UMEME Abridged IPO Prospectus

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INITIALPUBLIC

OFFERING

ABRIDGEDPROSPECTUS

A B R I D G E D P R O S P E C T U S

1

Abridged Prospectus in respect of

• An offer for sale by Umeme Holdings Limited of 350,000,000 shares, in aggregate, with a par value of UShs 17.087763 each in the share capital of Umeme at an offer price of UShs 275 per Offer Share;

• An offer for subscription of 272,378,000 new shares, in aggregate, with a par value of UShs 17.087763 each in the share capital of Umeme at an offer price of UShs 275 per Offer Share; and

• The listing of Umeme on the Uganda Securities Exchange (“USE”).

Application period opens 15 October 2012

Application period closes 7 November 2012

Listing date 30 November 2012

Application has been made to the USE for the listing of the Shares on the Uganda Securities Exchange Main Investment MarketSegment.AdmissiontotheOfficialListoftheUSEisexpected to become effective on 30 November 2012. Monies paid in respect of any application for Offer Shares accepted

will be returned if the Listing does not become effective. The USE assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Abridged Prospectus. Admission totheOfficialListisnottobetakenasanindicationofthemerits of the Company or the Shares.

The Offer Shares will carry the right to vote and to participate in all future dividends to be declared and paid on the ordinary share capital of the Company. The Offer Shares rank pari passu with other Shares, are freely transferable and are not subject to any restrictions on marketability or any pre-emptive rights.

Date of issue: 11 October 2012

Caution:This is an abridged version (“Abridged Prospectus”) of the prospectus in respect of an offer for sale by Umeme Holdings Limited and offer for subscription by Umeme Limited and the listing of Umeme Limited on the Uganda Securities Exchange (the “Full Prospectus”) which is available on Umeme’s Website and from the Authorised Selling Agents. This Abridged Prospectus does not contain all the information generally required of a prospectus or form of application. In the case of any issues, disputes or inconsistencies, the terms and conditions of the Full Prospectus shall apply.

Permission has been granted by the CMA to offer to the public the shares that are the subject of the Offer. As a matter of policy, the CMA does not assume responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Abridged Prospectus. Approval of this Abridged Prospectus by the CMA is not to be taken as an indication of the merits of the Company or its shares. If you wish to apply for Offer Shares in terms of the Offer then you must follow the procedures for application and payment set out in section 22.7 of the Full Prospectus.

UMEME LIMITED(Incorporated in the Republic of Uganda)

(Registration number: P. 548)(“Umeme” or “the Company”)

A B R I D G E D P R O S P E C T U S A B R I D G E D P R O S P E C T U S

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Abridged Prospectus in respect of an offer for sale by Umeme Holdings Limited and offer for subscription by Umeme Limited and the listing of Umeme Limited on the

Uganda Securities Exchange11 October 2012

Contents

Contents

1 Advisors to the Company in respect of the Offer 5

2 Corporate information 9

3 Tableandfigurereference 13

4 Definitions 17

5 Chairman’s letter 27

6 Umeme’s shared purpose and values 31

6.1 Shared purpose 33

6.2 Core values 33

7 Salient features of the Company and the Initial Public Offering 35

7.1 The Company 37

7.2 Particulars of the Offer 43

7.3 Key Offer statistics 45

7.4 Important dates and times 46

7.5 How to open an SCD Account 46

8 Overview of Umeme 49

8.1 History of Umeme 51

8.2 Overview of Umeme 51

8.3 The Concession 51

8.4 Operating performance 53

8.5 Financial performance 56

8.6 Deferred Bonus Scheme 57

9 Risk factors 59

9.1 Risks related to the Company’s business and industry 61

9.2 Risks related to regulatory environment 62

9.3 Risks related to Uganda 62

9.4 Risks related to this Offer 63

10 Terms and conditions of the Offer and Incentive Shares 65

10.1 Lock-in period for Initial Shareholder 67

10.2 Where to obtain a Full Prospectus / Application Form 67

10.3 Application procedure 67

10.4 Incentive Shares available to Umeme customers, employees and Directors 69

10.5 Governing law 71

Appendix A: Directory of Authorised Selling Agents 73


4 5

1. Advisors to the Company

in respect of the Offer


6 7

Transaction Advisor / BookrunnerStanbic Bank Uganda LimitedCrested Towers, Short Tower17 Hannington Road P. O. Box 7131

Kampala, Uganda

Legal AdvisorMasembe, Makubuya, Adriko, Karugaba & Ssekatawa Advocates (MMAKS Advocates)DTB Centre3rd FloorPlot 17/19 Kampala RoadP. O. Box 7166Kampala, Uganda

Lead Receiving BankStanbic Bank Uganda LimitedCrested Towers, Short Tower17 Hannington Road P. O. Box 7131

Kampala, Uganda

Public Relations ConsultantHill & Knowlton StrategiesRiverside Green Offices, Baobab Suite, 1st Floor, Riverside P. O. Box 34537 00100 GPO Nairobi, Kenya

Lead Sponsoring BrokerAfrican Alliance Uganda Limited1st Floor, Worker’s HousePilkington RoadP. O. Box 70828

Kampala, Uganda

International Legal AdvisorWebber Wentzel10 Fricker RoadIllovo Boulevard, Illovo Johannesburg 2196P. O. Box 61771Marshalltown, Johannesburg 2107

South Africa

Reporting AccountantsPricewaterhouseCoopers10th Floor Communications House1 Colville StreetP. O. Box 882

Kampala, Uganda

Share RegistrarsCustody And Registrars Services

Uganda Limited (C&R)Diamond Trust Bank CentreSuite 12A, 12th FloorPlot 17/19 Kampala RoadKampala, Uganda


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2.Corporate information


10 11

Principal place of businessAnd Registered address

Umeme Limited

Rwenzori HousePlot 1 Lumumba Avenue

P. O. Box 23841 Kampala, Uganda

Directors

Patrick Bitature Chairman

Charles Chapman Managing Director

Younes Maamar

James Mulwana

Stuart David Michael Grylls

Ian Francis


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3.Table and figure references


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TablesTable 1: Shareholding Structure 37

Table 2: Authorised and Issued Share Capital 38

Table 3: Summary of Statement of Comprehensive Income 39

Table 4: Summary of Balance Sheet 39

Table 5: Summary of Cash Flow Statement 40

Table 6: Summary Forecast for 12 months ended 31 December 2012 41

Table 7: Allocation Policy % 44

Table 8: Key Offer Statistics 45

Table 9: Important Dates and Times 46

Table 10: Operating Statistics 53

Table 11: Customer Numbers 55

Table 12: Analysis of Statement of Comprehensive Income 56

Table 13: Policy for transfer to Incentive Shares 70

FiguresFigure 1: Annual Average Distribution Losses (Percentage) 53

Figure 2: Umeme Collection Rate (Percentage) 54

Figure 3: Total Umeme Customers as of 31 December 54

Figure 4: Customer Mix by Number at 31 Dec 2011 / Customer Mix 55

by Revenue for FY2011


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4.Definitions


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In this Abridged Prospectus, unless otherwise inconsistent with the context, the words in the left hand column below have the meanings assigned to them in the right hand column, and words in the singular shall include the plural and vice versa, references to natural persons include bodies corporate and vice versa, and references to one gender shall include the other genders:

“Abridged Prospectus” This document which is a summarized version of the Full Prospectus

“Actis Infrastructure 2 LP” Actis Infrastructure 2 LP, a limited partnership registered under the Limited Partnerships Act 1907 (United Kingdom), with registration number LP12354

“Actis LLP” or “Actis” Actis LLP, a limited liability partnership incorporated under the laws of England and Wales with registration number OC305927

“Applicant” A legal entity or natural person who applies for Offer Shares in accordance with the process set out in this Abridged Prospectus and in more detail in the Full Prospectus

“the Application Form” The application form in respect of Offer Shares, available from the Authorised Selling Agents. A sample is included in Appendix B of the Full Prospectus

“Authorised Selling Agent” The broker / dealers and banks listed in Appendix A of this Abridged Prospectus

“Authorised Territory” The geographic area within the Republic of Uganda within which the Company is authorised to operate the Distribution System as set forth in its Licenses

“the Board” or “the Directors” The current board of directors of Umeme, whose names are set out or “Board of Directors” in section 2 of this Abridged Prospectus

“Bookrunner” Stanbic Bank Uganda Limited, a company incorporated under the laws of Uganda with registration number P.525

“CAGR” Compound annual growth rate

“CDC” CDC Group plc, a public company limited by shares incorporated in England and Wales with limited liability with registration number 3877777

“Closing Date” 7 November 2012 being the last day for acceptance of applications for Offer Shares

“CMA” Capital Markets Authority of Uganda

“the Companies Act” The Companies Act (Cap. 110), as amended


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“the Concession” Umeme’s concession for the lease, operation, maintenance, management and commercial use of the Distribution System, for a period of twenty years from the Transfer Date, as established under the terms of the Privatisation Agreements and the Licences

“Deferred Bonus Scheme” The undertaking by Umeme to provide a cash award to employees to bedeterminedbasedonthefinancialperformanceofUmemeintermsof EBITDA growth over the Vesting Period and the holding of qualifying Shares by the employee over the Vesting Period, as discussed in section 8.6

