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Govt debt cuts Umeme profits by Shs115.2b
Umeme wrote off large debts. However, the company hopes to recover the money in due course. PHOTO FILE
What you need to know:
- This, coupled with the debt servicing costs, saw Umeme’s profits for the year 2017 dip by 73 per cent, by far the worst performance the electricity distributor has ever registered since it took over from Uganda Electricity Board.
- However, despite the current challenges, the company has continued to register good progress in regard to new connections and revenue collection.
- Umeme announced a Shs7.6 dividend pay-out per ordinary share to all its shareholders for the year ended December 31, 2017.
- The payout reduced by 59.5 per cent from the Shs18.8 paid out in 2016.
For the first time in nearly 15 years, Umeme, has registered dismal performance, thanks, in part to government’s continuous delay (refusal) to pay money accumulated in utility bill.
The delay, as a result, forced Umeme to temporarily write off about Shs115.2b in bad debts largely incurred by government ministries, departments and agencies.
This, coupled with the debt servicing costs, saw Umeme’s profits for the year 2017 dip by 73 per cent, by far the worst performance the electricity distributor has ever registered since it took over from Uganda Electricity Board.
The shareholders, unlike before, this time will be entitled to a dividend pay-out of Shs7.6 per share which is less by Shs59.5 per cent the company paid out in 2016.
Financing costs for the year, going by report, were Shs59.7b ($16.5m), driven by increased borrowing, which ate into the profit thus dropping to Shs35.5b compared to the Shs132b in 2016.
Mr Selestino Babungi, the Umeme chief executive officer in an interview last week, said they would still pursue the recovery of the money in debt.
“We did this [wrote off the debt] because we are trying to be prudent. This however should not mean that we will not try to recover the money,” he said.
Mr John William Nyakatura, a corporate advisor, told Daily Monitor that “government should pay its utility bills”.
“If you analyse the financial performance you will realise that provision for electricity not paid accommodated nonpayment from the government to a tune of Shs115.2b. That certainly has an implication on the bottom line. The solution is: government must pay its debt on time,” he said. Given the circumstances, Mr Nyakatura, whose work includes analysing and making sense of financial results for companies listed on the stock exchange, however, was optimistic that Umeme had and will continue to perform well.
He also applauded Umeme for its efforts to connect more industries to electricity, adding more needed to be done to unlock the economy that has been under stress in the last five years or so.
Mr Nyakatura also said that despite a huge dip in Umeme’s profits, the company had maintained good performance on the stock exchange.
Explaining the considerable decline in profit, he said it was as a result of the regulatory requirements which demand that unpaid debt be written off.
Although this has an effect on the profitability and even the profit the shareholder could have received, he advised Umeme to ensure that the sum is collected from government.
“On the fate of the concession, Umeme, he said, needs to find a way of stating their case hinged on their achievements and the future - where they are taking the company. They must talk about their efforts to attract investors in generation,” he advised.
Umeme has lately been in the news with President Museveni, castigating the company for failing to bring down the cost of electricity.
In a letter to Energy minister, Irene Muloni, President Museveni, wondered why electricity consumers were still paying for losses, which he indicated should have been eliminated after a period of time.
The company’s power losses currently stand at about 17 per cent down from 38 per cent when the company took over about 15 years ago.
However, despite the current challenges, the company has continued to register good progress in regard to new connections and revenue collection.
“When we started, losses were at 38 per cent and now they are down to 17 per cent.” Florence Nsubuga,” the Umeme chief operations officer told journalist last week. Mr Babungi said they committed to ensuring that Ugandans have access to electricity through improved efficiency and increased electricity distribution. Currently, the company has about a million customers connected on the national grid.
“We are working to ensure that there’s increased access to electricity which will lead to further reduction in tariffs,” he said.
The company has also increases efficiency through connecting 75.3 per cent of its customers on the on the pre-paid metering system. This has increased from 65 per cent as of December, 31 2016.
Pre-paid revenue as a proportion of total revenue stood at 21 per cent, up from 16 per cent as of December 31, 2016.
Ms Marie Nassiwa, the Umeme chief financial officer, said customer connections increased by 18.3 per cent during the period under review to 1,125,291.
IN THE NEWS
Questioned. Umeme has lately been in the news with President Museveni questioning why the company has failed to bring down power losses in more than 15 years.
DIVIDEND PAYOUT
Umeme announced a Shs7.6 dividend pay-out per ordinary share to all its shareholders for the year ended December 31, 2017. The payout reduced by 59.5 per cent from the Shs18.8 paid out in 2016.
The dividend was recommended by the board during a meeting in Kampala last month. If approved at the Annual General Meeting due on May 17, it will be paid on or about July 6 2018 to shareholders in the company’s books as of close of business on June 20 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, explaining that the total pay-out of Shs12b was based on the performance of the company over the period between January to December 2017.
Additional reporting by Christine Kasemiire
