How conniving officials left UETCL Shs564 billion poorer

An investigation by Saturday Monitor has revealed possible widespread fraud at the Uganda Electricity Transmission Company Ltd (UETCL) around a string of projects, including compensation of project-affected persons (PAPs). We have independently established that between financial years 2016/2017 to 2019/2020, the energy transmitter spent an eye-watering Shs564.5billion in compensation of PAPs. 

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Documents accessed by Saturday Monitor, for one, indicate that Ms Sarah Lubowa was included as a PAP in a compensation package by consultants in the Entebbe-Mutundwe transmission line project. This was despite or in fact because of an audit establishing that many of her properties were as far as 10 metres from the edge of the way leaves corridor.

Recently, junior Lands minister, Mr Sam Mayanja, moved to block a compensation totalling Shs28.8billion to city tycoons. The compensation was ostensibly intended to pave the way for construction of a 132kV electricity transmission line from Namanve in Mukono District to Luzira, a Kampala suburb. Dr Mayanja instructed the Commissioner for Land Registration to lodge a commissioner’s caveat, adding that while titles had been issued with fictitious names such as Flavia Muntuyera and Asuman Irunga, the real owners were different. Eight of the several land titles were claims over public land that is classified as a wetland.

“I have also passed on this file to the Inspector General of Government—who has powers of investigation and ability to issue consequential orders—to thoroughly investigate this possible scam,” he said, adding that the ombudsman had been requested to halt payment in the Consent Order (High Court of Uganda Land Division Consolidated HHCS No 254, 256, 258, 263, and 271 of 2017) until the investigations are complete.

Damning internal report
A confidential dossier dated August 9, 2021 accessed by Saturday Monitor, however, paints a troubling picture. The internal report is signed by three UETCL board members (names withheld) and addressed to Finance Minister, Mr Matia Kasaija. The document accuses Mr Ucanda of maladministration. The report illuminates connivance between UETCL project staff and PAPs to defraud the energy transmitter via “bogus compensation claims.”

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Mr Ucanda is also called out for remaining a member of the Finance Committee for a dozen years and counting despite not having requisite qualifications to handle finance matters. 

“Where is impartiality, and independence to chair board meetings discussing procurement matters to which he, as chairman of the board, has deliberated on and taken a position at subcommittee level? Such a situation is akin to conflict of interest,” the report reads in part.

The three board members also cited the ongoing procurement of a contractor for the construction of the 132kV (37.3km) Mirama-Nshongezi Transmission line valued at €31.05m (Shs114 billion). This is a direct procurement (single sourcing of the contractor). 

“On the advice of the managing director, the board chairman invited the Ambassador of Sweden to Uganda and the Ambassador of Uganda to Sweden to witness the signing of the contract before the procurement was cleared by the board,” the report states.

We understand that while the board met on July 1, 2021, the representative of the Swedish Embassy in Uganda and the Ugandan Ambassador to Sweden pitched camp outside the meeting room. This as Mr Ucanda allegedly pestered the members to clear the contract. At the meeting, it was noted that the contract price of €31.05m was not subjected to negotiations as dictated by the procurement method of Direct Procurement. It was instead transferred into the contract as a lump sum contract price. 

“We discovered that the actual cost of the 37.3km of the 132kV transmission line component is €9.11m (Shs42.8b). This [contract price] puts the cost of the transmission line at $288,221(Shs1.03b) per kilometre, making the project the most expensive 132kV transmission line in UETCL history,” the report further reveals.

Connivance with PAPs
The report also detailed the connivance of UETCL staff with PAPs to force the company (essentially the government) to pay compensation for infrastructure, land, crops or trees, etc., that are either non-existent or exaggerated in value. 

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It is also alleged that UETCL staff mobilise some PAPs to reject compensation packages with the promise that the government would be willing to pay more. The increment is reportedly split between UETCL staff and PAPs. This, the report adds, has contributed to delays in project implementation as cases take long to reach a logical conclusion. 

To put face to the illegality, the report cites the Lira fish farm dilemma in which UETCL staff colluded with a PAP and her auditors to demand Shs1.2b in compensation. This was alleged not to be commensurate with the property affected by Karuma-Lira transmission line. 

When UETCL’s internal auditors investigated this case, the PAP’s auditors—Lawrie Prophets—disowned the financial statements and demands they had authored to allegedly help falsely claim outrageous compensation. Fortunately, effective oversight of the Remuneration and Technical Committee (RTC) saved the energy transmitter nearly Shs600m on this case.

On the 400kV Karuma-Kawanda Transmission line, UETCL staff colluded with a PAP to overstate trees being affected by the project. Whereas the valuation report indicated over 100 trees, an internal audit only discovered eight tree. The principal accountant in charge of projects was also allegedly involved in this duplicity. UETCL acted swiftly and managed to save at least Shs100m. 

The report also spotlighted the 220kV Mbarara-Mirama transmission line where UETCL staff connived with Ngabo Academy to make a fresh valuation in an attempt to make double payment. This was despite the fact that UETCL management had fully compensated the institution. The transaction was stopped, saving UETCL over Shs450m. 