“Distribution Licence” Licence granted to Umeme by ERA on 1 March 2005, in terms of which Umeme is required to distribute electricity to consumers through the Distribution System, as may be amended from time to time after the Transfer Date in accordance with its terms

“Distribution Network” The electric lines, transformer substations and other facilities operating at a voltage of 33 kV or less which are located within the Authorised Territory

“Distribution System” The distribution system, including the Distribution Network, land and other interests owned by UEDCL, including land and other interests in property, buildings, materials, equipment and facilities used by Umeme to distribute electricity and supply electrical power over the Distribution Network, and leased to Umeme by UEDCL under the terms of the Lease and Assignment Agreement

“DOMC” Distribution operation and maintenance costs

“Domestic Pool” The Offer pool consisting of three sub-pools being Employees and Directors, Retail East Africans, and QIIs in accordance with section 7.2 of this Abridged Prospectus

“East African” A citizen of one of the member states of the East African Community and bodies corporate established or incorporated in an East African Community member state under the provisions of any written law

“East African Community” or “EAC” The regional intergovernmental organization whose current member states include Uganda, the Republic of Kenya, the United Republic of Tanzania, the Republic of Rwanda and the Republic of Burundi, set up by the Treaty for the Establishment of the East African Community dated 30 November 1999 (as subsequently amended), with its headquarters in Arusha, Tanzania

“EBITDA” Earnings Before Interest, Tax, Depreciation and Amortisation

“Eligible Umeme Customer” A Retail Investor who meets the eligibility criteria set out in section 10.4 and, hence, qualifies to receive Incentive Shares fromUmemeHoldings in addition to the Offer Shares that that Retail Investor purchases through the Offer.

“Eligible Employee” AnEmployee (or secondee to theCompany)whoqualifies for theGrant Shares as per criteria set out in section 22.13 of the Full Prospectus

“Employee” Any person in the employment of the Company as at the date of the Full Prospectus

“ERA” Electricity Regulatory Authority of Uganda, established under the Electricity Act (Cap. 145)

“Escrow Agreement” The escrow agreement dated 18 February 2005 between UEDCL, Umeme and Citibank N.A., as escrow agent, establishing a USD escrow account in to which rental amounts are deposited from time to time by UEDCL, to serve as security for potential claims which may be made by the Company under the terms of the Privatisation Agreements

“Eskom” Eskom Enterprises (Proprietary) Limited, a company incorporated under the laws of South Africa with registration number 1999/002761/07

“Eskom (U)” Eskom Uganda Limited, a company incorporated under the laws of Uganda with registration number 26021

“the Finance Documents” The IFC Loan Agreement and the security documents and other financedocumentsreferencedtherein,inconnectionwithfundingtherehabilitation and expansion of the Distribution Network

“Foreign Investors” Investors who are not East Africans

“Full Prospectus” The prospectus in respect of an offer for sale by Umeme Holdings and offer for subscription by Umeme and the listing of Umeme on the USE dated 11 October 2012

“Globeleq Conco” or “Globeleq” Globeleq Holdings (Conco) Limited, now called Umeme Holdings, incorporated in Bermuda, with company incorporation number 34765, and currently continued under the laws of Mauritius as Umeme Holdings

“the Government” The Government of Uganda

“Grant Shares” The allotment by Umeme of an aggregate of a maximum of 13,500,000 Shares in Umeme to Eligible Employees as fully-paid up Shares on or before the date of the Listing conditional on successful completion of the Offer and under the terms of the Share Grant Scheme

“GWh” Gigawatt hour

“IFC” International Finance Corporation

“IFC Loan Agreement” The agreement entered into on 26 June 2009 between the IFC and Umeme, as amended from time to time, in terms of which the IFC granted a loan facility in the amount of USD 25 million to Umeme


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“Incentive Shares” The maximum of 19,000,000 Shares in Umeme currently held by Umeme Holdings that Umeme Holdings has pledged to transfer to Eligible Umeme Customers, Employees and Directors who participate in the Offer at an approximate rate of 1 Incentive Share for every 10 Offer Shares that such Eligible Umeme Customers, Employees and Directors purchase in terms of the Offer subject to the terms and conditions set out in section 10.4

“Initial Shareholder” Umeme Holdings

“International Institutional Investor” Foreign Investor established and operating as a body corporate to trade in securities in accordance with the regulations of its country. Does not include individuals

“International Pool” Offer Shares set aside for persons who are not Retail East Africans, Employees or QIIs but are entitled to apply for Offer Shares as a Foreign Investor

“kV” Kilovolts being 1,000 volts

“kWh” Kilowatt hour equal to 1,000 watt hours

“Lead Receiving Bank” Stanbic Bank Uganda Limited, a company incorporated under the laws of Uganda with registration number P.525

“Lead Sponsoring Broker” African Alliance Uganda Limited, a company incorporated under the

laws of Uganda with registration number V03393

“Lease and Assignment Agreement” The lease and assignment agreement dated 17 May 2004 entered into between UEDCL and Umeme, as amended from time to time, providing for the lease by UEDCL to Umeme of the Distribution System for the purpose of Umeme operating, maintaining, repairing, upgrading, expanding and exploiting the Distribution System

“Legal Advisors” MMAKS (Ugandan legal advisor) and Webber Wentzel (international legal advisor)

“LIBOR” London Interbank Offer Rate

“Liquidity Facility” The standby letter of credit facility in the amount of USD 5 million in favourof theCompany,asbeneficiary, issuedbyCitibankUgandaLimited, on behalf of UEDCL, to serve as additional security in meeting the Company’s demands on the escrow account established under the Escrow Agreement in the event cash in the escrow account is insufficient to meet the Company’s claims under the Lease andAssignment Agreement

“the Listing” The listing of the Shares on the USE, pursuant to the Offer, on or about 30 November 2012

“the Listing Rules” The USE Listing Rules, 2003

“Lock-in Agreement” The lock-in agreement dated 4 October 2012 and executed between Umeme Holdings and Umeme requiring Umeme Holdings not to dispose of or further encumber any of the Shares it holds in Umeme (butspecificallyexcludingtheSaleSharesandIncentiveShares)foraperiod of 365 days commencing on the date of the Listing, as further described in section 22.4 of the Full Prospectus

“Multilateral Agency” Organisation formed between three or more nations to work on issues that relate to all the countries in the organisation

“MW” Megawatt, being one million watts

“NSE” Nairobi Securities Exchange

“the Offer” (a) the offer by the Initial Shareholder of the Sale Shares at the Offer Price; and

(b) the offer by Umeme Limited of the Subscription Shares at the Offer Price,

in each case subject to the conditions set out in section 10 of this Abridged Prospectus and in more detail in section 22 of the Full Prospectus

“the Offer Price” The price at which the Offer Shares are offered for sale or subscription, being UShs 275 per Offer Share

“the Offer Shares” (a) the 350,000,000 Sale Shares; and (b) the 272,378,000 Subscription Shares,

subject to the Offer and taking into account the Listing Rules requirement that immediately following the Offering at least 20% of the Shares be held by public shareholders

“the Official List” The official list of the USE of which the Main Investment MarketSegment forms part

“Opening Date” 15October2012,beingthefirstdayforacceptanceofapplicationsforOffer Shares

“Power Sales Agreement” The power sales agreement between UETCL and Umeme dated 17 May 2004, as amended from time to time, relating to the long term bulk supply of electricity by UETCL to Umeme for onward sale and delivery to consumers through the Distribution System

“Privatisation Agreements” The Lease and Assignment Agreement, the Support Agreement and the Power Sales Agreement

“the Public Relations Consultant” Hill & Knowlton Strategies, a company incorporated under the laws of Kenya with registration number C.163920


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“Professional Investor” A person whose ordinary business or regular activity involves the buying and selling of securities, as a principal, and includes an underwriter, a bank, and an insurance company, a fund manager, a broker, broker’s representative, a dealer, dealer’s representative, an investment advisor or investment advisor’s representative acting as a principal, subject to any exception that may be prescribed by the CMA

“Qualified Institutional Investor” or “QII” Any Profesional Investor including Collective Investment Schemes established in the EAC and licensed by the relevant capital markets, insurance or retirementbenefitsregulatorthatinvestincapitalmarketsonbehalfofthirdparties, including the Institut National de Sécurité Sociale of Burundi, National Social Security Fund of Rwanda and National Social Security Fund of Uganda and Multilateral Agencies

“the Registrar” The Registrar of Companies in Uganda

“Reporting Accountants” PricewaterhouseCoopers, a partnership registered under the laws of Uganda with registration number 113042

“Reporting Accountants’ Report” The report set out in section 16 of the Full Prospectus

“Retail East Africans” East Africans other than QIIs

“Retail Investor” A Retail East African who participates in the Offer and is allotted Offer Shares

“the Sale Shares” The 350,000,000 Shares offered for sale by the Initial Shareholder as part of the Offer

“SCD” The Securities Central Depository operated by the USE

“SCD 1 Form” The form required to be duly completed and submitted in order to open a SCD Account. There are two types of forms depending upon the type of entity of the customer, SCD 1a for individuals and SCD 1b for organisations

“SCD Account” Securities depository account that holds the securities of an investor through which the investor is able to trade on the SCD platform

“Shareholders” Holders of Shares in the Company

“Share Grant Scheme” The undertaking by Umeme to allot up to a maximum of 13,500,000 Shares in Umeme to Eligible Employees by way of the Grant Shares as discussed in section 7.2

