Authority, aimed at improving customer experience, according to Umeme.

Some of the projects undergoing implementation are lines dedicated to improving supply reliability to Referral Hospitals, the substations at Matugga, Hoima, Jinja, Kisugu, Mbarara, and Mbale, and the integration of Uganda Electricity Transmission Co Ltd and evacuation lines in Kasana, Luzira, and Hoima. Others are the various transformer injections across the country, new prepaid connections, and prepayment accessories, as well as the development of the Geospatial Network Information System.

On the safety issues, the company reports seven deaths during the period arising from interference with the network and illegal operations by unauthorized people. Total revenues increased by a fifth to 1.076 trillion shillings from 897 billion in the same period in 2022, on growth in electricity sales, tariff adjustments, and provision of construction services.

The company also reports a slight reduction in operating costs due to new technology, while a fall in global inflation also tamed the rising costs. As the concession of the company is coming to its natural end, the accounting standards require an increase in the amortisation of the assets. This refers to the continuous writing off of the value of intangible assets like copyrights, parents, and franchises, as opposed to depreciation which refers to physical assets.

Earnings Before Interest, Tax, Depreciation, and Amortisation increased by 49.7 percent to 244 billion shillings due to the 28 percent increase in gross profit and 2.6 reduction in operating costs. The effect of the International Financial Reporting Standards (IFRS) on the ending of the contract meant that the amortization charge for the period increased to 210 billion compared to Shillings 79 billion in 2022, hence bringing the profit for the year to 13.2 billion, down from 64.4 billion shillings of 2022.

According to the results, a total of Shillings 41.9 billion was invested in the distribution network.

Term loans as of 30th June 2023 were reduced by Shillings 74 billion from 268 billion as of 30th June 2022 following the scheduled repayment of the term loans over the period.  Shareholders in the company will be earning Shillings 24 per share for the first half of the year, a shift in fortunes for them from the same period last year.

In the corresponding period of last year, there was no dividend declared as the company focused on clearing scheduled term debt and funding ongoing capital investments then. The final scheduled repayment of term loans is in December 2023. On the Uganda Securities Exchange, USE, Umeme Ltd shares have been the best sellers as, according to analysts, investors rush to take advantage of the expected huge government payout at the end of the 25-year concession in 2025. Umeme Ltd’s latest share price was 400 shillings compared to the initial public offer price of 275 in 2012.

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