To its credit, after 16 years of great service to ensure Ugandans have unlimited access to electricity, even the blind can now see that utility firm Umeme is clearly aligned to the National Resistance Movement (NRM) 2021-2016 manifesto of securing Uganda’s future: vision 2040: and Uganda’s National Development Plan by focusing on increasing grid connections, increasing demand, reliability of supply and driving efficiencies.
In this briefing, MediaSpace News tracks Umeme’s 16 year journey.
Read on:
HOW IT ALL STARTED
Umeme Limited is Uganda’s main electricity distribution Company, listed on the Uganda Securities Exchange and cross listed on the Nairobi Securities Exchange. The Company operates a 20-year electricity distribution concession from the Government of Uganda that took effect on 1st March 2005. This means its first concession expires in 2025 and discussions with relevant stakeholders are ongoing to renew it.
After the electricity sector reforms in 1999, Uganda adopted a single buyer electricity sector model, where Uganda Electricity Transmission Company Limited (UETCL) is the System Operator, responsible for the purchase of electricity from all Independent Power Producers, import and export of electricity and being Umeme’s sole supplier.
BUSINESS MODEL
As an electricity distributor, Umeme is licensed to distribute and supply electricity to customers operating between 33kV and 240 volts. This mandate involves; operation, maintenance and upgrade of electricity distribution infrastructure, electricity retail and provision of related services.
The distribution infrastructure is composed of 161 terminal points with Uganda Electricity Transmission Company at their 20 substations; Umeme’s 69 distribution substations; 15,564 km of Medium Voltage network, 14,014 distribution transformers and 21,788 kms of low voltage network, including 1.5 million metering points.
The sector is regulated by the Electricity Regulatory Authority (ERA), whose mandate includes setting operating standards, sector monitoring and setting appropriate end user tariffs.
Umeme holds 2 licenses, namely; the Distribution and the Supply Licenses. The distribution license allows the Company to invest in the network (build substations, extend electricity lines, install transformers, and maintain the network) while the supply license allows the Company to provide service to end users (connect customers, bill customers, collect revenues, address customer issues.
The Company also has a Lease and Assignment Agreement with Uganda Electricity Distribution Company Limited (UEDCL) that spells out how assets are supposed to be maintained.
In addition, Umeme has a Power Sales Agreement with Uganda Electricity Transmission Company Limited (UETCL) that governs the purchase of power from UETCL.
Umeme has a Support Agreement with the Ministry of Finance Planning and Economic Development (MEMD) that guides on what support the Government can provide to the Company as it undertakes its operations.
Umeme is listed on the Uganda Securities Exchange (USE) and cross-listed on the Nairobi Securities Exchange (NSE). Ugandan retail investors own 35.5%, NSSF owns 23.2%, East African – 33.7% while International investors have up to 31.1% stake in the Company. Umeme accounts for more than 97% of the power distributed in Uganda up to 33kV.
CHARGES
Umeme charges end-user tariffs as approved by the Electricity Regulatory Authority.
The approved tariffs to be collected meet the cost of the entire electricity supply industry (generation, transmission and distribution). Umeme’s contribution to the cost as at August 2020 is 34% of the average tariff whereas transmission and generation 66%. Umeme has grown its operations through the period of its concession. Customer numbers have grown from 292,237 in 2005 to 1,526,000 in June. Losses have been reduced from 38% in 2005 to 17.5% by the end of June 2020 and the collection rate has grown from 80% in 2005 to 99% in June 2020.
MILESTONES
Umeme has positively anchored Uganda’s electricity supply industry that is projected for further growth on commissioning of new generation plants.
The success of Umeme is traced to implementation of its strategic plans over the period. This has focused on investment in the electricity distribution infrastructure to improve on efficiency, reduce energy losses, expand and reinforce the distribution infrastructure, and increase customer connections.
INVESTMENTS
The Company has invested over USD 739m in the distribution network to ensure safe, efficient and reliable electricity supply. In 2020 alone, Umeme spent USD83.3 million (about UGX310 billion) to ramp up capacity enhancement and network stabilization in rapidly growing regions across the country. The 2020 plan, which was part of a larger USD450m (UGX1.7 trillion) for the 2019 and 2025 investment agenda, was in support of Uganda’s National Development Plan focusing on increasing grid connections, increasing demand, reliability of supply and driving efficiencies. The 2020 investment focused on 6 critical areas of the business, which when completed, will see us reliably connect over 300,000 additional customers to the grid. The six areas included; addressing energy losses and improve operational efficiency (USD 26.89 million); addressing load demand growth (USD22.72 million); power supply reliability (USD18.89 million); power generation evacuation and supply (USD10.79 million); network systems automation (USD1.93 million) and network protection and security (USD2.06 million). Umeme has tabled a $219 million (Shs813.2 billion budget) for 2021. Of that, $119 million (Shs442.4 billion) will be for capital investments in the grid while $60m (Shs222.4bn) will cater for net operating costs. The Company says it will spend $2m (Shs6.6bn) on lease payments and the balance ($38m/Shs141.8bn) on an assortment of other items. It will invest in the evacuation of Karuma and Acwa hydropower plants, improving power supply and expanding the network.
