Govt quizzed over late request for Umeme buyout loan

By John Odyek

KAMPALA - In under a week from now, the lease agreement between the Ugandan government and electricity distributor Umeme will expire.

But ahead of the March 1 expiry date, MPs have expressed concerns over government's "last-minute" request for a $190 million (sh700 billion) loan to finance the buyout of the company.

Finance state minister (general duties) Henry Musasizi was on the receiving end of questions over the late request.

This was on Tuesday (February) as he interfaced with members of Parliament's Committee on National Economy.

Making a case for the loan, Musasizi said it would cover the compensation for Umeme’s unrecovered capital investments, as stipulated in the lease and assignment agreement.
He also said the loan would be provided by Stanbic Bank.

But deputy committee chair Robert Migadde expressed doubts about the feasibility of the timeline, saying that penalties in the form of interest would be imposed on the government if the buyout is delayed. 

“The amount we are borrowing is merely an estimate," he said. 

"We don’t have the Auditor General’s report to confirm this figure, and the timelines don’t allow for adequate scrutiny of the information."

MP Stella Atyang (Moroto) said a thorough assessment would help determine the exact amount needed for the buyout loan.

'Last minute'

Dokolo North MP Moses Ogwal questioned the urgency of the payment, highlighting that there are numerous other companies with outstanding debts to the government. 

“The private sector owes the government over sh3 trillion. Why is this debt being prioritized? Are we encouraging the private sector to take the government to court?” he quizzed.

“Why is this being rushed?" probed Koboko County MP James Baba.

"We knew Umeme’s contract was going to expire, so why is this being done at the last minute?”

During the same interface, Maracha County MP Denis Oguzu Lee questioned whether the power distributor had adequately recovered its expenses through the tariffs it charges consumers. 

“The government has been pursuing a feed-in tariff policy where companies like Umeme should recover their investments through tariffs, a policy that has been approved by the Electricity Regulatory Authority (ERA) over the years."

Energy state minister Sidronius Okaasai responded to the MPs' concerns.

He clarified that the Auditor General had hired an independent auditor, Grant Thornton Uganda, in July 2024 to conduct an audit and determine the final buyout amount for Umeme. 

“As of February 24, 2025, the draft buyout amount stands at $201 million (sh740 billion), according to the latest report received by the office of the Auditor General,” said the minister.

Okaasai also said the finance ministry is seeking an additional $50 million (sh184 billion) to capitalize Uganda Electricity Distribution Company Limited (UEDCL), which will take over Umeme’s operations and obligations.

The minister further clarified that the final due date for the buyout is March 31, 2025, after which penalties for delayed payment would be imposed.

Geoffrey Okoboi, the director of economic regulation at ERA, attended the interface with MPs.

He explained that Umeme’s investments in substations, which have a minimum recovery period of 20 years, could not be fully recovered under the current timeline set by the concession agreement. 

“Umeme has made cumulative investments of approximately $800 million (sh2.9 trillion) over the last 20 years, of which $680 million (sh2.5 trillion) has been recovered," said Okoboi.

"The remaining amount represents what still needs to be paid. A company cannot recover the full value of its investments immediately."