Umeme Hit By Investor Outflow

A major shareholder in Umeme Limited (UMME) is exiting the company, a move that has raised concern about the future of the Ugandan electricity distributor. Umeme stock is listed on both the Nairobi Securities Exchange (NSE) and Uganda Stock Exchange (USE). 

The shareholder bolting out of Umeme is British private equity firm Actis. It turns out Actis recently notified Umeme that it was no longer interested in holding the company’s shares. As such, Actis is dumping millions of Umeme shares.

Actis owns 14.3% of Umeme and it plans to sell the entire stake. More than 1.92 billion shares of Umeme are listed on NSE. Actis has in recent years shown a lack of appetite for Umeme stock. The firm earlier owned 60% of the power company before it significantly trimmed the stake in 2014 by offloading 45% of its equity interest.

Umeme stock down 30%
Actis is dumping Umeme at a time when the stock has plunged more than 30% so far in 2016 despite Umeme’s bright prospects given that Uganda is far from reaching 100% electricity connectivity. Besides, Umeme provides a range of power solutions beyond connecting businesses and consumers to the grid. Umeme shares are trading in the vicinity of Ks17.
 

Umeme stock suspended
The Nairobi Securities Exchange (NSE) has suspended trading in Umeme stock for two weeks pending the sale of Actis stake in the power company. The management of Umeme requested for the suspension in trading of the company’s stock. The move is seen as designed to avoid erosion of the value of the stock because the decision by Actis to exit the company was likely to spark a selloff in Umeme stock.

Trading in Umeme stock on Uganda Stock Exchange has also been halted.
On the NSE, Umeme is in the same sector as Kenya Power Company (KPLC), Kengen (KEGN), Total Kenya (TOTL) and KenolKobil (KENO). 

As Umeme sees investor outflow, Kenya Power has announced that it expects to reduce its cash burn in FY2017, expecting to cut FY2017 capex by 16% from a year earlier.