Govt seeks sh2 trillion for Umeme concession takeover

Uganda Electricity Distribution Company Limited (UEDCL), is seeking for $540m (sh2.059Trillion) from external funders to ensure a smooth transition and takeover from power distributor Umeme.

Appearing before the Parliament Budget Committee, the Natural Resources Committee Chairperson, Dr Emmanuel Otaala, said that of the required figure, an initial investment of $190m is needed during the takeover process, while an estimated buyout amount of $225.75m (sh860.806b) is due to Umeme.

Otaala told the budget committee that the figures are subject to a final report by the Auditor General.

“Government should avail the necessary financing to ensure smooth transition and takeover from Umeme. The $765.75m that UEDCL requires, It says it has been consulting various financial institutions in the world to support it in this cause and they are positive about it. So, this money will not be coming from Government directly, but from external funding,” Otaala said.

Umeme was granted the power distribution concession in 2015 subject to renewal. Umeme concession ends in 2025 and there is a termination clause in the contract which instructs government on what to do.

Why contract is terminated?

In May 2021, President Yoweri Museveni expressed his displeasure with Umeme, and warned that its 20-year concession would not be renewed after it comes to its natural end in February 2025.

Museveni’s agitation stemmed from the high electricity tariff, affected by high return on investment, which he said was stifling industrialisation, and ultimately, government’s job creation and poverty reduction efforts.

He said once Umeme’s concession ends, government will take over power distribution, adding that power for industrial parks will go straight from generation to the factories without any third party.

The President’s remarks at the time resurrected a three-year debate, and uncertainty over the future of Umeme’s concession after 2025.

Umeme reacts

The head of communications at Umeme Ltd, Peter Kaujju told New Vision last week that discussions were taking place between them and the government about what happens when their contract ends in 2025.

“Discussions between Umeme and the Government about what happens after this contact (has ended) are ongoing. Right now, we are concentrating on the work before us because we have a lot of work to do within these remaining three years. So, we are very busy executing what is expected of us as per the current contract,” Kaujju said.