Umeme Limited said on Monday that revised tariff performance parameters negotiated with the regulator helped soften the impact of weak performances in the second and third quarters of 2019, with the company’s results boosted further by reining in costs.
The company, which is Uganda’s largest electricity distributor, said its after-tax profit for 2019 increased 4.8% year on year to Shs139.1bn, equivalent to Shs86 per share.
Revenue rose by 19% to Shs1.7 trillion, the fastest increase since Umeme listed on the Uganda Securities Exchange in 2012. Income from electricity sales increased 3.4% to Shs1.6 trillion, down from the 12.7% growth registered in 2018; the slump was largely a result of lower tariffs for extra-large industrial consumers.
Electricity volume sales, on the other hand, rose 5.7% to 3,182 gigawatt-hours driven by an increase in demand from large industrial customers. But growth was muted compared to 2018 when volume sales increased by 9.1%, reflecting weaker growth in sales to extra-large and medium industrial customers, and a decline for commercial customers.
The utility also improved its revenue collection rate to 99.7% from 98.5% in 2018 “on account of improved service and multiple bill payment options that provide convenience to our customers.” The continued distribution of pre-paid meters also helped, it added.
In its half-year results, Umeme blamed new performance targets announced in April 2019 by the Electricity Regulatory Authority for negatively impacting its “financial and operational performance” for the period.
Umeme said that although it had improved the efficiency of its operations in the six months — its average monthly operating cost per customer reduced by 18.1%, while operating costs per megawatt-hour fell 11.5% — the “regulatory allowance for operations and maintenance costs were insufficient, thus constraining our service levels.”
The company’s distribution concession with the government includes performance targets that require a minimum number of new connections each year, place a limit on power losses, and set an operating cost allowance limiting the operation and maintenance costs the utility can recover through the tariff.
However, Umeme says it negotiated new six-year tariff parameters, announced in December, that replaced April’s performance targets. The new targets are “more conducive” to its operations and “lessened the impact on the overall results for the year,” the utility said in a statement.
Umeme said it spent Shs289bn on capital investments in 2019, up from Shs230bn the previous year. These include Shs104bn invested “in the distribution network, for projects related to growth, supply reliability and loss reduction; and Shs185bn in last-mile connections (under a GoU access program).”
Umeme’s cost of sales in 2019 rose 29.7% to Shs1.1 trillion, reversing the 5% reduction recorded in 2018. Electricity purchases from the Uganda Electricity Transmission Company Limited increased to Shs984.2bn, growing 11.2% year on year; in 2018 electricity purchases fell 4.5%. Still, the biggest contributor to the increase was Shs189.5bn in construction costs for services to the Rural Electrification Agency, which is yet to be cleared.
Gross revenue came in at Shs594.1bn from Shs581.1bn a year ago.
Operating expenses narrowed to Shs225.5bn, reducing by 3.4% from the previous year, as the company reined in repair and maintenance expenses. These declined 32.4% to Shs30.9bn, a deceleration from the 21.3% increase Umeme reported in 2018. Administration expenses were up 5.6%, coming in at Shs182.9bn.
Umeme’s operating cost per customer reduced by 14% in 2019 to Shs146,505 from Shs169,464 the previous year, the company said. It credited this to technology and growth in its customer base. Customers increased to 1,468,654 at the end of 2019, up from 1,291,811 in 2018, driven by a 14.9% increase in domestic customers.
|Industrial – Medium||2,604||2,606||-0.1%|
|Industrial – Large||502||502||0.0%|
|Industrial – Extra Large||40||40||0.0%|
The company’s operating profit rose 0.7% from a year ago to Shs245.5bn. Finance income was up 2%, faster than 2018’s decline of 42.1%, while finance costs fell by 10.8%. It reported a pre-tax profit of Shs204.3bn, 4.8% higher than a year ago.
Umeme’s directors approved a final dividend of Shs41.3 per ordinary share to be paid for 2019, up from Shs40.9. If approved by shareholders, the dividend will be paid on 17 July 2020, the company said.