Umeme hopes contract won’t be terminated
Posted Thursday, May 15 2014 at 19:28
Umeme is confident that its contract will not be terminated before the concession period expires, the company chairman, Mr Patrick Bitature, has said.
Addressing the media after the company’s annual general meeting in Kampala yesterday, Mr Bitature said many things which are mentioned in the 2011 commissioned report have been overtaken by events, adding that it is in the interest of Uganda to ensure stability and respect for the rule of law to attract investments.
“The President has been the biggest mobiliser for attracting investment. That is why the government endeavours to respect the terms and conditions of concession agreements. Our government respects the rule of law and hopefully this contact will not be terminated unduly,” he said.
The Parliament’s Ad-hoc Committee on the Energy Sector recommended that the Umeme 20-year concession that expires in 2015 be terminated on grounds that it exaggerates energy losses and that the contract only serves to protect the firm’s interests.
Mr Bitature, however, said: “Government may choose to terminate the contract but there are consequences that are spelt out in the agreement which we will have to follow to the letter.”
Termination of the contract would mean that government would have to pay Umeme $206.3 million (Shs526.3) billion, which is 120 per cent of Umeme’s unrecovered investment as at December 2013.
According to the Support Agreement between the government and Umeme, Uganda would have to pay the buy out amount in nine months.
Should the government fail to pay within the nine months, the principal would attract interest of 20 per cent.
If Uganda waits for the 20-year concession to expire in 2025, it would pay Umeme 105 per cent of Umeme’s increasing unrecovered investment.
Mr Bitature, however, said despite the negative media reports about the cancellation of the concession, the power distributor managed to attract 20 foreign and local funders to buy a stake into Umeme Holdings, a sign that the company is doing well.
On Wednesday, 20 institutional investors had bought Shs215 billion shares that is put on sale in Uganda and Nairobi Securities exchanges.
Another tranche of about Shs12b shares will be launched next Monday.