Umeme staff with some of the electric wires that they confiscated after an operation to curb electricity theft in Nateete, Kampala, last year. Photos | File
Since late-2022 when the government directed Umeme to phasedown investments in the distribution network to keep the buyout amount, when the latter’s concession comes to natural end of this month, in check, large swathes of the country have been experiencing intermittent power supply.
The power outages, according to varying accounts, have been occasioned by, among others, breakdown or slow replacement of transformers or interruption of powerlines owing to weather conditions and other factors. Between 2022 and the last months of this year, the frequency of these outages has surged leading some critics to insinuate ‘sabotage’or ‘deliberate creation of a crisis.’
Nonetheless, the Auditor General’s recent report details that Umeme “continuously made investments” in the network increasing the financial liability which the government is supposed to pay in accordance with Section 12 of the Support Agreement of the concession entered in 2004 starting March 1, 2005 running until end of March this year.
One thing certain is that the government, through the Uganda Electricity Distribution Company Ltd (UEDCL), is gearing to take over operations of the distribution network effective April 1.
Several meetings have been held by the joint technical committee at Amber House, seat of the Energy ministry, while several officials are scheming how to cash in, peddling joint ventures and other schemes, during the transition period.
The distribution network operated by Umeme comprises, among others, 60 substations, 15 switch stations,32,794 of low voltage lines, 18, 756km of medium voltage lines, and 19, 319 distribution transformers. Add to the mix non-network assets such as 22 office buildings, ten Very High Frequency (VHF) sites, and eight pieces of open land.
When Umeme leased UEDCL’s assets in 2005, there was more land in the handover file, a lot of which has been stripped or encroached on, like land belonging to several other parastatals built by the Milton Obote and Idi Amin governments.
But before the Umeme-UEDCL handover ceremony, behind closed doors is the rope pulling between the Ministry of Energy and Umeme executives about the specificity of the buyout amount.
The Ministry of Energy nearly one month ago submitted to Cabinet a request to borrow $191m (Shs700b) as buyout amount to Umeme from Stanbic Bank. The loan is payable within five years, with a 4.7 percent margin per annum including insurance cover. Stanbic is also charging a 1.2 percent or Shs8b as arrangement fees.
According to inside sources, the power regulator, Electricity Regulatory Authority (ERA), which has been long accused of sleeping on the job and being in cahoots with Umeme, had initially quoted $155.5m (Shs567b) as the buyout amount, excluding applicable taxes.
Umeme annually submits an investment plan to ERA, which reviews, approves or disallows the plan. UEDCL, the owner of the distribution asset, is required to keep a keen eye on these capital expenditures. Umeme then recoups its investments from sale of power to the consumers. But owing to the need to keep the end-user tariff reasonably low, ERA staggers this recouping over a long-term period.
Moving targets
According to the September 2024 computations by ERA, gross investments stood at $756.7m (Shs2.7 trillion), of which $608.6m (Shs2.2 trillion) was capital recovery as at end of the concession and $148.m (Shs540b) as unrecoverable costs as the end of the concessions, yielding a buy-out amount of $155m.
However, sources intimated that the $155m elicited harsh scrutiny from the Ministry of Energy as it included several last-minute investments, including the recent upgrading of the Yaka meter system.
Consequently, ERA has since revised the buyout amount to $127.7m(Shs465b) as at the end of the concession, sparking protests from Umeme, which has expressed its displeasure to both the ministry and Solicitor General.
Umeme, according to ERA’s revised estimates between 2005 and 2024, has invested $735m (Shs2.6 trillion) and an additional $10m (Shs36b) between January and March 2025, bring total gross investments to $746m, of which $625m (Shs2.2 trillion) is capital recoverable and $121m ($443b) is unrecovered investments by the end of concession.
The regulator further provided a detailed breakdown of its estimates, to justify the $127m buyout amount. Asked why they are tabling conflicting figures, ERA’s head of communications, Mr Julius Wandera, defended that verification of Umeme’s investments is an ongoing exercise until they bow out.
“Even as I write,there are ongoing projects. Their licence requires them to do so. ERA has been approving and retiring their investments on an annual basis. Otherwise, the current estimates would be as high as $500m. So, the regulator is very alive to the buyout because the regulator is the best-placed actor on that subject,”Mr Wandera said.
