Umeme Ltd’s 20-year power distribution concession in Uganda officially ends in March 2025. This presents uncertainty, opportunities, and risks for investors worldwide. Umeme Limited’s stock is cross-listed on the Uganda Securities Exchange (USE) and the Nairobi Securities Exchange (NSE). Umeme is Uganda’s main electricity distributor. It was incorporated in Uganda as a private company in 2004 and became a public company in 2012.
Ownership consideration
Umeme was the first utility company listed on Uganda’s stock market. Capital markets are perfect avenues to raise predictable capital for growth.
Currently, the company is partly owned by Ugandans who have invested in its shares, with the National Social Security Fund (NSSF) holding the largest stake at 25.3%. Umeme Shares issued are 1,624,278,005 with a market Capitalisation of UGX 674.1 billion. Power distribution assets belong to the government.
Umeme Concession end is confirmed.
Umeme licenses have not been renewed and UEDCL has already received a license to take over. It has already embarked on a recruitment exercise of staff with priority given to Umeme staff. Umeme’s 20-year concession to distribute electricity in Uganda expires on March 30, 2025.
The public and stakeholders in the energy sector are closely monitoring how the Umeme to UEDCL transition will unfold, particularly regarding its impact on electricity prices, responsive customer service, and service quality.
The Ugandan government has decided not to renew Umeme’s electricity distribution concession, marking a significant shift in the country’s energy sector strategy. This decision aligns with a broader cabinet plan to bring all three major components of the electricity supply generation, transmission, and distribution management under government ownership.
The move aims to centralize operations and maintenance of the power sector, potentially enhancing efficiency and ensuring greater state oversight as detailed here.
While this signals a new era for Uganda’s energy landscape, it raises questions about the future of private sector involvement and the impact on Umeme’s longstanding role as a trusted electricity distributor. The decision reflects the government’s commitment to retaining control over critical infrastructure, though its implications for service delivery, investment, and sector stability remain to be seen.
Buyout plan.
Shareholders are looking at a buyout value of $191.00Mn which is about $0.12 per share. Ministry for Finance, Planning and Economic Development (General Duties), presented a loan proposal to Parliament for the Umeme buyout. The $190,988,556 Loan facility will be provided by Stanbic Bank. In the past 20 years, Umeme has invested approximately US$800 million, recovering about US$680 million.
Umeme Brand reputation.
Umeme is trusted and that explains why each share in March is still UGX 415. Umeme’s strong brand reputation as a trusted and reliable electricity distributor in Uganda has kept its shares steady at UGX 415, despite the March exit plan.
The company’s consistent financial performance, underpinned by steady revenue growth and profitability, has made it a safe and attractive investment for long-term shareholders. Operating within a clear regulatory framework, Umeme benefits from reduced uncertainty, while its history of regular dividend payouts appeals to income-focused investors.
As a key player in Uganda’s energy sector, the company’s strategic importance in powering the economy further enhances its value proposition. With limited alternative investment options offering similar stability, Umeme shares remain a preferred choice for risk-averse investors.
Umeme has connected 2.2 million customers to the electricity grid, a significant increase from just 286,000 connections in 2005, driven by our commitment to simplifying the connection process and making electricity more accessible to all.
Gold in utility stocks.
Utility stocks can withstand economic slowdowns and offer stable dividend payouts. Umeme has been one of the big players in Uganda’s securities Exchange with trading turnover at an average of 53% over the period and attracting global interest.
The Umeme trend in dividend policy has been to make large payouts to shareholders ahead of the concession termination. Their dividends have averaged well above 20% per annum since 2021. Umeme has paid out a total of Sh14.62 billion (USh359.8 billion) in dividends since 2018.
Could the government delay or fail to pay Umeme?
The actual payment deadline is March 31, 2025. Will the government extend the concession for a year? The government penalties start.
It shall pay interest to Umeme Limited on any outstanding portion at the rate of 10% per year for the period of 30 to 45 days after the end of the natural term, 15% for 46 to 90 days, and 20% for any period beyond 91 days until the full payment is made.
The Uganda Electricity Distribution Company Limited (UEDCL) plans to take over Umeme’s operations from April 1, 2025, after the natural termination of Umeme’s power distribution concession and a buyout. Most stock brokers are predicting a full-year payout of approximately Ugx80–95 from Umeme.
Do you sell Umeme shares now or wait?
It is a discussion to have with your investment or stock broker to weigh options. Do you as a shareholder wait to see the government’s actual offer and the future of Umeme operations in April?
Are you waiting for a dividend announcement? Shareholders are holding onto their stocks due to confidence in the company’s long-term value, the steady income from dividends, and optimism about Uganda’s economic growth and Umeme’s role in infrastructure development.
Additionally, the low volatility of Umeme’s shares and the anticipation of potential future gains or strategic advancements in the energy sector are discouraging investors from selling, solidifying its position as a cornerstone of many investment portfolios in Uganda.
Shareholders could sell now and also explore other high-performing stocks like MTN, and Stanbic among others. They can also explore investing in treasury bills.
Uncertain future. Though signs are clear that Umeme is counting down to the March 2025 exit, things can change. Umeme is not a diversified company but tied to just one government concession which is may be no more.
Will Umeme venture into something else outside of the energy sector? Will it delist? Will Umeme be suspended from the stock market in April 2025? Umeme’s Social media communication is profiling their 20-year journey and so are interviews with stakeholders like NSSF and the Uganda Securities Exchange. A clear direction that they are handing over.
UEDCL needs Shs 4.02 trillion (just over $1 billion) to finance the operational and capital costs for three years starting April 2025. The Uganda Electricity Distribution Company Limited (UEDCL) is set to take over the distribution mandate.
This transition aligns with the government’s goal of having all major electricity operations managed by state-owned entities. The decision reflects a desire for greater control and accountability within the electricity sector, potentially aiming to improve service delivery and reduce costs for consumers.
This change could lead to a restructuring of the electricity supply chain in Uganda, with the government focusing on enhancing infrastructure and service reliability.
As an electricity distributor, Umeme is licensed to distribute and supply electricity to customers. This mandate involves; the operation, maintenance and upgrade of electricity distribution infrastructure, electricity retail and provision of related services. The sector is regulated by the Electricity Regulatory Authority, whose mandate includes setting operating standards and appropriate end-user tariffs.
