Investors in Umeme have recovered about sh50b in paper wealth over the past week as its stock price soared due to demand at the exchange.

The listed utility firm’s share price had tanked to trade at levels of sh170 per share in February this year.

However, over the past week, the Umeme stock price recovered — climbing by 15%, one of the fastest price movements seen on the exchange in a short time.

Umeme’s total market capitalization has grown from lows of sh341b as at end of trading on December 7 to highs of sh391b by December 20, representing nearly sh50b growth on investors’ paper wealth. The total market capitalisation is the value of any publicly traded company’s outstanding shares owned by stockholders.

The current interest in the Umeme stock was sparked by recent announcements by the Government that it would let the firm’s 20-year concession run its course without being renewed.

Speculation over the past decade had put investors under immense pressure as its share price suffered the most over market sentiments. There have been at least two unsuccessful attempts to kick out Umeme — one in 2012 and the other in 2019. Some Members of Parliament in 2012 felt that the concession terms were heavily skewed in its favour and called for its “immediate termination”.

But terminating the concession mid-way was a decision government could not afford — partly due to the impact it could have on Foreign Direct Investments.

Market analysts at Crested Capital noted: “Investors can now make an investment decision regarding Umeme, clearly knowing that the concession will not be renewed after March 2025.”

Before December 8, buyers of Umeme shares were relatively few, with bids under 100,000 at sh210 per share. But the announcement on the concession saw signifi cant growth in both bids and the stock price.

Although potential investors are willing to fork out even more for a piece of the company, investors holding Umeme shares are not ready to sell at the prevailing market price.

According to data from Crested Capital, as at close of trading on December 20, buyers were willing to snap more than 657,000 Umeme shares at sh241 per share.

To investors, cutting Umeme loose ended years of back-and-forth negotiations with the State over its rocky concession terms and conditions.

At the annual general meeting earlier this year, Umeme reported that the amount due to the shareholders from government was about $300m at the time or about sh600 a share, a figure which analysts say with continued investment, will increase by 2025.

This means that Umeme shareholders will earn nearly three times per share held compared to selling the same shares today at the prevailing market price.

Reports show that Umeme has paid out about sh428b or sh263 per share to shareholders in dividends since 2013 to date — translating into an average dividend yield of 9.87%.

Umeme is currently the ninth most valuable stock at the exchange, which makes about 1.88% of the exchange equity market.

WILL UMEME DELIST?

It is not yet clear to tell the fate of Umeme at the stock after March 2025. Sources at the stock exchange told New Vision that “no such talks” on delisting the utility firm “are currently ongoing”.

Analyst at Crested Capital said in a statement that “government may extend or negotiate a new concession based on fresh terms” ahead of the concession end date.

Adding that there is also a possibility of Umeme being “acquired by government and remaining a listed company in its current form, which includes management and service delivery systems”.

But permanent secretary to the treasury Ramathan Ggoobi noted that the signals over the contract outlook have been clear for all.

“The debate on energy has been on for some time, right from the President in almost every speech,” he said recently.

“You are going to have electricity moving directly from the generation to the industrial park without a middle man. If there is any specific information you want on, for example, how the transition will be managed, that detail will come from the relevant sectors.

“Cabinet is discussing this matter. It will come to Parliament. Everything will be on the table. I do not what you to start speculating. When you speculate on these matters, sometimes you burn your Fingers” Ggoobi noted.