Jubilee Holdings raises its stake in the 250MW Bujabali power plant to 40.9%

UGANDAFinancial services holding company Jubilee Holdings has invested an additional US$40.7 million in Uganda’s hydroelectric power plant Bujagali, raising its stake in the project to 40.9 percent in the year ended December 2020.

The Nairobi Securities Exchange-listed company previously held a 25 percent stake in the 250-megawatt plant which supplies half of Uganda’s effective energy capacity.

Increased investment in Bujagali is part of Jubilee’s strategy of allocating capital to assets with stable, long-term returns.

“Our additional investment in Bujagali totals US$40.7 million. Of this, US$20.4 million or roughly half is from a loan that we have obtained from a commercial bank,” Jubilee’s chairman Nizar Juma told shareholders at the virtual annual general meeting held on June 29, 2021.

The insurer took a US$22 million loan from Kampala-based DFCU bank to finance part of the additional investment in the power plant.

The loan, which has a variable interest rate, matures in five years and is secured using shares of Bujagali.

Mr. Juma said the loan was taken because its terms are favorable based on the investment it financed.

“All the returns that we get from Bujagali are in dollars and the loan that we have is also in dollars,” he said.

“The interest that we pay on the loan is less than six percent and the return from Bujagali is 12 percent plus so it makes a lot of sense. And we will repay the loan from receipt of the dividends that we get from Bujagali.”

The power plant is Africa’s largest privately financed hydropower project. Increased investment in the project, real estate and government bonds has seen the insurer generate nearly half of its income from non-insurance sources, Mr. Juma said.

Jubilee expects to complete the sale of majority stakes in its regional general insurance subsidiaries to Allianz by the end of 2021.

The company will receive an estimated KShs7 billion (US$64.8 million) in the deals with Allianz while KShs3 billion (US$27.8 million) will be invested in the operating businesses in Kenya, Uganda, Tanzania, Burundi, and Mauritius.

“Our additional investment in Bujagali totals US$40.7 million. Of this, half is from a loan that we have obtained from a commercial bank

Nizar Juma – Chairman, Jubilee Holdings

The insurer plans to use proceeds from the transaction to boost its capital position and make additional investments.

Mr. Juma told shareholders that the board will deliberate on whether or not to make a special cash distribution at the next annual general meeting.

Jubilee’s net profit grew marginally to KShs4.08 billion (US$37.8 million) in the year ended December when most insurers posted a mix of profit declines and losses, partly attributed to paper losses in listed equities investments.

During the AGM, Jubilee Holdings Limited shareholders confirmed the payment of the final dividend of KShs8 (US$0.074) per share as recommended by the board.

Despite operating in a challenging environment characterized by the effects of Covid-19 and related lockdowns, the firm demonstrated resilience to earn a profit before tax of  Sh5.08 billion for the financial period ended December 31, 2020, an increase of Sh70 million compared to 2019.

The Group’s total assets increased by 12.1 percent to Sh145.86 billion (US$1.35 billion) from Sh130.08 billion (US$1.2 billion) and total shareholders’ equity and reserves increased 15.8 percent from Sh28.25 billion (US$262 million) to Sh32.72 billion (US$303 million) due to an increase in retained earnings and reserves.

Shareholders also approved an amendment of the company’s Articles of Association to allow it to buy back its own shares in the future in accordance with the provisions of the Companies Act 2015 and guidelines that are currently under development by the Capital Markets Authority.

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