Electricity distribution company, discount UMEME has reported a slight fluctuation in its annual net profits in the year 2016, driven by shrinkage in power demand from customers, particularly manufacturers.
A slowdown in industrial power sales grew by only 5.4%, far low than the traditional growth in the margin of 8% to 10%.
Large industrial customers grew by 5.9% while medium industrial customers grew by 3.3% in terms of kilowatt hours sold.
During the stakeholders annual general meeting held on Thursday, the Board Chairman of UMEME, Patrick Bitature attributed the reduction in demand to 2016 general elections which had economic impact on investment along with geopolitical shocks in neighboring export markets.
“Traditionally, we have grown at 9% in demand every year but last year we grew by only 5.4%. The industries are the biggest consumers and once they begin to produce as much as they were producing, only then can we see demand,” Bitature told journalists after the meeting at Sheraton Kampala Hotel.
He however said that demand began picking up at the beginning of 2017 driven by normalcy in the domestic political environment.
Selestino Babungi, the UMEME Managing Director noted that the slowdown was reflective of an equal sluggishness within the manufacturing sector which grew by less than 1% in 2016.
“We can’t underestimate the impact of a country undergoing a period. Elections began in Quarter 4 of 2015 and stretched on for half a year. As a result, some investors held back on their capital investment and were cautious on making long term commitments,” Babungi said.
Despite the low demand, UMEME’s total revenue rose by 13%, from Ush 1.1 billion in 2015 to Ush 1.3 billion in 2016. Gross profit grew by 3% to Ush 430 billion from Ush 418 billion in 2015.
Net profit however shrunk to Ush 100 billion in 2016 from Ush 106 billion, due to the general performance on the company’s regulatory targets for the period.
In terms of general customer base, 20% (157,270 customers) of the population were added on the grid bringing the total customer number to over 1 million.
Babungi said that UMEME has heavily invested in technology to improve the delivery of service. In 2016, more than half USD 500 million was invested in the network which saw energy losses cut to below 19%.
Notable among the technologies is the introduction of the pre-paid metering system (Yaka) which brought UMEME’s operational costs in 2016 down by 5%. Of all the total customers, 65% are on the pre-paid system leading to a 98.4% in collections in 2016.
Thursday’s meeting approved a dividend of Ush 7.8shs per share to each of UMEME shareholders which will be payable in July this year. In total, UMEME has declared dividends im excess of Ush 17 billion.
In the same meeting, the previous Board Chairman, Patrick Bitature was reinstated to head the Board for another year. He said the set dividend was guided by the forthcoming investments especially in infrastructure.
Regarding performance in energy losses, Babungi reported that the energy losses out turn slightly reduced from 19.5% in 2015 to 19% in 2016. Many of the gains were registered in the second half of the year (at 18.9%).
The steady traction in losses is attributed mainly to the ‘Wuyo’ campaign.
Losses in power theft has reduced by 5% saving close to Ush 1 billion of the Ush 70 billion that is lost in power thefts each year.
Florence Nakibungwe, the UMEME Chief Operations Officer said; “The campaign (Wuyo) did a lot to explain to our customers the impact of power thefts. We lose 17.8% of revenue in power theft and Mbale alone where theft very high contributes 10% of these thefts.”