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The East African : Oct 24th 2015
38 ENERGY Power cuts: No respite for large users Some companies we≥e subjected to mo≥e than 10 hou≥s of loadshedding pe≥ day, su≥ging bills and dep≥essed ea≥nings By BERNARD BUSUULWA Special Correspondent ergy losses within its network since 2005, but large power consumers still suffer frequent power cuts. Total energy losses have dropped E from 38 per cent in 2005 to 19.2 per cent in June, thanks to fresh investments in new substations and transformers, sophisticated billing systems and tougher enforcement actions targeted at illegal connections. Now the company plans to invest $440 million in the period 20132018 on network expansion, rollout of prepaid meters and improvement of customer support services, according to its investment strategy. But large consumers, who con- tribute 70 per cent to Umeme’s revenues, say reduced power losses have not translated into actual benefits due to Umeme’s worn out electricity supply infrastructure. This has resulted in routine pow- er outages, with some companies, especially in the industrial and telecommunications sectors, subjected to more than 10 hours of loadshedding per day in September, surging bills incurred on diesel generators and depressed earnings. “This has led to considerable losses in production and higher running costs,” said Ramesh Babu, managing director of Abacus Pharma Ltd, a medical products manufacturer. In September, Abacus experi- enced a total of 118 hours of loadshedding. As a result, the company lectricity distributor Umeme has recorded a drop in overall en- INCREASED COSTS Lubowa sub-station is among the facilities that Umeme has upgraded in its bid to improve electricity supply. Picture: Morgan Mbabazi used 13,000 litres of diesel, which cost Ush20.8 million ($5,619), Mr Babu said. Economists estimate energy costs account for more than half of production costs in the region. The problem has been compound- ed by increased demand for electricity, after the commissioning of Bujagali dam in 2012. Total electricity demand per year has increased to 550 Megawatts compared with the 450MW recorded prior to Bujagali’s 250MW coming onto the national grid, Umeme revealed. Umeme attributes delays in refur- bishing its network to slow investment approvals by the Energy Regulatory Authority (ERA), but the industry regulator claims Umeme’s “Large consumers say reduced power losses have not translated into actual benefits due to Umeme’s worn out infrastructure.” submissions had errors. Currently, ERA takes more than 12 months to approve new investment projects by Umeme while average project execution time is estimated at 18 months. In spite of delayed investment ap- provals, Umeme plans to invest $20 million-$30 million per year on new projects to fix supply bottlenecks experienced by large consumers, company sources say. Uncertainty over changes in pow- er tariffs has similarly weighed on some large consumers in light of the massive depreciation of the Uganda shilling since January. Exchange rate movements ac- count for a dominant share of 45.7 per cent of electricity tariffs compared with inflation and oil prices; this implies additional increases in power tariffs as the shilling falls further. Electricity tariffs for large indus- trial users increased from Ush315.6 ($0.085) per kilowatt hour in the first quarter of 2015 to Ush320.5 ($0.086)/kWh in the second quar- Though Umeme plans to invest $440 million in the period 2013-2018 on network expansion, rollout of prepaid meters and improvement of customer support services, large consumers continue to suffer power cuts. American Tower Corporation, Uganda’s largest tower operator, owns 1,400 masts around the country but 500 of these lack access to power. The company spends about Ush1.3 million ($351) on diesel supplies for each mast every month. In September, Abacus Pharma Ltd experienced a total of 118 hours of loadshedding. As a result, the company used 13,000 litres of diesel, which cost Ush20.8 million ($5,619). ter, data compiled by ERA shows. This tariff band was raised to Ush328.7 ($0.089) per kilowatt hour for the period July-September. Umeme is cross listed at the Uganda and Nairobi Securities Exchange; its share price this month at Ush620 ($0.168) compared with the Ush595 ($0.160) recorded in August shortly after it declared a Ush4.5 billion ($1.2 million) halfyear loss for 2015. The EastAfrican BUSINESS OCTOBER 24-30,2015 Tanzania seeks mo≥e tou≥ists By APOLINARI TAIRO Special Correspondent TANZANIA IS pulling all stops to attract tourists from North