Umeme Investor Presentation June 2017 Umeme powering Uganda T - - PowerPoint PPT Presentation

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Umeme Investor Presentation June 2017 Umeme powering Uganda T - - PowerPoint PPT Presentation

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Moniko Substation, completed in 2016 Umeme Investor Presentation June 2017 Umeme powering Uganda T wenty year concession to distribute electricity in Uganda (running to 2025) Contracted net US$ return of 20% p.a. on investment

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SLIDE 1

Umeme Investor Presentation

June 2017

Moniko Substation, completed in 2016

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SLIDE 2

Umeme – powering Uganda

2

Blue chip customer base

  • T

wenty 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 agreed through to 2018

  • Single buyer model with Government of Uganda Support Agreement
  • Secure cash flow: over 70% revenues from industrial, commercial and government customers
  • Diversified investor base with listing on Uganda & Nairobi Securities Exchanges
  • Incentivised management team
  • 50% dividend payout policy
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SLIDE 3

Uganda’s power sector

3

Other IPPs (hydro / thermal)

Generation Transmission Distribution

L L L

  • 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
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SLIDE 4

Umeme – Footprint & Customer Mix

4

25 district offices across 4 regions Customer Breakdown (%)

Domestic 92% Commercial / Industrial 8%

Revenue Contribution (%)

Domestic 27% Commercial 15% Street Lighting 0% Industrial - Medium 20% Industrial - Large 38%

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SLIDE 5

Macroeconomic Environment

16% 6.6% 11.6% 9.3% 7.5% 7.9% 4.4%

  • 5%

0% 5% 10% 15% 20% 2010 2011 2012 2013 2014 2015 2016 Uganda Manufacturing Sales (GWh)

  • High interest rates & election period slowed down

economic activity during Q1 and Q2 2016

  • Manufacturing sector grew 0.4%
  • Slowest annual GWh sales growth in recent years
  • Ferdsult

Engineering Services exits electricity distribution business

%

5

Sales growth weakens

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SLIDE 6

System Demand Analysis

6

409 424 472 469 488 515 539 300 350 400 450 500 550 600 2010 2011 2012 2013 2014 2015 2016

Max System Demand

MW System demand CAGR at 4.7% during the period Industrialization drive to support demand going forward

+4.7%

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SLIDE 7

Investing Ahead

102 130 166 224 321 407.4 500

  • 100

200 300 400 500 600 2010 2011 2012 2013 2014 2015 2016 US$m

Load Growth

  • Moniko Substation (US$ 6.8m)
  • T
  • roro Industrial Park (US $ 1.1m)
  • Luzira Portbell substation (US $ 0.6m)

Automated Metering

  • 2,500 Connections by end of 2016 Kampala

industrial users)

  • Improved metering and revenue cycle efficiency

Pre-payment Metering

  • Government of Uganda conversions
  • New Connections (+157k)
  • Post-paid customer conversions (+39k)
  • Loss reduction & improved revenue collection

Loss Reduction

  • Medium voltage distribution (Kibuli feeder)

Cumulative Capital investment Sample completed projects in 2016

US$ 93m invested in 2016

7

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SLIDE 8

Investing Ahead

Project implemented in line with government policy to prudently manage fiscal resources while deterring government ministries, departments and agencies from accumulating

  • arrears. The technology is the first of its kind in the world.

8

Government of Uganda Pre-Payment Project

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SLIDE 9

Safety

Non-network fatalities incl. power theft, domestic electrics, network interference, way-leaves encroachment and unauthorized operations 16 10 17 3 7 1 1 2 1 39 47 36 35 28 18 15 21 17 32 30 39 10 20 30 40 50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Network related fatalities Non-network related fatalities (illegal)

No. No. 9

One network related fatality in 2016

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SLIDE 10

Investing in service & growth

157k in 2016 65% on pre-paid

Customers Sales

Category

No. Share Growth GWh Share Growth Domestic 867,671 91.3% +19.9% 585 22.8% +2.6% Commercial 79,476 8.4% +19.4% 323 12.6% +4.3% Street Lighting 306 0.0% +0.3% 2 0.1% +3.0% Industrial - Medium 2,564 0.3% +5.5% 420 16.3% +3.3% Industrial - Large 527 0.1% +3.1% 1,239 48.2% +5.9% Total 950,814 100% +19.8% 2,567 100% +4.4%

