Umeme technician carries out a connection. PHOTO/ FILE
The long-awaited Auditor General’s report on Umeme’s buyout was released yesterday, sending shockwaves among the power distributors’ shareholders and setting the stage for a potential legal showdown at the London Court of International Arbitration.
The audit determined $118m (Shs430.3 billion) as the right amount payable to Umeme, less by Shs423b the company claims.
But the concession says Umeme reserves the right to determine whether any dispute of a value of over $7m (Shs25.5b) can go to international arbitration.
The Auditor General, Mr Edward Akol, presented the audit report to the Speaker of Parliament Anita Among, detailing $118 million (Shs430.3 billion), exclusive of taxes, as the money due to Umeme, which is required to hand over management of the country’s electricity distribution network next Monday.
In simple terms, the buyout amount is the cost of undepreciated and unrecovered investments by the company through the tariff as at the date of the retransfer of the power grid, in this case, March 31.
According to the audit, the $118m is also exclusive of the $9.7m (Shs35.3b) related to work-in-progress that is running up to March 30, 2025.
The power regulator, Electricity Regulatory Authority (ERA), put Umeme’s cumulative investments at $746.798m (Shs2.7 trillion) until the end of March.
Of the Shs2.7 trillion, ERA maintains that Umeme has so far recovered $625.22m (Shs2.2 trillion), leaving a balance of $127.655m (Shs465.5b) as unrecovered investments. Hence, ERA submitted $127m (Shs463b) as the buyout amount triggering heavy protests from Umeme, which submitted claims of $234m (Shs853.1b) as the buyout amount.
In a statement published yesterday by the company’s external lawyers, Shonubi, Musoke and Co. Advocates, Umeme said upon receiving the audit report from the government, the company “will review the findings and determine the necessary course of actions, if any.”
The buyout amount, in this case $118m, is payable within 30 days, essentially by March 31. The concession, for running the country’s power grid technically ended in February, allows for a one-month retransfer period which ends on Monday.
Knowledgeable sources told this newspaper that President Museveni, who directed the non-renewal of the company’s concession in 2022, had been briefed about the matter. Sources said he had directed that the Auditor General’s report be immediately presented to Parliament and the company’s money be wired latest by Friday/Saturday.
Parliament last week unsystematically approved borrowing of $191m (Shs700b), approved by Cabinet as the draft Umeme buyout, while ignoring concerns laid out by among others, ERA, Auditor General, and the parliamentary Committee on the National Economy that scrutinises loans.
It is now apparent that the Shs700b loan approved is higher than what is actually required.
While receiving the buyout audit report yesterday morning, Ms Among said the loan was passed under the condition that the payment to Umeme would match the Auditor General’s audited figures and underscored that only the approved amount be wired out for the Umeme buyout.
“So we should be able to pay what the Auditor General is reporting, not the estimate that we were given. And as we made a disclaimer that day, that we shall only pay based on the Auditor General's report and after receiving the report, we are going to have the report laid in plenary” said Ms Among said.
Method to madness
Throughout this month, Energy ministry honchos have been in Parliament making a case for the buyout and preparing for the retransfer of the national grid from Umeme to the Uganda Electricity Distribution Company Limited (UEDCL), effective April 1.
In so doing, the Energy Minister, Ms Ruth Nankabirwa, and her technocrats joined by officials from UEDCL and ERA appeared before the committee on the National Economy to persuade MPs on the need to support the takeover process.
In all appearances before the committees, the Energy sector officials were unclear on the exact amount required for the buyout. Ms Nankabirwa at one point told the committee that she planned to engage her Finance ministry counterpart to table a loan request that would accommodate a figure that would not go below the required amount for the buyout.
Consequently, junior Finance minister Henry Musasizi last Thursday tabled a loan request of $191m (Shs700b) from Stanbic Bank to cater for the buyout during the House sitting chaired by Ms Among.
The loan is payable within five years, with a 4.7 percent margin per annum including insurance cover. Stanbic is also charging 1.2 percent or Shs8b as arrangement fees.
An hour after the audit report was shared with Ms Among, it was tabled during plenary chaired by her deputy Thomas Tayebwa, who expressly ruled against MPs debating the report and also declined to refer to the requisite committee for further scrutiny something that the Opposition objected to. This drew the ire from a cross-section of legislators.
The Auditor General Mr Edward Akol hands over the Special Audit Report on the Umeme concession to the Speaker of Parliament Ms Anita Among at Parliament on Thursday 27th March, 2025. Photo/Courtesy
“I have been here for a number of years, we have never passed a report of the Auditor General that we have not read. In fact this will be the first in modern history of Parliament that a report can be laid and MPs pass it without even seeing,” said the Shadow Finance minister Ssemujju Nganda.
While buttressing the same demand, the Leader of the Opposition in Parliament, Mr Joel Ssenyonyi, said: “Before we pass it, it would be good that we know what is in that report. Can we ascertain so that we don’t have so many run-ins on the figures.”
