April 13, 2015 / 11:29 AM / 4 years ago

Uganda's power firm Umeme sees 2015 revenues up 10 pct

* Industrial customers, higher tariffs to lift earnings

* Umeme’s 2014 revenue rose modestly, profits fell

* Election jitters, weak currency may weigh on earnings

By Elias Biryabarema

KAMPALA, April 13 (Reuters) - Uganda’s sole power distributor Umeme said on Monday its 2015 revenue could rise by 10 percent, driven by increasing demand from industrial customers and higher tariffs.

Umeme’s Managing Director Selestino Babungi expects a surge in power demand from manufacturers, underpinned by economic growth in the east African nation. Higher electricity tariffs introduced in January will also lift revenue, he said.

The government forecast’s growth of 5.3 percent in fiscal 2014/15 (July-June) versus 4.5 percent in the previous year, driven by infrastructure investment.

Babungi, who was appointed this month, said he would focus on connecting new customers and expanding the distribution network by building new substations and lines at the company which is listed both on Ugandan and Kenyan bourses.

“What we’ve seen is that growth, in terms of electricity demand, is picking up ... industrial demand has gone up,” Babungi told Reuters.

“If you combine that with the tariff increase of 2 percent and the energy loss reduction ... our projection is that revenues will be up by around 10 percent over last year.”

Power losses, the difference between kilowatt-hours generated and those distributed to end-users, arise from hitches in the distribution network and illegal connections.

Umeme says it intends to reduce power losses to 18.6 percent this year from 21 percent in 2014.

Umeme’s 2014 revenue rose modestly to 977.7 billion shillings ($328 million) from 965.8 billion shillings. Its pretax profits fell by 12 percent, hurt by the shilling’s depreciation against the dollar. Umeme buys power in dollars and sells electricity to its customers in shilling.

Babungi said it was likely that economic activity could slow down because of uncertainty before a general election expected early next year, affecting the utility’s performance.

“In the period running into the elections, investors are cautious ... we normally see large industries commit less on capital investments,” he said.

“If there’s industrial slowdown our (power) demand projections will not be met.”

The local currency’s depreciation against the dollar was also a concern, Babungi said.

Analysts expect the shilling, which has lost about 7 percent of its value to the dollar so far this year, to remain under pressure on account of scarce hard currency inflows weighing against strong demand from importers.

“Again we’re seeing the shilling is still losing ground ... we think that will be another risk,” Babungi said.

$1 = 2,977.0000 Ugandan shillings Editing by James Macharia

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