umeme limited h1 2018 investor presentation · umeme - powering uganda • twenty year concession...
TRANSCRIPT
Tororo Cement Industries Expansion
Umeme Limited
H1 2018 Investor Presentation
Contents
Umeme & Electricity Sector Introduction
Macro Economic Update
Electricity Supply Industry Overview
Operational Review
Regulatory Update
Financial Performance
Safety Update
H2 2018 Priorities
2
Umeme - powering Uganda• Twenty year concession to distribute electricity in Uganda (running to 2025)
• Contracted net US$ return of 20% p.a. on investment
• Regulated by the Electricity Regulatory Authority with energy losses target, collections target
and operating cost allowance targets set through 2018
• Secure cash flow: over 70% revenues from industrial, commercial and government customers
• Diversified investor base with listing on Uganda & Nairobi Securities Exchanges
• 98% Distribution market share
• Incentivised management and staff
3
Umeme Value Drivers
Investment Return
•20% USD Net ROI
•Capital Recovery
•Tax Recovery
Regulatory Incentives
•Loss reduction
•Cash collections
•Operating Expenses
Financial Performance
(EBITDA)
4
20% USD Return earned on
capex completed and
subsequently verified by ERA.
Investment costs: 20% ROI, Tax
and Capital recovery plus
operating expenses (DOMC) form
Umeme revenue requirement
7-year Regulatory targets set up to
2018. Performance against targets
can enhance or dilute 20% USD ROI
Other IPPs(hydro / thermal)
Generation Transmission Distribution
LL
L
Uganda’s power sector• Uganda’s electricity sector was liberalised in 1999, supported by World Bank
• Sector unbundled into generation, transmission and distribution to foster
transparency & investment
• Single buyer model
5
Macro Economic Update
0.0
0.5
1.0
1.5
2.0
2.5
170
180
190
200
210
220
Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18
Composite Index of Economic Activity
CIEA Monthly Changes %
• Quarterly CIEA data
points to improved
economic activity
• Expansion in Private
Sector Credit supporting
growth
• Manufacturing sector YTD
credit growth highest at
9.4%
• GDP growth expected to
reach 6% in 2018/19
compared to 5.8% of
2017/18
• Headline Inflation – July
3.1%
• CBR – 9%Source: Bank of Uganda
6
2,118 2,277
2,458 2,567
2,760
1,045 1,114 1,220 1,260
1,345 1,461
500
1,000
1,500
2,000
2,500
3,000
2013 2014 2015 2016 2017 2018
Sales (GWh)Full year
Half year
GWh
State of Electricity Supply
+8.6%
Effective Generation – 688 MW
Peak Demand excluding exports - +5.9%
System Demand include exports – 637MW
Generation Load Factor – 74%
5-Year Max Demand CAGR – 4.9%
H1 2018 GWh sales up 8.6% (FY17: 7.5%)
Source: UETCL
492508
521534
563
596
300
350
400
450
500
550
600
650
2013 2014 2015 2016 2017 2018
Max System DemandMW +5.9%
7
-
200
400
600
800
1,000
1,200
1,400
2013 2014 2015 2016 2017 2018
Post-paid
Pre-paid
('000)
651
794
574
1,1251,208
Electricity Demand: +8.6%
Category GWh Growth (y/y) FY 2017 (%)
Domestic 317.5 +1.6% +6.9%
Commercial 178.3 +7.9% +5.7%
Street Lighting 0.5 -32.9% -0.7%
Industrial - Medium 224.3 +6.3% +3.0%
Industrial - Large 740.0 +12.9% +9.7%
Total 1,460.7 +8.6% +7.5%
Prepaid Revenue Share
Customer numbers Sales (GWh) Growth
Sales (GWh) by Customer Category
Up 7.3% from FY 2017
76.3% on pre-paid
2%
6%
12%
16%
21%
24%
0%
4%
8%
12%
16%
20%
24%
28%
2013 2014 2015 2016 2017 H1 2018
Prepaid Revenues % of Total%
922
286
951
8
55 55 53 48
51
26 29 28
22 22 27
-
10
20
30
40
50
60
70
80
2013 2014 2015 2016 2017 2018
Full year Half yearUS$m
Operational PerformanceRevenue collections Energy Losses
Regulatory targets*Operating costs
* Umeme financial year (Jan-Dec). Tariff year runs from 1st March
** Allowance is adjusted annually for international and local inflation
Tariff
parameter ‘13 ‘14 ‘15 ‘16 ‘17 ‘18
Energy losses
(%)
19.6 21.0 18.9 17.4 16.1 15.1
Collection rate
(%)
81.1 97.5 97.7 97.9 98.2 98.5
Operating
