Companies

Jubilee buys additional Sh4.4bn shares in Uganda power plant

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Jubilee insurance Centre. FILE PHOTO | NMG

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Summary

  • Insurance group Jubilee Holdings has invested an additional Sh4.4 billion in Uganda’s hydroelectric power plant Bujagali, raising its stake in the project to 40.9 percent in the year ended December.
  • The Nairobi Securities Exchange-listed firm previously held a 25 percent stake in the 250-megawatt plant which supplies half of Uganda’s effective energy capacity.

Insurance group Jubilee Holdings has invested an additional Sh4.4 billion in Uganda’s hydroelectric power plant Bujagali, raising its stake in the project to 40.9 percent in the year ended December.

The Nairobi Securities Exchange-listed firm previously held a 25 percent stake in the 250-megawatt plant which supplies half of Uganda’s effective energy capacity.

Increased investment in Bujagali is part of Jubilee’s strategy of allocating capital to assets with stable, long-term returns.

“Our [additional] investment in Bujagali totals Sh4.4 billion. Of this … Sh2.2 billion or roughly half is from a loan that we have obtained from a commercial bank,” Jubilee’s chairman Nizar Juma told shareholders at the virtual annual general meeting held on June 29.

The insurer took a $22 million (Sh2.3 billion at current exchange rates) loan from Kampala-based DFCU bank to finance part of the additional investment in the power plant.

The loan, which has variable interest rate, matures in five years and is secured using shares of Bujagali.

Mr Juma said the loan was taken because its terms are favourable based on the investment it financed.

“All the returns that we get from Bujagali are in dollars and the loan that we have is also in dollars,” he said.

“The interest that we pay on the loan is less than six percent and the return from Bujagali is 12 percent plus so it makes a lot of sense. And we will repay the loan from receipt of the dividends that we get from Bujagali.”

The power plant is Africa’s largest privately financed hydropower project. Increased investment in the project, real estate and government bonds has seen the insurer generate nearly half of its income from non-insurance sources, Mr Juma said.





Jubilee expects to complete the sale of majority stakes in its regional general insurance subsidiaries to Allianz by the end of this year.

The company will receive an estimated Sh7 billion in the deals with Allianz while Sh3 billion will be invested in the operating businesses in Kenya, Uganda, Tanzania, Burundi and Mauritius.

The insurer plans to use proceeds from the transaction to boost its capital position and make additional investments. Mr Juma told shareholders that the board will deliberate on whether or not to make a special cash distribution at the next annual general meeting.

Jubilee’s net profit grew marginally to Sh4.08 billion in the year ended December when most insurers posted a mix of profit declines and losses, partly attributed to paper losses in listed equities investments.