Tororo Cement Industries Expansion

Umeme Limited

H1 2018 Investor Presentation

Contents

Umeme & Electricity Sector Introduction

Macro Economic Update

Electricity Supply Industry Overview

Operational Review

Regulatory Update

Financial Performance

Safety Update

H2 2018 Priorities

2

Umeme - powering Uganda• Twenty year concession to distribute electricity in Uganda (running to 2025)

• Contracted net US$ return of 20% p.a. on investment

• Regulated by the Electricity Regulatory Authority with energy losses target, collections target

and operating cost allowance targets set through 2018

• Secure cash flow: over 70% revenues from industrial, commercial and government customers

• Diversified investor base with listing on Uganda & Nairobi Securities Exchanges

• 98% Distribution market share

• Incentivised management and staff

3

Umeme Value Drivers

Investment Return

•20% USD Net ROI

•Capital Recovery

•Tax Recovery

Regulatory Incentives

•Loss reduction

•Cash collections

•Operating Expenses

Financial Performance

(EBITDA)

4

20% USD Return earned on

capex completed and

subsequently verified by ERA.

Investment costs: 20% ROI, Tax

and Capital recovery plus

operating expenses (DOMC) form

Umeme revenue requirement

7-year Regulatory targets set up to

2018. Performance against targets

can enhance or dilute 20% USD ROI

Other IPPs(hydro / thermal)

Generation Transmission Distribution

LL

L

Uganda’s power sector• Uganda’s electricity sector was liberalised in 1999, supported by World Bank

• Sector unbundled into generation, transmission and distribution to foster

transparency & investment

• Single buyer model

5

Macro Economic Update

0.0

0.5

1.0

1.5

2.0

2.5

170

180

190

200

210

220

Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18

Composite Index of Economic Activity

CIEA Monthly Changes %

• Quarterly CIEA data

points to improved

economic activity

• Expansion in Private

Sector Credit supporting

growth

• Manufacturing sector YTD

credit growth highest at

9.4%

• GDP growth expected to

reach 6% in 2018/19

compared to 5.8% of

2017/18

• Headline Inflation – July

3.1%

• CBR – 9%Source: Bank of Uganda

6

2,118 2,277

2,458 2,567

2,760

1,045 1,114 1,220 1,260

1,345 1,461

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015 2016 2017 2018

Sales (GWh)Full year

Half year

GWh

State of Electricity Supply

+8.6%

Effective Generation – 688 MW

Peak Demand excluding exports - +5.9%

System Demand include exports – 637MW

Generation Load Factor – 74%

5-Year Max Demand CAGR – 4.9%

H1 2018 GWh sales up 8.6% (FY17: 7.5%)

Source: UETCL

492508

521534

563

596

300

350

400

450

500

550

600

650

2013 2014 2015 2016 2017 2018

Max System DemandMW +5.9%

7

-

200

400

600

800

1,000

1,200

1,400

2013 2014 2015 2016 2017 2018

Post-paid

Pre-paid

('000)

651

794

574

1,1251,208

Electricity Demand: +8.6%

Category GWh Growth (y/y) FY 2017 (%)

Domestic 317.5 +1.6% +6.9%

Commercial 178.3 +7.9% +5.7%

Street Lighting 0.5 -32.9% -0.7%

Industrial - Medium 224.3 +6.3% +3.0%

Industrial - Large 740.0 +12.9% +9.7%

Total 1,460.7 +8.6% +7.5%

Prepaid Revenue Share

Customer numbers Sales (GWh) Growth

Sales (GWh) by Customer Category

Up 7.3% from FY 2017

76.3% on pre-paid

2%

6%

12%

16%

21%

24%

0%

4%

8%

12%

16%

20%

24%

28%

2013 2014 2015 2016 2017 H1 2018

Prepaid Revenues % of Total%

922

286

951

8

55 55 53 48

51

26 29 28

22 22 27

-

10

20

30

40

50

60

70

80

2013 2014 2015 2016 2017 2018

Full year Half yearUS$m

Operational PerformanceRevenue collections Energy Losses

Regulatory targets*Operating costs

* Umeme financial year (Jan-Dec). Tariff year runs from 1st March

** Allowance is adjusted annually for international and local inflation

Tariff

parameter ‘13 ‘14 ‘15 ‘16 ‘17 ‘18

Energy losses

(%)

19.6 21.0 18.9 17.4 16.1 15.1

Collection rate

(%)

