Uganda’s power distributor is planning to raise $170 million in debt to finance the country’s electricity distribution system capital expenditures over the next five years.

The disclosures are contained in a debt proposal arrangement by the International Finance Corporation (IFC), the investing arm of the World Bank.

According to the disclosures, the electricity distributor is planning to invest up to $440 million in Uganda’s distribution system over the course of the next years until and including 2018.

“Out of this amount the company expects to raise debt financing of up to $170 million, while the remainder is to be financed through internally generated funds,” said IFC in the disclosures.

The move comes a few weeks after Uganda’s finance minister Maria Kiwanuka’s budget speech in which she said that the power distributor is required to install at least 15,000 pre-paid meters this financial year to ensure increased efficiency in electricity use and also reduce distribution system losses.

The investing arm of the World Bank, which at the end of last year owned 45.22 million shares or a 2.78 per cent stake in Umeme, said that it is planning to provide part of the funds required for the capital expenditure investments in form of a loan.

“IFC now proposes to provide up to $50 million in debt financing to support Umeme’s capital expenditure program over the next six years mainly involving the upgrade and expansion of medium voltage transmission lines and substations and through the introduction of pre-paid meters across its customer base,” said IFC.

In its annual report for the period ended December last year, the company said that it plans to raise significant debt financing, part of which will be used in the extension of the prepayment metering system and achieve its target of prepayment for all new connections in 2014.

“The investment is aimed at improving the system’s operational performance including distribution losses and collection rates amongst others. Umeme holds a concession for electricity distribution in Uganda until 2025,” notes the IFC disclosures.

The power company listed its shares at the Uganda Securities Exchange (USE) at the beginning of December last year and at the Nairobi Securities Exchange (NSE) at the end of the same month after an initial public offer (IPO).

It sold a total of 622.37 million shares through the IPO of which 272.37 million subscription shares were issued by the power distributor and the other 350 million shares issued by Umeme Holdings which is owned by London-based private equity fund, Actis to pay off an expensive shareholder loan.

Umeme posted Ush57.11 billion ($21.26 million) in profit after tax for the period ended December 2012 compared to Ush23 billion ($9.22 million) for the period ended December 2011, an increase of more than two times.

“After the IPO, the company repaid the entire Umeme Holdings Limited loan of Ush75 billion ($28 million). The IFC loan of $20 million is the only debt on the company’s books. With the improved balance sheet the company can now source additional low cost funds to finance its forthcoming capital programme,” said Patrick Bitature, chairman of Umeme in a statement that accompanied its full year results in March this year.

The shares started trading at Ush275 ($0.10) at the USE and its last traded price was Ush344 ($0.133) giving the power distributor a value of Ush588.61 billion ($215.64 million), though they have never traded at the NSE since listing.

(Read: Sparks fly over Umeme’s failure to supply power to businesses)