Goodbye Umeme: What next after UEDCL’s takeover?

When Umeme assumed control, Uganda's power sector faced significant challenges: Electricity reach was below 10 percent, technical losses were substantial and frequent blackouts were the norm.

Fast forward to today, and the improvements are notable: Over 2.3 million households are now connected, up from under 250,000 in 2005. Power losses have decreased from 38 percent to approximately 15 percent. The distribution network has expanded from 2,500Km to over 70,000 Km of power lines and prepaid meters have granted consumers greater control over their electricity usage.

UEDCL’s move
With Umeme's departure, the pressing question is whether UEDCL can uphold and enhance these advancements.
Some of the advantages on UEDCL's side include having a closer alignment with national electrification objectives, a more extensive transmission network offering increased electricity availability and insights from Umeme's experiences, informing potential improvements.

However, challenges loom: Government-run utilities usually face efficiency obstacles and without private capital, sourcing funds for ongoing grid expansion is uncertain. This leaves lingering questions about the future of innovations such as prepaid meters and digital tracking.

Many Ugandans recall the Uganda Electricity Board (UEB) era's challenges: Regular and prolonged power outages, delayed repairs and maintenance and challenges in service delivery and infrastructure management.

Today, however, the electricity sector boasts of new power plants, an expanded grid, and a tech-savvy populace, something that demonstrates that UEDCL's starting point is markedly improved.

The transition plan involves introducing a Public-Private Partnership (PPP) after assessing Umeme's assets. The strategy is to stabilise the system under UEDCL for three years, evaluate the true value of Uganda's power distribution network, and then invite private investors to create a hybrid operational model.

“Ensuring uninterrupted and improved service delivery remains a top priority,” says Engineer Ziria Tibalwa Waako, the chief executive officer of the Electricity Regulatory Authority (ERA), who emphasizes that stringent performance benchmarks have been established for UEDCL, which include financial health indicators linked to efficiency, loss reduction, and effective revenue collection.

With UEDCL's shift from private to public management, concerns about accountability are natural. However, there are some mechanisms to ensure transparency and efficiency. The 2022 amendment to the Electricity Act introduced stringent penalties for non-compliance, targeting both corporate entities and individual leaders.

A primary concern during this transition is the potential impact on electricity tariffs. The government has committed to reducing tariffs by approximately 10 percent, aiming to alleviate the financial burden on consumers.

But this is dependent on government-backed financing, which lowers capital costs and translates to savings for end-users. Eng. Waako notes that such financing strategies are crucial for making electricity more affordable and sustainable.

Funding dilemma

Umeme’s private shareholders injected necessary capital for grid expansion. On February 25, the director, economic regulation at ERA, Geoffrey Okoboi said: “Umeme made cumulative investments in the last 20 years of about $800 million [Shs2.9 trillion] and has recovered about $680 million [Shs2.5 trillion] from these investments.”

The State Minister for Energy, Sidronius Okaasai says the Auditor General procured an independent auditor in July 2024 and assigned Grant Thorton Uganda to audit and determine the final buyout of Umeme. So far, the figure from the Auditor General’s office, seen by this paper, is “$201 million (Shs737 billion) in the latest draft.

With the shift to government control, upfront investments in transformers, network upgrades, and new connections are essential. The ambitious goal is to electrify every Ugandan household by 2030.

UEDCL plans to rely on initial funding from the Energy and Finance Ministries, aiming for self-sustainability through end-user tariffs thereafter.

Okaasai notes that the Finance Ministry is seeking $50 million (Shs183 billion) to capitalise UEDCL to enable it take over the implementation of the commitments of Umeme. Whether this approach will suffice to meet electrification targets is yet to be determined.

Financial settlement
The financial reconciliation between government and Umeme is a critical aspect of this transition. Umeme's investments in Uganda's grid have $608.6 million in capital recovery and $148 million in unrecoverable costs by the end of its concession.

The buyout amount was initially $155 million (Shs568 billion) by September 2024 but rose to $192 million (Shs704 billion) by January 2025, as per the Auditor General's report and to $201 million (Shs737 billion) in February, the Energy Ministry’s documentation shows.

The government has a 30-day window post-March 31 to settle this amount, with specified interest rates for any delays ranging from 10 to 20 percent if payment delays reach 90 days from March 31.

Workforce transition
To maintain operational continuity, over 2,300 Umeme employees, including engineers and field staff, are transitioning to UEDCL, a move that leverages existing expertise while minimising service disruptions.

“The transition is designed to be smooth, with minimal disruption, allowing consumers to experience seamless service under the new management,” Eng Waako says.

Contractors
Naturally, people have questions— Will the offices remain? Will my Yaka still work? This is what is happening.
First, those familiar Umeme offices where you have been paying bills and lodging complaints –most of them will remain, Eng Waako assures.

“However, if a UEDCL office is already nearby, then expect some reshuffling—one office might close. But customers will be directed to the nearest functional office,” she notes.

What about service continuity, especially for those waiting on new meters, poles, or grid extensions? The fear of transition delays is real—no one wants to apply for electricity today and have it installed sometime in the next century.

