Umeme Chief’s Growth Plan [interview]

SELESTINO BABUNGI took office on April 1 as the managing director of Umeme, the country’s main power distribution company. He told journalists recently about his plans and targets, and his opinion of Uganda’s power sector. Alon Mwesigwa brings you the details of then discussion.

You are taking over from Charles Chapman. Do you have a special strategy to push ahead or will you continue with Chapman’s tactics?

Chapman came to turn around the company. The company has grown. We are listed we are bankable we have attracted private capital in terms of debt – $190m. The fundamentals are right. Now, we are on the growth agenda. We are moving towards strengthening the network.

In the past, whenever it would rain, so many places would go off. But because of the investments we have made, supply reliability has greatly improved. Technology has become part and partial for the sector. One of them is prepaid metering. Currently, 30 per cent of our customers are on prepaid meters. Over [my tenure], we want to convert 100 per cent to the prepaid metering.

Any new customer coming on board is on pre-paid metering. The second element of my strategy is the caliber of our staff. We want to train them and have a staff that is customer-centric and that is addressing the needs of our stakeholders in this growth agenda. Yes, Chapman’s strategy sets the foundation, but we are now on the growth trajectory, which requires a different strategy altogether.

What’s your investment plan?

From an investment perspective, as a company we are driven mainly by some key items: to drive efficiency in the sector by reducing energy losses to improve customer service either through investing in the network or better ways of serving customers to expand the network through investment in substations, new lines, and distribution lines. We want to increase access because Uganda’s access rate is around 15 per cent.

Some countries like Cameroon have reached 50 per cent. We want to push the government agenda and reach 40 per cent by 2025. Our investment priorities are in the 201318 five-year programme. We plan to invest $440m in this period, which is about Shs 1.2tn.

Last year, we invested 269bn ($96m). And this year, we plan to invest [either slightly less or more than that] by $10m.

How would you rate Umeme’s performance as a concessionaire?

We have seen companies all the way from different countries come to Uganda to study our model. We have seen Ghana, Liberia, Zanzibar, and Rwanda come in. The same model that is here is the same that Actis [former majority shareholder] is deploying in Cameroon and it is becoming popular with the World Bank. When Umeme got the concession, one of the targets was to do capital investments of $65m by 2010.

By the end of 2014, total investments in the network were around $321m – that’s five times the initial target – which is an outstanding achievement. Another target was to grow the customer numbers. At the time when Umeme was starting, the target numbers were 10,000 and post Bujagali Umeme was supposed to connect 15,000 per year.

Now, we are connecting in the north 100,000 customers per annum. The losses were around 38 to 40 per cent and we have brought them to 21.3. That’s an enormous achievement.

Why is electricity in Uganda still more expensive compared to the region?

You recall around 2011, there were discussions that tariffs were high because losses were high. We are doing the right thing to reduce our component [losses] in order to reduce the tariffs. Transmission and generation costs have the biggest impact on the end user tariffs. And, therefore, if you are to reduce end user tariffs sustainably, you have to reduce the generation costs.

Government has come in to do direct capital investments in Karuma and Isimba. This naturally will bring down the generation costs to four cents. For Bujagali, the average cost is around 11 cents, [but] before Bujjagali came in during the thermal crisis, Aggreko and other thermal plants were charging in the excess of US 22 cents. Yes Bujagali is expensive but it came at a time of crisis.

Do you expect a crisis in case Karuma and Isimba are delayed?

What’s happening now is that we are still drawing all the power we are having from hydro and the biogas from the sugar plants – Kakira and Kinyara. The thermals are still there being warmed up. We still have capacity of 100MW available on thermal.

We also still have around 20 to 30MW available from biogas. Our maximum demand now is at 540MW. Effective generation available is around 670MW, including the thermal. In 2015, we will still continue without thermal, but what I foresee is that in the tail end of 2016, we may start getting in thermal plants to support us. But, also, what we see is that if Karuma and Isimba do not start by 201718, then possibly there will be a crisis. It is paramount that Isimba and Karuma come on board on time.

Lastly, Umeme has had issues with the regulator, particularly on the pricing of power. What sort of relationship do you envisage in your tenure?

The regulator is there to oversee the sector. But the current dispute is the one that arose because the regulator was attempting or amending our license without following due process. Of course in the electricity act and our license, there are mechanisms to be followed. [If they don’t follow them,] we go to the disputes tribunal, commercial court or arbitration and it’s the same process we are following now.

Does it affect our day-to-day relationships with the regulator?

No. It is one of the areas where the regulator undertook to amend the license without following procedure. We leave it to the tribunal to resolve.

Source : The Observer


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