Umeme H1 2017 Results

Presentation4 October 2017

H1 2017 Results Presentation – 4th Oct 2017

Overview

2

Safety performance

Electricity demand & macro update

Regulatory developments

H1 2017 Investments

Operational & financial update

Electricity generation update

Summary & Outlook

Safety

Non-network fatalities incl. power theft, domestic electrics, network interference, way-leaves encroachment and unauthorized operations

3

No network related fatality in H1 2017

16

10

17

3

7

1 1 02

0 1 0

39

47

36 35

28

18

715

21

17

3230

39

0

10

20

30

40

50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Network related fatalities

Non-network related fatalities (illegal)

No.No.

Full Year

Growing electricity demand

4

472 469488

515

539561

300

350

400

450

500

550

600

2012 2013 2014 2015 2016 2017

Max System DemandMW

1,937

2,118 2,277

2,458 2,567

935 1,045

1,114 1,220 1,260

1,345

500

1,000

1,500

2,000

2,500

2012 2013 2014 2015 2016 2017

Full year Half yearGWh

Peak demand in H1 2017

up 4.1% at 561 MW

H1 2017 GWh sales up 6.7%

(FY16: 4.4%) driven by industrial

demand and lower grid losses

H1

Effective generation

estimated at 680MWImproving macro-environment

Regulatory Developments

5

Amendment 5 issued in May 2017• Accrued growth factor and tax receivables amounting to Ushs 115.3 billion impairment

provisions

• No further reconciliations of growth factor revenues

• Recovery of prior growth factor amounts ongoing

Power Supply Price Reconciliation

• Actual power supply costs against related billing revenues for period Jan 2010- Jun 2017

• Ushs 87.7 billion (US$ 24.4m) due to Umeme

Capex Approvals process

Capital Investments

Load Growth

• Moniko Substation Interconnection lines (US$ 8.0m)

• Roofings Namanve Quality of Supply (US$ 4.8m)

• Ishaka substation works (US$ 1.5m)

• Kakiri service area improvement (US$ 1.3m)

• Tororo Cement Industries (US$ 0.5m)

• Tembo Steel supply quality improvement (US$ 0.8m)

Automated Metering

• Improved metering and revenue cycle efficiency

Pre-payment Metering

• New Connections (+69k)

• Post-paid customer conversions (+20k)

• Government of Uganda pre-paid installations

• Loss reduction & improved revenue collection

Cumulative Capital investment

Sample projects in H1 2017

6

166 224

321

407

500

527.7

100

200

300

400

500

600

2012 2013 2014 2015 2016 2017

US$mUS$ 27.5m invested in H1 2017

Customers & Revenue Split

Sales Revenue

Category GWh

H1 Growth

(y/y)

FY 2016

(%) Ushs

Growth

(y/y)

Domestic 312.4 +9.0% +2.6% 189.6 +11.2%

Commercial 165.3 +4.8% +4.3% 104.8 +12.0%

Street Lighting 0.8 +17.7% +3.0% 0.6 +26.7%

Industrial - Medium 211.1 +1.2% +3.3% 139.4 +7.3%

Industrial - Large 655.6 +8.1% +5.9% 262.3 +10.3%

Total 1,345.2 +6.7% +4.4% 696.7 +10.2%

Revenue Contribution

Customer numbers Prepaid Revenue Share

Sales & Revenue Growth

7

304

715

-

200

400

600

800

1,000

1,200

2012 2013 2014 2015 2016 2017

Post-paid

Pre-paid

('000)

651

794

574513

9511,019

Up 7.3% from FY2016

70% on pre-paid

Domestic,

27%

Commercial,

15%Industrial -

Medium,

20%

Industrial -

Large, 20%

Industrial -

Extra

Large, 18%

2%

6%

12%

16%

20.0%

0%

4%

8%

12%

16%

20%

24%

2013 2014 2015 2016 2017

Prepaid % of Total Revenue%

H1

Operational performance

Revenue collection Energy losses

Regulatory targets*Operating costs

* Umeme financial year (Jan-Dec). Tariff year runs from 1st March

** Allowance is adjusted annually for international and local inflation

Tariff

parameter ‘13 ‘14 ‘15 ‘16 ‘17 ‘18

Energy losses

(%)

19.6 21.0 18.9 17.4 16.1 15.1

Collection rate

(%)

