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Umeme profits plunge by Shs51.2b over debt repayments
Umeme says profits fell due to a requirement to pay outstanding loans before expiry of its concession. Photo / File
What you need to know:
- Umeme has indicated that profits for the half year to June dropped from Shs64.4b to Shs13.2b
Umeme profits plunged by Shs51.2b in the half year ended June, according to details in the power distributor’s financial statement published early this week.
The drop, the largest in the company’s history, was occasioned by international reporting standards that require the power distributor to repay debts ahead of expiry of its concession in 2025.
Umeme’s 20-year power distribution concession will come to natural termination in March 2025.
The International Financial Reporting Standards require Umeme to align debt repayment, otherwise known as amortisation, to the shorter term of the remaining contract duration.
The standards require that debt, including interest and principal, is repaid within the contract period.
Government has already indicated it will not renew Umeme’s concession when it expires in March 2025.
During the period ended June, Umeme indicated that debt repayment had increased to Shs210b from Shs79b, thus experiencing a massive decline in profits from Shs64.4b to Shs13.2b.
However, the power distributor reported an increase in earnings before interest, tax, depreciation and amortisation (EBITDA), which rose by 49.7 percent to Shs244b.
Electricity sales for all categories including domestic, commercial, medium industrial and large industrial customers, registered an increase, growing by 8 percent, 9 percent, 9 percent and 11 percent, respectively.
The growth was due to an increase in connections, which during the period, were driven by a reduction in connection charges and the introduction of Uganda Development Bank’s hybrid loan financing scheme.
During the period, Umeme registered an additional 72,411 customers compared to 56,547 in 2022, which saw the number of customers connected on the grid rise to 1.8 million.
Distribution efficiency rose to 83 percent, compared to 81 percent on account of reduction in distribution losses, which dropped to 16.7 percent from 17.1 percent.
Distribution and energy losses have remained a challenge for Umeme, which after years of declining, increased during Covid-19.
Approved investments stood at Shs41.9b, targeted at improving quality of electricity supply, enabling growth in demand, reduction in energy losses, network re-configuration and digitisation of the network.
Umeme also reported a 19.9 percent increase in revenue from Shs897b to Shs1.076 trillion, due to an 8.3 percent growth in electricity sales and reduction in operating costs, which reduced by 2.6 percent to Shs112b compared to Shs115b due to increased efficiency, technology uptake and optimised supply chain.
Operating cash flow increased by 18 percent to Shs221b, supported by cash collections, operating profits, optimised working capital and financing costs during the period.
Outstanding debt reduced by 72 percent to Shs74b from Shs268b, due to scheduled repayment over the period.
Umeme also indicated that it expects to have completed all loan repayment schedules by December 2023.
In regards to dividend payment, Umeme said based on the performance during the period, the directors had recommend an interim dividend of Shs24 per share payable on or about February 29, 2024. The book closure date for entitlement to the dividend shall be February 9, 2024.