He added: “The figures you quote above are all estimates except for Cabinet approval. They are estimates because the Auditor General is still auditing as I write this text. The Cabinet approval of $191m was based on the Office of Auditor General (OAG) draft position in January, but again, OAG is still auditing. The last figure on the buyout, I can say on authority that it shall be out on March 31.”
On the other hand, documents seenby this newspaper detail Umeme eyeing $234.7m (Shs856b) as the buy-out amount, exclusive of applicable taxes, and computed based on the Net Ac- cumulated Capital Investments of the Lease and Assignment Agreement.
As per to Umeme’s estimation, they have invested in the region of $832.1m (Shs3 trillion), of which $603m (Shs2.2trillion as capital recoverable at the end of the concession and $223m (Shs815b) as uncoverable investments when the concession runouts.
According to documents, Umeme between September 2021 and October 2025, submitted numerous investments appeals to ERA, seeking reconsideration of how much they have invested between 2009 and 2022.
Spanner in works
Umeme’s head of communications, Mr Peter Kaujju, deflected our inquiries pending the final Auditor General’s audit.
“The mandate to ascertain the buyout amount rests with the Auditor General. They are moving towards the closing but of the process and then a final number will be communicated,” Mr Kaujju said.
On the other hand, the Auditor General has detailed $201m (Shs736b) as the buyout amount due to Umeme, exclusive of applicable taxes but inclusive of $9.7m (Shs35b) related to work-in-progress that is running until end of this month, in a draft audit to concerned officials.
The OAG’s also recommends, among others, that Umeme avoids new con- tracts or lines affecting the distribution system or rights to be transferred, provide UEDCL with various lists and documentation, including employee details, licences, contracts, unconnected customers, spare parts inventory, warranties and insurance policies, transfer or assign benefits of contracts, warran ties, insurance policies, books, records, inventory, and customer accounts receivables to UEDCL, and submits a report to ERA operations, services, and compliance with licence conditions.
For long spells, there have been unanswered queries regarding the Escrow account held in Citi Bank in London where Umeme has been funneling money from 2005, as per the concession, to cushion Umeme in case of eventualities. The management and withdrawals from the account has for long spells elicited suspicion.
However, the findings reveals that there were no further deposits made by Umeme after 2013.
“The last significant activity on the account occurred on June 17, 2013, when Umeme executed Bulk Supply Tariffs (BST) offsets against the outstanding balances of the government, reducing the account balance to nearly zero. Since then, no other transactions have taken place, except for periodic deductions of agent fees and occasional deposits by UEDCL specifically intended to cover Escrow Agent fees,” the audit notes.
Clause 12 of the Support Agreement of the concession provides that if the concession runs its natural course, as in this case, the buyout amount due to Umeme shall equal 105 percent of the cost of the modifications that undepreciated and unrecovered by Umeme through the prevailing tariff at the time of the takeover.
The agreement also stipulates that the government shall pay the money not less than 30 days from March 31. Upon receipt of its money, meme shall re-transfer the distribution network back to UEDCL.
In the event that of default by government, the buyout amount shall accrue, among others,10 percent for the period from the period of 30 days until 45 days after March 31, 15 percent for the period of 46 days until 90 days March 31, and 20 percent interest from for the period of 90 days from March 31.
WHAT NEXT?
Since President Museveni first doubled down on the government taking back the distribution network from Umeme, a joint technical committee comprising officials from various MDAs, was established to chart a roadmap for the transition expected in three weeks’ time.
The proposal floated to keep Umeme around as the transition is being managed was flatly rejected, to people familiar with the matter. However, the recent surge in power outages that have flabbergasted many electricity users have left many wondering and others worried of sliding back to the days of Uganda Electricity Board (UEB).
To reform the power sector, UEB was split into successor companies; UEDCL, sub-sector reforms — the Power Sector Restructuring and Privatisation Strategy supported by the World Bank and the Norwegian Water Resources and Energy Directorate—in 1999.
At the time of unbundling UEB, about 180,000 households were connected to the grid, representing 12 percent of electricity access. Today, there are slightly two million households connected, out of the nine million households in the country, according to the Uganda Bureau of Statistics (Ubos).
For Umeme, which in October 2012 listed on the Uganda Securities Exchange to raise capital, the company is left with few options; delisting and transitioning to a private company, winding up, or transitioning into a company doing other business.
