The Umeme Annual General Meeting, has today approved a UGX28.2 per share final dividend to all its shareholders for the year ended 31 December 2018.
This, in addition to the UGX12.7 interim half-year dividend, adds up to a total of UGX40.9 per share-a 438.2% rise from the UGX7.6 per share that Umeme paid in 2017.
In total, the giant utility will fork out up to UGX66.4 billion in dividend payments, up 87.1% from UGX12.7 billion in 2017, thanks to a combined stellar performance and an increased dividend pay-out ratio- 35% in 2017 to 50% in 2018.
Between 2017 and 2018, the number of customers grew by 15% from 1.13 million to 1.29 million and electricity sold grew by 9.1% from 2,277 Gigawatt hours (GWh) in 2017 to 3,011 GWh in 2019. Coupled with tighter revenue collection measures, revenue grew by 12.7% from UGX1.42 trillion in 2017 to UGX1.60 trillion. With tighter cost controls, profit jumped by 274%
The power distributor in 2018, posted a 274% rise in profit, from UGX35.5 billion in 2017 to UGX132.8 billion for 2018.
The final dividend, subject to deduction of withholding tax, where applicable, will be paid on or about 15th July 2019 to shareholders in the books of the Company at close of business on 20th June 2019.
‘The dividend will be paid into the shareholder bank accounts or mobile money accounts whose details are maintained by the Securities Central Depository (SCD),” Mr. Selestino Babungi, the Managing Director, told the AGM.
Looking to the future: Umeme’s 2019/2025 Capex plan
Babungi, told the AGM that to satisfy electricity demand that is growing 9.1% annually and a customer base growing at 15% per annum coupled with the government’s universal connection policy that seeks to connect 300,000 customers per year; thereby increasing access to electricity to 60% by 2027, the company planned to invest approximately USD450m (UGX1.7 trillion) between 2019 and 2025.
He outlined 4 strategic areas where the company would be investing, namely: “network adequacy to meet forecast growth driven by need to absorb the anticipated generation with major prioritisation of industrial parks and industrial zones of Namanve, Mukono, Iganga, Kapeeka, Luzira and Mbale.”
The company would also prioritise the improvement of reliability and quality of supply, with a major focus being put on injecting new substations and new transformer zones in high growth areas.
The other two priorities included, supporting supporting the Government agenda for accelerated access and in this regard, Umeme targets to connect over 2 million customers over next 6 years as well as improving efficiency of the distribution network by leveraging on new technologies.
“Universal access means you will require a large footprint (coverage), which means opening more service centres (offices), building substations, extending lines, injecting transformers and recruiting more people on the ground. These require massive investments,” Babungi explained.
He also noted that facilitating the uptake of the new generation capacity at Isimba and Karuma dams, needs a robust and well-maintained network to absorb and effectively distribute this power.
Isimba Dam, which was commissioned early this year, increased Uganda’s installed power generation capacity from 1, 014 megawatts (MW) to 1, 197MW. Once Karuma Dam starts generating power next year, Uganda’s installed capacity will increase by 600MW.
“Focus will be on extending the distribution grid to evacuate the 783MW additional generation, connecting 2 million premises to the grid, thus creating demand. Network evacuation pipes/lines to the demand growth areas will require massive investments,” he said.
Mr. Babungi observed that quick connections for the new applicants and the supply of quality and reliable power require adequate resources for repairs and maintenance.
“The network is expanding across the country, meaning you will need human resources on the ground to keep quality lights on 24/7. This offers a great opportunity for job-creation (capacity development). The company will need to triple its current number of technical staff to serve the double the size to serve 3.4m customers by 2025,” he noted.
Last year alone, Umeme spent $62 million on the distribution.
Babungi also said given the sector needs and the projected Umeme investment, the company had exercised its rights under the Electricity Act, to apply to the Electricity Regulatory Authority to reconsider its tariff performance parameters for 2019 – 2025.
He however, noted with concern that whereas the distributor had applied to the regulator to be allowed USD65m in operating costs, so as to meet the huge task ahead, they had only been granted USD41m for 2019.
He said this was bound to affect both the service quality and losses targets.
“We will struggle,” he said.
Solid fundamentals for 2018
Beyond the good dividend, Babungi told shareholders that their company stands on solid ground.
Between 2017 and 2018, the number of customers grew by 15% from 1.13 million to 1.29 million and thanks to increased generation capacity and a consistent reduction in energy losses- 16.6% in 2018 from 17.2% in 2017, there was more power to sell.
Electricity sold grew by 9.1% from 2,277 Gigawatt hours (GWh) in 2017 to 3,011 GWh in 2019. Coupled with tighter revenue collection measures, revenue grew by 12.7% from UGX1.42 trillion in 2017 to UGX1.60 trillion.
Subsequently, net profit jumped 274% from UGX35.5 billion in 2017 to UGX132.8 billion.
In the last 13 years, Umeme has invested over $600m into doubling the distribution network to over 34,000km and growing customer connections by more than 4 times.