However, their request was rejected, with Mr Tayebwa citing the need for the government to expeditiously implement the recommendations of the report.
“What do I lose by referring you to the committee? I would love that but if we have to beat the deadline of March 31,” Mr Tayebwa told MPs.
After the plenary, MPs who were nudged to approve the report without its contents, expressed their displeasure, especially after establishing that the buyout amount is lower than the loan that was approved.
Alarm bells ringing
Mr Jim Mugunga, the Finance ministry spokesperson, told this newspaper last evening that there is “no cause for alarm” as only the reconciled amount will be paid out.
“Definitely we cannot pay over and above what the audit has indicated. The variance between the reconciled figure and the loan that the minister presented is that we needed to get ahead of time to start looking for the money to pay Umeme as the other procedures were running in the background. We are fair partners to Umeme and the agreement is such that we have to pay them within 30 days,” Mr Mugunga said.
For Umeme, the reconciled buyout amount landed as the proverbial slap in the face. Knowledgeable sources indicated that there “is a high probability” of appealing the award since the concession was largely tilted in favour of the outgoing power distributor.
According to the concession, Umeme reserves the right to determine whether any dispute of a value of over $7m (Shs25.5b) can go to international arbitration. The enforcement of awards is subject to the jurisdictions of the courts or tribunals in Uganda, and the arbitration in the UK.
The company was specifically granted carte blanche to opt for arbitration in London and would also pay any out-of-pocket expenses over and above what would have been incurred had the arbitration been held in Uganda.
In the same vein, the government negotiators of the concession waived the country’s sovereign immunity and jurisdictions over its current and future assets in any part of the world save for its aircraft, naval vessels and other defence-related assets or assets protected by the Diplomatic and Consular privileges under the 1976 Sovereign Immunities Act of the UK or the 1976 Sovereign Immunities Act of the USA or any analogous legislation, for purposes of enforcement of any award under the Arbitration Agreement.
The company also consented that jurisdiction over its current and future assets and rights be subject to any court of competent jurisdiction for any action filed by the government.
The concession encompasses several agreements, namely the LAA entered between Umeme Ltd and UEDCL on May 17, 2004, and amended in 2005, Power Sales Agreement entered on May 17, 2004, between UETCL and Umeme (amended), Support Agreement between government and Umeme, among others.
In yesterday’s notice first published in New Vision and later circulated widely on social media, Umeme said it will update “its shareholders and inform them of any proposed actions, if necessary”.
Seven years into its operation, Umeme listed on the Uganda Stock Exchange to raise financing but also inoculate itself from early termination as it was highly anticipated after back-to-back inquiries established that the government got a deal. Later in 2017 the company also listed on the Nairobi Stock Exchange.
Notable among the inquiries included the Gen Salim Saleh-led committee whose other member included Mr Muyanja Mbabaali, Mr Perez Bukumunhe, and Dr Muhammad Serunjogi, which recommended in their 2009 report titled, ‘Report on Electricity Tariff Reduction’ that government urgently undertakes forensic investigations into the concessions.
Today, the largest shareholders in the company are National Social Security Fund (NSSF) with 23.34 percent, Allan Gray (Pty) Ltd with 14.82 percent, Rock Creek Group LP with 8.9 percent, ICM Management Ltd with 8.313 percent, Coronation Asset Management (Pty) Ltd with 5.88 percent, Oddo BHF Asset Management GmbH with 4.132 percent, International Finance Corp with 2.7 percent, Conrad N. Hilton Foundation with 1.929 percent, and Vanderbilt University Office of Investments with 1.901 percent.
Bracing for unknown
Several crisis meetings were held yesterday to digest Mr Akol’s report. The ERA board convened an emergency meeting to among others digest the buyout amount and last week’s legal advisory by Deputy Attorney General Jackson Kafuuzi in which he opined that the regulator did not have authority to overly pry into the company’s investments, which would form the basis for determination of the buyout.
While the concession provides that the retransfer of the power infrastructure can only happen upon Umeme receiving the buyout amount, the incoming power distributor, UEDCL issued a statement underlining that the handover is slated for April 1.
“UEDCL assures all customers that services will not be interrupted. All electricity units, acquired before April 1, 2025 and not used by customers on their metre accounts will remain valid. Normal vending and loading for all customers will continue on MTN, Airtel and other collection platforms,” UEDCL noted.
Since early this year, large parts of the country have experienced intermittent power outages which have been attributed to among others, derelict power infrastructure of the distribution network, system overload, weather, and the poor handling of Umeme-UEDCL transition.
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.
POWER SECTOR
UEDCL is one of the three successor companies of the defunct Uganda Electricity Board (UEB), alongside Uganda Electricity Generation Company Ltd (UEGCL) and Uganda Electricity Transmission Company Ltd (UETCL), as part of the first-generation electricity 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. UEDCL assets were then leased to Umeme as one of the ways to spur private sector investments in the electricity sub-sector.
Compiled by Frederic Musisi, Damali Mukhaye, & Arthur Arnold Wadero
