Power utility firm Umeme faces a second straight year of declining revenues after Uganda’s energy sector regulator announced on July 9 that end-user tariffs for electricity will reduce in the third quarter of this year — a relief for consumers whose burden eases by two percent compared with prices for the April-June period.
The Electricity Regulatory Authority (ERA) said the tariffs for the July-September quarter are a weighted average of many factors, but the biggest driver was the appreciation of the Uganda shilling against the US dollar — by 3.3 percent in the second quarter of 2021.
In the second quarter of 2021, the local unit against the dollar appreciated from Ush3,665.78 as of February 26 to Ush3,546 as at end of May. Indeed, the Uganda shilling also appreciated by 4.1 percent against the dollar from an exchange rate of Ush3,699.17 to the dollar in November 2020, which the regulator used to determine the base tariff for the year 2021.
Umeme executives fear that the low tariffs coming in the middle of a second lockdown due to the Covid-19 pandemic may trigger a decrease in demand for power, which impacts revenues.
"I am yet to look at the numbers but with lockdown, demand in the city is down, because there is no activity. For domestic users, again, one may not have money in the pocket to buy electricity," said Selestino Babungi, the Umeme MD.
The Uganda Securities Exchange listed Umeme — also cross listed on the Nairobi Stock Exchange — is looking to recover from last year, when Covid restrictions had a direct impact on the company’s revenues.
The utility firm’s revenues last year dipped by seven percent to Ush1.66 trillion ($466.5 million) compared with Ush1.77 trillion ($497.4 million) in 2019.
The dip was attributed to reduced demand for power during the 2020 lockdown, which saw the cost of operations increase by six percent to Ush226 billion ($63.8 million) due to Covid-19 related costs and network maintenance expenses.
In February 2020, peak demand for electricity in Uganda was 728.7MW, but in March when the government imposed lockdown, demand dropped to 694.5MW, and hit a low of 588.8MW in April, before picking up in July, August and September.
The regulator said the impact of the current Covid-19-induced restrictions, imposed in June until the end of July, which include suspension of many business activities and inter-district movements, will have an impact on the sector.
"This time we will again see the […]