New Vision (Kampala)

Uganda: Umeme Woos Upcountry Investors

The structural monopolistic nature of power distributor Umeme and its remaining 13 years of the 20-year concession make it a good buy, a top official said over the weekend.

"As investment advisers, there are particular aspects of the IPO to point out to the investors specific to Umeme's running concession and the monopoly of the business," Kenneth Kitariko, the African Alliance chief executive officer, said. African Alliance is the IPO sponsoring broker.

Kitariko noted that the IPO could not have been approved by the Capital Markets Authority (CMA) and the Uganda Securities Exchange (USE), the sector regulators, if the company was not viable.

"We need to understand their (CMA and USE) role. Their major role is to protect the public. In their opinion, the company met their requirements and it is fit to go public," he explained.

He noted that technical energy losses had also dropped to 25% this month, against the regional benchmark of 15%.

"Losses against collections all point to a positive element for the IPO. They have close to 600,000 clients. So there is a growth story here. That is what we are saying investors should be part of," Kitariko observed.

He pointed out that with Bujagali's 250 megawatts online "they (Umeme) have something to sell. If you have something to sell, you will make profits." He argued that even before the IPO, Umeme was "here to make money for its investors."

"The billing, technical and poor customer care concerns are soft issues, which are being addressed. But at the end of the day, you want to make money as you address these issues," Kitariko said, adding "as a matter of fact, Umeme's reputation has improved over the years."

He said with the inclusion of more selling agents and brokerage firms (seven brokers and five banks), they were hopeful to market the shares further deep than the normal structure.

"This should help us reach many people as far across the country as we can," Kitariko said.

Meanwhile, the IPO drive has gone to upcountry towns to draw more local participation in the over sh170b sale of shares in Uganda's main electricity utility company.

The IPO transaction team consisting Stanbic Bank, African Alliance and the Umeme senior management team will beginning today conduct road shows in Gulu, Lira, Masaka, Mbarara, Mbale, Jinja, Kasese and Hoima to give residents more information on the share purchase process.

"We have received numerous queries from interested buyers and investors upcountry in the one-week since we announced the IPO. The objective of this IPO is to give Ugandans a chance to own part of Umeme and share in its successes now and in the future. So, it made a lot of sense for us to go to the people upcountry and tell them first-hand how to buy shares and the benefits they will enjoy," said Henry Rugamba, the Umeme head of communications.

The IPO opened on October 15, with an offer of 622,378,000 shares or 38.3% of the company's issued share capital upon listing. The IPO closes on November 7, and will target Umeme's power consumers and the East African retail clients.

"It is important to note that Ugandans have been given first offer, and the best way to ensure that we take this opportunity is by taking it to where the people are. The road shows are one way of doing so, and we will use other avenues as well over the next two weeks," Rugamba said.

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