Uganda’s power distributor, Umeme, has posted a 52.87 per cent increase in profit after tax on increased revenues and a drop in finance costs.

The power distributor on Monday said that profit after tax grew to Ush47.33 billion ($18.2 million) in the first six months of this year compared to Ush30.96 billion ($12.5 million) posted over the first six months of last year.

Earnings growth was supported by a 17.63 per cent increase in revenues to Ush467.04 billion ($180 million) as at the end of June 2013 from Ush397.03 billion ($160.6 million) as at the end of June 2012.

Financing costs dropped 20.67 per cent to Ush12.79 billion ($4.9 million) from Ush16.13 billion ($6.5 million) over the same time period.

“Profits were in line with our expectations and it will be interesting to see how the company will perform in the second half of this year given that the second half of last year was lower than the first half performance,” said Vimal Parmar, head of equity research at Burbidge Capital.

Burbidge Capital has placed a buy rating on Umeme’s shares which are listed on the Uganda Securities Exchange (USE) and cross listed on the Nairobi Securities Exchange.

The rating by the corporate finance advisory firm is based on expected growth in power demand, a low electrification rate in Uganda that provides opportunities from higher expected penetration and Umeme’s monopolistic positioning with a dominant market share and increasing customer connections to drive unit sales.

The shares last traded at Ush360 ($0.14) at the Kampala bourse, a 30.91 per cent gain when compared to Ush275 ($0.10), its opening price at the beginning of this year, making it the best performing stock at the USE.

At the beginning of July this year, the power distributor, in disclosures contained in a debt proposal arrangement by the International Finance Corporation (IFC) said that it is planning to raise $170 million in debt to finance the country’s electricity distribution system capital expenditures over the next five years.

Umeme said that it is planning to invest up to $440 million in Uganda’s distribution system over the course of the next years until and including 2018 with $170 million coming through debt and the remainder through internally generated funds.

IFC, 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 up to $50 million in debt financing to support the power distributor’s capital expenditure program over the next six years.

The money will be used for the upgrade and expansion of medium voltage transmission lines and substations and the introduction of pre-paid meters across Umeme’s customer base.

Umeme’s shares were listed at the USE at the beginning of December last year and cross listed at the NSE at the end of the same month after an initial public offer (IPO) where it sold a total of 622.37 million shares.

The power distributor issued 272.37 million subscription shares for the IPO while Umeme Holdings, which is owned by London-based private equity fund, Actis issued another 350 million shares issued by to pay off an expensive shareholder loan.

Patrick Bitature, chairman of Umeme in a statement that accompanied its full year results in March this year said that company repaid the entire Umeme Holdings Limited loan of Ush75 billion ($28 million) and with the improved balance sheet, the company can source additional low cost funds to finance its capital programme.