The share price of Umeme Limited had on Wednesday dropped by 27.5 percent since the stock resumed trading on Friday as investors reacted to the prospect of a much smaller compensation from the Ugandan government.
The firm’s share price touched lows of Sh11.6 on Wednesday, marking the fourth consecutive fall amid uncertainty of whether remaining shareholders will get the full value of their investment.
This has seen its market value fall by Sh7.1 billion to Sh18.8 billion as the company, which is cross-listed on Kenya and Uganda stock exchanges, seeks to compel the Ugandan government to pay it an extra $292 million (Sh37.7 billion) after its electricity supply deal ended on March 31, 2025.
The government has paid Umeme $118 million (Sh15.2 billion) after rejecting the company’s larger claim, with an arbitration process in London set to determine if the claimant is entitled to the balance.
The uncertainty has sparked a sell-off since Umeme’s shares resumed trading, with retail investors leading exits. The company’s latest financial statements show that its market value is far higher than what the company is currently worth, underlining the importance of securing additional compensation.
Umeme closed the year ended December 2024 with a book value equivalent to about Sh5.3 per share.
Those buying are betting that Umeme will emerge victorious in the legal battle. The arbitration could take up to 20 months to be concluded, indicating a potential long wait for investors keen on getting a maximum payout from the Ugandan government.
The company’s shares were suspended from trading on March 31 –the day it was compelled to hand over its assets to Uganda Electricity Distribution Company Limited even as its larger claim was rejected.
The company had expected to be paid its entire claim by the last day of the 20-year concession.
The lower-than-expected payout saw Umeme skip a final dividend for the year ended December 2024 when it also sunk into a net loss of 510.5 billion Ugandan shillings equivalent to Sh18.2 billion at current exchange rates.
“As communicated in the public notice … the company is seeking to recover the balance of the outstanding buyout amount payable to it in the sum of $292 million plus contractual interest, through the international arbitration route,” Umeme said in a statement.
The company added that its board and management are committed and fully focused on the recovery process to ensure the preservation and protection of the interests of the firm and its shareholders. The financial position of Umeme could change if it receives additional pay from the government.
“Expected credit losses increased to Ushs361 billion (Sh12.9 billion) … mainly due to accounting provision on other financial assets because of a highly conservative decision taken by the company in accordance with IFRS Accounting Standards,” the company said.
“The company resolved to recover this amount through the arbitration process to be conducted in London, United Kingdom.”
Ahead of its listing in 2012, the firm had warned investors of the risk of a lower-than-expected compensation at the end of the concession due to government sabotage.
Umeme’s biggest shareholders include Uganda’s National Social Security Fund with a 23.4 percent stake, South African asset manager Allan Gray (14.82 percent) and the International Finance Corporation (2.78 percent).
