Umeme Limited, Uganda’s main electricity distributor chaired by Patrick Bitature, reported a 14.4 percent drop in shareholder ownership for the first half of 2024.
As of June 30, 2024, shareholder equity had decreased to USh803 billion ($216 million), from USh937 billion ($252 million) at the end of 2023. This reduction is mostly due to financial difficulties as the corporation nears the end of its 20-year concession, which will expire on March 30, 2025.
The loss in equity is mostly due to a low profit after tax, which remained constant at USh13 billion ($3.5 million). Despite retaining profitability, Umeme experienced accelerated amortization of intangible assets. The amortization charge increased from USh210 billion ($56 million) in 2023 to USh238 billion ($64 million) in the first half of 2024, as required by International Financial Reporting Standards (IFRS).
The higher amortization lowered Umeme’s total assets, which declined from USh2,347 billion ($656 million) in December 2023 to USh2,243 billion ($693 million) in June 2024. A decrease in capital investments contributed to the asset’s downfall.
Umeme reduced its financial costs by 36.2%, decreasing to USh16 billion ($4 billion) after repaying all term loans in December 2023.
However, these benefits were offset by an increase in the income tax rate, which rose to USh11 billion ($3 million) from USh3.5 billion ($941,824) in the same period in 2023. The increased tax liability was caused by the performance on profit before tax.
The company’s net operating cash flow also decreased dramatically, falling from USh221 billion ($59 million) in 2023 to USh112 billion ($30 million) in the first half of 2024. This decline was attributed to lower payables and delays in government payments.
As Umeme’s concession nears its end, Chairman Patrick Bitature underlined the importance of a peaceful transfer of assets back to the Ugandan government. Bitature reminded stakeholders that Umeme is dedicated to facilitating a smooth re-transfer while safeguarding the interests of customers, employees, and shareholders.
The coming months will be critical for Umeme as it enters the last stages of its concession.
The company’s ability to manage these problems will be critical to preserving shareholder value and ensuring a smooth transition out of the Ugandan energy distribution business.