Umeme’s net profit fell 5.8% in 2016 to Shs99.7 billion, weighed down by higher financing costs and flat earnings, the power distributor said in full year results released on Monday.
Revenues were up 13% to Shs1.3 trillion on the back of a 4.4% increase in electricity sales, pushing gross profit up 3% to Shs430.4bn. This, however, was eroded by an 18.7% increase in the cost of goods sold.
EBITDA was up 5.6% in shilling terms to Shs261.5bn but it was flat in dollar terms at $76.6m, supported by a 10.2% drop in operating expenses.
Financing costs rose 30.6% to Shs69.3bn as the company drew down $70 million in debt during the year. Umeme said the debt was part of $92.8 million it invested in the network during the reporting period “on network expansion and restoration, new connections and rollout of prepaid metering”.
The company’s debt exposure rose from $141.7m to $194.3m at the end of 2016. Despite the continuing investments in the network, energy losses fell only marginally, from 19.5% to 19% year-on-year, well below the regulatory loss target of 16.9%. Losses in Q1 2016, which fell outside the reporting period, were down to 18.5%, the company said.
The energy losses also remained high despite an increase in pre-paid customers from 52.2% to 65% of the total customer base, and a revenue collection rate of 98.4%. Despite the increase in mostly residential pre-paid customers, they still contribute only 16.3% of the power distributor’s overall revenue, up from 11.6% in 2015.
Despite the slowdown the company said it remains optimistic about its future prospects. “The company is motivated by the growth opportunities presented by the country’s industrialisation drive and related progress in increasing power generation capacity,” the statement said.
Hydropower dams at Karuma (600megawatts) and at Isimba (183MW) are expected to double the country’s installed capacity to 1,678.5MW and hopefully reduce the end-user tariff. The government hopes that a refinancing of the 250MW Bujagali hydropower dam and increased demand from industry will reduce end-user tariffs and the cost of doing business in the country.
Umeme said investments in the network since it took over the power distribution concession have now reached the half-billion dollar mark but the regulator will be keen to see the investments translate into lower energy losses and fewer blackouts.
According to the company key investments last year included a new 40MVA Moniko sub-station to power industries in Mbalala and Lugazi on the road between Kampala and Jinja, as well as upgrading the power supply to the Namanve Industrial Park. The company is also moving to convert more Government of Uganda accounts, which are among the worst perennial defaulters, to prepaid meters.
Umeme said it would pay a final dividend of Shs7.8 per share, bringing the total dividend of the year to Shs18.8 per share – down from Shs24.4 in 2015.
“The company has opted to reduce the dividend payout during the year in view of the anticipated capital requirements for the business,” it said. Books will be closed on June 20, 2017 and the dividend will be paid by July 5, 2017, the statement said.