allowance
(US$m) **
36.5 44.4 45.7 47.2 48.7 50.2
Opex up 21.9% y/y
24.3
21.3
19.5 19.0
17.2 16.7
16
18
20
22
24
26
2013 2014 2015 2016 2017 2018
%
100.3 99.1
98.2 98.4
100.2
102.8
95
97.5
100
102.5
105
2013 2014 2015 2016 2017 2018
%%%
9
Capital Investments
Pre-payment Metering
• Government of Uganda Time of Use
• New connections
Cumulative Capital investment
Sample projects in 2018
US$ 31m invested in H1 2018
Network &
substations, 93%Systems &
IT, 3%
Operation
al assets,
3%
Land &
buildings,
1%
Load Growth
• Kampala Industrial Business
Park/Namanve 33kv Industrial Ring
• Upgrade of Gulu sub-station
• Nyakesi substation, Tororo
• Kawanda-Kapeeka Load Transfer
Quality of Supply
• Namanve Industrial Park
102 130 166
224
321
407
500 566 596
84 110 127
172
250
316
383
434 449
-
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018
Total UnrecoveredUS$m
10
Regulatory Updates
• Recovery of UShs 103.7 billion lifeline tariff revenue was
included in Q2 and Q3 2018 tariffs
• Bujagali Energy Limited refinancing was completed – effect of
15% reduction in large industrial tariffs
• Offsets of USD 8.5m effected for arrears government
installations (post-paid accounts)
• 331 out of 469 government installations converted to pre-
paid metering
• Pending unrecognized Capex by ERA – US$ 93m
• Engagement on tariff parameters for 2019-25 ongoing
11
Electricity Tariff Developments
29%
35% 35%
46% 46%
2016A 2017A 2018Q1 2018Q2 2018Q3A
Umeme Distribution Margin (%)
0
100
200
300
400
500
600
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
End User Tariff (UShs)
Weighted Average EUT Bulk Supply Tariff• Weighted Average End User Tariff up 1.5% YTD
• Bulk Supply Tariff reduced by 21.4% in Q2
2018
• Bujagali Refinancing benefits (generation tariff
down from 11 cents from 8 cents) passed onto
extra-large industrial category to drive
consumption
• Recovery of UShs 103.7 billion lifeline tariff
revenue started in Q2 2018
• Distribution Margin increased as a result of
lifeline revenue recovery
200
300
400
500
600
700
800
Street
Lighting
Domestic Commercial Medium
Industrial
Large
Industrial
Extra-large
Industrial
Tariff per consumer category (UShs)
Q1 2018 Q2 2018 Q3 2018
12
58
68
76
90 90
31 33 38 39 36
45
-
10
20
30
40
50
60
70
80
90
100
2013 2014 2015 2016 2017 2018
Full year Half yearUS$ m
Financial Performance (US$)
Financials Summary (US$m) EBITDA (US$)
Profit after tax (US$)
Income Statement H1 2018 H1 2017 %ch
Revenue 198.8 195.2 +1.9%
Cost of Sales (128.2) (134.8) -4.9%
Gross Profit 70.6 60.4 +16.9%
Operating Expenses 28.4 22.2 +9.8%
EBITDA (ex Amendment 5) 44.7 35.9* 24.5%
Finance Costs (ex. lease) 8.0 8.2 -0.3%
PBT (Adjusted) 23.2 16.2* 43.2%
Tax Rate 29.2% 30%* -
Profit After Tax 16.3 11.3* +44.2%
Financial Position at H1 2018 FY 2017 %ch
Total Assets 651.1 645.0 +0.9%
Shareholders Equity 181.7 169.6 +7.1%
Net Debt 174.0 187.0 -7.0%
* Adjustments for effects of Amendment 5
** Assuming 30% tax rate on adjusted PBT.
2017 EBITDA
excl. Amendment 5
effects
2017 PAT excl.
Amendment 5
effects
31
36 34
40
31
17 18 19 16
11
16
-
5
10
15
20
25
30
35
40
45
2013 2014 2015 2016 2017 2018
US$ m
13
Financial Performance (UShs)
Financials Summary (UShs bn) EBITDA (UShs)
Profit after tax (Ushs)
Income Statement H1 2018 H1 2017 %ch
Revenue 735.8 704.4 +4.5%
Cost of Sales (474.4) (486.4) -2.5%
Gross Profit 261.5 218.0 +20.0%
Operating Expenses 105.6 93.3 +13.1%
EBITDA 165.0 129.0* +27.9%
Finance Costs (ex.lease) 29.6 29.1 1.6%
Profit Before Tax 87.3 58.6* 49.0%
Tax Rate (%) 30.1* 30**
Profit After Tax 61.0 41.0* +48.9%
EPS 38.0 25.3* +48.9
DPS (Interim) 12.7 0.0 -
Financial Position at H1 2018 FY 2017 %ch
Total Assets 2,529.2 2,349.4 +7.7%
Shareholders Equity 706.0 617.7 +14.3%
Net Debt 676.0 681.2 -0.8%
*Figures adjusted for effects of Amendment
**Assuming 30% tax rate.
2017 EBITDA excl.
Amendment 5 effects
Figures are rounded.
