ACTIS SET TO CASH IN ON UMEME INVESTMENT

Just over half way through the 20 year concession to distribute power in Uganda, Actis has all but sealed-and-delivered a deal to offload its interest in Umeme.

This week the private equity firm announced through its wholly owned subsidiary, Umeme Holdings Ltd (UHL) that it had sold about 122 million shares to National Social Security Fund (NSSF) and was in advanced stages of shedding the remaining 110 million shares to institutional investors and retail traders on the Uganda Securities Exchange (USE).

While the numbers are not yet clear sources in the financial industry Actis has done well for itself on the whole concession deal.

“They made money at the Initial Public Offering (IPO), in dividend payouts,” said Salma Nakiboneka, the head of research at Crested Capital investment bank.

In dividend payments alone over the last three years UHL bagged sh35.8b out of a total of sh129b doled out to shareholders. A systematic reduction of their interest in the power distributor since 2012 has seen the private equity home take home a lot more.

In the IPO in 2012 UHL shed 40 percent of its interest for sh171b, most of which was used for expansion and paying off debt. Another 743 million shares were offloaded in 2014 when UHL reduced its holding to 14.30 percent for undisclosed sum, but somewhere in the region of sh250b going by the sh340 per share NSSF paid for the 100 million shares it bought during the transaction.

"And finally the sh59.4b they earned by offloading the 122 million shares to NSSF in the latest transaction for a grand total of about sh480b in share sales in the last four years...

This does not include interest on money lent to the Umeme and management fees the company.

“No doubt this has been a very profitable investment for Actis but more importantly it shows that the capital markets here work. That investors can come into this market and exit in a credible way is the biggest win of this transaction,” said Ken Kitariko, Africa Alliance’s local boss.

NSSF in its statement this week said it had earned sh22b in dividends since 2012 and made an 89 percent return in its Umeme holding, reporting that it had spent sh81.7b while the total value of the investment now is over sh132.3b.

“Our investment in Umeme Limited since it listed on the Uganda Securities Exchange has delivered returns to the Fund,” Said NSSF managing director Richard Byarugaba.

NSSF is now the major shareholder and it is expected that Umeme Management Services Ltd will be retained to manage the company once Actis exits.

Other observers agreed that the deal was a good one for NSSF.

“It ticked all the boxes. It was a local investment. A big outlay of cash. In a company with far reaching economic impact,” Kitariko said....

During the life of their involvement Umeme has seen the number of accounts grow to 860,563 from the 300,000 they fund connected in 2005. To make this happen the company has invested about $440m by the end of June this year.