Govt looking for financier to fund Umeme buyout

Umeme is expected to exit the electricity distribution market at the end of its concession in March. Photo / File
What you need to know:
- According to the Ministry of Energy, government should by March 2025 have secured between $100m and $150m or slightly above which is needed for the Umeme buyout
The Ministry of Finance has said government is looking for a financier to fund the Umeme buyout expected to be above $150m.
However, govenerment is yet to ascertain the final amount but is currently conducting an audit of Umeme’s investments that would have remained unpaid at the end of the concession.
This was revealed by Ministry of Finance acting director of economic affairs and chairperson of sustainable resource mobilisation cluster Moses Kaggwa, in a telephone interview yesterday.
“We are looking for the buyout amount. The Auditor General has to give us the final figure. We hope it will come through by the end of this month. Once we get the final figure, we shall seek a supplementary because we are borrowing. We are looking for a potential financier right now,” he said.
In details contained in the 2024 report for the year ended June, Auditor General Edward Akol indicated that Umeme had continuously invested leading to an increase in the financial liability that government will pay at the natural end of the 20-year concession in March.
The Auditor General also indicated that he was conducting a special audit for the End of the Lease and Assignment Agreement between Umeme and Uganda Electricity Distribution Company Limited (UEDCL), noting that UEDCL had also indicated that it was “working with the Ministry of Finance to secure external funding for the buyout amount”.
Asked whether it was not late to be looking for a financier just two months to the end of the concession, Mr Kaggwa said plans to secure the money were in advanced stages, saying; “by the time Umeme's contract ends, the money will be available”. In its half-year report to June 2024, Umeme indicated that it expected government to have determined the final buyout amount by the end of February 2025, and pay by March 30, 2025, failure of which, interest will apply, factoring in the period of delay. For instance, the report noted that cash payment of the buyout with a 5 percent return is expected within 30 days of the end of the concession, beyond which, interest of 10 percent per annum will apply if the money is not paid between 30 and 45 days after the concession termination date.
The report further noted that interest of 15 percent per annum and 20 percent will apply if the buyout is not paid between 46 and 90 and after 90 days until the buyout is paid in full, respectively, after the termination date.
On Wednesday, Energy State Minister Sidronius Okaasai Opolot told Daily Monitor that the ministries of Energy and Finance were working together to mobilise the expected buyout amount so that Umeme is paid by the end of March 2025.
“Government has to mobilise a figure that we don't know as of now and pay it to Umeme by March 2025, or agree on how it will be paid. We have to pay in this financial year [2024/25]. We are working with Ministry of Finance to mobilise the amount,” he said, noting that earlier in 2022, they had proposed a phased payment plan that would have reduced the estimated $250m (Shs922.5b) buyout by the end of the concession.
However, the proposal was rejected by Parliament pending findings of a special audit into Umeme investments, but Mr Opolot insisted that several approaches had since been taken to ensure that the buyout amount is reduced.
“The current buyout is going to be less than $250m (Shs922.5b). We anticipate this figure to be between $100m (Shs369b) and $150m (Shs553.5b) or slightly above,” he said.
Staffing UEDCL
According to Energy State Minister Opolot Okasai, government is now waiting for the audited accounts of Umeme to know the final buyout payment.
However, he noted that as they wait for the audit, government early this month initiated the handing over of assets, which will continue up to March.
For example, he said, they have already started recruitments that seek revamping of UEDCL to prepare for the takeover Umeme.
Recruiting is also considering current Umeme and UEDCL staff, especially for top management positions, a process that is being fast-tracked to enable a seamless end of the concession.