The National Social Security Fund (NSSF) has today received a dividend payment of more than Ushs3.3billion against its shares in Umeme Limited.
NSSF is the third largest institutional investor in the utility distribution company, after purchasing an additional 100million shares in the company in May this year, which increased its stake to 231,722,771 shares, an equivalent of 14.27%.
Handing over the cheque to NSSF Managing Director Mrs. Geraldine Ssali Busuulwa, Umeme General Manager, Corporate and Regulatory Affairs, Mr. Sam Zimbe described 2013 as a successful and eventful year for Umeme, it was our first full year of operation since the commissioning of Bujagali Dam which gave us more power to distribute and it was our first full year of trading on the Securities Exchange which witnessed a steady growth in value to our shareholders.”
Mr. Zimbe went on to thank the Board and Management of NSSF for recognizing electricity distribution as a viable investment channel.
NSSF is the third largest institutional investor in the utility distribution company, after purchasing an additional 100million shares in the company in May this year.
NSSF Acting Managing Director Geraldine Ssali Busuulwa said that the Fund’s investment in Umeme has delivered good returns to members, making it one of the best performing in the Fund`s equities portfolio. She applauded Umeme Limited management for efficiently ensuring a positive shareholder return so quickly after going public.
“In less than two years, NSSF has enjoyed a 41% return from its shareholding in Umeme Limited. The dividends the Fund has received are vindication for the Fund. Our decision to invest in Umeme Limited was well-informed because among other reasons, this is one of the best performing companies in East Africa and the second largest company on the Uganda Securities Exchange,” she said, adding that the Funds shares have appreciated by over shs11 billion since it invested in the company.
She applauded Umeme Limited management for efficiently ensuring a positive shareholder return so quickly after going public.
The dividend payment, in respect of 231,722,771 shares, was UGX 3,309,001,170 (Uganda shillings three billion, three hundred and nine million, one thousand one hundred and seventy only). Umeme has paid a total of 24.8/= per share to its shareholders in 2013.
Umeme’s performance in 2013 was underpinned by capital investments, increase in sales and improved performance against regulatory targets. Mr. Zimbe reaffirmed the company’s commitment to bringing energy losses down further having achieved 24.3% in 2013 and investment in appropriate technology to improve customer service delivery.
“We have converted over 90,000 domestic customers and over 800 Government offices to the Prepayment Metering System and we have commenced up-country conversions in Masaka. This dividend payment is going directly to NSSF, but we want to thank all the investors in the company, individual and private, who bought shares in Umeme Limited right from the initial public offering and over the last couple of years as they recognised the opportunity for what it is,” Mr. Zimbe said.
This is the second dividend payment NSSF has receivedin two years, bringing its total dividend earnings to Ugx 5.27 billion after payment of Ugx 1.97 billion in July last year.
“On top of the direct benefit to NSSF members, investing in Umeme spurs the economy on further because it supports increased industrialisation and other investments, which we are also interested in as an investment management Fund,” Ssali said.
Umeme investment legitimate
Ssali clarified recent reports that the decision to invest in Umeme Limited was ill advised, saying that the Fund carried out due diligence, secured all necessary approvals, and followed relevant procedures.
The dividend earnings are a result of the Fund’s overall aggressive but prudent investment strategy that has led to revenue growth of more 200% and payment of a return above inflation to members, over the last 3 years.
“The Fund’s guiding principle is to provide a reasonable return to members, without compromising the safety of savings. Our investment in Umeme Limited, guided by our Investment Policy, was in the best interest of the members,” she said.
Since commencement of its operations in 2005, the company has invested over USD134m in the distribution system, increased the customer base from 250,000 to about 460,000 customers, reduced energy losses from over 38% to 27% and increased revenue collections from 75% to over 98% by December 2011. Umeme directly employs over 1,300 staff.
Umeme’s 2011 annual report reflected a 32 per cent growth in earnings before Interest Taxation Depreciation & Amortization (EBITDA) before exchange differences of UGX 103.6 billion, up from UGX 71.2 billion in 2010. Profits before tax grew from UGX 6.4 billion in 2010 to UGX 44.6 billion in 2011.
Following an Initial Public Offering of 38.3% shares Umeme was listed on the Uganda Securities Exchange on 30th November 2012. The majority shareholder remains Actis the emerging markets private equity firm with a total of USD5bn funds under its management.