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Umeme operates a 20-year electricity distribution concession from the government after which its assets and operations will be handed back to the government in March 2025, with private shareholders getting compensated at the value of net assets plus a premium of five per cent.
However, amortisation and corporate transfers have been reducing the present value of the assets progressively as the company winds down towards the handover back to the State.
By the end of June 2023, the present value of the company was stated at $251 million (Shs933 billion), down from $320 million (Shs1.2 trillion) a year earlier.
“The present value expected to be recovered as a buyout amount at the end of the concession was $251 million (Shs921 million) as at period-end December 31, 2022: $271 million (Shs1 trillion),” said Umeme in its 2023 half-year financial filings. Currently, the stock is trading at a price that is well below its book value, pointing to a sizeable capital gain for investors holding out for the government buyout.
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The stock’s closing price of Shs359.63 per share gave it a market capitalisation of Shs583.9 billion ($156.8 million), highlighting the size of the capital gains available at present value under the terms of the planned State takeover.
Shareholder dividends
Meanwhile, investors have been enjoying dividends from the firm and in six months will receive dividend payouts.
In the six months to June, Umeme declared an interim dividend equivalent to Ush38.7 billion ($10.4 million) or Shs23.72 per share, even as it accelerated debt payments ahead of the conclusion of its concession.
The dividend will be paid on February 29, 2024, to shareholders who will be on record as of February 9, 2024.
Umeme’s main shareholders include the International Finance Corporation (IFC), which retains a 2.8 per cent stake acquired during the firm’s 2012 Initial Public Offering.
Umeme increased its loan repayment by 12.3 per cent to Shs100.5 billion ($27 million), with the company saying it plans to settle the remaining term loans by December 2023.