Electricity distributor Umeme Limited has announced a 20 per cent rise in revenue to Shs1,075bn for the first six months of the year, while gross profit increased by 27.8 per cent. This marks a recovery from the 3.3 per cent fall in revenue and 6.7 per cent decline in gross profit reported for the same period last year.
The company said the growth in revenue is due to a higher electricity sales, favourable underlying pricing, and profit from construction services.
Revenue from electricity sales increased by 15.3 per cent to Shs1,010.6bn, up from growth of 3.2 per cent in the first half of 2022, driven by an 8.3 per cent surge in electricity sales. “During the period, an additional 72,411 customers were connected to the grid, compared to 56,547 in 2022, representing 28 per cent growth, and increasing the customer base to 1.8 million,” Umeme said in its interim financial statement.
The rise in sales and connections was due to increased economic activity, the reduction of connection charges, and the launch of a customer connection subsidy program supported by a loan from the Uganda Development Bank, said the company.
Construction income from new electricity connection services increased by Shs52.3bn to Shs70.8bn, compared to a fall of 13.5 per cent last year.
The standout expense during the period was a large write-off of the value of its service concession agreements to reflect their diminishing economic benefit to the company. Umeme reported a Shs210.2bn amortisation charge, up from Shs78.5bn in the same period last year.
That pushed its operating income down to Shs33.3bn from Shs99.9bn last year.
Umeme was granted a concession by the government in 2005 to run the country’s power distribution network for 20 years on behalf of the Uganda Electricity Distribution Company Limited. In November, the government informed the company that the concession will cease in March 2025 and will not be renewed.
The amortisation charge is a non-cash expense accounting for the gradual reduction in the value of intangible assets. In Umeme’s case, the assets are the rights and assurances granted to it by the government under the concession.
These include “support for obligations, security protection, obtaining of agency loans, expeditious clearance of imported equipment, and notice and opportunity to be heard” – and “the carrying value of the assets added to the distribution network by the company, less the residual amount (buy out amount).”
Umeme reported a pre-tax profit of Shs16.6bn for the first six months of 2022, down from Shs92.7bn. Profit for the period also reduced to Shs13.2bn compared to Shs64.4bn a year earlier.
The company said it will pay an interim dividend of Shs24 per share – based on real cash flows – on 29 February 2024, after it pays off all its long-term debt in December. Umeme said it generated Shs280.2bn of free cash flow in the period, up from Shs212.7bn the previous year.