+4.4%

Sales (GWh)

333 618

  • 200

400 600 800 1,000 2010 2011 2012 2013 2014 2015 2016 Post-paid Pre-paid ('000) 651 794 574 513 951 458 405 1,627 1,735 1,937 2,118 2,277 2,458 2,567 500 1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 GWh

Customer numbers +19.8% Prepaid Revenue Share

2% 6% 12% 16% 0% 4% 8% 12% 16% 20% 2013 2014 2015 2016

Prepaid Revenues % of T

  • tal

%

Customers & Sales Growth

10

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SLIDE 11

Regulatory 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

Energy losses at 19.0% Tariff parameter

‘13 ‘14 ‘15 ‘16 ‘17 ‘18 Energy losses (%) 23.5 20.5 18.6 17.1 15.9

14.9

Collection rate (%) 97.3 97.5 97.7 97.9 98.2

98.5

Operating allowance (US$m) ** 43.8 44.5 45.9 47.4 48.9

50.4 30.0 27.3 26.1 24.3 21.3 19.5 19.0 16 18 20 22 24 26 28 30 32 2010 2011 2012 2013 2014 2015 2016 % 95.1 98.9 94.0 100.3 99.1 98.2 98.4 80 85 90 95 100 105 2010 2011 2012 2013 2014 2015 2016 % 39 45 46 55 55 53 48 20 25 30 35 40 45 50 55 60 2010 2011 2012 2013 2014 2015 2016 US$m

  • 10.2%

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SLIDE 12

Financial performance

Financials Summary EBITDA (US$)

US$ m, Ushs bn

2016 2015

%ch

Income Statement

iFigures rounded

Revenue US$ 383 358 +7% Ushs 1,312 1,161 +13% Cost of Sales US$ (258) (229) +12% Ushs (882) (743) +19% Gross Profit US$ 126 129

  • 2%

Ushs 430 418 +3% Operating Costs US$ (48) (53)

  • 10%

Ushs (164) (172)

  • 5%

EBITDA US$ 77 76 +0.3% Ushs 262 248 +6% Finance Costs (ex lease) US$ (13) (9) +36% Profit Before Tax US$ 45 50

  • 10%

Tax Rate % 34% 34% Profit After Tax US$ 31 34

  • 9%

Ushs 100 106

  • 6%

Financial position at

2016 2015

Total Assets US$ 606 526 +15% Shareholders Equity US$ 153 149 +10% Net Debt US$ 201 142 +41% Per share data (Ushs) Ushs Ushs Earnings 61.0 65.0

  • 6%

Total Dividend 18.8 35.2

  • 47%

Payout Ratio 31% 54%

Profit after tax (US$)

FY10-14 adjusted for unrealized FX losses

26 35 46 58 68 76 76.6

  • 10

20 30 40 50 60 70 80 90 2010 2011 2012 2013 2014 2015 2016 US$ m 16 16 26 31 36 34 31

  • 5

10 15 20 25 30 35 40 2010 2011 2012 2013 2014 2015 2016 US$ m

EBITDA flat y/y PAT down 9% 12

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SLIDE 13

Trading update

Market cap US$180m at Ushs 400 share price

Dec-16 (1) At IPO P/E 5.7x 10.8x EV/EBITDA (2) 5.0x 3.9x P/(Buyout amount less net debt) (3) 0.7x 1.2x Dividend Yield 4.7%

  • Return on unrecovered investments (US$) (4)

10% 16%

Notes

(1) Actual 12 months to 31st December 2016 (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. Net of financing costs

13

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

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

Market capitalisation (US$m)

20 40 60 20 40 60

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

Volume (m)

