Uganda races against time for Umeme buyout and UEDCL transition

With less than 12 days (288 hours) remaining, the Ugandan government is scrambling to secure substantial funds for the impending handover of power distribution from Umeme Ltd. to the state-owned Uganda Electricity Distribution Company Ltd (UEDCL). The government needs $191 million (Shs695.9 billion) for the Umeme buyout and an additional $50 million (Shs183.2 billion) for UEDCL’s initial investment.

The handover, scheduled for April 1st, follows the natural expiration of Umeme’s 20-year concession. However, officials from the Electricity Regulatory Authority (ERA) and Energy Minister Ruth Nankabirwa have expressed concerns about the government’s preparedness.

The buyout amount, intended to compensate Umeme for unrecovered capital investments, remains uncertain. While Parliament approved Shs725.42 billion towards the buyout as part of a larger supplementary budget, the final figure is pending the Auditor General’s report, expected on March 28th.

Previously, the Cabinet approved $191 million based on recent Auditor General reports indicating Umeme’s growing investments. However, Umeme had sought $231.7 million (Shs856 billion), excluding taxes, based on their net accumulated capital investments.

Minister Nankabirwa suggested the final buyout could reach $195 million to $200 million due to Umeme’s ongoing investments, such as recent substation upgrades. Umeme reports total investments of $832.1 million, with $603 million recoverable at the concession’s end.

ERA’s CEO, Eng. Ziria Tibalwa, emphasized the necessity of Umeme’s continued investments, highlighting recent outages and the need for immediate repairs to a live network.

Umeme’s distribution network encompasses extensive infrastructure, including substations, switch stations, and thousands of kilometers of power lines, along with non-network assets like office buildings.

UEDCL’s Initial Investment and Readiness

Eng. Tibalwa also raised concerns about the delayed $50 million initial investment for UEDCL, crucial for a smooth transition. She criticized the lack of a phased handover, where UEDCL could have collaborated with Umeme prior to the concession’s end.

The Ministry of Finance, Planning, and Economic Development is reportedly in advanced stages of securing the $50 million through internal borrowing, promising its availability by next week.

UEDCL’s Managing Director outlined a $70 million annual investment plan for the next 25 years to enhance network capacity and reliability. He claimed half of the initial funding is secured, with procurement underway. UEDCL highlights its experience in distributing power in remote areas, emphasizing technological advancements.