Umeme Limited has released its financial results for the year ending 31 December 2017 indicating that its net profit reduced to Shs35.49bn, down from Shs138.8bn in 2016.
However, its gross profit increased by 8.3% to Shs515.9bn on account of improved distribution margins and continued reduction in energy losses. Umeme says delayed approval of some capital investments by the regulatory authority continues to negatively impact on the gross margin.
“As disclosed in the 2017 interim financial results, the Company reported an impairment provision in the amount of Shs115.2bn as a result of the issuance of Amendment 5 to Umeme’s Electricity Supply License,” Umeme says justifying the reduction in net profits. Reduced profitability is also attributed to the billions paid to Electricity Regulatory Authority that resulted from an under provision of electricity charges for consumption under the lifeline tariff category.
“In the determination of domestic End User Tariffs, the Electricity Regulatory Authority (ERA) sets a lifeline tariff- a subsidized electricity price applicable for small quantities of electricity consumed which is intended to provide a benefit to low income households,” Umeme reveals, adding:
“The cost of this lifeline energy tariff charged at a concessionary rate is recovered from a surcharge on energy consumed by domestic customers above the lifeline rate.”
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Umeme says owing to an underestimation of units consumed below the lifeline, the Company under recovered Shs57.7bn and Shs46bn relating to 2017 and 2016 respectively from the End-User Tariffs as determined by ERA.
The Company adds that financing costs for the year were Shs59.7bn (US$16.5m) driven by increased borrowings and increases in LIBOR.
“Outstanding long term debt at the end of the year wasUS$181m,” Umeme says in its financial statement.
Umeme says energy losses reduced to 17.2% during the year compared to 19.0% achieved in 2016. Umeme customers increased by 18.3% to 1,125,291, with an additional 174,477 grid connections compared to 157,270 in 2016. Umeme says in 2017 the industry registered a maximum demand of 597.4MW compared to 557.4MW in 2016, reflecting growth of 7.2%.
As a result of reduced profits, Umeme directors have recommended that a final dividend of Shs7.6 per share be paid for the year ended 31 December 2017, down from Shs18.8 per share paid in 2016.
