CORRECTION AND UPDATE – APOLOGIES FOR ERRORS IN PREVIOUS VERSION
The Initial Public Offer by power company Umeme (www.umeme.co.ug) in Uganda closed on 7 November. Results will be known before the listing scheduled for 30 November, but the company had sought to raise UGX171 billion ($65.8 million) by offering 622m shares in an offer that opened on 15 October. Meanwhile, Ugandan parliamentarians have called for a statement by the Finance Minister Maria Kiwanuka, according to a press report on the Observer website, with inquiries into tax and accounting for assets. Some MPs are calling for the listing to be delayed for fuller study of an energy sector report.
As the offer was closing, a report in The Independent cited corporate advisor William Nyakatura of African Alliance Brokers, said there has been a big turn up of applications from around the region. Umeme Managing Director Charles Chapman said that the portion of the IPO reserved for international share investors was sold up by the end of October, and where the company collected US$31million: “In the retail category, we received strong participation from the rural areas and Kampala and other urban areas.” Chapman also said that the offer has received significant participation from the regional market, especially Kenya, where the offer is made to institutional investors. Stanbic Bank and African Alliance were sponsors.
Ugandan investors had been offered the Eyongeza incentive scheme offering a bonus share for every 10 shares they bought, and all customers of the distribution firm were invited to buy. A day before closing it was announced that the International Finance Corporation, a part of the World Bank group, would also buy shares in the IPO. The IFC first mentioned funding Umeme in 2009 on its website. Umeme staff have been given 10,000 shares each as a morale booster, according to local reports, with increases if they keep their shares for 3 years.
Umeme was 100% owned by private equity firm Actis since 2009 and is a regulated electricity distribution company in Uganda, supplying over 460,000 customers by the end of 2011, up from nearly 355,000 in 2009, according to our earlier story. They are mainly located in the semi-urban strip from Entebbe through Kampala to Jinja. In March 2005, Umeme was awarded a 20-year concession to manage and operate the assets of Uganda Electricity Distribution Company (UEDCL) as part of broader privatization of power in Uganda, including unbundling transmission, distribution and generation, and awarding concessions to operate existing generation plant. This article on The Observer website (www.observer.ug) gives background on some of the individuals and companies involved in the power sector in Uganda.
According to the Actis website: “Since Actis took over the ownership of Umeme following a privatisation process in 2005, the company went through a transformation phase, ramping up capital expenditure, improving the quality of management, formalising procedures, introducing a culture of safety throughout the organisation, and educating the population (mainly children) on the benefits and risks of electricity. By the end of 2010, Umeme had replaced over 120,000 rotten poles as part of its refurbishment programme. Safety is the top priority. The network restoration plans are on target and are due for completion by the end of 2012. Public, employee and contractor safety have improved, but public fatalities continue to occur, primarily because people come into contact with live conductors associated with pockets of the network yet to be refurbished. Umeme, guided by Actis, continues to make a significant effort to eradicate fatalities associated with its network. Much of this progress relies on an extensive school education programme, a 24-hour safety helpline, and the prompt response of the field teams on the ground – in the past it could take up to half a day to make the area around a fallen or unstable pole safe – now the average is 30 minutes. Uganda’s continued growth is pushing up demand for electricity: today approximately 7% of the population has access to electricity. And the proportion of population that has access is growing by 9% per year. Currently, the company connects more than 40,000 new customers every year.”