“the Share Registrars” Custody And Registrars Services Uganda Limited (C&R), a company incorporated under the laws of Uganda with registration number 153066

“Shares” Ordinary shares with a par value of UShs 17.087763 each in the issued share capital of the Company

“South Africa” The Republic of South Africa

“Standard Bank” Standard Bank Group Limited, a company incorporated under the laws of South Africa with registration number 1969/017128/06

“the Subscription Shares” The 350,000,000 Shares offered by the Company for subscription as part of the Offer

“Supply Licence” The licence granted to Umeme by ERA on 1 March 2005 in terms of which Umeme is required to supply electricity to consumers through the Distribution System, as may be amended from time to time after the Transfer Date in accordance with its terms

“Support Agreement” The support agreement dated 17 May 2004 between the Government and Umeme, as amended from time to time, pursuant to which the Government has undertaken to cooperate and provide support to Umeme in managing the Concession for the Distribution System

“Transaction Advisor” Stanbic Bank Uganda Limited, a company incorporated under the laws of Uganda with registration number P.525

“Transfer Date” 1 March 2005

“UEB” Uganda Electricity Board

“UEDCL” Uganda Electricity Distribution Company Limited, a company incorporated under the laws of Uganda with registration number P.429

“UEGCL” Uganda Electricity Generation Company Limited, a company incorporated under the laws of Uganda with registration number P.428

“UETCL” Uganda Electricity Transmission Company Limited, a company incorporated under the laws of Uganda with registration number P.427

“Uganda” The Republic of Uganda

“Umeme” or “the Company“ Umeme Limited, a limited liability company incorporated under the laws of Uganda with registration number P. 548

“Umeme Holdings” Umeme Holdings Limited, incorporated under the laws of Mauritius with registration number 97104 C1/ GBL, and formerly known as Globeleq (Conco)

“Umeme Share Offer Account” Umeme bank account related to the Offer held at the Lead Receiving Bank, details of which can be obtained from an Authorised Selling Agent

“USD” United States of America (“USA”) dollars, the legal tender of the USA

“USE” Uganda Securities Exchange Limited

“UShs” or “UGX” Ugandan shillings, the legal tender of Uganda

“the Vendors” Collectively, Umeme Holdings and Umeme

“Vesting Date” In relation to the Deferred Bonus Scheme, the date that is 3 years from 1 January 2013

“Vesting Period” In relation to the Deferred Bonus Scheme, the period from 1 January 2013 to the Vesting Date


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5.Chairman’s letter


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Dear Investor,On behalf of the Board, it is my pleasure to present this Abridged Prospectus to you related to the offer for subscription by Umeme and the offer for sale of shares in Umeme by Umeme Holdings set out in the Full Prospectus.

The Offer is designed to diversify the ownership of the Company and in particular to attract Ugandan investors including employees and customers. The Offer is being carried out through a combination of an invitation to the public to subscribe for new shares in Umeme and a partial sale to the public by Umeme Holdings of its existing shares in Umeme. The intent is to give new investors the opportunity to own a stake in Umeme and participate in its future growth as it accompanies the development of Uganda.

We are excited about the strong growth potential for Umeme. We believe the growth outlook for the Ugandan economy will continue to drive the demand for electricity. In addition, we will work with the Government to continue extending the penetration of electricity throughout the nation to expand access to the power we distribute. The generation capacity of the country has increasedsignificantlywiththecommissioningofBujagali.Bujagalialongwithadditionalsmallergeneration projects will support the expected demand increases over the years to come. The success of Umeme is the result of the hard work of the people at Umeme. Shareholders and employees both invest in a company, in different ways but with similar aspirations. Shareholders invest capital and employees invest human capital through their energy and effort in work. We allstandtobenefitfromtheopportunitiesthatliebeforeusasUmemestrivestobuildvaluefor its shareholders.

The proceeds that the Company receives (net of related expenses) through the issue of Subscription Shares will be used to repay the shareholder loan. This will reduce the Company’s currentleveragelevelssignificantlyastheproceedswouldreducetheCompany’sdebtburdenand thereby its debt ratios. In particular, the Company reported a gross interest-bearing debt to book equity ratio of 0.9:1 as at 30 June 2012 and, as shown in section 18.3.2 of the Full Prospectus, the pro forma impact of the Offer would be to reduce the reported gross interest-bearingdebttobookequityratioto0.3:1. Thissignificantchange intheCompany’scapitalstructure should increase the Company’s effective unutilised debt capacity and should allow the Company to secure and drawdown additional commercial debt over the next few years to assistinfinancingitscapitalexpenditureprogrammedrivenbytheinvestmentandimprovementof the Ugandan distribution network.

Subsequent to the Offer the Shares will be listed on the USE. The Listing will provide Umeme greater access to capital through the public markets to more effectively fund Umeme’s investments. The Company intends to execute a listing by introduction on the NSE after obtaining approval from the regulatory authorities in Kenya, to provide additional liquidity to its shareholders through the largest exchange in the region. An application to the Kenyan Capital Markets Authority will be made at the appropriate time in this regard. We advise you to refer to the Risk Factors set out in section 14.4 of the Full Prospectus in order to better understand the risks associated with the proposed listing by introduction.

We have made use of local and international professional advisers in the pricing of the Offer, who have ensured that the Offer Price of UShs 275 per share is reasonable.

We advise you to also review the Risk Factors detailed in section 14 of the Full Prospectus in order to better understand the risks and uncertainties associated with Umeme, its industry, Uganda and its regulatory environment as well as the transaction contemplated in this Abridged Prospectus.

The details of the Offer are set out in the Full Prospectus. Your decision to invest should be based on the Full Prospectus. We urge you to read it carefully

Yours sincerely,

Mr. Patrick BitatureChairman


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6.Umeme’s shared

purpose and values


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6.1 Shared purpose

Umeme’s vision is “to be an electricity retail and distribution business providing exceptional customer service in a safe, reliable and cost effective manner, with a work force that is well motivated and skilled,generatingsufficientprofits tosustainandbuild thebusinesswhileprovidingvalue to theshareholders.”

6.2 Core values

Umeme’s business, and the commitment of its people, are underpinned by a number of core values.

n Ensuring a high degree of customer satisfactionn Supporting and continuously developing employeesn Conducting our work with integrity founded on honesty and ethical behaviourn Allowing safety to govern all our actionsn Respecting the environment


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7.Salient features of

the Company and the Initial Public Offering


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This section highlights certain important information contained in the Full Prospectus, which should be read in its entirety for a full appreciation of the subject matter contained herein. If you are in any doubt as to its meaning or what action to take, please consult your licensed broker/dealer, investment advisor,accountant,banker,lawyerorotherprofessionaladvisor.Theinterpretationanddefinitionsof abbreviated terms used in this summary are set out in section 4 of this Abridged Prospectus.

7.1 The Company

7.1.1 Incorporation

Umeme was incorporated in Uganda as a private limited liability company on 6 May 2004 and was converted into a public company on 28 June 2012 under the Companies Act. Umeme is a subsidiary of Umeme Holdings. Umeme Holdings in turn is a subsidiary of Actis Infrastructure 2 LP, an investment fund under the management of Actis, through a holding company in Mauritius, Actis Infrastructure Umeme Limited. See the detailed ownership structure in section 11.2 of the Full Prospectus. Actis isaleadingprivateequityfirminvestinginemergingmarkets.

7.1.2 Umeme’s shareholding structure

Umeme’s shareholders as at the date of this Abridged Prospectus are as set out in the table below.

7.1.3 Nature of business

Umeme took over the Distribution System for the distribution and supply of electricity in Uganda from UEDCL under the Concession for a period of 20 years, commencing 1 March 2005. Under the Concession, Umeme is also required to repair, upgrade, and expand the Distribution System within Uganda and such contiguous areas as Umeme and ERA may agree.

(1) Held as a nominee shareholder for Umeme Holdings(2) Assumes 622,378,000 Offer Shares, 13,500,000 Grant Shares and 18,048,400 Incentive Shares. Incentive Shares reflect 10% of the Employees and Directors and Retail East African pools. See discussion in section 7.2.

Before the Offer

S hareholder No. of shares % ownership No of shares % ownership

Umeme Holdings Limited 1,338 ,300,000 99.99%

Stuart David Michael Grylls (1) 100,000 0.01%

Brigitte Kusiima Byarugaba (1) 1 0.00%

Nicolas Mwasame (1) 1 0.00%

Rebecca Nakiranda (1) 1 0.00%

Naomi Byabazaire (1) 1 0.00%

Janet Ayesigwa (1) 1 0.00%

Public shareholders - -

Total 1,338 ,400, 005 100 .00 %

After the Offer

Table 1: Shareholding Structure

970,251,600

100,000

1

1

1

1

1

653,926,400

1,624,278,005

59.73%

0.01%

0.00%

0.00%

0.00%

0.00%

0.00%

40.26%

100.00%

(2)


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7.1.4 Authorised and issued share capital

The information set out below should be read in conjunction with the Reporting Accountants’ Report in section 16.1 of the Full Prospectus.

There have been no alterations to the share capital of the Company over the past three years, except as on 28 June 2012 when the Company redenominated each share into a Ugandan Shilling par value, to executed a 100,000 for 1 share split of the authorised and issued share capital and to increased the authorised share capital to UShs 30,757,973,400 divided into 1,800,000,000 ordinary shares of par value of UShs 17.087763 each. There is no capital of the Company that is under option or agreed conditionally to be put under option.

