Bloomberg News

Umeme of Uganda Sees Earnings Rising 22% on Rebate, Lower Debt

October 24, 2012

Umeme Ltd., the Ugandan power distributor owned by Actis LLP, forecast a 22 percent increase in earnings before interest, tax and depreciation in the year through December.

Umeme began an initial public offering of a 38.6 percent stake on Oct. 15 at 275 Ugandan shillings (1 U.S. cent) a share. The offer for 622.4 million shares closes Nov. 7 and will be followed by listing on the Uganda Securities Exchange in the capital, Kampala, on Nov. 30. The shares will also list on the Nairobi Securities Exchange after regulatory approval.

“Our Ebitda will come in at $50 million,” versus $41 million last year, Managing Director Charles Chapman said in an interview yesterday in the Kenyan capital, Nairobi.

Umeme forecasts power demand in Uganda, east Africa’s third-biggest economy, will grow 20 percent a year for the next five years, while generating capacity is expanding 15 percent a year and should slow to 10 percent by 2015, Chapman said.

The company’s earnings growth will be partly driven by a 20 percent rebate on infrastructure investments received in January from Uganda’s Electricity Regulatory Authority, Chapman said. Interest costs will also fall, he said. Umeme plans to use some of the IPO proceeds to pay off a loan of $27 million from Actis, according to the IPO prospectus.

Industrial Growth

Established in 2005, Umeme has a 20-year renewable concession and has invested $150 million in transmission infrastructure and plans $35 million more next year, he said.

In the fiscal year through December 2011, profit grew to 23 million Uganda shillings from a loss of 2.85 million shillings a year earlier, according to the prospectus. Profit in the year to December 2012 is forecast to grow to 41.4 million shillings. The company’s dividend policy will be to give shareholders half of the profit, he said.

Umeme plans to double home customers to one million in seven years, Chapman said. They make up about a third of its consumers while companies account for the rest, he said. Large- scale customers including steelmakers, sugar refiners and cement producers consumer about 43 percent of Uganda’s power.

“The demand in the industrial sector is very high so even if we did not connect any homes we could sell all of our output,” he said. “Industrial customers drive the growth; politically, it is very important to connect domestic customers.”

Umeme and the Electricity Regulatory Authority agreed on targets to be met in the seven years starting from March 1, including making network improvements to cut transmission losses to 15 percent from 25 percent, Chapman said.

To contact the reporter on this story: Eric Ombok in Nairobi at

To contact the editor responsible for this story: Shaji Mathew at

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