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Umeme IPO: 46% shares boughtPublish Date: Oct 16, 2012
Umeme IPO: 46% shares bought
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Charles Chapman UMEME Managing Director shares a moment with Charles Mbiire of Uganda Securities Exchangeduring launch of UMEME IPO at Serena Hotel Kampala.Lillian Babirye
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By Stephen Ilungole

Umeme’s 46% stake allocated to the international investors in the initial public offering (IPO) launched yesterday has already been snapped up, a top official revealed in Kampala on Monday.

“In fact, it was oversubscribed. The process is being completed,” Patrick Mweheire, the Stanbic Bank executive for investment banking in East Africa, said. Stanbic is the transaction advisor and lead receiving bank. Mweheire explained that because of the strong macro trends and sector fundamentals, outstanding operating performance, conservative business model and the diversified and scalable platform, UMEME was a great opportunity for investors.

“It is a great opportunity because it is a structural monopoly. There is no other UMEME,” he noted.

UMEME is offering 622,380,000 shares or 38.3% of its issued share capital through an IPO, which runs from October 15 to November 7, before the share trading starts on the Uganda Securities Exchange (USE) on November 30.

Individual investors will take up 20%, institutional investors 25%, international investors 46%, while 9% will go to UMEME employees and directors.

Mweheire also defended the sh275 share price, saying it was four times lower than what the Kenya Power Company costs in Nairobi.

Patrick Bitature, the UMEME chairman, called Actis, the owners of UMEME generous.

“The sh275 price is a 10% discount for customers. They did not have to be generous because investors are ready and roaring to go,” he said.

Charles Chapman, the UMEME managing director, allayed fears over the expiry of the 20-year concession in 2025, saying the law allowed them to apply for a further 20-concession extension.

“My understanding is that we will be applying to the Government to extend the concession. However, the shareholders may choose not to renew it, but agree on how to proceed,” Chapman explained.

“People should not miss the opportunity. There is potential to connect over six million customers onto the grid and 99% of the industrial customers. The growth is phenomenal. And we have not even factored in Karuma’s planned 600 megawatts,” he added. Karuma dam is expected to be online by at least 2018.

Joseph Kitamirike, the USE chief executive, in an earlier interview explained that the remaining 13 years of the concession were many for the new investors to earn a return on their investment.

“You are buying into a company in performance for the next 13 years. A person buying shares today may not have them in 13 years. But what does the expiry of the concession mean? It means the life of the company is ending. You liquidate and divide assets. But it should not prevent it from being listed. That also assumes that the Government will not renew the concession,” Kitamirike had said earlier.

Chapman said the Bujagali’s 250-megawatt addition onto the national grid, would give UMEME a significant growth for the next two years.

Chapman also observed that the 12% annual electricity demand growth was expected to continue for the next seven years.

“With just 9% of the households connected to the grid, the success story has only begun,” he said.

Charles Mbire, the USE chairman, said the eight local listed company and the 15th equity listing would offers investors diversity from commercial banks and manufacturing firms.

“We encourage this (listing) because it improves the level of savings,” Mbire said.

He said UMEME had turned around itself in the past eight months, although he did not elaborate, citing legal restrictions. “We will try to maintain the rules and protect the value of the investments,” he added.

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