In the opinion of the Directors, the issued share capital of Umeme is adequate for the purposes of the business of Umeme for the next twelve months.

7.1.5 Directors of the Company

As at the date of the Full Prospectus, the Company had six directors whose names are set out in section 2 of this Abridged Prospectus. Of these six directors, one is an executive director while five(includingtheChairman)arenon-executivedirectors.TheDirectorsallhaveextensivebusinessexperience that makes them well suited to serve on the Board of the Company in supervising the activities of the Company.

Table 2: Authorised and Issued Share Capital

Ushs ’000(*)

Authorised share capital: 1,800,000,000 shares with a par value of UShs 17.087763 each 30,757,973

Issued and fully paid share capital: 1,338,400,005 shares with a par value of UShs 17.087763 each 22,870,262

(*) Umeme redenominated each share into a Ugandan Shilling nominal value on 28 June 2012

7.1.6 Summaryofrelevantfinancialinformation

This section should be read together with the Reporting Accountants’ Report in section 16.1 of the Full Prospectus.

ThesummarisedstatementsofcomprehensiveincomeofUmemeforthefiveyearsended 31 December 2011 and the six months ended 30 June 2012 are as follows:

The summarised balancesheetsofUmemeforthefiveyearsended31December2011 and six months ended 30 June 2012 are as follows:

Twelve months ended 31 December

Six months ended 30 June CAGR

UShs’m 2007 2008 2009 2010 2011 2012 ’07 – ‘11

Revenue 367,135 424,247 476,596 513,676 535,567 444,115 9.9 %

Gross profit 107,755 138,351

145,684

157, 588 186,434 124,751 14.7%

Operating profit 21 ,493 15,717

33,129

16,070 60,091 52,798 29.3%

Profit before tax 21,820 13,164

25,629

6,351 44,619 43,979 19.6%

Net profit/(loss) 13,329 11, 585

10,409

(2,846) 23, 011 30,963 14. 6%

EPS (UShs/share) 2,160,000 1,190,000 780 ,000 (210,000) 1,720,000 2,310,000

EPS (UShs/share) (adj for share split) 21.6 11.9 7.8 (2.1) 17.2 23.1 Additional information

Dividend per share (1) (UShs/share) 0.00 0.00 0.00 0.00 0.00 0.00

Table 3: Summary of Statement of Comprehensive Income

(1) Although the Company has not issued dividends it has been making distributions to shareholders through interest payments on its shareholder loan (see detailed analysis in section 18.3.4 of the Full Prospectus)

31 December 30 June UShs’m 2007 2008 2009 2010 2011 2012

Current Assets 134,809 157,321

159,981

193,583 202,426 267,067

Non-current Assets 215,443 267,866

281,844

319,795 356,824 376,922

Total Assets 350,252 425,187

441,825

513,378 559,250 643,989

Current Liabilities 103,847 125,286

150,896

175,495 196,449 294,721

Non-current Liabilities 192,528 223,306 203,925 253,725 255,632 211,137

Equity 53,877 76,595

87,004 84,158 107,169 138,131

Total Equity & Liabilities 350,252 425,187 441,825 513,378 559,250 643,989

Table 4: Summary of Balance Sheet


40 41

ThesummarisedcashflowsofUmemeforthelastfiveyearsended31December2011andsixmonths ended 30 June 2012 are as follows:

7.1.7 Landandfixedassets On 1 March 2005, Umeme took over the operation and management of the Distribution System,

which was formerly operated by UEDCL, under the Concession. This arrangement requires Umeme to pay Rental for the lease of the Distribution System, including the right to operate the assets and charge customers for the distribution and supply of electricity over the Distribution Network.

Under the terms of the Privatisation Agreements, Umeme is required to make investments to expand the Distribution System, in the form of land and buildings, sub-stations, medium and low voltage lines, furniturefittings, tools andequipment, computer andcommunicationequipment andmotorvehicles. However, as the Distribution System is leased to Umeme under the terms of the Lease and Assignment Agreement, legal title to the assets comprising the Distribution System remains with UEDCL, as owner of the Distribution Network. Umeme is, however, given the exclusive right to operate and manage the assets forming part of the Distribution System, including the right to charge customers for the distribution and supply of electricity over the Distribution Network. Accordingly, in line with Umeme’s accounting policy, the assets added to the Distribution System are not recognised asproperty,plantandequipmentinUmeme’sfinancialstatements.Instead,anintangibleassetequaltothe net carrying value of the assets added to the Distribution System by the Company is recognised, and is amortised over the shorter of the Concession period and the useful lives of the underlying property, plant and equipment.

In addition, as all property, plant and equipment are leased, there is no asset / property valuation to include in the Full Prospectus.

Twelve months ended 31 December

Six months ended 30 June

UShs’m 2007 2008 2009 2010 2011 2012 Net cash from / (used in) operating activities (5,706) 9,798 39,05 1 46,201 50,887 54,660

Net cash used in investing activities (19,076 ) (35,528 ) (38,408 ) (38,355 ) (50,942 ) (45,923)

Net cash from / (used in) financing activities 17,433 22,997 (6,104) 8,779 (9,692) (2,930)

Net (decrease) / increase in cash and cash equivalents (7,349 ) (2,734 ) (5,461) 16,62 5 (9,747 ) 5,807

Cash and cash equivalents at the start of the period 53,729 46,380 43,646 38,185 54,810 45,063

Cash and cash equivalents at the end of the period 46,380 43,646 38,185 54,810 45,063 50,870

Table 5: Summary of Cash Flow Statement

7.1.8 Material contracts

Umeme has a number of material contracts currently in force, including the Privatisation Agreements, the Licences, the Finance Documents, the Escrow Agreement and the Liquidity Facility. These agreements are described further in section 21.2 of the Full Prospectus. Other than the preceding agreements, the Company has not entered into any other material contracts (other than contracts entered into in the ordinary course of business) over the past two years immediately preceding the publication of the Full Prospectus.

7.1.9 Summary forecast for the year ended 31 December 2012

Note:

The profit forecast is based on management’s prudent assumptions and has been prepared on the basis of the accounting policies used in previous years as set out in the Reporting Accountants’ Report in section 16 of the Full Prospectus. The forecast assumes that the financial impact of differences between actual and estimated inflation and exchange rates, related to the retail tariff, can be passed on to customers, as allowed through the Privatisation Agreements.

These projections are based on certain assumptions and are for illustrative purposes only. Actual results achieved may differ from those projected.

7.1.10 Borrowings of Umeme

As at 30 June 2012, Umeme had total outstanding loans in the amount of UShs 120.6 billion. The precedingbalancereflectstwoloansbothofwhicharedenominatedinUSD,specificallyashareholderloan of USD 27.0 million and a loan from the IFC of USD 21.6 million. The combined amount of USD 48.6 million was translated to UShs at an exchange rate of USD / UShs of 2,478 at 30 June 2012. As at 30 June 2012, the Company also had credit facilities with Standard Chartered Bank Uganda Limited in the total amount of USD 9.5 million (UShs 23.5 billion) of which none were drawn as at that date.

12 months ended

UShs’m 31 December 2012

Revenues 859,904

Gross profit 225,809

Operating income 77,425

Profit before tax 59,106

Net profit 41,374

EPS (UShs/share) 30.9

Table 6: Summary Forecast for 12 months ended 31 December 2012


42 43

7.1.11 Dividends In line with international best practice, the Company subscribes to sound capital management

principles and aims to maintain strong credit ratings and healthy capital ratios in order to support its business and to enhance shareholder value. Dividends paid by the Company are an integral part of the capital management process.

The Company’s strategy, since it began operations in 2005, has been to reinvest the majority of internally generatedcashflowsback into thebusiness.ThiswasdrivenbyUmeme’s commitmentto investing intheDistributionSystemto improve itsefficiencyandcapabilitiesandconsequentlyservice delivery. In addition, the Company is able to generate a set return on its invested capital as part of the Concession. As a result, the Company has not paid dividends since its inception, although Umeme has paid an increasing level of shareholder loan interest for the past three years as a means of distributing cash to shareholders (see detailed discussion and analysis in section 18.3.4 of the Full Prospectus).

However,consideringtheconsistentincreaseininternallygeneratedcashflow,theBoardhasadopteda revised dividend policy as described below.

The Company anticipates paying out dividends in UShs, subject to the below, based on achieving an earnings cover multiple of approximately two (2) times over a medium term basis (i.e., it expects to pay dividends of approximately half of its reported earnings (other than exceptional unrealised gains /lossesonfinancialassetsandliabilities)foreachfinancialperiod).

In determining the level of dividend payments, the Company will take the following into account:

n minimum capital requirements as may be prescribed by law, from time to time;n conditions regarding dividend payment as stated in any loan agreements or debentures;n theCompany’scapitaladequacy,performance,liquidity,currentcashflowandfinancialposition, having regard to any debt servicing requirements, including any impact in foreign exchange;n future business plan and investment capital requirements (including the anticipated capital requirements of the Company and its operating subsidiaries if any); andn all dividends will only be declared in line with prudent and conservative business practice.