INNOVATING FOR SERVICE
During the last 16 years, Umeme has innovated and implemented technologies that have delivered a remarkable customer experience.
The utility firm rolled out SCADA (Supervisory Control and Data Acquisition) and other auto switches for remote monitoring and control of the distribution network. Network automation has led to higher system uptime and better supply reliability to electricity consumers.
Realizing that billing and revenue collection processes were cumbersome and inconvenient to customers, Umeme rolled out a pre-payment metering system called Yaka in 2011. Last year Umeme converted over 168,000 to the Yaka system. Umeme is now left with only about 30,000.
During the same period, Umeme implemented an integrated payments system that enables customers to pay their bills 24/7 through mobile money, Visa and through the numerous bank platforms. The payment convenience has increased the revenue collections rate from 80% in 2005 to an average of 99% over the last 5 years.
For the post-paid customers, Umeme has introduced the automated meter reading system, eBill and smsBill to shorten the commercial billing cycle. The Umeme Contact Centre provides a 24/7 access platform for customers to report or inquire on various services. In line with modern trends, Umeme has incorporated digital and social media platforms in her various communication channels. The UmemeApp has most of the features for customer self-service. These include balance enquiries, bill payment, buy Yaka token, access to the last 5 tokens, see planned outages a month in advance, get power saving tips and contact us.
As a business, Umeme has since prioritized technology in driving efficiencies across its operations. Efficiency is important in the quest to provide affordable services. To that end, Umeme has improved the electricity distribution efficiency from 50% to 85% as of 2019, through reduction of energy losses to 17% from 38% of 2005 coupled with increased revenue collections to 99% from 80% of 2005. These improvements have benefited the sector and the consumers to an estimated saving of $170m per annum.
CORPORATE SOCIAL RESPONSIBILITY
Umeme has implemented varying levels of engagement with local communities. The utility firm has focused on programs that can make a community stronger economically, socially or environmentally, through impact assessments and development programs. Some of the activities implemented during 2020 such as supporting the 2nd Annual Transformational Leadership Forum was organized by Rotary Uganda to raise USD 100,000 for the purchase of two Blood testing machines for the Mengo Hospital Rotary Blood Bank. Supporting this initiative yet again demonstrated Umeme’s continued support to Rotary Uganda and has committed itself to foster health and community wellbeing.
POWER DEMAND
Umeme can proudly note that continued growth in electricity demand now stands at over 1,200MW from the 180MW of 2005. Electricity sales have been growing at 6% per annum hitting 3,182GWh in the last 12 months compared to 1,015 GWh of 2005.
With increased customer connections and industrial demand this trend is projected to continue over the coming period.
As a result, the number of electricity generation plants have increased from two in 2005 to 21 as of 2018, with a combined installed capacity of 1,167MW.
BUILDING TECHNICAL CAPACITY
Because the utility firm prioritizes the development and skilling of her employees, Umeme continues to lead in the training and development of technical and engineering staff. The utility firm recruits over 20 Graduate Trainees and 100 technicians from Universities and technical colleges per annum.
The new staff undergo a 3-year technical development programme ahead of their commissioning as engineers or technicians. Due to this deliberate policy, the technical capacity of the engineering department has drastically improved. The company employs 2000 direct employees with an additional 700 contractor staff. 23% of the staff are female.
FINANCIAL PERFORMANCE
In the general outlook of things, the Company aspires to remain an attractive investment for its shareholders and capital providers. As such, delivering sustainable profitability is an important pillar for the business.
Umeme is also among the top ten taxpayers in Uganda with average tax remittances of Ush 100 billion per annum. In 2013, the Company mobilized US$190 million of long term financing from the International Finance Corporation, Stanbic Bank and Standard Chartered Bank, to finance its investment
THE FUTURE
As an investment driven sector, the upcoming generation capacity requires significant investments in the distribution infrastructure. Going forward, Umeme investment plan will be focused on uptake of new capacity, increased access, and driving efficiencies in the business operations. A total estimate of US$ 1.2 billion is required to fund distribution network investments over the next 10 years. The ambition is to power communities, businesses and industries for a prosperous Uganda.
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The structure of Umeme operations and other players:
The impact of the investments is summarized below:
Performance Area | 2005 | 2021 |
Network length (km) | 16,000 | 44,000 |
Distribution Transformers | 6,000 | 14,000 |
Distribution Transformer Capacity (MVA) | 550 | 1,900 |
Customers on the Grid | 290,000 | 1,500, 000 |
Distribution Energy Losses | 38% | 17% |
Electricity sales (GWh) | 1,015 | 3,182 |