Despite a tough 2020, characterised, by among others, a Covid-19-induced slowdown in power consumption as well as the government suspension of the free Electricity Connection Programme (ECP), Umeme has announced it still managed to connect more customers as well as return a moderate return for its shareholders- albeit lower than 2019.
In results announced yesterday, Umeme announced that total customer numbers increased by 2.5% from 1,469,963 in 2019 to 1,506,920 in 2020. Worth noting is that there was an above-average growth in industrial customers, notably, a 5% increase (from 2,714 to 2,845) in medium industrial customers and another 5% increase in large industrial users- from 551 to 578 customers. Connections to extra-large industrial users, increased by 32% from 37 to 49.
Industrial users, together, account for 56.6% of all power sold. Medium industrial users, account for 18.3%, large industrial, 20.4% and extra-large industrial, 17.9%.
The growth in users was underpinned by an ambitious investment programme that saw Umeme, Uganda’s largest power distributor invest significantly in the network.
“We concluded our capital investment program of up to UGX279 billion (US$75 million) to improve the network distribution capacity, supply reliability and operational efficiencies. The money was mainly invested in capital projects in building 7 substations of Ntinda, Kakiri, Gulu, Mbale, Bombo and Nakawa, constructing distribution integration lines with transmission infrastructure, expansion of distribution transformer and conversion of 168,000 customers to prepayment metering,” said Umeme, in a statement signed by Patrick Bitature, the company’s Board Chairman.
The capital assets investment largely fuelled the company’s growth in its asset base- by 5% to UGX2,665 billion in 2020, from UGX2,542 billion in 2019.
ECP suspension significantly dents Umeme income
According to Umeme, the power distributor saw a 72% reduction in ECP revenues alone, from UGX190 billion in 2019 to UGX54 billion in 2019. This subsequently ate into the total revenue turnover.
“Revenue which includes revenue from the ECP, decreased by 7% to UGX 1,661 billion in 2020 compared to UGX 1,777 billion in 2019,” Umeme said, adding that this was compounded by a 3% decrease in electricity sales to UGX1,606 billion, in 2020, from UGX 1,655 billion in 2019.
The company also reported a 6% increase in operational costs, to UGX226 billion in 2020 from UGX214 billion in 2019, largely as a result of increases in repairs and maintenance costs, as well as the cost of implementing Covid-19 Standard Operating Procedures.
“The resultant gross profit reduced by 19.4% to UGX 479 billion compared to UGX 594.1 billion in 2019,” said Bitature, adding: “Profit after Tax Profit after Tax reduced by 69% to UGX 43.1 billion from UGX. 139.2 billion of 2019.”
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Launched in late 2018, the Electricity Connections Policy (ECP) is a government of Uganda’s10-year, $558 million project that aims to drive 60% access to grid power by 2027 through providing free electricity connections to at least 300,000 customers annually from an average of 70,000. The ECP is implemented by the Rural Electrification Agency (REA).
As part of the program, customers receive a 100% subsidy from the government to cover the cost of the last mile connection- covering no pole and one pole connections. Customers are only required to pay shs20,000 inspection fees.
However due to Covid-19 related financial challenges, the government, in December 2020 formally suspended it, allowing private customers to pay for their connections. Although the formal suspension by the government was announced in December 2020, Umeme, had already, in July 2020 suspended connections, over USD23 million (UGX94 billion) arrears. By the time it was suspended, there was a backlog of 205,500 applications.
Cabinet has since approved the resumption of Electricity Connections starting with no-pole connections effective 8th March 2021.
The company reported improvements in revenue collection, to 100.3% from 99.7% in 2019 on account of the rollout of pre-paid metering, prompt government and the general improved electricity bills payment culture. Customer satisfaction also improved slightly, to 72.5 % up from 71% in 2019.
Optimistic outlook
Umeme’s Bitature said that based on the capital investments made and the rollout of the Covid-19 vaccine, Umeme was confident of a better future.
“We believe as governments respond to the pandemic through the vaccine rollout, we project economic recovery and improvements in the general operating environment. We shall continue with focus on safety, continuity of electricity supply services, resolution of the regulatory matters, operational and financial performance,” he said.
He also said that “the resolution of the Concession extension beyond 2025 is fundamental in unlocking long term capital for investment in the distribution network to evacuate new loads, increase access, improve the quality of supply and reduction of technical losses.”
