Shareholders of cross-listed Ugandan electricity distributor Umeme are looking at a lower-than-expected payout after a concession deal with the Uganda government lapsed and the recommended company buyout price was slashed by nearly half.
The firm, which has been cross-listed on the Nairobi Securities Exchange (NSE) since December 2012, was operating a 20-year electricity distribution concession from the government of Uganda, which expired on March 31.
As per the terms of the agreement, the company was to hand back assets and operations to the government by the end of March 2025, with private shareholders getting compensated at the value of unrecovered capital investments plus a premium of five percent.
The company had submitted a final buyout demand of $234 million (Sh30.3 billion), equivalent to Sh18.63 per share. But the Uganda government, through a final report from the Auditor-General’s office, has authorised a payment of $118.39 million (Sh15.3 billion), which works out to Sh9.43 per share.
In an earlier draft, the Auditor-General had put the buyout amount at $191 million (Sh24.7 billion) or Sh15.21 per share.
Umeme said in a notice on Sunday that it was compelled by the Uganda government to hand over the distribution system to Uganda Electricity Distribution Company Ltd, adding that this would be done on March 31 as scheduled.
“The company has, without prejudice, invoiced for and received the government’s admitted sum of $118.39 million. Umeme disputes, amongst several things, the audited figure in the OAG’s report and has informed the government of Uganda, that the company will issue a formal notice of dispute to the government in accordance with the terms of the support agreement,” said the company in its notice.
“The board remains committed to ensuring an accurate and appropriate return for its shareholders and is optimistic that the matters in dispute will be resolved during the ensuing 30-day good faith negotiations period or in any event subsequently by an arbitral tribunal in London.”
Delays in paying out beyond the one-month window would attract interest at 10 percent per annum for the period between 30 and 45 days, 15 percent per annum if the delay runs between 46 and 90 days, and 20 percent per annum for a delay of more than 90 days, until the amount is settled in full.
There are also additional costs of $9.79 million (Sh1.27 billion) that are pending verification, which if agreed upon would add Sh0.78 to the buyout price per share, taking the total due to Sh10.21.
In a separate notice, the Uganda Securities Exchange (USE) announced the suspension of the Umeme share from trading for the next two weeks, citing the ongoing public speculation about the end of the concession and determination of the final buyout amount.
The suspension is likely to flow over to the NSE when the market resumes activity today after being closed on Monday due to the Idd ul Fitr public holiday. The Umeme share closed at Sh16 on Friday, effectively locking investors in the company at that price until the buyout matter is resolved.
The company’s latest available shareholder register shows that by the end of 2023, it had a total of 6,543 shareholders, out of whom 5,068 had a holding of 10,000 shares or below each.
The top 10 shareholders of the company, who include Uganda’s national social security fund and the World Bank’s International Finance Corporation (IFC), held 1.25 billion shares, equivalent to 76.8 percent of the company’s 1.62 billion issued shares.
