By managing to attract high profile investors like Investec Asset Management, power distributor Umeme Limited has shown that it is not just a banter company but rather an attractive investment.
Following a successful bid, Investec Asset Management, one of the largest managers of third party assets in Africa, is now, after Actis, the single largest shareholder in Umeme.
In a heavily oversubscribed offer, Investec Asset Management secured 18.5% of the company on behalf of its clients at an investment of $40m.
Actis Capital LLP, a private equity firm focused on investments in emerging markets, through its Ugandan subsidiary, Umeme Holdings Limited sold a partial 39.05% stake of the 60.0% held in the power utility firm.
The Actis subsidiary now retains a 21.03 per cent stake and is still the largest shareholder in Umeme Limited. The National Social Security Fund Uganda upped its stake to 14.27 per cent from 8.11 per cent, but was dislodged from the second slot of top owners.
Investec Asset Management becomes the second largest shareholder of the Ugandan electricity distributor, which is cross-listed on the Nairobi Securities Exchange (NSE).
Commenting on the investment, Roelof Horne, Portfolio Manager at Investec Asset Management said in a press statement; "We are always searching across the capital spectrum for investment opportunities that offer our clients access to Africa's exciting growth potential and infrastructure development is a key investment theme for us. Umeme is a critical component of the Ugandan energy sector, with the laudable ambition of providing access to safe, reliable and cost effective power.
"In a continent where the lack of energy provision has proven to be one of the biggest constraints to realising economic potential, Umeme has greatly improved and extended access to power across Uganda over the past decade. We are confident that our investment will facilitate their continued growth. This investment also reiterates our commitment to identifying high-quality investments that play such a critical role in fostering Uganda's economic growth."
This transaction is the largest secondary block trade to date on the USE following on from Umeme's Initial Public Offering (IPO) and subsequent cross-listing on the NSE, and the $190m corporate financing.
Alastair Herbertson, infrastructure investment specialist at Investec Asset Management, concluded: "Investing in Umeme is an indication of Investec Asset Management's developing ability to invest in infrastructure. This type of investment is a means of supporting African economies by reducing the cost of doing business and generating future opportunities for further investment."
Patrick Mweheire, the Executive Director Stanbic Bank Uganda, Actis' transaction advisors says that the total institutional transit was Ush215 billion of which Ush199 billion was to Uganda and the other Ush15.7 billion in Kenya.
He said, "There was interest from about 30 unique funds. Allocation was therefore based upon interest level, the type of fund... we were looking for long term holders of Umeme shares. So we were biased in bringing in institutions that would support this company for the long haul, that was the primary criteria."
The retail piece was launched on the USE on Monday May 19, 2014 and was Ush12b ($5m), an additional $7m was allocated to Management and Directors of Umeme.
On that day 705,800 shares were traded on the special lots board at Ush340 each to register a turnover of Ush239.97 million. The counter had an outstanding demand of 33.43 million shares by the close of the day's trading session.
The total number of Umeme shares on offer from Actis was 585.6 million for institutional investors and 34 million for East African retail investors.The successful sale of the stake of Umeme Holdings share of Umeme has earned Actis US$85.5m.
In a press statement, David Grylls, a Partner at Actis says, "We are delighted to be deepening the capital pool into Uganda and broadening the institutional shareholders of Umeme, to continue the next phase of growth. That growth is indicative of Uganda's powerful macroeconomic story."
Eng. Kabagambe Kalisa, the Permanent Secretary in the Ministry of Energy and Mineral Development on his part said, "By divesting the Umeme shares to such credible investors, Actis is further enhancing the energy sector. These investors are welcome to Uganda and to look at additional investment opportunities in the sector and beyond."
Power firm Umeme Limited has a 25-year power distribution concession in Uganda although there have been recent concerns from stakeholders who accuse the company of poor performance.A parliamentary report in March recommended that the government cancels Umeme's concession.
Umeme's management however maintains that they have met all its contractual obligations. The power firm in its latest financials reported an 89% rise in pretax profits, to Ush115.2 billion.
The uproar that followed the announcement that the power firm was voluntarily suspending trading on the Uganda Securities Exchange (USE) recently has it.