ANNUAL REPORT 2020 ANNUAL REPORT 2020 REPORT UMEME LIMITED ANNUAL Mukono North UETCL Substation Commissioned in 2020 the INTEGRATED ANNUAL REPORT 1
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Electricity Distribution for a Better Uganda ANNUAL REPORT 2020 ANNUAL REPORT 2020 REPORT ANNUAL UMEME LIMITED Mukono North UETCL Substation commissioned in 2020 THE INTEGRATED ANNUAL REPORT 1 WHAT WE STAND FOR 2 OUR BUSINESS 4 MANAGEMENT REVIEW & ANALYSIS 16 CHAIRMAN’S REPORT 18 MANAGING DIRECTOR’S REPORT 20 CORPORATE GOVERNANCE 24 SUSTAINABILITY REPORT 44 FINANCIAL STATEMENTS 69 HISTORICAL PERFORMANCE STATISTICS 155 Contents SHAREHOLDER INFORMATION 156 LIST OF ACRONYMS AND ABBREVIATIONS AGM Annual General Meeting BST Bulk Supply Tariff Capex Capital Expenditure CGU Cash Generating Unit DOMC Distribution, Operating and Maintenance Costs EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation EIR Effective Interest Rate ECL Expected Credit Losses ECP Electricity Connections Policy ERA Electricity Regulatory Authority ESG Environmental, Social and Governance FVOCI Fair Value through Other Comprehensive Income FVTPL Fair Value through Profit or loss GDP Gross Domestic Product GoU Government of Uganda HVE Total Energy Purchased IAS International Accounting Standards IFC International Finance Corporation IFRS International Financial Reporting Standards IFRIC International Financial Reporting Interpretations Committee ISA International Standards on Auditing IPP Independent Power Producer IVA Independent Verification Agency KV Kilo-Volts IT Information Technology LED Light-Emitting Diode LV Low Voltage MV Medium Voltage NSSF National Social Security Fund MEMD Ministry of Energy and Mineral Development OBA Output Based Aid OCI Other Comprehensive Income Opex Operating Expenditure PSP Power Supply Price P&L Profit and Loss PV Present Value RQ Reconciling Amount SHE Safety, Health and Environment SMT Senior Management Team SPPI Solely Payment of Principal and Interest TOU Time of Use UEDCL Uganda Electricity Distribution Company Limited UETCL Uganda Electricity Transmission Company Limited URA Uganda Revenue Authority Ushs Uganda Shillings USD United States Dollars VAT Value Added Tax WHT Withholding Tax WIP Work In Progress IV Umeme Limited Annual Report & Financial Statements 2020 THE INTEGRATED 1 ANNUAL REPORT 1.1 About the Report We are pleased to report to our shareholders and stakeholders on the performance of Umeme Limited ‘’Umeme’’ for the year ended 31 December 2020. In this report, we report on our financial performance and operational results in relation to the economic, social, environmental, and corporate governance framework. The report covers value creation, electricity supply industry, risks/opportunities, their impact, and outcomes to the varying stakeholders, pointing to matters we consider material to the business operations. 1.2 Scope and Boundary The report covers both financial and non-financial information and provides informa- tion that give an integrated view of the Company’s business operations. The Financial Information is prepared in accordance International Financial Report- ing Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), and the requirements of the Companies Act, 2012 of Uganda. The report is also guided by principles and requirements of the Uganda Securities Exchange and the Nairobi Securities Exchange. The non-financial information is summarised from the Company’s internal and external data sources. The report is for the year ended 31 December 2020. 1.3 Audit and Assurance The report was reviewed by the The Board Audit Committee and approved by the Board of Directors. The financial report was audited by the Independent External Auditors, who also re- viewed the entire annual report. The Company’s internal audit function also provides internal assurance to the Board, through the Board Audit Committee in relation the compliance, risk management and internal controls of the Company. 1.4 Financial and Non-Financial Information The report includes both financial and non-financial information. The financial infor- mation mainly relates to audited financial statements which appear on page 69 to page 154 of this report. The non-financial information is covered under all other sections of the report 1.5 Feedback We appreciate your feedback on our annual reports for further improvement of future reporting. Send the reporting improvement feedback to [email protected]. Umeme Limited 1 Annual Report & Financial Statements 2020 WHAT WE 2 STAND FOR Our Purpose Umeme is mandated to build, operate and maintain Uganda’s electricity distribution infrastructure in delivery of electricity supply services to its customers. The company operations are aligned to the Government agenda of ensuring achievement of universal access to modern energy while ensuring a sustainable and