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Umeme crosses 1 million customers mark, but sees reduced profit

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High financing costs and increased costs of operation dampened power distributor, Umeme’s net profit for 2017, results announced by the company today show.

Umeme Managing Director, Celestino Babungi

Despite an 8.7% growth in revenue from Shs1.36 trillion in 2016 to Shs1.48 trillion in 2017; a 40% rise in cost of financing from Shs42.6 billion to Shs59.7 billion, a 9% rise in cost of sales and a 12% rise in operating expenses conspired to cause a 73% decline in profits.

Cost of sales went up by Shs78.7 billion while operating expenses went up by Shs20 billion.

These and other costs saw profit reduce from Shs132 billion in 2016 to Shs35.5 billion.

According to Reuters, part of the rise in financing costs was attributed to the rise in the interbank benchmark lending rate after a surge in the London Interbank Offer Rate (LIBOR) – a benchmark for interest rates on some of its debt – and that “as a result of the above, the full year … profit declined.”

A 6% depreciation in the Shilling to the US Dollar in 2017- from an average of Shs3,420 in 2016 to Shs3.611 in 2017 also meant that, Umeme which imports almost all its major inputs and yet earns in Shillings, would see a rise in costs especially the purchase price from Uganda Electricity Transmission Company Limited (UETCL)

Firm fundamentals

Despite a slump in after tax profits, Umeme posted improvements in key business fundamentals, namely; customer growth, energy loss reduction and revenue collections.

Customer numbers grew by 19% from 947,000 in 2016 and crossed the 1 million mark, closing 2017 at 1,125,000 customers.

This led to a surge in peak power demand by 4.5% in 2017 from 539MW to 563MW against effective generation estimated at 680MW and as a result electricity sales went up 7.5% from 2,567GWh in 2016 to 2,760GWh in 2017.

Mr Selestino Babungi, the Umeme managing director while speaking at the financial results release said “We are committed to ensuring access to electricity for all Ugandans. Through improved efficiency and increased electricity distribution, we’ve been able to increase Umeme’s customers to over 1 million,” he said.

“We are working hard to ensure that there’s increased access to electricity which will lead to further reduction in tariffs,” he added.

(Left-Right); Selestino Babungi, the Umeme MD, Marie Nassiwa, the Chief Finance Officer and Florence Nsubuga, the Chief Operations Officer. This was during a media briefing on the 2017 Financial Results at the Kampala Serena Hotel on Thursday. (Courtesy Photo).

Marie Nassiwa, the Chief Financial Officer, said Umeme connected 174,477 new customers in 2017 compared to 157,270 in 2016.

She said the firm was employing the most appropriate technology to bring down energy losses, sustain a rigorous safety regime and invest in strengthening the network to improve the quality and reliability of supply…”

Umeme also reported that energy losses went down from 19 % to 17.2% while revenue collection went up from 98.4% to 100.2% as a result of continued investment into the distribution network especially pre-paid metering.

Umeme reported that it had invested $65m (Shs237.3 billion) in 2017 and out of this, $42m (Shs153.3 billion) went into prepaid metering systems while the rest went to loss reduction, reliability improved and a series of substations across the country.

Shs12bn dividend kitty

As expected dividend per share reduced by 59.5% from the Shs18.8 paid out in 2016 to Shs7.6 in 2017.

A total of Shs12 billion will be paid out to shareholders.

The dividend was recommended by the Board of Directors during their first meeting of 2018 in Kampala early this month.

If approved at the Annual General Meeting to be held on 17 May 2018, the final dividend subject to deduction of withholding tax, where applicable, will be paid on or about 6 July 2018 to shareholders in the books of the Company at close of business on 20 June 2018.

‘The dividend will be paid into the shareholder bank accounts or mobile money accounts whose details are maintained by the Securities Central Depository (SCD),” Grace Semakula, the Umeme investor relations manager, said.

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