6 November 2012

Uganda: Umeme Happy With IPO, but Parliament Probe Still Looms

Photo: Rachel Mabala/Daily Monitor
Umeme's Initial Public Offer listing.

As Umeme closes its Initial Public Offer of shares today, the parliamentary committee that investigated the energy sector has warned of possible negative consequences to the public when Parliament finally discusses the findings.

Commenting after Umeme floated its shares to the public, Jacob Oboth Oboth, the chairperson of the Energy ad hoc committee that investigated the energy sector, said the inquiry found that Umeme's dealings are unclear. The committee passed a vote of no confidence in the company.

"The public should evaluate the company before they rush to buy shares. People should know that whatever they are rushing for is likely to facilitate Umeme's underhand dealings," Oboth warned at the time.

For fair measure, Umeme, in its prospectus, lists Parliament's investigations as one of the risks whose outcome could "impact on the operations and financial condition of the company."

The IPO has run from October 15 to today, following approval from the Capital Markets Authority and the Uganda Securities Exchange. It targets to raise Shs 171.2bn from the more than 622 million shares that have been up for grabs, with each going for Shs 275. Umeme, through Henry Rugamba, its head of communication, declined to comment on the committee report, saying it would be speculative since it had not been tabled in Parliament.

Other committee members were reluctant to comment on Umeme's IPO, saying Parliament is yet to debate the probe report. Parliament rules prohibit members from publicly discussing committee reports before they are tabled in the House. In spite of the rules, however, Oboth, who cited the overriding public right to know, advised members of the public to exercise caution before buying Umeme shares.

"Those who are ready to carry out due diligence on Umeme will not buy. But I caution others who cannot to take precautionary measures," he said.

For instance, Oboth wondered why, if Umeme has nothing to hide, it would get listed before being cleared by the investigations. "If it is not to hoodwink the public and to manage the public perception, why is it getting listed at a time it is under investigation?" Oboth said.

Rugamba told The Observer the company had nothing to hide, adding that it has followed the capital market rules on full disclosure.

"The committee's terms of reference were to investigate the thermal power arrangements, not us [Umeme]. However, on issues of whether we are a legal entity, it should be noted that before you are listed, there are arrangements you follow. We complied with this by [providing] documents concerning the company," he said.

Oboth said his committee had doubts about who owns Umeme. "If they refused to reveal their ownership to Parliament, who can trust them now -- apart from those who are gullible?" he said, adding, "Before they rush to offer shares to the public, our people need to know who owns Umeme. Nobody knows their exact investments."

In spite of Oboth's doubts, Rugamba says Umeme has witnessed strong interest in the IPO across the country, with various banks and brokers registering good orders for shares. In fact, African Alliance, the authorized brokers, said in a statement that Umeme's international poll had been oversubscribed.

"Umeme has published its annual report which demonstrates (that) we have a robust business, which meets its targets in all areas such as collections, bringing down energy losses and investment in the building and refurbishment of infrastructure," Rugamba stated in an email to The Observer.

With the IPO deadline slated for November 7, Umeme is now concentrating on the Enyongeza scheme which, according to Charles Chapman, the Managing Director, has had an overwhelming response as well. The scheme is aimed at enabling Umeme customers obtain shares in the company, for as long as they have a valid Umeme account.

Parliament's delay to consider the committee's report has worked in Umeme's favour; the probe report has spent close to nine weeks on Parliament's order paper. However, Oboth says when Parliament eventually discusses the report, the content and likely action will be relevant to the public and the sector -- whatever that will be. "The report will never be too late, although some people are trying to move ahead of it," he said.

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