Stock exchange suspends Umeme share trading

The Uganda Securities Exchange (USE) has announced the suspension of the Umeme counter on the bourse following the end of the company’s 20-year concession and eventual transfer of electricity distribution to the Government of Uganda. The company handed over the network to the Uganda Electricity Distribution Company Ltd on March 31, after accepting compensation amounting to more than $118 million (more than UGX430 billion). Umeme became a listed company on the USE on October 15, 2012 and the shares of the company started trading on the USE on November 30, at a share price of UGX 275 per share. The company is currently trading at UGX415 per share, though at one time it rose to a high of UGX450. The company’s shares were first cross-listed on the Nairobi Securities Exchange (NSE) in Kenya on December 14, 2012, with active trading commencing on July 31, 2013. However, in a March 31 press release, the USE stated that the counter of UMEME Limited which is listed on the Main Investment Market has been put on hold “temporarily.” “The Uganda Securities Exchange (USE) hereby informs all investors and the general public that the counter of UMEME Limited which is listed on the Main Investment Market Segment of the USE has been temporarily suspended,” the release said. “The involuntary suspension of the counter by the USE is made in the interest of investor protection and maintaining transparency of the market. The suspension is on the basis of the ongoing public speculations regarding the end of the UMEME concession and determination of the final buy out amount.” It added, “The suspension shall take effect on Monday, March 31, 2025 for a period of two weeks to enable the company address key concerns regarding price sensitive information and to mitigate the potential impact of the end of the concession period.” Umeme’s market capitalization is currently valued at about UGX674 billion, which is equivalent to about 2.37% of the USE equity market. Since December 3, 2012, Umeme’s market cap has increased from UGX487 billion, an increase of 38.3%. Given that Umeme now has no business from which to generate revenue, given that the concession has ended, the company has to pay the shareholders at the current market price and delist from the USE and the NSE. Richard Byarugaba, the USE board chairman, has expressed concern about the potential delisting, saying it would negatively impact market turnover. Apparently, the Government was not interested in buying off Umeme’s shares, instead opting to compensate the company for the investment it made in the network. In general, if a listed company is bought off by another entity, shareholders of the target company receive cash for their shares. The company’s stock is then typically delisted from the stock exchange, and it ceases to trade. With its 378,933,288 shares, the National Social Security Fund (NSSF) was Umeme’s leading shareholder and could receive cash amounting to more than UGX150 billion for its shares in Umeme. NSSF initially invested UGX138.7 billion in Umeme and over the years, earned more than UGX70 billion in dividend payments. The Fund initially purchased 251,951,071 Umeme shares in 2013. Later in November 2016, the Fund entered into an agreement to buy an additional 121,820,850 shares from Actis Infrastructure. The purchase increased the Fund’s total stake in Umeme Limited from 15.5% (251,951,071 shares) to 23% (373,771,921 shares), making NSSF the largest institutional investor in Umeme.