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Monday,September 24,2018 15:09 PM

Umeme: 12 years of powering Uganda

By Samuel Sanya

Added 13th August 2018 02:08 PM

Under the Government-run Uganda Electricity Board (UEB), power outages were a norm rather than an exception.

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Under the Government-run Uganda Electricity Board (UEB), power outages were a norm rather than an exception.

BUSINESS

It is hard to believe today, but just 12 years ago, access to electricity was the preserve of selected urban dwellers.

Under the Government-run Uganda Electricity Board (UEB), power outages were a norm rather than an exception.

The National Power Company was losing four in every ten shillings of power it produced to thieves and an old network. Observers noted that things started to improve in 2005 when Umeme, a private company, was awarded a 20-year concession.

At the start of the concession, Commonwealth Development Corporation (CDC), which initially led the concession before handing over to Actis, reported that the 20,000km network of poles, substations and wires, was in a sorry state.

They estimated that at least 120,000 poles were rotten and in need of urgent replacement to ensure supply reliability across the grid.

It became quickly apparent that not only were there huge energy losses to the system to the extent of 38% or even more of all power distributed, but that the power utility was not collecting all the money due to it.

 
At the beginning of the concession, only 80% of billings were being collected. A World Bank study in 1988 had concluded that Uganda’s electricity system was financially not viable due to distribution inefficiency, characterised by high energy losses (40%) and uncollected bills.

The then UEB, was heavily reliant on government subsidies. All this should not have come as a surprise as investment in the system was woefully low.

In the first year of the concession, $6m (about sh22b) was invested, a figure which has grown to a cumulative $565m (sh1.8 trillion) by the end of December 2017.

This investment has been put to good use as the company’s revenues and profits have continued to grow, but most telling has been the dramatic increase in people connected to the grid.

The network infrastructure has more than doubled. Revenues have jumped ten-fold since the beginning of the concession. In 2017, Umeme collected sh1.7 trillion, compared to about sh130b in 2005.

In the same year, Uganda Electricity Transmission Company Limited (UETCL) was paid sh1 trillion as power purchase costs from Independent Power Producers. A World Bank study among to a cumulative $565m (sh1.8 trillion) by the end of December 2017.

This investment has been put to good use as the company’s revenues and profits have continued to grow, but most telling has been the dramatic increase in people connected to the grid. The network infrastructure has more than doubled.

Revenues have jumped ten-fold since the beginning of the concession. In 2017, Umeme collected sh1.7 trillion, compared to about sh130b in 2005.

In the same year, Uganda Electricity Transmission Company Limited (UETCL) was paid sh1 trillion as power purchase costs from Independent Power Producers.

 
A World Bank study among 30 African countries in 2016, titled “Making Power Affordable for Africa and Viable for Utilities,” noted that Uganda and Seychelles as the only countries with near self-sufficient sector revenues; without reliance on Government subsidies.

Uganda achieved this mainly through improving on efficiencies especially system losses and operating efficiency.

Selestino Babungi, the Umeme managing director, notes that during the last 12 months, system losses have more than halved to 17.2% (December 2017) of power generated from 38% recorded in 2005.

He says the benefit to the economy of the energy loss reduction is about sh260b per annum, which could have manifested itself through higher tariffs of tax payers footing subsidies.

The new efficiencies in the electricity sector have changed the way manufacturers who require constant power supply, school going children who need lighting to study, and households who require quick connections view the energy sector.

There have also been benefits to independent power producers, who have been attracted to the economy to raise the installed electricity generation capacity from 380MW to about 850MW due to Uganda’s conducive investment climate.

“There is still a lot to do throughout the sector – bringing more power online and expanding the transmission and distribution grid. We have no illusions about this. We need to ready the economy for the extra 1000MW coming on stream,” Babungi says.

He notes that Umeme is evidently committed to doing its part in ensuring a more efficient distribution of power.

“I believe a momentum has been created and that with government support, we can continue earlier successes well into the second half of the concession,” Babungi observes.

 

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