Uncertainty, Bleak Future Looms as Umeme fails to pay shareholders

Uncertainty, Bleak Future Looms as Umeme fails to pay shareholders

UNDERFIRE: Umeme Managing Director Mr Selestino Babungi Kampala | RedPepper Digital – Uganda’s Electricity distributor Umeme has decided not to pay out any dividends to its shareholders despite the significant recovery in business over the last year, according to the performance indicators.

The unexplained decision comes amidst what the company calls uncertainty created by the delayed government decision on the renewal of the company’s concession as well as the continuing start-stop measures on businesses affected by COVID-19. The current 20-year concession comes to an end in 2025, and according to management, there is no progress so far to give them confidence that they will have it renewed. However, the Umeme board chairperson Patrick Bitature is hopeful of a positive outcome when the talks begin.

Earlier in April, the chairman revealed that the talks would resume as soon as the new government was fully assembled (after May) following the electioneering process that disrupted many government programs for almost a year.

There is also uncertainty around the management of the electricity sector in the next few years following the plan to merge the government entities involved in the sector’s value chain.

They include Uganda Electricity Distribution Company Ltd (which gave the contract to Umeme), Uganda Electricity Transmission Company Ltd, Uganda Electricity Generation Company and the Rural Electrification Agency.

The Minister for Energy Ruth Nankabirwa has shown great support towards this move, saying capacity has been built over the last 20 years and that creation of the Uganda Electricity Company will help improve service delivery.

“The lack of clarity of the concession post-2025 limits significantly our ability to raise capital and make capital investments in the electricity distribution system to achieve the national electrification goals. We await further engagements with the government for an amicable settlement of the negotiations,” said the statement by Bitature and the Managing Director Celestino Babungi.

Umeme’s revenues increased by 9.3% to UGX 928 billion in the six months ended June this year, compared to the UGX 849 billion for the same six month period in 2020, according to the half-year financial statements.

The growth is attributed to increased electricity demand across all consumer categories following reduced restrictions after the 1st wave of COVID-19.

Net profit more than doubled from UGX 21.8 billion to Shillings 48.2 billion over the same period compared to UGX21.8 billion in the interim period to June 2020.

Despite this, however, the directors do not recommend payment of an interim dividend.The company reports increased […]

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