Shareholders of Uganda’s listed power distributor Umeme Ltd face lower dividends after the firm succumbed to more than 60 percent fall in net profit for the year ended December 31, 2020.
The firm, which is listed on the Uganda Securities Exchange (USE) and cross listed on the Nairobi Securities Exchange (NSE), made a profit after tax (PAT) of $36.82 million in 2019, according to its annual report (2019), meaning that its net profit will fall by more than $22.09 million in 2020.
In 2019 the firm set aside Ush66 billion ($17.92 million) as dividends for shareholders, translating to Ush41.34 ($0.01) per share.
Umeme, through a cautionary statement on Monday, told shareholders that its net profit for 2020 will decline by more than 60 percent largely due to the effects of the Covid-19 pandemic, regulatory lag and suspension of the government’s free connections policy.
“Shareholders and potential investors are advised to exercise caution while trading in the Company’s shares. The Company is optimistic that the recovery in the business environment as Governments respond to the pandemic will support stronger operational and financial performance in the year ahead,” said Company Secretary Shonubi, Musoke & Company advocates
Umeme, which is majority (23 percent) owned by the National Social Security Fund (NSSF), is the biggest power distributor in Uganda accounting for 97 percent of the distribution network and a growing customer base of 1.6 million people.
The firm operates a 20-year electricity distribution concession from the Government of Uganda that took effect on March 1, 2005.
Uganda’s installed capacity increased to 1,253MW in 2019 from 984 MW in 2018 following the commissioning of Isimba Hydro Power Plant in March 2019 and other mini hydros.
So far, Umeme has invested over $700 million into Uganda’s power distribution network to-date while in 2020 alone, the firm spent $83.3 million to step up capacity and network stabilisation in rapidly growing regions across the country.
The firm’s immediate projects for implementation this year include evacuation of new generation capacity, energy loss reduction, strengthening the network to improve power quality and network expansion to grow the customer base and achieve access targets.
Umeme has made a budget proposal of $219 million for 2021 before the Electricity Regulatory Authority (ERA) for approval.
Its customer numbers have increased to 1.6 million from 290,000 in 2005 while energy loses have dropped to 16.4 percent from 38 percent in the same period.
Last year, the Government of Uganda suspended the free Electricity Connection Policy (ECP) due to lack of funds.
The free electricity connections policy was launched in 2018 for a 10-year period ending in 2027, with the prime objective of increasing electricity access and providing cleaner energy to Ugandans.
The new policy direction provides an opportunity to serve customers willing to meet their connection costs without undue delays.
However, according to Umeme, the Electricity Regulatory Authority has provided guidance on the implementation mechanism and the firm has resumed connections.