“If you applied under Umeme, your request won’t vanish into a bureaucratic black hole. UEDCL is taking over pending applications, materials are being transferred, and—while you might experience a slight delay (think 12-15 days instead of 10)—services should continue flowing relatively smoothly. UEDCL has already locked in 70 percent of the contracts for service providers, so materials like poles and cables won’t suddenly disappear,” she explains.

What about suppliers—the companies that have been selling Umeme wires, transformers, and all things electric? ERA’s management notes that if you have got a contract with Umeme, keep dealing with that power distributor.

“Umeme may be stepping down from distribution, but it is not disappearing—it remains a functioning company, still responsible for honouring its contracts. However, if any unresolved issues arise, suppliers will have to register them with UEDCL, and the Attorney General will step in to sort out the legal mess,” Eng Waako elaborates.

Power consumers
Then there is the all-important question of payments. You have probably wondered, "Will I still be able to pay for my Yaka using my phone? Or will I wake up on April 1, 2025 to find my usual payment options gone?"

The answer: Nothing changes. Your mobile money apps, bank payments, and vending services will continue working as they always have. MTN, Airtel, and the banks that have been working with Umeme have already been brought on board with UEDCL, and your electricity tokens will keep flowing without a hitch.

A UEDCL monopoly?
For the next three years (2025 to 2027), the Uganda Electricity Distribution Company Limited (UEDCL) will oversee the country's electricity distribution. However, this arrangement is not permanent. The government plans to introduce a Public Private Partnership (PPP) model post-2027, inviting private sector participation once UEDCL stabilises and demonstrates investment potential. This is aimed at reducing power costs, which were previously influenced by Umeme's profit-driven approach with a 20 percent return on investment, official documentation shows.

A critical challenge during this transition is maintaining accountability and transparency and the government's performance in managing the sector during this period will influence future private investment.

An effective management could attract private players back into the sector, benefiting consumers through competitive tariffs.
The government has set an ambitious target tariff of $5 cents per kilowatt-hour (kWh) and is emphasizing reliability because electricity outages disrupt businesses and daily life, making consistent service a priority.

To monitor performance, ERA is employing two key reliability metrics:
System Average Interruption Frequency Index (SAIFI): Measures how often a consumer experiences power outages annually.
System Average Interruption Duration Index (SAIDI): Measures the total duration of outages per consumer each year.
UEDCL will face financial incentives to meet these reliability targets. Failure to do so means it won't receive automatic compensation through consumer tariffs, something ERA crafted to ensure the focus remains on delivering consistent and reliable service.

Umeme's shareholders
When Umeme exits the stock exchange, it initiates a process to settle its financial obligations. This involves addressing outstanding debts first, as creditors have legal priority over shareholders. Once debts are cleared, any remaining assets are distributed among shareholders. This sequence ensures that the company meets its legal obligations before rewarding investors.

In this case, Umeme will first settle its Shs37.8 billion net debt that it told its shareholders in its 2024 half year financial results presentation and then the rest, depending on what shareholders decide on in their annual general meeting, will be distributed among themselves.

Delick Manishimwe, a research analyst with Crested Capital, advises Umeme investors to consider some opportunities here:
Dividend seekers: Explore stocks that have shown robust returns, such as Stanbic Holdings (SBU), MTN Uganda (MTNU), Quality Chemicals (QCIL), and Bank of Baroda (BOBU).

Fixed income investors: Government treasury bills and bonds offer attractive annual returns above 15 percent, providing low-risk, stable investment options.

Where will Umeme go?
Despite news that Umeme’s concession would not be renewed, its share price on the Uganda Securities Exchange (USE) has continued rising from Shs200 in 2022 to Shs415 on March 6, suggesting that investors still had confidence in Umeme as a company, potentially seeing value in its assets, brand, or future business opportunities outside its current role.

Umeme prospects
The upcoming investors’ call for Umeme's shareholders expected this month will decide how to allocate dividends from the buyout but this decision rests solely with the company’s Board.

Umeme could reinvest back in Uganda’s energy sector because the latter is currently positioning itself as a prime investment destination on the continent. The sector boasts a mature legal and regulatory framework, further strengthened by recent reforms such as the Electricity (Amendment) Act of 2022.

This legislation effectively dismantling the previous single-buyer model. The transmission sector, for example, is experiencing increased investment, with independent private investors receiving licenses to enhance the transmission network.
This development is crucial for extending the transmission backbone, aiming for nationwide distribution without solely relying on government funding.

Plus, the introduction of net metering has transformed consumers into "prosumers," enabling them to produce and consume electricity. By connecting high-capacity solar installations to the grid, for example, prosumers can manage energy costs and contribute to national grid. It is a win-win situation—like getting paid to exercise because your treadmill generates electricity!

ERA has reaffirmed its commitment to transparency and efficiency as Uganda's electricity sector undergoes significant reforms. Recent legal, policy, and regulatory reforms aim to improve service delivery and achieve sustainability in the energy sector.
However, challenges such as high returns on private investments and limited private interest in rural electrification persist, prompting ongoing efforts to address these issues.