81.1 97.5 97.7 97.9 98.2 98.5

Operating

allowance

(US$m) **

36.5 44.4 45.7 47.2 48.7 50.2

Opex up 21.9% y/y

24.3

21.3

19.5 19.0

17.2 16.7

16

18

20

22

24

26

2013 2014 2015 2016 2017 2018

%

100.3 99.1

98.2 98.4

100.2

102.8

95

97.5

100

102.5

105

2013 2014 2015 2016 2017 2018

%%%

9

Capital Investments

Pre-payment Metering

• Government of Uganda Time of Use

• New connections

Cumulative Capital investment

Sample projects in 2018

US$ 31m invested in H1 2018

Network &

substations, 93%Systems &

IT, 3%

Operation

al assets,

3%

Land &

buildings,

1%

Load Growth

• Kampala Industrial Business

Park/Namanve 33kv Industrial Ring

• Upgrade of Gulu sub-station

• Nyakesi substation, Tororo

• Kawanda-Kapeeka Load Transfer

Quality of Supply

• Namanve Industrial Park

102 130 166

224

321

407

500 566 596

84 110 127

172

250

316

383

434 449

-

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016 2017 2018

Total UnrecoveredUS$m

10

Regulatory Updates

• Recovery of UShs 103.7 billion lifeline tariff revenue was

included in Q2 and Q3 2018 tariffs

• Bujagali Energy Limited refinancing was completed – effect of

15% reduction in large industrial tariffs

• Offsets of USD 8.5m effected for arrears government

installations (post-paid accounts)

• 331 out of 469 government installations converted to pre-

paid metering

• Pending unrecognized Capex by ERA – US$ 93m

• Engagement on tariff parameters for 2019-25 ongoing

11

Electricity Tariff Developments

29%

35% 35%

46% 46%

2016A 2017A 2018Q1 2018Q2 2018Q3A

Umeme Distribution Margin (%)

0

100

200

300

400

500

600

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

End User Tariff (UShs)

Weighted Average EUT Bulk Supply Tariff• Weighted Average End User Tariff up 1.5% YTD

• Bulk Supply Tariff reduced by 21.4% in Q2

2018

• Bujagali Refinancing benefits (generation tariff

down from 11 cents from 8 cents) passed onto

extra-large industrial category to drive

consumption

• Recovery of UShs 103.7 billion lifeline tariff

revenue started in Q2 2018

• Distribution Margin increased as a result of

lifeline revenue recovery

200

300

400

500

600

700

800

Street

Lighting

Domestic Commercial Medium

Industrial

Large

Industrial

Extra-large

Industrial

Tariff per consumer category (UShs)

Q1 2018 Q2 2018 Q3 2018

12

58

68

76

90 90

31 33 38 39 36

45

-

10

20

30

40

50

60

70

80

90

100

2013 2014 2015 2016 2017 2018

Full year Half yearUS$ m

Financial Performance (US$)

Financials Summary (US$m) EBITDA (US$)

Profit after tax (US$)

Income Statement H1 2018 H1 2017 %ch

Revenue 198.8 195.2 +1.9%

Cost of Sales (128.2) (134.8) -4.9%

Gross Profit 70.6 60.4 +16.9%

Operating Expenses 28.4 22.2 +9.8%

EBITDA (ex Amendment 5) 44.7 35.9* 24.5%

Finance Costs (ex. lease) 8.0 8.2 -0.3%

PBT (Adjusted) 23.2 16.2* 43.2%

Tax Rate 29.2% 30%* -

Profit After Tax 16.3 11.3* +44.2%

Financial Position at H1 2018 FY 2017 %ch

Total Assets 651.1 645.0 +0.9%

Shareholders Equity 181.7 169.6 +7.1%

Net Debt 174.0 187.0 -7.0%

* Adjustments for effects of Amendment 5

** Assuming 30% tax rate on adjusted PBT.

2017 EBITDA

excl. Amendment 5

effects

2017 PAT excl.

Amendment 5

effects

31

36 34

40

31

17 18 19 16

11

16

-

5

10

15

20

25

30

35

40

45

2013 2014 2015 2016 2017 2018

US$ m

13

Financial Performance (UShs)

Financials Summary (UShs bn) EBITDA (UShs)

Profit after tax (Ushs)

Income Statement H1 2018 H1 2017 %ch

Revenue 735.8 704.4 +4.5%

Cost of Sales (474.4) (486.4) -2.5%

Gross Profit 261.5 218.0 +20.0%

Operating Expenses 105.6 93.3 +13.1%

EBITDA 165.0 129.0* +27.9%

Finance Costs (ex.lease) 29.6 29.1 1.6%

Profit Before Tax 87.3 58.6* 49.0%

Tax Rate (%) 30.1* 30**

Profit After Tax 61.0 41.0* +48.9%

EPS 38.0 25.3* +48.9

DPS (Interim) 12.7 0.0 -

Financial Position at H1 2018 FY 2017 %ch

Total Assets 2,529.2 2,349.4 +7.7%

Shareholders Equity 706.0 617.7 +14.3%

Net Debt 676.0 681.2 -0.8%

*Figures adjusted for effects of Amendment

**Assuming 30% tax rate.

2017 EBITDA excl.

Amendment 5 effects

Figures are rounded.