efficient electricity supply industry. Our ambitions are ingrained in our pursuit of being: • Uganda’s main and preferred electricity distributor, delivering value to our customers, the Government, and stakeholders • Employer of choice, attracting, developing, and retaining top talent • an attractive investment for shareholders and other capital providers through provision of short- and long-term value. With the increasing generation capacity and build-up of the transmission back bone, we consider continued investment in scaling up the distribution capacity and reach as fundamental in provision of stable and quality supply to our existing and future customers, in tandem with the National Development Goals. Our Vision Powering communities, business and industry for a prosperous Uganda We aim to be at the centre of Uganda’s social economic transformation through the distribution and supply of safe and reliable electricity. Our Mission To supply our customers with safe, reliable electricity through an efficient distribution network and with passionate people, while delivering sustainable shareholder value. 2 Umeme Limited Annual Report & Financial Statements 2020 Our Values Our Core Values embody our beliefs and guide our behaviour in the conduct of business operations to achieve our aspirations: We place the Safety of our employees and the public at the centre of our actions We provide an experience of exceptional Customer Service We act with Integrity, fairness and transparency in all our dealings We deliver our services as One Team We deliver our services and value through Innovation and the zeal to succeed continuously raising the bar on our performance. Umeme Limited 3 Annual Report & Financial Statements 2020 OUR 3 BUSINESS 3.1 Who We Are As an electricity distributor, Umeme is licensed to distribute and supply electricity to customers operating Umeme Limited is Uganda’s main electricity between 33kV and 240 volts. distribution Company, listed on the Uganda Securities Exchange and cross listed on the Nairobi Securities This mandate involves, operation, maintenance and Exchange. upgrade of electricity distribution infrastructure, electricity retail and provision of related services to The National Social Security Fund that has 23% customers. We distribute 97% of electricity in Uganda, shareholding in Umeme Limited, is currently the largest serving 1.5 million customers that include domestic shareholder. (see list of top ten shareholders on page households, commercial small and medium enterprises, 114). and industrial customers. The Company operates a 20-year electricity distribution The sector is regulated by the Electricity Regulatory concession from the Government of Uganda that Authority (ERA), whose mandate include setting took effect on 1st March 2005. After the electricity operating standards, sector monitoring and setting sector reforms in 1999, Uganda adopted a single buyer appropriate end user tariffs. electricity sector model, where Uganda Electricity Transmission Company Limited (UETCL) is the System Operator, responsible for the purchase of electricity from all Independent Power Producers, import and export of electricity and being Umeme’s sole bulk supplier. Government of Uganda Electricity Regulatory Authority (ERA) Licence for Ownership UEGCL UETCL Distribution Supply Support UEDCL Licence Licence Agreement Trans Bujagali Operator Lease Agreement System Other IPPs Operator (Hydro / thermal) Power Sales Agreement Kenya Export / Import Tanzania Customers Generation Transmission Distribution 4 Umeme Limited Annual Report & Financial Statements 2020 3.2 Our Electricity Distribution Footprint (11kV and 33kV, Distribution Lines) The distribution infrastructure is composed of 161 terminal points with Uganda Electricity Transmission Company at their 20 substations; Umeme’s 69 distribution substations; 15,564 km of Medium Voltage network, 14,014 distribution transformers and 21,788 kms of low voltage network, including 1.5 million metering points. The network distribution operations are split between Kampala and Up Country, further split int0 13 technical engineering areas. Umeme Limited 5 Annual Report & Financial Statements 2020 3.3 Our Service Centres We operate from 27 service centres split into 4 Operations Regions (Western, North Eastern, Kampala East and Kampala West), further split into 40 operations centres. 6 Umeme Limited Annual Report & Financial Statements 2020 Gulu Substation the capacity of which has been recently doubled to 10MW Mukono North UETCL Substation commissioned in 2020 Umeme Limited 7 Annual Report & Financial Statements 2020 3.4 Corporate Information Principal Place of Business and Company Secretary Registered Address SHONUBI, MUSOKE & CO ADVOCATES UMEME LIMITED SM Chambers Rwenzori House, Plot 14 Hannington Road Plot 1 Lumumba Avenue P. O. Box 23841, Kampala,