Capitalmanagementisaprocess,whichcontinuesthroughoutthefinancialyear.However,itisanticipatedthatamaximumoftwo(2)dividends,aninterimandafinaldividend,willberecommendedbytheUmemeBoardofDirectorsinrespectofanygivenfinancialyear.TheBoardmaydeclareaspecialdividend,ifitseesfit,onlyinexceptionalcircumstances.

TheCompanyanticipatesthatitwillproposeafinaldividendforthefinancialyear31December2012tobe paid, subject to shareholder approval, in the second quarter of 2013. Investors who purchase the Offer Shareswillqualifyforthefinaldividendifdeclaredforthefinancialyearended31December2012.

Dividends paid to Ugandan resident Shareholders who are individuals attract withholding tax at a rate of 10%. Dividends paid to Ugandan resident Shareholders who are companies and non-resident

Shareholders currently attract withholding tax at a rate of 15%. By law Umeme is required to deduct withholding tax from dividends paid.

The tax treatment of dividends is dependent upon the individual circumstances of each Shareholder and the tax jurisdiction applicable to such Shareholders. It is recommended that Applicants seek appropriate advice in this regard.

7.2 Particulars of the Offer

Number of Shares on Offer The Vendors are offering 622,378,000 Shares in Umeme at a price of UShs 275 per Offer Share 350,000,000

Sale Shares are being sold by Umeme Holdings and 272,378,000 Subscription Shares are new Shares of the Company offered for subscription. On completion of the Offer, the aggregate Offer Shares will constitute 38% of the issued share capital of the Company which meets the Listing Rules requirement that immediately following the Offering at least 20% of the Shares are held by public shareholders.

Listing of the Shares Following the Offer, all the Shares are to be listed on the USE. It is also the intention of the Company to

apply for an approval to execute a listing by introduction on the NSE as soon as possible after its primary listing on the USE – subject to receiving approvals from the CMA, USE, Kenyan Capital Markets Authority and NSE. Approval of the Kenyan Capital Markets Authority for the listing by introduction has not been obtained as at the date of this Abridged Prospectus. The Company intends to apply at the appropriate time to the Kenyan Capital Markets Authority for approval to list by introduction on the NSE. The proposed Offer is being made with reference to the listing of the Company on the USE only which listing will proceed even if no authorization is received from the Kenyan Capital Markets Authority for the proposed listing by introduction on the NSE.

Status of the Offer Shares The Offer Shares rank pari passu in all respects with all other Shares, including the right to participate in

full in all dividends and/or other distributions declared in respect of such Shares, all surpluses in the event of liquidation or winding up and the right to vote.

The Offer Shares will be freely transferable and will not be subject to any restrictions on marketability or anyrightsoffirstrefusalontransfer.

Minimum number of Offer Shares per Application The minimum number of Offer Shares for which application may be made is 1,000. Applications for

greater than this minimum must be in multiples of 100 Offer Shares.

Structure and allocation of the Offer InordertostrikeabalancebetweenretailinvestorsandQualifiedInstitutionalInvestors(“QIIs”)as

well as local and foreign investors, the Offer is structured into two main pools namely, the “Domestic Pool” and the “International Pool”. The Domestic Pool consists of three sub-pools (Employees and Directors, Retail East Africans and QIIs).

54% of the Offer Shares have been earmarked for the Domestic Pool and the balance of 46% of the Offer Shares for the International Pool. Within the Domestic Pool, 9% of the Offer Shares have been reserved for Employees and Directors, 20% for Retail East Africans and 25% for QIIs in EAC.


44 45

Incentive Shares In addition, the Vendors wish to provide an incentive to Umeme’s customers, Employees and Directors

to invest in Umeme. Consequently, Umeme Holdings has undertaken to transfer Incentive Shares from its current shareholding to Eligible Umeme Customers as well as Eligible Employees and Directors that purchase Offer Shares. Umeme Holdings will transfer up to one Incentive Share for every ten Offer Shares that are allocated to Eligible Umeme Customers, Eligible Employees and Directors through the Domestic Pool just prior to the Listing. Consequently, the effect of the transfer of the Incentive Shares is that an Eligible Umeme Customer, Eligible Employee or Director who successfully applies for 1,000 Offer Shares and is allotted these Shares in full will, in addition, receive a further 100 Incentive Shares from Umeme Holdings for free and, hence, will own 1,100 Shares in Umeme at the conclusion of the Offer. The terms and conditions for the transfer of Incentive Shares are set out in section 10.4.

Share Grant Scheme Umeme also wishes to better incentivise its workforce to deliver the Company’s objectives in terms

of safety, customer service, increased access and financial performance.The Board believes thatan important route to achieving this goal is to have Employees who are also Shareholders in the Company. Consequently, the Umeme Board has approved the grant of a parcel of Shares to all of its Eligible Employees as part of the Offer process under the terms of the Share Grant Scheme. This scheme involves Umeme making a grant of up to 10,000 Shares in Umeme, aggregating to no more than 13,500,000 Shares, to all its Eligible Employees as at the date the Offer opens (the “Grant Shares”), subject only to the successful conclusion of the Offer. Umeme will settle the income taxes due in respect of the Grant Shares on behalf of its Eligible Employees as and when these fall due. Full details of the Share Grant Scheme are set out in section 13.6 and terms and conditions relating to the Grant Shares in section 22.13 both sections in the Full Prospectus.

Use of proceeds Funds raised, net of related expenses, through the issue of the Subscription Shares will accrue to the

Company and will be primarily utilised to repay existing shareholder loans. Funds raised, net of related expenses, through the sale of the Sale Shares will accrue to Umeme

Holdings, the immediate Shareholder.

Table 7: Allocation Policy %

Categ ory of Applic ant % of Of fer

Employees and Directors

Retail East Africans

QIIs in EAC

Total Domestic

International

9%

20%

25%

54%

46%

Underwriting The Offer will not be underwritten.

Minimum aggregate applications The Offer is subject to minimum aggregate applications of 20% of the Offer Shares, that is UShs 89.3

billion or 324,860,000 Offer Shares.

The Listing Rules require that immediately following the Offer, at least 20% of the Shares shall be held by not less than 1,000 shareholders. In the event that the minimum subscription is not achieved, a waiver of the Listing Rules requirement to have at least 1,000 shareholders may be sought from USE to proceed with the Listing. If the Listing does not become effective, monies paid in respect of any application for Offer Shares accepted will be returned.

IntheeventthattheaggregateapplicationsforOfferSharesexceedstheminimumnumberspecifiedabovebutarefewerthantheOfferShares,firstprioritywillbegiventoallotmentofSubscriptionShares. Only if the aggregate applications exceed the number of Subscription Shares will any Sale Shares be allocated to Applicants.

7.3 Key Offer statistics

TTable 8: Key Offer Statistics

Offer price per Offer Share (UShs / share)

Par value of each Offer Share (UShs / share)

Premium of each Offer Share

Total number of issued Shares

Total number of Subscription Shares

Total number of Sale Shares

Total number of Offer Shares

Total number of issued Shares post Offer assuming full subscription

Gross proceeds from the Offer to Umeme (UShs)

Estimated net proceeds from Offer receivable by Umeme (UShs)

Net asset value per Share prior to the Offer (30 June 2012) (UShs)

Pro forma net asset value per Share after the Offer (30 June 2012) (UShs)

Pro forma dilution per Share after the Offer

Total number of Grant Shares

275.0

17.087763

257.9

1,338,400,005

272,378,000

350,000,000

622,378,000

13,500,000

1,624,278,005

74,903,950,000

67,116,950,000

103.21

126.36

18.3%

StatisticsDetails


46 47

7.4 Important dates and times

7.5 How to open an SCD Account

All Applicants are required to have a valid SCD Account.

Applicants who already have an SCD Account can complete the Application Form manually or electronically at a brokers premises.

Manual application Place the SCD Account number in the slot boxes provided on the Application Form and proceed with

the process.

Electronic application Click on electronic Umeme Application Form with guidance of the broker and follow the below.

n A form will appear for you to completen Enter your SCD Account number or your Financial Card numbern Partoftheformshouldfilloutautomaticallyn Oncethebiodatahasbeenfilled,completetheformbyfillingtheremainingsectiononshares

and the funds you intend to payn The broker will print the form for you to signn Deliver the form with the payment to your broker

IfanApplicantdoesnothaveanSCDAccount,thentheApplicantwillneedtofillintheappropriateform (SCD 1a Form for individuals and SCD 1b for organisations, see sample in Appendix C) the Application Form and the broker’s KYC form (the KYC form will enable a broker to open the trading account in their system to trade the shares thereafter). An individual applying for a new SCD Account will be required to provide the following documentation:

1. Three colour passport photos;

The offer timetable is subject to amendment and extension if agreed by Umeme, the CMA and the USE.Any such amendment or extension will be announced publicly through a press announcement.

Offer opens (Domestic Pool)

Offer closes (Domestic Pool) Announcement of allotment results

Last date for payment of Offer Shares for International InstitutionalInvestors and QIIs

Dispatch of SCD Account statements and any refund monies disbursed

Date of Listing and commencement of trading on the USE

Table 9: Important Dates and Times

10am, 15 October 2012

5pm, 7 November 2012

14 November 2012

16 November 2012

23 November 2012

30 November 2012

2. Proof of bank details (i.e., bank statement or cancelled cheque leaf); and3. Avalid,legalidentificationdocument.

An applicant may also open an SCD Account through an Authorised Selling Agent listed as a bank in Appendix A by using their Financial Card number and the Application Form as an SCD 1 Form.