57

84

70

106

132

112

31

47 38

68 54

41

61

-

20

40

60

80

100

120

140

2012 2013 2014 2015 2016 2017 2018

Full year Half yearUshs bnUshs bn

H1 2018 PAT up 49%

2017 PAT excl.

Amendment 5 effects

149 178

248

308 325

82 84 113 133 129

165

-

50

100

150

200

250

300

350

2013 2014 2015 2016 2017 2018

Full year Half yearUshs bn

H1 2018 EBITA up 28%

14

Trading Update

Market cap US$153m at UShs 346 share price

Dec-17 (1) At IPO

P/E 5.0x 10.8x

EV/EBITDA (2) 3.5x 3.9x

P/(Buyout amount less net debt) (3) 0.5x 1.2x

Dividend Yield (H1 2018 Annualized) 7.3% -

Return on unrecovered investments (US$) (4) 8% 16%

Notes

(1) Actual 12 months to 31st December 2017. Multiples calculated on adjusted EBITDA &

PAT excluding Amendment 5 (2) EBITDA excludes finance income/cost & FX gain/loss. Includes interest on bank deposits(3) Indicative assuming GoU termination premium of 20% of unrecovered investment (4) Prior year unrecovered investment base

250

350

450

550

650

750

850

250

350

450

550

650

750

850Share price (Ushs)

USE

NSE

0

20

40

60

0

20

40

60

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Volume (m)

Market cap US$153m at UShs 346

share price

Year to Date daily value traded at

US$ 27.5k

15

Shareholder UpdateShareholder Summary

No. Top 20 Shareholders (Jun 2018) % Held

1 National Social Security Fund Uganda 23.2%

2 Allan Gray* 10.0%

3 Kimberlite Frontier Africa Master Fund 8.6%

4 Utilico Emerging Markets Limited 4.5%

5 Investec Asset Management Africa Fund 4.3%

6 Imara SP Reid 4.1%

7 The Africa Emerging Markets Fund 3.9%

8 International Finance Corporation 2.8%

9 Coronation Global Opportunities Fund 2.6%

10 Duet Fund 2.5%

11 Vanderbilt University 1.2%

12 Conrad N Hilton Foundation 1.1%

13 Boutique Collective Investments 1.1%

14 Kuwait Investment Authority 1.0%

15 Central Bank Of Kenya Pension Fund 0.9%

16 William Byaruhanga 0.8%

17 National Social Security Fund Kenya 0.6%

18 Sudhir Ruparelia 0.6%

19 Frontier Market Opportunities Master Fund 0.6%

20 Stanchart Nominees NR A/C 9318 0.5%

Other 25.1%

*Aggregated accounts

International

Funds, 27%

Africa (excl.

East Africa),

24%

East Africa

Institutional,

14%

Uganda

Institutional,

26%

Uganda Retail,

7% Directors &

Employees, 1%

Other, 1%

Umeme Shareholder Distribution

16

Safety of Staff & the Public

Non-network fatalities incl. power theft, domestic electrics, network interference, way-leaves encroachment and unauthorized operations

No network related fatality in H1 2018

16

10

17

3

7

1 10

20

1 10

39

47

3635

28

1816

19

15

21

17

3230

39

0

10

20

30

40

50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Network related fatalities

Non-network related fatalities (illegal)

No.No.

Full Year

17

Priorities for H2 2018

Conclude negotiation of 2019-2025 tariff parameters with

ERA

Continue the concession extension work stream

Evaluate medium term capex financing options

Engage ERA on outstanding income recoveries, including

capital investments

Delivery of core financial performance drivers (costs,

collections, energy losses and growth)

Implementation of ICT Systems (SAP & HRIS)

Organizational readiness for growth

18

Generation Pipeline

Source: Umeme, UETCL, MEMD

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

MW

Namanve & Kakira hydro

Karuma

MW

Nalubale

Pre-2000

Kiira

Bujagali

Isimba

Generation Outlook – Installed Capacity

Large-hydro:

Karuma - 600 MW (71% completed)

Isimba - 183 MW (76% completed)

Agago-Achwa – 83 MW

Ayago - 600MW

Orianga - 400MW

Kiba - 290MW

Agago-Achwa – 83 MW

Muzizi - 44MW

Mini-hydros (GET-FIT): 156.5 MW

inc.

Siti I – 5 MW

Waki – 4.8 MW

Lubilia – 5.4 MW

Rwimi – 5.5 MW

Muvumbe – 6.5 MW

Nyagak 3 – 5.4 MW

Other

Soroti Solar – 10 MW

Tororo Solar – 10 MW

Siti II - 16.5 MW

Kikagati – 16 MW

Kabale Peat plant 33 MW

Kabale geothermal 30MW

19

Generation Pipeline +1000MW

Isimba Hydro Power Project

Source: Uganda Electricity Generation Company Limited

Isimba Hydro Power Project (183 MW)Status: 87%

20

Karuma Hydro Power Project

Source: Uganda Electricity Generation Company Limited

Karuma Hydro Power Project (600 MW)Status: 75%

21

Transmission Grid Status

22

Thank You

23