Uganda’s power distributor, Umeme Limited has revealed that it will scale down use of wooden poles going forward in favour of concrete poles.
This was revealed by the Umeme Managing Director, Selestino Babungi on Thursday while addressing the press at Kampala Serena hotel immediately after the company’s Annual General Meeting.
Babungi revealed that there are already some investors in the country making concrete poles (using cement).
He said concrete poles have a long lifespan compared to wooden poles, making the former affordable in the long run.
“Concrete can have a lifespan of up to 40 years unlike wooden poles whose lifespan is less than 10 years,” Babungi said.
He added that the Tororo line was connected using concrete poles and the company is looking forward to “scaling up adoption of concrete poles.”
He added that it’s environmentally friendly to use concrete poles. This will come as bad news to investors who have been planting eucalyptus with the aim of selling wooden poles to Umeme.
New Concessional Deal In Offing
In a related development, Patrick Bitature, Chairman, Board of Directors, Umeme revealed that the power distributor is optimistic of getting a new concessional deal by end of this year.
He noted that negotiations with government are set to start.
Bitature revealed that the company enjoyed a reasonably good year financially in 2018 and this was further spiced up by a decision by the Ministry of Energy to embark on new negotiations.
Bitature explained that the reason behind the early negotiations is because the company intends to secure funding on a long term tenure when the price is low globally and ensure that power tariffs can be brought down.
“Many people were concerned about the concession and the government has shown a good heart; they have invited us to renegotiate our concession much as we still have six years ahead. We haven’t yet reached the end of our concession but it is in both parties’ interest to begin renegotiating our concession now because we have Karuma power that is eminent, Isimba is now switched on and we need to evacuate this power which means we need long term funding if we borrow money for five years,” Bitature said.
Responding to questions on how long the negotiations are likely to take, Bitature was non-committal on the time but only revealed that the two parties are working to have a deal sealed by the end of 2019.
Umeme’s pronouncement comes at a time when President Yoweri Museveni in his 12th March 2018 letter warned the Ministry of Energy against renewing Umeme’s concession arguing that the country should be looking for cheaper ways of modernising and expanding the distribution and distribution lines.
Umeme’s power distribution concession is due to expire in March 2025 having started in March 2005 when the South African company took over electricity distribution in Uganda and the policy has a provision for negotiations into a concessionaire to start three years to the expiry of its concession and apply for a renewal of the concession.
The President wrote: “I am now directing you to furnish me with the explanations on all these matters. In the meantime, there should be no question of renewing Umeme’s concession. By copy of this letter, I am also directing the Inspector General of Government to look into these issues.”
However, when the Minister of Finance, Matia Kasaija was asked by Legislators on how far Government had prepared for Umeme’s exit, Kasaija said that Government had not yet taken a firm decision on the Umeme debacle and that the biggest task was finding a company with huge financial muscles to put up investments to increase power distribution.
The President’s decision to cancel Umeme’s concession was informed by the 2017 audit report by the Auditor General, John Muwanga that indicated that Government lost approximately Shs129Bn to Umeme in depreciation and return on asset since Government entered into contract with the electricity company.
The report revealed that the depreciation cost and return on investment shot to Shs11.1bn from 2004 to 2015, with the loss having increased to Shs13.6bn after 2015, bringing the total loss to Shs129bn.
Umeme seems to have put the loss making days behind them with Bitature informing journalists that the company had a good year financially with the Company’s financial performance indicating that the company recorded profits of Shs133bn in 2018, up from Shs36bn recorded in 2017.
Umeme to pay Shs66.4bn in dividends
Energy losses that have bogged the company for many years also reduced to 16.6% in 2018 compared to 17.2% in 2017. Energy losses stood at 38% when Umeme took over power distribution in 2005.
Further, the company’s total assets as of 31st December 2018 rose to Shs2.464 trillion compared to Shs2.349Trn in 2017.
Umeme’s electricity sales also increased by 13% to Shs1.6 trillion in the year 2018, net revenues (after adjustments) increased by 0.8% to 1.49 trillion in 2018 compared to 2017.
On the other hand, customers connected to the grid, within the Umeme footprint, increased by 14.8% to 1.3 million. With the impressive performance, shareholders approved Shs28.2 per share as dividends, implying that the company will spend Shs66.4bn in dividends to shareholders.
In 2018, the company invested $62 million in the network.
Over the next six years, the Company projects it will spend $450 million in capital investment. Priority will be on expansion of the power distribution network, improve the quality and reliability of supply, increase access (connect 2 million premises to the grid between now and 2027).