7.5.1 How to apply for shares – Domestic Pool

The Offer to the Domestic Pool will open subsequent to the Bookbuild with the Offer Shares fixedattheOfferPrice.ToapplythroughtheDomesticPool,thecompletedApplicationForm(seesample form in Appendix B), together with the necessary payment should be submitted to any of the Authorised Selling Agents set out in Appendix A of this Abridged Prospectus.

The Application Form, necessary payment and the appropriate SCD 1 Form, as noted above, must be submittedtotheAuthorisedSellingAgentsidentifiedinAppendixAofthisProspectus.

Application Forms can be obtained from any Authorised Selling Agent which includes the Lead

Sponsoring Broker and Lead Receiving Bank.

Payment may be made in the form of:

n cash;n a valid banker’s draft/cheque, drawn on a bank licensed in Uganda, made payable in favour of

Umeme Share Offer Account in UShs;n electronic funds transfer to the bank account of the Authorised Selling Agent, as designated; orn (QIIs and International Institutional Investors only) an irrevocable on demand bank guarantee

from a commercial bank licensed in Uganda, in the format required by Umeme and valid until 21 November 2012.

The use of a bank guarantee is restricted to only QIIs and International Institutional Investors. Retail East Africans and Retail Foreign will be required to use one of the other forms of payments above.

Personal cheques will not be accepted. Late applications will not be considered.


48 49

8.Overview of Umeme


50 51

8.1 History of Umeme Umeme was incorporated on 6 May 2004 as a joint venture between Globeleq Conco, a subsidiary

of CDC, and Eskom holding 56% and 44% of the Shares, respectively. The joint venture was formed to bid for the Concession from UEDCL. The Concession was part of the World Bank restructuring program for the sector for which the World Bank and other international development agencies advised the Government on the privatisation of the power industry. Umeme’s bid was successful and, in 2005, Umeme was awarded the 20-year Concession for the distribution and supply of electricity to customers over the Distribution Network.

On 28 November 2006, Eskom sold its 44% investment in Umeme to Globeleq Conco, thus making Globeleq Conco the sole shareholder of Umeme. The Shares in Umeme were subsequently transferred between CDC group entities. Globeleq Conco was renamed Umeme Holdings whose ownership was subsequently transferred to Actis Infrastructure Umeme Limited which is 97.77% held by Actis Infrastructure 2 LP.

8.2 Overview of Umeme Through the Concession, Umeme operates as the primary electricity distribution company in Uganda,

responsible for distributing electricity to Ugandan residents and commercial entities. UEDCL owns the Distribution Network that has been leased to Umeme under the Privatisation Agreements. Umeme purchases electricity from UETCL, which owns and operates the high voltage transmissions network over 33kV. UETCL purchases electricity from several sources. The primary source is UEGCL, which owns the Nalubaale and Kiira hydropower generation stations and equipment in Jinja that are concessioned to Eskom (U). Sithe Global Power and Industrial Promotion Services Kenya which operate the Bujagali hydropower generation station are now the second key supplier in the country.

8.3 The Concession

TheConcessionwasestablishedtocreateaprofitableventurewithgrowthprospectsforaninvestorand to create incentives to improve and expand the distribution of power in Uganda. The Government needed to improve the service delivery of electricity to Ugandan customers as well as create a stronger more attractive distribution function that would in turn attract new independent power producers (“IPP”). A power sector is unattractive to IPPs when the distribution function cannot guarantee adequate collections to pay for generation. Therefore improvement of the distribution functionbenefitstheentiresectorfromgeneratorstocustomers.


52 53

Tariff mechanism

TheelectricitytariffinUgandawasrestructuredin2001toreflectthetariffmechanismincludedintheSupplyLicence.Thetariffmodelisstructuredtobeclosetofullycost-reflectiveinordertopassonthe following:

n generation and transmission costs;

n costs of servicing UEDCL’s historic loans (pre-existing to the Transfer Date);

n Umeme’s operating costs (DOMC);

n Umeme’s required return on invested capital; and

n a contractually agreed bad debt allowance for Umeme.

Whilethetariffisstructuredtofullyreflectcosts,thesectorhasbeensubsidizedbytheGovernmentsince 2007 in order to maintain acceptable tariff levels in the face of increased electricity generation costs.Thisresultedinretailtariffsremainingflat,andevendecreasinginJanuary2010,untilJanuary2012when the Government subsidies were removed from the tariff and the average retail tariff increased by an average of 48%.

Economics to Umeme

The Concession is structured so that if Umeme’s operational performance matches the targets used in setting the tariff, and assuming no growth in sales volume during the retail tariff year, its annual returns from operating the electricity distribution concession will be equal to a contractually allowed return on its investment of 20%. This contractual return is set through the life of the Concession and isnotpartofthetariffreview.Thereturnisoninvestmentinfixedassetsaswellasanallowedreturnon working capital. The return is annual, based on an approved level of capital investment in nominal USD and working capital in nominal UShs.

In addition, Umeme receives all of the reward and bears all the risk of achieving its tariff targets, including distribution losses, uncollected debt and DOMC.The change in profits as a result ofUmeme’s meeting or missing these targets is the resulting positive or negative impact, respectively.

Termination Payment

A Termination Payment (“TP”) is due to Umeme in the event of termination of the Concession before 28 February 2025 or on natural termination on expiry of the Concession. In the case of the Government default, the TP is set at between 106% and 120% of the un-depreciated invested capital (“IN”), while in the case of a Company default, the TP is set at between 80% and 94% of the IN amount. On natural termination on expiry of the Concession, the TP is set at 105% of the IN amount.

8.4 Operating performance

8.4.1 Operating statistics

The following general operating statistics illustrate the performance of the Company in 2009, 2010 and 2011 and the six months ended 30 June 2012.

Table 10: Operating Statistics

12 months ended 31 DecemberSix months

ended 30 June2009 2010 2011 2012

CustomersNumber of net customers connected 35,543 50,620 52,349 27,517Number of pending service applications 4,560 2,037 1,544 1,222Total number of customers 354,839 405,459 457,808 485,325

ElectricityGWh units sold 1,401 1,627 1,735 935GWh units purchased 2,146 2,324 2,387 1,256

Distribution SystemTotal length of distribution lines (km) 8,778 8,828 8,897 8,902Total length of low voltage lines (km) 9,643 9,963 10,477 10,651Total distribution transformers 6,244 6,355 6,496 6,538

Inaddition,theCompanyhassignificantlyimproveditscollectionratesincethestartoftheConcession.

Figure 1: Annual Average Distribution Losses (Percentage)

38%

34%

35%

34%

35%

30%

27%

26%

28%

30%

32%

34%

36%

38%

40%

2005 2006 2007 2008 2009 2010 2011

AvgA

nnua

l Dist

ribut

ion

Loss

es

(1)

(1) Includes the two months prior to Umeme taking over the Concession


54 55

Figure 2: Umeme Collection Rate (Percentage)

80%

84%

90% 90%

94%95%

99%

75%

80%

85%

90%

95%

100%

2005 2006 2007 2008 2009 2010 2011

Colle

ctio

n Ra

te

8.4.2 Customers

Since Umeme commenced operations in 2005 the Company has added more than 165,000 net new customers to its customer base and is currently connecting over 50,000 new customers every year.

Figure 3: Total Umeme Customers as of 31 December

292,237298,026 303,444 304,867

354,839

405,459

457,808

270,000

290,000

310,000

330,000

350,000

370,000

390,000

410,000

430,000

450,000

2005 2006 2007 2008 2009 2010 2011

Umeme distributes to a mix of residential and commercial / industrial customers. As of 31 December 2011, Umeme had a total customer base of 457,808 with the following breakdown by type.

Figure 4: Customer Mix by Number at 31 Dec 2011 Customer Mix by Revenue for FY2011

Type Amount

Domestic 419,025

Commercial 36,438

Industrial 2,018

Street lighting 327

Total 457,808

Table 11: Customer Numbers

Domestic

Commercial

Industrial

Street Lighting

Domestic

Commercial

Large Scale Industrial

Medium Scale Industrial

Street Lighting

91.5%

8%

0.4% 0.1%

30%

15.7%33.6%

20.7%

0.1%


56 57

8.5 Financial performance

Statement of comprehensive income

The table below sets out a summary of Umeme’s statement of comprehensive income and operating statisticsoverthepastfivefinancialperiodsto31December2011.

As shown in the table above, the rapid growth in customer numbers along with an increase in available powersuppliedhastranslatedintosignificantgrowthinsalesvolumes.Theaggregatesalesmeasuredin GWh grew at a CAGR of 11.1% from 2007 to 2011. The revenue line is impacted by many factors outside of Umeme’s control, including the price of power generation and Umeme’s own investment levels. It is important to note these external costs are offset through the payments Umeme makes foritspower(costofsales)anddepreciation.Asaresult,revenuedoesnotnecessarilyreflectthegrowth in earnings of the Company.

