Umeme’s Buyout to Cost Taxpayers $215m

Government is set to pay US$215 million to acquire majority shares of power distributor, Umeme.  

The move comes as Umeme’s 20-year contract comes to a close in 2025, giving the government full control of the power distribution system and marking the end of a long-standing private sector arrangement.

During a meeting between the Committee of Environment and Natural Resources and the Ministry of Energy officials on Tuesday, 11 April 2023, the Permanent Secretary, Irene Bateebe, revealed that Uganda Electricity Distribution Company Limited (UEDCL) requires US$158 million to enable it to invest in the distribution system over the next three years.

This is meant to reduce the final buyout amount payable to Umeme to US$7.1 million when the concession comes to its natural end.

Bateebe said that as of December 2022, the buyout price was at US$215 million.

“On an ongoing basis, Umeme is investing and ERA has a recovery mechanism where they recover part of this investment from the tariff. The Umeme concession and the asset remained on the books of UEDCL and the agreement provides for an option where UEDCL can come in and invest today,” she said.

She said that if they attract concessional funding through UEDCL, the government can invest and gradually reduce Umemes’ investment.

Bateebe added that the figure of the final buyout could either decrease or increase based on the Auditor General’s investigations.

Meanwhile, Members of Parliament have called on the Ministry of Energy to take action and ensure a steady energy supply for Ugandans during and after Umeme’s exit.

Umeme is reportedly failing to replace damaged transformers and poles due to its impending exit in 2025.

This development has raised concerns among Members of Parliament over the possibility of widespread blackouts and power outages.
 
Agule County MP, Hon. Polycarp Ogwari, expressed his concerns over the issue and asked the Chairperson of the Natural Resources Committee to ensure that the Ministry of Energy addresses the issue since the exit is still far away.

Dr. Emmanuel Otala, the Chairperson of the Natural Resources Committee, expressed the need for the Ministry of Energy to take action and ensure that Umeme’s exit does not affect  electricity supply.

He tasked Minister of State for Mineral Development, Hon. Peter Lokeris, with the responsibility of finding a solution and providing clear information about who will take over after Umeme.

Bukimbiri County Representative, Hon. Eddie Kwizera, tasked the ministry to provide their strategy for handling the exit of Umeme.

“When you indicate the US$63 million, yet we know that the company is absent on the ground; like in Kisoro, we don’t have them and when there is no power, there is no personnel, we need to know that there is the capacity for them to use the money,” he said.

Irene Bateebe said UEDCL which will replace Umeme needs a capitalization of US$64 million to build its capacity.