By Robert Baldwin

Much has been written about the need for Uganda to invest in its own energy infrastructure. The problem is, since 2012 over UGX 650Bn has already been raised for energy investments through the Uganda Securities Exchange (USE).

The Initial Public Offer of Umeme Limited involved foreign investor Actis selling 40% of the company. The subsequent secondary offers in 2014 (45%) and 2016 (15%) resulted in 6,000 shareholders owning Umeme and the original foreign investor Actis, 100% divested!

Combined, the UGX 650Bn was raised from institutions such as NSSF Uganda, local fund managers, saccos, East African pension funds, emerging market investors, some foreign, and several thousand individuals.

Umeme’s public listing is a classic case of local investors jumping in to dilute foreign investors and as a result, not only sharing profits but keeping them within Uganda’s economic ecosystem rather than sending dividends abroad.

The recent takeover of power distribution by Government unfortunately displaces Ugandan and East African investors who made up the majority of Umeme Limited’s shareholding prior to UEDCL’s takeover.

A little-known fact is that NSSF Uganda is the single largest individual shareholder owning 23% of the company. Government only needed to buy 27% + 1 share of Umeme Limited to become the majority shareholder then manage it accordingly.

To acquire the 27% GoU would have paid UGX 182Bn or USD 49Mn (43.8Mn shares at current market price of UGX 415 per share = UGX182Bn). Instead, Government of Uganda paid UGX 433Bn (USD 118Mn), an amount Umeme will likely dispute in court and petition for an even higher payoff.

In hindsight, taking up 27% +1 share would have maintained Umeme’s most irreplaceable asset – human capital – highly adept at managing the “last mile” of power distribution as well as leveraging the track record of attracting private investment for Uganda’s energy sector.

As the successful Umeme Limited IPO shows, GoU should consider raising funds through the capital markets from Ugandan and East African regional investors. Energy investments such as the Hoima oil refinery and East African pipeline require patient, long-term capital. Uganda’s stock market is perfectly positioned to provide this kind of capital.
Colleagues, the appetite is here.

Robert is the CEO of Crested Capital.
robert@crestedcapital.com.