EBITDA, which grew at a CAGR of 23.5% from 2007 to 2011, is the primary indicator of the Company’sprofitabilityasitreflectsthenetimpactofUmeme’sinvestmentprogramaswellasitsperformance in terms of meeting or exceeding its sales volume targets and tariff parameters. The Company’sprofitisdrivenbythecontractedUSD20%returnonERAapprovedinvestmentswhichis then impacted positively or negatively by the ability of Umeme to meet the set tariff parameters relatedtodistributionlosses,debtcollectionsandDOMC.TheCompanyearningsalsobenefitfroman increase in sales volume from the prior year as the retail tariff is based on an adjustment of the prior year sales volume. The increase in sales volume in 2011 was restricted by the limitations in generation which resulted in load shedding during the year. The shortfall in supply was subsequently alleviated by the Bujagali hydro plant which is now operating at full capacity.

8.6 Deferred Bonus Scheme

In addition to the Share Grant Scheme as discussed in section 7.2, on 28 June 2012, the Board discussed and endorsed a plan to design and implement an incentive scheme with a Vesting Period starting on 1 January 2013. On 1 August 2012, the Shareholders approved the outline terms of the incentiveelementoftheschemesubjecttofinalapproval fromtheBoard. Insummary,thesalientfeatures of this Deferred Bonus Scheme will include:

n the scheme will be open to all Eligible Employees including executive Directors;

n under the scheme, the Company will award to participating employees, at the commencement of the scheme, a right to receive a cash award on the Vesting Date;

n to qualify to receive an award an individual participating employee must be the registered owner throughouttheVestingPeriodofaspecifiednumberofqualifyingShares,thequantumofwhichwill be determined by the employee’s seniority in the Company; and

n after the Vesting Date, the employee will receive the cash award (after deduction of any PAYE tax which may be payable), provided that the employee has fulfilled the service, qualifyingshareholdingandperformanceconditionsthatwillhavebeenspecifiedandwhichwillhavebeendesigned to promote employee retention and continued performance.

The cash award that an employeemay receivewill be determined by the financial performanceof Umeme in terms of EBITDA (subject to minimum and maximum thresholds) over the three years ended 31 December 2013, 31 December 2014 and 31 December 2015 compared to the year ended 31 December 2012 as well as the number of qualifying Shares that the employee holds throughout the Vesting Period. See additional details regarding the plan, including the qualifying Shares per employee level, in section 13.6 of the Full Prospectus.

Table 12: Analysis of Statement of Comprehensive Income


58 59

9.Risk factors


60 61

The Company’s operating results, financial condition and prospects could be materially and adversely affected by any of the risks described below. In that event, the value of the Shares, subsequent to Listing, could decline and investors could lose all or part of their investment in the Shares. Section 14 of the Full Prospectus contains more detailed information of these risks.

These risks should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. You should consider carefully the risks and uncertainties described in the Full Prospectus, together with all other information contained in the Full Prospectus before making any investment decision.

9.1 Risks related to the Company’s business and industry

n A disruption or failure by UETCL or power generators, or a lack of available power from the generators could adversely affect the Company.

n Umeme expects the next review for adjustment of the tariff parameters related to the Concession to be in March 2019. The outcome of these review processes is uncertain. The future profitability of the Company will be impacted by the tariff parameters that are ultimately agreed.

n The Company may not be able to implement operational improvements necessary to achieve agreed tariff parameters (including energy losses, collection rates and DOMC). To the extent these tariff parameters are not met there would be a negative impact on the results and potentially the financial position of the Company.

n Through the retail tariff, the Company receives a contractual 20% return on its investments in fixed assets. However, the return is provided on only those fixed assets that are approved by ERA. The approval process may cause an undeterminable lag between when the investment is made and when the return is recognized, if at all, by the Company. This lag could have an impact on the timing and amount of the Company’s cash flows and results of operations.

n UEDCL is also required to approve Umeme investments related to the Termination Payment. UEDCL may fail to verify and approve all Umeme investments, even if those investments had already been approved by ERA. This may have an adverse impact on the Termination Payment due to Umeme if the Concession were terminated.

n The failure to operate energy facilities safely and reliably could adversely affect the Company.

n The failure to properly and timeously invest in, and complete, construction projects could adversely affect the Company.

n The Company’s historical operating results may not be reliable indicators of future performance.

n The Company may not be able to obtain financing, or may not be able to obtain financing on acceptable terms, which could adversely affect the Company’s financial condition, results of operations and cash flows.


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n The Company is exposed to interest rate risk on its loan facility from the IFC. Interest is payable at a floating rate pegged to LIBOR therefore an increase in LIBOR could negatively impact the cash flows and financial condition of the Company.

n The Company’s revenues are correlated with the economy, such that economic conditions may adversely affect the Company’s customers and correspondingly the Company’s financial condition or results of operations.

n As many of the Company’s liabilities are either denominated in USD or are benchmarked to the USD, depreciation of the UShs as against the USD may have a material impact on reported financial results.

n The Company is currently included in an investigation of the energy sector by an ad hoc committee of Parliament. The outcome of the investigation could require changes to the energy sector regulatory framework or cause a review of the Concession which may have an impact on the operations and financial condition of the Company.

n The Company is exposed to, and currently is (or may become) engaged in, a variety of legal and/or regulatory proceedings.

n Changes in taxation rates or law, failure to manage the risks associated with such changes, or misinterpretation of the law, could materially and adversely affect the Company’s results of operations, financial condition and prospects.

n The Company could fail to attract or retain senior management or other key employees.

n Trade union members may influence and cause industrial strikes that may adversely affect the Company’s operations.

9.2 Risks related to regulatory environment

n The power sector is regulated by ERA with oversight from relevant Government ministries, changes in the legal or regulatory environment could adversely affect the Company’s business.

n The failure of the Company to obtain and renew licenses, permits and approvals necessary for its operations, including its Concession, could adversely affect the Company.

n The approval, by ERA of prohibitively high tariffs could adversely affect the Company’s financial results.

9.3 Risks related to Uganda

n Political, economic and social developments in Uganda and neighbouring countries.

n Policy changes in Uganda could ultimately lead to changes in the regulatory environment that may impact the ability of the economy to grow or how Umeme conducts its business.

9.4 Risks related to this Offer

n Shares are subject to price fluctuations.

n One shareholder, Umeme Holdings, will, after the Listing, retain over 50% of the Shares, giving it a substantial amount of management control.

n Allocation of the Offer Shares may take longer than expected.

n There is no existing market for the Company’s Shares and it is uncertain whether one will develop to provide Shareholders with adequate liquidity.

n The Company may not be able to fulfil its dividend policy in the future.

n The Company may not be able to execute a secondary listing on the NSE or if it is able to list on the NSE it may not provide an increase in liquidity for the Offer Shares.


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10.Terms and conditions

of the Offer and Incentive Shares


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10 Terms and conditions of the Offer and Incentive Shares

See complete terms and conditions in section 22 of the Full Prospectus.

10.1 Lock-in period for Initial Shareholder

Umeme Holdings has undertaken under the terms of a Lock-in Agreement executed with the Company (a document available for inspection under section 21.7 of the Full Prospectus) not to dispose of or further encumber any of the Shares it holds in Umeme (but specifically excluding the Sale Shares and Incentive Shares) for a period of 365 days commencing on the date of the Listing. The Lock-in Agreement includes an exception for 1) the encumbrance created under, and IFC’s rights as secured party in accordance with, the Share Pledge Agreement, described in section 21.2.5.4 of the Full Prospectus and 2) a general undertaking given by Umeme Holdings to Standard Chartered Bank (Mauritius) Limited pursuant to a facility agreement dated 5 October 2010 not to create or permit to subsist any security over any of its assets.

10.2 Where to obtain a Full Prospectus / Application Form

Copies of the Full Prospectus and Application Form can be obtained from any Authorised Selling Agent which includes the Lead Sponsoring Broker and Lead Receiving Bank (see Appendix A).

10.3 Application procedure

Persons wishing to apply for Offer Shares must complete the Application Form and return it to any one of the Authorised Selling Agents listed in Appendix A of this Abridged Prospectus by 5:00pm 7 November 2012.

In addition, in order for an Applicant to receive an allocation of Offer Shares, they must have an SCD Account. Applicants who already have an SCD Account can complete the Application Form and place the SCD Account number in the slot boxes provided and proceed with the process. If an Applicant does not have an SCD Account, they must complete the appropriate SCD Account opening form (SCD 1a for individuals and SCD1b for organisations), the Application Form and the broker’s KYC form (the KYC form will enable a broker to open the SCD Account in their system to trade the shares thereafter). An individual applying for a new SCD Account will be required to provide the following documentation:

1. Three colour passport photos;

2. Proof of bank details (i.e., bank statement or cancelled cheque leaf); and

3. A valid, legal identification document issued by an authorised government entity.


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Applicants may choose to apply through the available online sites of the Authorised Selling Agents. Selling agents will provide soft copies of the (SCD 1a for individuals and SCD1b for organisations), the Application Form and the selling agents KYC forms. Should the applicant not hold an SCD accounts by the offer period, they should have the SCD form and identification form notarized by a lawyer and have the documents couriered to the offices of the selling agent (no scanned copies will be accepted).

An applicant may also open an SCD Account through an Authorised Selling Agent listed as a bank in Appendix A by using their Financial Card number and the Application Form as an SCD 1 Form.

Application Forms can be obtained from any Authorised Selling Agent which includes the Lead Sponsoring Broker and Lead Receiving Bank. A sample Application Form in Appendix B and a sample SCD 1 Form in Appendix C accompany the Full Prospectus.

