Umeme confirms 2025 exit from Uganda

Umeme technician carries out a connection. The power distribution company confirmed Thursday that they had received a notice from government that their 20-year concession will not be renewed after expiry in 2025. PHOTO/ FILE  

What you need to know:

  • Uganda Electricity Distribution Company Limited (UEDCL) is the government entity on whose behalf Umeme Ltd runs the electricity distribution infrastructure.
  • Umeme’s investment and turnover have grown over the years. In August, for example, it revealed that its half-year pretax profit by June had jumped to 33 percent. This followed a spike in energy sales and a drop in its operational costs.
  • Umeme in its 2021 financial year report noted that in the event of a natural termination of concession and subject to, and in conjunction with, the retransfer of the Distribution System to UEDCL or its designee, government will pay to the Company immediately available funds, the Buy Out Amount equalling 105 percent of the cost of modifications, undepreciated and unrecovered through the tariff as of the date of the retransfer.

Power distribution company Umeme confirmed on Thursday that they will exit Uganda in 2025 after they received notice from government that their 20-year concession will not be renewed upon expiry.
“The concession is enshrined in several binding Concession Agreements. The Company has formally received written communication from the Government of the Republic of Uganda, notifying it that the current Concession will continue to run until its natural end in March, 2025 as stipulated in the Concession Agreements after which, there will be no renewal,” the power distributor said in the Thursday morning statement.
Umeme further noted that it remains committed to performing its obligations as per the existing Concession Agreements and will continue to operate and maintain the electricity distribution system in line with prudent utility practice to ensure continued service delivery through to the end of the concession.

Mr Solomon Muyita, the communications manager at the Energy Ministry said government is planning to name a multi-sectoral committee that shall oversee the auditing process of Umeme's investments and assets. 
Part of the reasons for government to end the Umeme concession have been high electricity tariffs. 
"Government decided to bundle electricity agencies which are is the context of forming one company that will provide cheaper electricity," Mr Muyita said. 
According to him, Umeme will be solely responsible in dealing with its public shareholders whose shares are held on the Uganda Securities Exchange.

Umeme’s investments
Umeme’s investment and turnover have grown over the years. In August, for example, it revealed that its half-year pretax profit by June had jumped to 33 percent. This followed a spike in energy sales and a drop in its operational costs.
For the first six months of this year ending June 30, Umeme’s pretax profits rose to Shs92.8 billion compared to Shs69.6 billion recorded in the same period last year.
It also said the steep rise in profits was largely on account of higher electricity sales that rose nine percent year-on-year and a 6.5 percent drop in operating costs driven by a reorganisation of the business and efficiency gains from investment in technology.

Umeme's corporate affairs manager, Mr Peter Kauju, last month noted that the company had so far made an investment of $765 million (Shs2.8 trillion) through different financing channels.
Enters UEDL

Uganda Electricity Distribution Company Limited (UEDCL) is the government entity on whose behalf Umeme Ltd runs the electricity distribution infrastructure.
Mr Paul Mwesigwa, the UEDCL managing director, told this publication last month that the company has built a specialised capacity to manage electricity distribution. He adds that when Umeme’s contract with the government expires in 2025, “we are ready and prepared to manage the activities because, currently, we monitor on behalf of the government the distribution network investment run by Umeme.”
Mr Mwesigwa said UEDCL’s technical department, headed by engineers with experience in “managing network activities and planning for the network including connectivity across the country”, can hold the fort.

Mr Mwesigwa believes it does. He said that UEDCL has for a decade been running an electricity distribution business in areas where Umeme did not reach. He also said the company has since 2013 successfully operated in more than 74 districts that Umeme found not to be commercially viable such as Kyenjojo, Kagadi, Moyo, Adjumani, Nakapiripirit, Moroto, etc.
While UEDCL, currently runs its business with at least 380 manpower base, Mr Mwesigwa says it would absorb 90 percent Umeme’s manpower if the latter leaves.
“When the concession comes to an end, we expect to have another recruitment to expand,” he said, adding: “We are talking about taking over all the Umeme staff, and the office facilities that Umeme is operating.”

Umeme in its 2021 financial year report noted that in the event of a natural termination of concession and subject to, and in conjunction with, the retransfer of the Distribution System to UEDCL or its designee, government will pay to the Company immediately available funds, the Buy Out Amount equalling 105 percent of the cost of modifications, undepreciated and unrecovered through the tariff as of the date of the retransfer.

In 2013, the government commissioned the Rural Electrification Programme, under the Ministry of Energy, to extend electrical power to hard-to-reach areas. UEDCL was then assigned the responsibility to develop and manage the network.


 

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