81.1 97.5 97.7 97.9 98.2 98.5

Operating

allowance

(US$m) **

36.5 44.4 45.7 47.2 48.7 50.2

8

26.1

24.3

21.3

19.5 19.0

17.5

16

18

20

22

24

26

28

2012 2013 2014 2015 2016 2017

%

94.0

100.3 99.1

98.2 98.4 99.9

85

90

95

100

105

2012 2013 2014 2015 2016 2017

%%%

Energy losses down 1.5%

from FY16

46

55 55 53 48

27 26 29 28

22 22

-

10

20

30

40

50

60

70

80

2012 2013 2014 2015 2016 2017

Full year Half yearUS$m

Financial performance (US$)

Financials Summary (US$m) EBITDA (US$)

Profit after tax (US$)

9

Income Statement H1 2017 H1 2016 %ch

Revenue 195.2 194.6 +0.3%

Cost of Sales (134.8) (131.8) +2.2%

Gross Profit 60.4 62.7 -3.7%

Operating Expenses 22.2 21.7 +2.2%

EBITDA 4.0 39.1 -89.8%

EBITDA (ex Amendment 5) 35.9 39.1 -8.5%

Finance Costs (ex. lease) 8.2 5.9 +38.2%

Profit Before Tax (15.7) 23.6 -

PBT (Adjusted) 16.2 23.6 -31.4%

Profit After Tax (13.1) 16.1 -

PAT (Adjusted) 11.3* 16.1 -29.5%

46

58

68

76 77

26 31 33

38 39 36

-

10

20

30

40

50

60

70

80

90

2012 2013 2014 2015 2016 2017

Full year Half yearUS$ m

26

31

36 34 31

14 17 18 19

16 11

-20

-10

-

10

20

30

40

2012 2013 2014 2015 2016 2017

US$ m Full year Half year

FY12-14 adjusted for unrealized FX losses

Financial Position at H1 2017 FY 2016 %ch

Total Assets 593.1 606.2 -2.2%

Shareholders Equity 138.1 163.8 -15.7%

Net Debt 207.7 201.2 +3.2%

*Assuming 30% tax rate on adjusted PBT

H1 2017

EBITDA excl.

Amendment 5

effects

H1 2017 PAT

excl. Amendment 5

effects

Financial performance (Ushs)

Financials Summary (Ushs bn) EBITDA (Ushs)

Profit after tax (Ushs)

10

Income Statement H1 2017 H1 2016 %ch

Revenue 704.4 658.7 +6.9%

Cost of Sales (486.4) (446.3) +9.0%

Gross Profit 218.0 212.4 +2.6%

Operating Expenses 80.2 73.7 +8.9%

EBITDA 14.2 132.7 -89.3%

EBITDA (ex Amendment 5) 129.4 132.7 -2.4%

Finance Costs (ex. lease) 29.6 20.1 +47.3%

Profit Before Tax (56.7) 80.2 -

PBT (Adjusted) 58.6 80.2 -26.9%

Profit After Tax (47.5) 54.5 -

PAT (Adjusted) 41.0* 54.5 -24.8%

Financial Position at H1 2017 FY 2016 %ch

Total Assets 2,131.9 2,191.9 -2.7%

Shareholders Equity 496.2 592.1 -16.2%

Net Debt 730.8 727.3 +0.5%

*Assuming 30% tax rate on adjusted PBT

117

149

178

248 262

64 82 84

113 133 129

-

50

100

150

200

250

300

2012 2013 2014 2015 2016 2017

Full year Half yearUShs bn

65

84

70

106 100

31

47 38

68

54 41

-20

-

20

40

60

80

100

120

2012 2013 2014 2015 2016 2017

UShs bn Full year Half year H1 2017 PAT

excl. Amendment

5 effects

FY12-14 adjusted for unrealized FX losses

H1 2017 PAT

excl. Amendment

5 effects

Trading update

Market cap US$205m at Ushs 455 share price

11

250

350

450

550

650

750

850

250

350

450

550

650

750

850

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Share price (Ushs)

USE

NSE

150

200

250

300

350

150

200

250

300

350

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Market capitalisation (US$m)

0

20

40

60

0

20

40

60

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Volume (m)