Each Application Form submitted must be accompanied by payment for an amount equivalent to the value of Offer Shares applied for by the Applicant. Payment may be in the form of:

n cash;

n a valid banker’s draft/cheque drawn on a bank licensed in Uganda in favour of the Umeme Share Offer Account;

n electronic funds transfer to the bank account of the Authorised Selling Agent, as designated; or

n (QIIs and International Institutional Investors only) an irrevocable on demand bank guarantee from a commercial bank licensed in Uganda, in the format required by Umeme and valid until 21 November 2012.

The use of a bank guarantee is restricted to only QIIs and International Institutional Investors, Retail East Africans and Retail Foreign will be required to use one of the other forms of payments above.

Personal cheques will not be accepted.

If any draft or cheque accompanying an application is dishonoured or not paid on first presentation, such an application will be held as being invalid. The Applicant shall be responsible for any losses and all costs incurred.

QIIs and International Institutional Investors will not be required to provide direct payment on application. Payment for the Offer Shares applied for by QIIs and International Institutional Investors will be made upon allotment and within two working days of the announcement of allotment results. By submitting an Application Form, each QII and International Institutional Investor binds itself to the Vendors to pay in full the value of Offer Shares allotted to them.

The Authorised Selling Agents will refuse to accept any applications that are not received by the stipulated submission time. Neither the Vendors nor any of their advisors or agents in relation to the Offer shall be under any liability whatsoever should an Application Form fail to be received 5:00pm on the Closing Date.

Counterfoils torn from the bottom of the Application Forms will be issued to Applicants as receipts.

All applications received from a single Applicant will be aggregated and be treated as a single application in terms of the Offer.

Applications are irrevocable and may not be withdrawn once received.

Applications must be for a minimum of 1,000 Offer Shares and in multiples of 100 Offer Shares thereafter.

All alterations on the Application Form, other than the deletion of alternatives, must be authenticated by the full signature of the Applicant.

Umeme reserves the right to accept any application, in whole or in part, even if the Application Forms are incomplete or incorrectly completed.

Persons or companies are not allowed to apply in a nominee capacity and must disclose the names and address of their principals and the number of Offer Shares applied for on behalf of each principal.

Applications may be made in the names of the executor or administrator of the estate of a deceased person or a guardian of a minor.

Applicants may be called upon for evidence of their authority or capacity to sign the Application Form.

The Vendors reserve the right to alter, relax or waive any of the terms and conditions with respect to the making of applications as they, in their sole discretion, may deem fit.

10.4 Incentive Shares available to Umeme customers, employees and Directors

Umeme Holdings has undertaken to transfer Shares (“Incentive Shares”) from its current shareholding in Umeme to Retail Investors who meet the specified criteria and participate in and are allotted Offer Shares for nil consideration. This is intended to be an incentive for customers of Umeme to invest in Umeme through the Offer.

Retail Investors who will qualify to receive the Incentive Shares (“Eligible Umeme Customers”) are those who meet the following criteria:

n are not Foreign Investors or Qualified Institutional Investors as defined in this Abridged Prospectus;

n are natural persons resident in Uganda or corporate entities incorporated or registered in Uganda with their main place of business located in Uganda;

n are consumers of electricity in Uganda and are able to provide a valid Umeme customer account number that relates to the supply of electricity to the Investor’s residential or commercial premises (note: the customer account does not necessarily have to be in the name of the Investor but may be in the name of the landlord or other account holder); and


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n have made valid applications for Offer Shares and have been allotted Offer Shares under the terms of this Offer.

Umeme Holdings has set aside a maximum of 19 million Incentive Shares in Umeme to transfer to Eligible Umeme Customers as well as Employees and Directors that purchase Offer Shares. The number of Incentive Shares to be transferred to each Eligible Umeme Customer, Employee and Director will be computed in accordance with the policy set out in the table below.

Table 13: Policy for transfer to Incentive Shares

Number of Offer Shares allotted to Eligible Umeme Customer, Employee or Director

Number of Incentive Shares to be transferred to Eligible Umeme Customer,

Employee or Directorby Umeme Holdings

Between 1,000 and 1,900 100

Between 2,000 and 2,900 200

Between 3,000 and 3,900 300

Between 4,000 and 4,900 400

Between 5,000 and 5,900 500

Between 6,000 and 6,900 600

Between 7,000 and 7,900 700

Between 8,000 and 8,900 800

Between 9,000 and 9,900 900

10,000 and above1 Incentive Share for every 10 allotted rounded down to the nearest 100 Incentive Shares and subject to a cap of 100,000 Incentive Shares

In the event that application of the policy set out in the table above becomes impractical in that the number of Incentive Shares to be transferred would exceed the maximum number of Incentive Shares available, Umeme Holdings will modify the policy set out above as follows:

n firstly, reduce the number of Incentive Shares to be transferred to Eligible Umeme Customers who have been allotted 10,000 or more Offer Shares pro-rata to bring the number of Incentive Shares to be transferred to within the available number of Incentive Shares subject to a minimum transfer of 1,000 Incentive Shares to every such Eligible Umeme Customer; and

n secondly, in the event that the number of available Incentive Shares is still insufficient, reduce the entitlement of all remaining Eligible Umeme Customers pro-rata.

Umeme Holdings will transfer the Incentive Shares to the SCD account of each Eligible Umeme Customer on or before the Listing of the Shares on the USE. Umeme Holdings will be responsible

for the payment of any stamp duties or other costs that may arise in respect of the transfer of the Incentive Shares to Eligible Umeme Customers.

The Incentive Shares will be transferred cum-dividend and will be entitled to any dividends that Umeme declares and pays after the date of transfer.

Incentive Shares will also be available to Umeme Employees and Directors who are allotted Shares from the Employees and Directors’ allocation pool. However, there will be no cap as to the number of Incentive Shares that Umeme Employees and Directors receive in respect of shares allotted to them under the Employees and Directors’ allocation pool.

10.5 Governing law

This Abridged Prospectus, the Full Prospectus and any contract resulting from the acceptance of an application to purchase Offer Shares shall be governed by and construed in accordance with the laws of Uganda and it shall be a term of each such contract that the parties thereto and all other interested parties submit to the exclusive jurisdiction of the courts of Uganda.


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Appendix


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African Alliance Uganda LimitedWorkers House 5th Floor,

Southern Wing 1 Pilkington Road Kampala, Uganda

Contact: Mr. Kenneth KitarikoTel: +256 414 235 577Fax: +256 414 235 575

E-mail: [email protected]

Baroda Capital Markets (U) Limited18 Kampala Road

P.O. Box 7197 Kampala, Uganda

Contact: Mr Suraj K. SrivastavaTel: +256 414 233 680-3

Fax: +256 414 258 263Email: [email protected]

[email protected]

Crane Financial Services LimitedCrane Chambers 38 Kampala Road

P.O. Box 22572 Kampala, Uganda

Contact: Mr. Vivek ShamaTel: +256 414 341 400 / 341 403

Fax: +256 414 231 578Email: [email protected]

Crested Stocks and Securities Limited6th Floor Impala House

Plot 13/15 Kimathi AvenueP.O. Box 31736

Kampala, UgandaContact: Mr. Robert Baldwin

Tel: +256 414 230 900Fax: +256 414 230 612

Email: [email protected]

Dyer and Blair Uganda Limited 1 Lumumba AvenueP.O. Box 36620Kampala, UgandaContact: Mr. Paul BwisoTel: +256 414 233 050Fax: +256 414 218 633Email: [email protected]

Equity Stock Brokers Limited Orient PlazaPlot 6/6a Kampala RoadP.O. Box 3072 Kampala, UgandaContact: Mr. Edward RuyongaTel: +256 414 236 012-5Fax: +256 414 348 039Email: [email protected] UAP Financial Services Ltd1st Floor, Communication HouseP.O. Box 1610Kampala, UgandaContact: Mr. Patrick NdonyeTel: +256 414 332 743 / 312 332 743E-mail: [email protected]

Appendix A: Directory of Authorised Selling Agents BrokersMembers of the Uganda Securities Exchange and Licensed Securities Central Depository Agents

A B R I D G E D P R O S P E C T U S

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Banks

Stanbic Bank UgandaCrested Towers Building, Short Tower17 Hannington RoadP. O. Box 7131Kampala, UgandaContact: Mr Lameck OtimTel: +256 414 230 000Fax: +256 414 230 608E-mail: [email protected]

Barclays BankHead OfficePlot 2 / 4, Hannington RoadP. O. Box 7101Kampala, UgandaContact: Ms. Susan LugalambiTel: +256 417 122 000Fax: +256 417 122 052 / 414 321 839E-mail: [email protected]

Centenary BankHead Office: Mapeera HousePlot 44 – 66 Kampala RoadP. O. Box 1892 Kampala, UgandaContact: Mr. Francis Ogwang Tel: +256 414 251 276 / 7Fax: +256 414 251 273 / 4Email: [email protected]

DFCU BankHead OfficePlot 2 Jinja RoadP. O. Box 70Kampala, UgandaContact: Mr William SekabembeTel: +256 312 200 374 / 229Email: [email protected]

Diamond Trust BankDiamond Trust BuildingPlot 17/ 19, KampalaP. O. Box 7155Kampala, UgandaContact: Mr. Thirumoorthy RamakrishnanTel: +256 414 387 000 / 100Fax: +256 414 218 633Email:[email protected]

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