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NSSF buys 100 million Umeme shares for sh34bPublish Date: May 24, 2014
NSSF buys 100 million Umeme shares for sh34b
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A technician connecting power. Increased demand for power should translate into higher earnings growth for Umeme
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By Vision Reporter

The National Social Security Fund (NSSF) spent sh34b to purchase an additional 100 million Umeme shares, making the fund the third largest institutional investors in the power distribution company.

“As a result, the fund increased its shareholding in Umeme Ltd. from 131,722,711 shares (8.1%) to 231,722,771 shares (14.27%), Geraldine Busuulwa, the NSSF acting managing directors, said yesterday.

UK’s Investec Asset Management became the second largest shareholder in Umeme after buying 300,000,000 shares to own 18.47% interest in the electricity distribution business.

Umeme Holdings Ltd. remains the largest shareholder, although its shares reduced to 341,426,701 from the previously held shares of 975,653,505, owning 21.03%.

NSSF yesterday defended its decision to buy more shares in Umeme, saying the power distribution company “is one of the best performing companies in East Africa and the second largest company on the Uganda Securities Exchange (USE).

Busuulwa explained that since Umeme’s initial public offer, NSSF has enjoyed a 41% total return, including sh3b in dividends.

“The investment fits well within our considered approach to deploy capital in growing areas such as the energy sector,” she said in a statement.

Uganda has one of the lowest electricity consumptions per capita levels in the world, with only estimated 12% of the population access to electricity.

Busuulwa said Umeme plays a critical role in supporting economic growth of Uganda through enabling access to electricity.

“Going forward, increased demand for electricity to support the growing economy should translate into higher earnings growth for the company,” she forecast.

However, NSSF acknowledged the potential risks of its investment arising from the threat of cancellation of the Umeme Ltd. concession as recommended by the parliamentary adhoc committee on energy.

“We also believe that the costs of immediate cancellation would be substantial to the Government and as such it would be untenable to adopt the recommendation,” Busuulwa observed.

“The fund makes investment decisions in the best interest of the members and this decision to invest in Umeme is no exception. Investing in Umeme offers a chance to the fund’s registered members to own part of a company that offers good returns going forward.”

The other likely risk the fund should watch is government refusal to renew the Umeme concession when it expires.

However, Busulwa said, “assumption has been incorporated in our valuations and as such have been priced.”

She said investment in Umeme was approved by the relevant authorities, including the fund’s management investment committee, the board, Solicitor General and the Minister of Finance.


Also related to this story

Umeme wants to increase power prices

MPs vote to terminate Umeme, Eskom contracts

Umeme shares suspension lifted

Umeme should sensitize Ugandans about prepaid billing system

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