Overview:
Both Umeme and Eskom have been notified of the Government’s decision not to renew their concessions when they come to their natural end in March 2023 and March 2025, respectively.
The Government of Uganda plans to nationalise the country’s power sector once Umeme’s concession officially runs out in three years’ time.
The state-run company will also involve a minority shareholder from the private sector, according to the Ministry of Energy and Mineral Development said in a statement on Friday.
Both Umeme and Eskom have been notified of the Government’s decision not to renew their concessions when they come to their natural end in March 2023 and March 2025, respectively.
Quoting a cabinet directive of October 3, 2022, Mr. Solomon Muyita, a Principal Communications Officer, at the Energy ministry, said the government plan will culminate in creating the Uganda National Electricity Company Limited (UNECL) as a state-run entity with majority shareholding under a Public Private Partnership (PPP) arrangement.
Mr Paul Mwesigwa, the UEDCL managing director, says the company has built a specialised capacity to manage electricity distribution.
“We are ready and prepared to manage the activities because, currently, we monitor on behalf of the government the distribution network investment run by Umeme,” he says.
Umeme’s exit was sealed a few years ago amid accusations of not investing in power distribution and high charges.
In April 2022, Parliament passed the Electricity Amendment Bill, 2022, which among others, permits generation and transmission licensees to supply electricity in bulk directly to categories of customers specified by the minister.
The Bill ended decades of Umeme’s monopoly as the sole bulk power supplier.
“This action would of necessity eliminate Umeme in service territories where it is not licensed and in effect implement the presidential directive on selling power to industries at a tariff that eliminates the expensive distribution costs of Umeme,” the report by the Natural Resources Committee read in part.
President Museveni has often criticised Umeme, saying its poor distribution network and the high electricity tariffs have continued to frustrate government’s industrialisation efforts.
Ruth Nankabirwa, the Minister of Energy and Mineral Development, said her ministry has already constituted a Joint Committee to handle the Eskom Concession and is in the process of making a similar arrangement for the Umeme concession.
The respective committees, she said, are tasked with the planning and management of the end of the concessions to ensure seamless handover of the operations of the assets.
“Government is committed to avail the necessary financing to ensure it fulfils its obligations in the related agreements,” said Irene Bateebe, the Permanent Secretary in the Ministry.
“UEDCL and UEGCL will be supported to enable them to manage the transition period and operation of the concessions as happened with the 50MW Namanve Thermal Power Plant that has reverted to UEGCL in 2021,” Ms. Bateebe is quoted as saying in a statement shared by Mr Muyita.
Ms Bateebe said Uganda would compensate Umeme for any investments it had not recouped during the concession period.
“UEDCL and UEGCL will be supported to enable them to manage the transition period and operation of the concessions as happened with the 50MW Namanve Thermal Power Plant that has reverted to UEGCL in 2021.” Bateebe said.
She added that an audit would be done at the termination of both contracts.