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SLIDE 14

Trading update

Shareholder Summary

No. Top 20 Shareholders (May 2017) % Held 1 National Social Security Fund Uganda 23.2% 2 Allan Gray* 7.1% 3 Kimberlite Frontier Africa Master Fund 7.1% 4 Investec Asset Management Africa Fund 4.7% 5 Utilico Emerging Markets Limited 4.3% 6 The Africa Emerging Markets Fund 3.5% 7 International Finance Corporation 2.8% 8 Coronation Global Opportunities Fund 2.6% 9 Duet Fund 2.5% 10 Kattegat Trust 1.8% 11 Boutique Collective Investments 1.6% 12 Imara SP Reid 1.4% 13 Conrad N Hilton Foundation 1.1% 14 Vanderbilt University 1.1% 15 T.Rowe Price 1.1% 16 Kuwait Investment Authority 1.0% 17 Central Bank of Kenya Pension Fund 0.9% 18 William Byaruhanga 0.8% 19 Old Mutual 0.8% 20 Frontier Market Opportunities Master Fund 0.7% Other 30%

*Aggregated accounts 0.6% 2.0% 6.8% 14.7% 20.3% 26.0% 29.4% 0% 10% 20% 30% 40% Other Directors & Employees Uganda Retail EA Inst. Africa Inst. (excl. EA) Uganda Inst. International

Shareholder Distribution (May 2017)

 Actis divestiture completed Dec 2016  NSSF Uganda largest shareholder  Employee holdings supported by Long Term Incentive Plan 14

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SLIDE 15

Summary & Outlook

  • Focus on technical & commercial losses reduction
  • Recognition of investments
  • Resolution of Amendment 2&4
  • Concession Renewal

15

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SLIDE 16

Appendices

  • Appendix 1: Uganda’s macroeconomic outlook
  • Appendix 2: Generation Pipeline
  • Appendix 3: Generation overview
  • Appendix 4: Tariff analysis
  • Appendix 5: Karuma & Isimba Projects
  • Appendix 6: UETCL Transmission Backbone

16

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SLIDE 17

Appendix 1: Uganda’s macroeconomic

  • utlook

Source: Economist Intelligence Unit (March 2017)

  • “High commercial lending rates and

election-driven uncertainty during Q1 dragged down growth in 2016. Real GDP growth is projected to average 5.1% within 2017-2021.

  • Public investments in infrastructure

projects in the power and transport sectors will be key drivers

  • n

growth in 2017-18. Government expects the oil sector to drive growth in the medium term with production targets of 200k bpd. by 2020”

4.7% 4.8% 5.1% 4.8% 4.9% 5.1% 4.7% 1.9% 2.3% 2.4% 2.2% 2.6% 2.7% 2.4% 0% 1% 2% 3% 4% 5% 6% 2013 2014 2015 2016 2017 2018 2019

Real GDP growth forecast

Uganda World

17

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SLIDE 18

Appendix 2: 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 (52% completed)  Isimba - 183 MW (65% 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

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Generation Pipeline +1000MW

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SLIDE 19

Appendix 3: Generation overview

Source: Umeme, UETCL, MEMD

Energy supply mix (Effective Generation) Average Monthly Dispatch

Large-hydro, 542MW, 85% Mini-hydro, 54MW, 9% Cogeneration, 32MW, 5% Thermal, 7MW, 1% Large Hydro 87% Thermal 1% Co- Generation 5% Mini-Hydro 7%

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SLIDE 20

Appendix 4: Tariff analysis

Umeme distribution price is approx. 30% of end- user tariff Uganda’s tariffs in line with Kenya’s at Large Industrial category

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$

5.2 5.1 4.5 4.2 5.2 5.4 5.2 3.0 3.5 4.0 4.5 5.0 5.5 6.0 2010 2011 2012 2013 2014 2015 2016

Real Distribution price

USD/KWh 19 17 16 10 20 13 8 7 16 13 9 7 13 15 11 10

  • 5

10 15 20 25 Domestic Commercial Medium Industrial Largest Industrial

Regional End-user Tariffs - Jan 2017

Uganda Kenya Tanzania Rwanda US$ cents

20

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SLIDE 21

Appendix 5: Karuma & Isimba Projects

21 Isimba Hydropower project Status: 65% Commissioning: Q3 2018 Karuma Hydropower project Status: 52% Commissioning: Q1 2019

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SLIDE 22

Appendix 6: UETCL Transmission Backbone

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