57
84
70
106
132
112
31
47 38
68 54
41
61
-
20
40
60
80
100
120
140
2012 2013 2014 2015 2016 2017 2018
Full year Half yearUshs bnUshs bn
H1 2018 PAT up 49%
2017 PAT excl.
Amendment 5 effects
149 178
248
308 325
82 84 113 133 129
165
-
50
100
150
200
250
300
350
2013 2014 2015 2016 2017 2018
Full year Half yearUshs bn
H1 2018 EBITA up 28%
14
Trading Update
Market cap US$153m at UShs 346 share price
Dec-17 (1) At IPO
P/E 5.0x 10.8x
EV/EBITDA (2) 3.5x 3.9x
P/(Buyout amount less net debt) (3) 0.5x 1.2x
Dividend Yield (H1 2018 Annualized) 7.3% -
Return on unrecovered investments (US$) (4) 8% 16%
Notes
(1) Actual 12 months to 31st December 2017. Multiples calculated on adjusted EBITDA &
PAT excluding Amendment 5 (2) EBITDA excludes finance income/cost & FX gain/loss. Includes interest on bank deposits(3) Indicative assuming GoU termination premium of 20% of unrecovered investment (4) Prior year unrecovered investment base
250
350
450
550
650
750
850
250
350
450
550
650
750
850Share price (Ushs)
USE
NSE
0
20
40
60
0
20
40
60
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Volume (m)
Market cap US$153m at UShs 346
share price
Year to Date daily value traded at
US$ 27.5k
15
Shareholder UpdateShareholder Summary
No. Top 20 Shareholders (Jun 2018) % Held
1 National Social Security Fund Uganda 23.2%
2 Allan Gray* 10.0%
3 Kimberlite Frontier Africa Master Fund 8.6%
4 Utilico Emerging Markets Limited 4.5%
5 Investec Asset Management Africa Fund 4.3%
6 Imara SP Reid 4.1%
7 The Africa Emerging Markets Fund 3.9%
8 International Finance Corporation 2.8%
9 Coronation Global Opportunities Fund 2.6%
10 Duet Fund 2.5%
11 Vanderbilt University 1.2%
12 Conrad N Hilton Foundation 1.1%
13 Boutique Collective Investments 1.1%
14 Kuwait Investment Authority 1.0%
15 Central Bank Of Kenya Pension Fund 0.9%
16 William Byaruhanga 0.8%
17 National Social Security Fund Kenya 0.6%
18 Sudhir Ruparelia 0.6%
19 Frontier Market Opportunities Master Fund 0.6%
20 Stanchart Nominees NR A/C 9318 0.5%
Other 25.1%
*Aggregated accounts
International
Funds, 27%
Africa (excl.
East Africa),
24%
East Africa
Institutional,
14%
Uganda
Institutional,
26%
Uganda Retail,
7% Directors &
Employees, 1%
Other, 1%
Umeme Shareholder Distribution
16
Safety of Staff & the Public
Non-network fatalities incl. power theft, domestic electrics, network interference, way-leaves encroachment and unauthorized operations
No network related fatality in H1 2018
16
10
17
3
7
1 10
20
1 10
39
47
3635
28
1816
19
15
21
17
3230
39
0
10
20
30
40
50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Network related fatalities
Non-network related fatalities (illegal)
No.No.
Full Year
17
Priorities for H2 2018
Conclude negotiation of 2019-2025 tariff parameters with
ERA
Continue the concession extension work stream
Evaluate medium term capex financing options
Engage ERA on outstanding income recoveries, including
capital investments
Delivery of core financial performance drivers (costs,
collections, energy losses and growth)
Implementation of ICT Systems (SAP & HRIS)
Organizational readiness for growth
18
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
19
Generation Pipeline +1000MW
Isimba Hydro Power Project
Source: Uganda Electricity Generation Company Limited
Isimba Hydro Power Project (183 MW)Status: 87%
20
Karuma Hydro Power Project
Source: Uganda Electricity Generation Company Limited
Karuma Hydro Power Project (600 MW)Status: 75%
21
Transmission Grid Status
22
Thank You
23