America, Europe, Southeast Asia and South Africa. Already an online tourism marketing portal was launched by President Jakaya Kikwete at the same time as commercial television adverts, which are to be aired by CNN and BBC for six months, were launched in October. The TV advert is part of the marketing campaign called “Tanzania, the Soul of Africa” that is meant to raise the international tourists arrivals from the 1.140,156 recorded in 2014 to 10 million by 2025, said Minister for Natural Resources and Tourism Lazaro Nyalandu. The minister said that the marketing programme, which is expected to open up southern Tanzania, will cost $100 million, partly to be financed by the World Bank. “We are aiming at getting more tourists to visit the rich tourist products available in southern Tanzania and make the southern circuit an independent destination similar to the more famous northern circuit. The plan will also help develop bridges, roads and lodges in the south, thus encouraging mobility of tourists,” he said. Through support from the Eu- ropean Union, the World Bank and the United Nations Development Programme (UNDP), the government of Tanzania has designed a tourism development master plan that will result in more investments in southern Tanzania. Through a programme to at- tract more tourists, Tanzanian government had focused its marketing and tourist product development in less developed, southern regions. T≥ansnational Bank in talks with st≥ategic investo≥ ove≥ some of its sha≥es By JAMES ANYANZWA The EastAfrican KEY SHAREHOLDERS of Kenya’s Transnational Bank plan to sell part of the bank to a strategic investor. This being done to raise new cap- ital and bolster the bank’s performance in an industry that has seen two lenders — Dubai Bank and Imperial Bank — collapse in quick succession with billions of dollars of depositors’ money in less than three months. Transnational chief cxecutive Sammy Lang’at told The East African that discussions are ongoing and the bank hopes to conclude a deal in six months. “The discussions are still with the shareholders. Somebody has expressed interest in buying shares in the bank,” said Mr Lang’at. The small-sized bank, with a pal- try 0.15 per cent market share and 17 outlets in Kenya, had a core capital of Ksh1.8 billion ($17.33 million) as at December 31, 2014, against the minimum statutory requirement of Ksh1 billion ($9.62 million) Its net profit fell 20 per cent to Ksh125.71 million ($1.21 million) from Ksh158.11 million ($1.52 million) in the same period. Its customer deposits increased to Ksh7.66 billion($73.75 million) in 2014 from Ksh7.18 billion($69.13 million) sets grew to Ksh10.23 billion($98.5 million) in 2013 while its total asfrom Ksh9.65 billion ($92.92 million). The bank’s s shareholders as at December 31, 2013 included Archers and Wilcock Ltd (23.75 per cent), Sovereign Trust Ltd (23.03 per cent), Duggan Ltd (15.53 per cent), Pyramid Trustee Ltd (15.12 per cent) and November Nominees Ltd (7.28 per cent). Others are Simbi investors (4.11 per cent), Losupuk Ltd (2.79 per cent), Kanyerere Ltd (2.15 per cent), and Lohan Investments Ltd (1.45 per cent). In August, the Central bank of 0.15pc Kenya put Dubai Bank into receivership for violating banking laws and regulations including failure to maintain sufficient capital and liquidity ratios. A few days later, the lender was put under liquidation. Early this month, Imperial Bank went under with Ksh48 billion ($462.19 million) of depositors money, excluding the Ugandan subsidiary. Kenya is keen on reducing the The market share of Transnational Bank, which has a core capital of Ksh1.8 billion ($17.33 billion) and 17 branches across the country number of banks in the economy to a few that are strong enough to weather shocks, fund large infrastructure projects and charge affordable rate of interest. In 2007, the country increased the minimum core capital for banks to Ksh1 billion ($9.62 million) from Ksh250 million ($2.4 million), setting December 31, 2012 as the deadline. An attempt by the Treasury Cabinet Secretary Henry Rotich to further increase the bank’s core capital from Ksh1 billion ($9.62 million) to Ksh5 billion ($48.14 million) by December 31 2018 met intense resistance from Members of Parliament. Uganda and Tanzania have also increased the core capital for banks in line with the region’s financial sector integration agenda. Kenya has a total of 21 small banks, which control only 8.4 per cent of the banking business. It has six big banks commanding a 49.9 per cent market share with 16 medium banks controlling 41.7 per cent of the market.
Oct 17th 2015
Oct 31st 2015