1 September 2012

Uganda: Executive Style - Emerging Out of the Dark


Power distribution company UMEME is in the news.

It is opening itself to the public by listing shares on the Uganda Securities Exchange. It has announced a new tariff-setting mechanism, pegging power prices on the rate of the Uganda shilling against the dollar. The company's Managing Director Charles Chapman told The Independent's Julius Businge that the company has finally emerged out of the dark:

Power seems to be increasingly more reliable, with fewer incidences of load shedding. What is your trick?

Of course the Bujagali Dam project is almost complete and the additional power has enabled us to buy enough to distribute constantly to users. Once the project is fully installed we will say good-bye to load shedding. We have continued with heavy investments to improve the network to prepare it for the increased supply and are committed to investing in technological solutions that will bring convenience to our customers. We encourage investors to bring on the grid smaller generation plants to complement the existing ones.

You report that you brought down energy losses to 25% in 2011, from 38% in 2005. What is the future like?

We need to improve the technology and devise more means to curb power theft. Over 2011 we piloted pre-payment meters in some areas, achieving a conversion of 8, 000 customers. The project has been very well received as customers appreciate the independence of managing their consumption costs. We believe there are no risks here. We are going to continue investing in the technology and will extend the service across the country. We have increased night patrols, and are doing a lot of ground work to ensure losses go down. Back in 2009 I promised we would bring power losses below 28% by this time and many did not believe that was possible, but we have done it. So the future is bright. My prediction is that over the next six years we will bring it to 15%, the same level as Kenya. We urge the community to work with us by reporting power theft. We have established our presence in most districts and our managers there are doing a good job.

How sure are you that the current stability will last when you have no control over power generation, which is the main cause of shortages?

Of course if we are short of power it is not good for our customers. Last year was bad, the exchange rate became so volatile, inflation went up but we still performed. The issue is our concession is a distribution concession, we do not supply power. But with Bujagali coming on board and having Karuma in the pipeline plus other generators, we will have enough power to supply.

You are planning to list on the Uganda Securities Exchange but the public's perception of UMEME has been negative given power shortages, and widespread allegations of bribery among your field staff. Won't this deter investors?

I do not want to talk much about the listing because the process is ongoing. But what you need to know is that UMEME is changing and becoming more transparent.

You have announced a new system where power tariffs will be adjusted automatically in line with inflation and the exchange rate. Won't this hurt your customers?

To me it is a very good method, but it is not easy for our customers to understand. Basically it is the currency that will determine the price change. However it is good for us all because when economic conditions are good tariffs will be adjusted downwards and the reverse is true. But also once Uganda becomes an oil-based economy, the shilling will appreciate against foreign currencies and our customers will automatically pay less per unit of power.

This is your fourth year in office. How has your experience been so far?

It has been a very interesting period. When I came, UMEME had faced the challenge of bringing down losses and we had to adjust power tariffs downwards, which many people don't remember. We are now stabilising and things are going well. The company has been able to grow in difficult times partly because we have innovated and worked closely with government. Currently 9% of the households in Uganda are connected to electricity and we intend to raise that number to 70% over the long term, then we will be happy.

What is the plan ahead?

We will continue to operate in a disciplined manner with a focus on driving productivity initiatives that will deliver sustainable improvements in business performance. The priority is to maintain a robust and stable financial and operating platform that will enable the company to provide superior returns to shareholders.

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