Power distributor Umeme Limited on Tuesday blamed a “challenging operating and regulatory environment” for the sharp fall in 2020 profits, with net income dropping 69 per cent to Shs43bn on the back of weak revenue growth.
The utility’s revenue fell 6.5 per cent to Shs1.6 trillion, reflecting a slide in revenue from construction services provided to the Rural Electrification Agency and from electricity sales.
Umeme suspended free connections to customers in June 2020 under the Electricity Connections Policy in response to delayed reimbursement by the REA — arising from “a realignment of priorities and financial resources by the government, in part brought about by the unexpected Covid-19 pandemic” — leading to a 69.6 per cent drop in construction revenue from the connections to Shs54bn.
Electricity sales declined by 3 per cent driven by lower sales to commercial, and medium and large industrial customers. “This was mainly because businesses deemed not to be essential service providers were closed during the [Covid-19] lock down period,” the company said.
The distributor reported a 0.1 per cent drop in cost of sales to Shs1.2 trillion, largely due to a Shs132.8bn fall in construction costs under the ECP programme. Gross profit fell 19.4 per cent to Shs478.9bn.
Umeme said it connected 59,623 new customers in 2020, down from 178,152 the year before, a result of suspending free connections. The regulator allowed the utility to charge for connections in December but Umeme says applications from entities ready to pay are far below what it registered before the policy was suspended.
The company said it is “working closely with government and funding agencies to source alternate funding and allow us to recommence the program and address the backlog.” Still, Umeme’s managing director, Selestino Babungi, last month told the Independent it could take “between six months and a year” before government renews funding for new connections.
Operating expenses rose 8.5 per cent to Shs244.7bn compared to 2019’s 3.4 per cent decline. This was mainly due to a rise in repair and maintenance expenses of 48 per cent, while foreign exchange losses increased by 46.7 per cent.
Umeme’s operating profit declined 62 per cent to Shs92.9bn. Profit before tax was Shs62.9bn, down 69.2 per cent from the previous year.
The company’s net income for the year slid 69 per cent to Shs43bn and earnings per share were Shs27, down from Shs86 in 2019. It said it will pay out Shs12.2 as dividend per share “on or about” […]