Left: Energy Minister Ruth Nankabirwa, Right: Chief Executive Officer of the Electricity Regulatory Authority (ERA), Ziria Tibalwa
With less than 12 days remaining until the power distribution concession expires, the Ugandan government is in a frantic race to secure $191 million (Shs695.9 billion) for the Umeme buyout and $50 million (Shs182.1 billion) for Uganda Electricity Distribution Company Ltd’s (UEDCL) initial investment.
As officials from the Electricity Regulatory Authority (ERA) admitted to the government’s unreadiness in taking over the power distribution, line Minister Ruth Nankabirwa also said the buyout could increase from what had been anticipated.
Effective April 1, the UEDCL will be in charge of distributing power across the country after Umeme’s 20-year concession ends naturally. The government last year informed Umeme Ltd that their concession, which started on March 1, 2005, will not be renewed upon expiry on March 31 this year.
“The minister in the letter asked us to start preparing to hand over to the government, which we are doing,” Mr Peter Kauju, the Umeme spokesperson, told Daily Monitor yesterday. To further allay people’s fears, the ministry yesterday said that the approval of the buyout amount by Parliament is in the advanced stages.
Assurance
“The buyout amount is a claim by Umeme for capital investments made and not recovered by the end of the concession. This further confirms the government’s unwavering commitment to honouring its contractual obligations while ensuring a smooth transition in the electricity distribution sector,” the ministry said in a statement.
The Auditor General, Mr Edward Akol, is expected to release the final report on March 28 detailing the exact figure the government will pay for the Umeme buyout.
Parliament on March 12 approved a Shs4.2 trillion Supplementary Budget of which Shs725.42 billion will go towards the financing of the Umeme buyout. The Cabinet in February approved the $191m basing it on the AG’s recent reports that indicated Umeme’s investments had grown. The Daily Monitor on March 6 reported that Umeme, according to the documents the newspaper saw, was eyeing $231.7m (Shs844.2b) as the buyout amount.
This amount, the newspaper reported, was exclusive of applicable taxes, and computed based on the net accumulated capital investments of the Lease and Assignment Agreement. Mr Kauju yesterday declined to talk about the buyout amount and simply said they are working towards handing it over as the government asked them.
According to Daily Monitor’s March 6 report, Umeme in the documents reviewed, estimated that they have invested in the region of $832.1m (Shs3 trillion), of which $603m (Shs2.19 trillion) is capital recoverable at the end of the concession and $223m (Shs812.5b) as uncoverable investments when the concession runs out.
Energy Minister Ruth Nankabirwa on Tuesday told Parliament’s Committee on Natural Resources that the final AG’s audit could push the Umeme buyout to $195m (Shs710.5b) or even $200m (Shs728.7b) because the firm is still investing. “For example on Friday, there was a power problem at the Ggaba substation and Umeme was on site installing a new transformer, which is bigger than the old one.
So there are those interventions Umeme has to bear till the end,” she said. Relatedly, the Chief Executive Officer of the Electricity Regulatory Authority (ERA), Ziria Tibalwa, on Tuesday told legislators on the National Economy Committee that Umeme is investing at the last minute because they operate a live network.
“For example, if today Parliament is off and the transformer is blown, do you wait for April 2025 when UEDCL is here? I don’t know whether it is a coincidence, but in the last month, we have had serious outages,” she said. “We had vandalism, the whole of Western Uganda went off, and we had two cables that gave way on Entebbe.
If we were to say that in the last month they (Umeme) have done nothing, we would be stuck,” she added. The distribution network operated by Umeme comprises, among others, 60 substations, 15 switch stations, 32,794 low voltage lines, 18, 756km of medium voltage lines, and 19,319 distribution transformers. Added to the mix are non-network assets such as 22 office buildings, 10 Very High Frequency (VHF) sites, and eight pieces of open land.
UEDCL initial investment
In the same meeting with the MPs on the National Economy Committee, Tibalwa cast doubt on the government’s readiness to take over the distribution sub-sector, which she blamed on the delayed securing of the $50m (182.1b) initial investment amount. “On our side, we aren’t even ready with the $50 million for UEDCL to start, let alone, the concession agreement wouldn’t allow UEDCL to step in,” she said.
Government learning process
“This is a learning process for the government that as we continue engaging in new contracts, we need to find ways of flexibility and escape routes where UEDCL should have started working hand in hand with Umeme, where UEDCL would invest long before the concession agreement,” she said. But the ministry in a statement yesterday said that its Finance counterpart is in the advanced stages of securing the required $50 million through internal borrowing to support UEDCL capital investments. “By the end of next week, these funds will be available to ensure that UEDCL is financially equipped to improve the quality of service,” the statement reads in part.
UEDCL PLEDGE
In an interview with this newspaper on the sidelines of the event where UEDCL received two licences of distribution and sales from ERA on December 31, the company managing director, Mr Paul Mwesigwa, announced the agency’s annual $70m (Shs255b) investment for the next 25 years. “We have so far secured half of that money in our bank account. We are currently doing procurement of materials and come April 1, our inventories will be full. We have experience in distributing power because we are already distributing it in hardto-reach areas such as Karamoja, Moyo, Adjumani, borders of Kisoro, and Bunagana,” he said.