Umeme ShareholdersShareholder Summary

No. Top 20 Shareholders (August 2017) % Held

1 National Social Security Fund Uganda 23.2%

2 Allan Gray* 9.1%

3 Kimberlite Frontier Africa Master Fund 7.6%

4 Investec Asset Management Africa Fund 4.8%

5 Utilico Emerging Markets Limited 4.3%

6 The Africa Emerging Markets Fund 3.9%

7 International Finance Corporation 2.8%

8 Coronation Global Opportunities Fund 2.6%

9 Duet Fund 2.5%

10 Imara SP Reid 1.9%

11 Boutique Collective Investments 1.6%

12 Vanderbilt University 1.2%

13 Conrad N Hilton Foundation 1.1%

14 Kuwait Investment Authority 1.1%

15 Central Bank Of Kenya Pension Fund 0.9%

16 William Byaruhanga 0.8%

17 Old Mutual 0.8%

18 Frontier Market Opportunities Master Fund 0.7%

19 Pinebridge SSA Equity Master Fund 0.7%

20 National Social Security Fund Kenya 0.6%

Other 28%

*Aggregated accounts

12

International

Funds

25%

Africa (ex. EA)

22%

Uganda

Institutional

24%

Uganda Retail

13%

East Africa

Institutional

13%

Directors &

Employees

2%Other

1%

Umeme Shareholder Distribution (Aug 2017)

Generation Pipeline

Source: Umeme, UETCL, MEMD

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

MW

Namanve & Kakira hydro

Karuma

MW

Nalubale

Pre-2000

Kiira

Bujagali

Isimba

Generation Outlook – Installed Capacity

Large-hydro:

Karuma - 600 MW (71% completed)

Isimba - 183 MW (76% completed)

Agago-Achwa – 83 MW

Ayago - 600MW

Orianga - 400MW

Kiba - 290MW

Agago-Achwa – 83 MW

Muzizi - 44MW

Mini-hydros (GET-FIT): 156.5 MW

inc.

Siti I – 5 MW

Waki – 4.8 MW

Lubilia – 5.4 MW

Rwimi – 5.5 MW

Muvumbe – 6.5 MW

Nyagak 3 – 5.4 MW

Other

Soroti Solar – 10 MW

Tororo Solar – 10 MW

Siti II - 16.5 MW

Kikagati – 16 MW

Kabale Peat plant 33 MW

Kabale geothermal 30MW

13

Generation Pipeline +1000MW

Summary & Outlook

H2 Tariff recoveries

Recognition of investments & Recovery of regulatory income

Negotiation of 2019-2025 regulatory targets

Upcoming Generation Investments

Staff development in line with sector needs

Strategic financial advisor mandate

Concession Tenure Review

14

Appendices

• Appendix 1: Generation overview

• Appendix 2: Tariff analysis

• Appendix 3: Distribution Tariff Margin

15

Appendix 1: Generation overview H1 2017

Source: Umeme, UETCL, MEMD

Energy supply mix (Effective Generation) Average Monthly Dispatch

16

Large-hydro

82%

Mini-hydro

10%

Cogeneration

3%

Thermal

4%Solar

1%

Large-hydro,

542MW, 85%

Mini-hydro,

54MW, 8%

Cogeneration,

32MW, 5%

Thermal,

7MW, 1%Solar, 5MW,

1%

Appendix 2: Tariff analysis

Umeme distribution price is approx. 30% of end-user tariff

Uganda’s tariffs competitive relative to Kenya. Uganda with favourable

generation mix – 85% hydro

Sources: Electricity Regulatory Authority Uganda, Electricity & Water Utilities Regulatory Authority Tanzania, Electricity Regulatory Commission Kenya, EWSA Rwanda. Data

collected as at January 2017 and converted using using Bank of Uganda official COMESA exchange rates to US$

17

4.5

4.2

5.25.4

5.25.0

3.0

3.5

4.0

4.5

5.0

5.5

6.0

2012 2013 2014 2015 2016 2017

Real Distribution price

USD/KWh

18 16

15

10

24

20 18

18 16

14

9 8

15 15

11 10

-

5

10

15

20

25

30

Domestic Commercial Medium Ind. Large Ind.

US$

Ce

nts

Regional End-user Tariffs (Jan 2017)

Uganda

Kenya

Tanzania

Rwanda

Appendix 3: Distribution Tariff Margin

18

Q1 2017 Q2 2017 Q3 2017 Q4 2017F

Distribution Tariff Margin 34% 35% 36% 41%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Distribution Tariff Margin (Q1-Q4 2017)

Margin improvement in Q3 and Q4 forecast attributed to tariff recoveries for $11m approved

capex in Q2.