While the board members stated that the compensation file for the 220kV Mbarara-Mirama transmission line was destroyed to frustrate investigations before internal audit could do its work, the compensation case for PIO Investments Ltd at Namanve under the Industrial parks project was one dramatic one. 

For many years, the PAP rejected compensation and delayed completion of the line connecting the Namanve South Substation to the grid. This was until a whistleblower informed the board of collusion between the PAP and UETCL staff to defraud the energy transmitter of Shs6.9b. Whereas UETCL disbursed funds to cover 22 acres of land for the Gulu Substation site at Koro-abili village in Omoro District, it was later discovered that the project team secured only 15 acres.

The document further details fraud involved in the establishment of the 220kV substation site in Fort Portal. The company’s internal audit concluded that UETCL lost over Shs430m in compensating properties situated outside the project area due to connivance by its staff. Documents indicated that over four acres of orphaned land (in excess of Shs200m), a residential house (Shs200m), and trees (Shs30m) compensated by the company did not exist inside the project area.

Litany of mistakes
In April 2021, the former Energy Ministry Permanent Secretary, Mr Robert Kasande, submitted a 288-page independent audit report to the World Bank Group in Uganda. Informed by reports of alleged fraud, fights, and conflicts of interest in the company, the Energy Ministry—with the World Bank backing—contracted Empower Consults Limited, an independent private firm, to audit the company against the allegations.

A copy of the report seen by Saturday Monitor points to critical gaps, procedural irregularities, and fraudulent conduct of key company staff (especially in the Project Implementation department).

The audit also revealed that the rules and procedures for carrying out due diligence do not exist or are not followed whereas officers in the Project Implementation department altered documentation on files and submitted “suspicious and incomplete” files for payment. The auditors also pointed to significant weaknesses in the procurement, with delays being reported in almost all stages of the procurement process. 

“[The delays have] had a ripple effect on the level of absorption of project funds. Several challenges responsible for the delay like poor quality of survey data, incidental costs not earlier planned, incomplete data submitted by Consultants, fraud, have been cited,” it stated.

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The End of Year Project Implementation Department report for 2019/2020 also revealed that UETCL has performed poorly in the way leaves acquisition process. For example, over 305 of the expected land titles received from the PAPs for the Kawanda-Masaka project were not handed over to the consultant while only 38 percent of the received land titles were processed and returned to the PAPs after processing. 

While the financial performance of the company has remained unstable with a strong performance in one year being offset by shortfalls in another, the audit report further stated that UETCL has consistently maintained an unqualified external audit report. It consequently recommended that UETCL management improve on the overall control measures in the payment process of PAPs compensation. All information on the PAP file has to be checked and verified, it added.

In an earlier interview with us, Ms Pamela Byoruganda—UETCL’s spokesperson—conceded to the existence of key issues raised by the  internal audit. She for instance admitted that the project consultants in the Grid Expansion and Reinforcement Project (GERP) project mapped a wrong route. She added that this caused a lot of issues since the wrong corridor was mapped, resulting in wrong perfect-affected persons.

“The PAPs quoted by the private auditors to be settled outside the way leaves corridor have not been paid until now and disciplinary action has been taken on staff members involved,” Ms Byoruganda said.

Limited oversight

A source in the company’s senior management team (board), who did not want to be named due to the sensitivity of the matter, said that there is currently no existing Project Information Management. This has reportedly limited oversight by top management.

“UETCL projects a surplus in generation capacity in the medium to long term, but growth in load/demand has fallen short of forecasts,” our source revealed, adding, “There are particularly grave challenges in timely delivery of transmission line projects.”

The estimated timeframe for procurement (preparation of documents to contract signing) in most project plans is four to six months. The actual duration observed during implementation, however, is anywhere between six and 24 months. 

UETCL makes annual bad debt provisions at an average of Shs25.5 billion per annum as the energy transmitter holds liability for any default of government MDAs to Umeme. Between 2014 and 2019, the company is said to have paid Shs89.6 billion in deemed energy charges—an annual average of Shs17.9 billion. Both deemed energy and bad debt provisions are non-value adding costs, acting to erode shareholder value since both are avoidable.

Experts say the reason why UETCL continues to struggle in performance is the significant deemed energy charges that the company continues to incur as detailed in the 2021 Auditor General’s report. Deemed energy refers to the electric power that is available for dispatch by an independent power producer (IPP).

We understand that due to non-existent or a weak grid infrastructure, and/or insufficient demand, the power is not dispatched. This effectively transfers the market risk from the investors to the government, especially when the power purchase agreement states so.

According to the Auditor General’s report, the company paid significant amounts relating to deemed energy purchases. 

“As a result, deemed energy costs of Shs87.7 billion, regarding 13 power purchase agreements (PPAs), were financed through the electricity tariff system, hence negatively impacting the electricity price to the final consumer,” the report states in part.

The report also pointed out that Uganda Electricity Distribution Company Limited (UEDCL) incurred Shs15.2 billion in power evacuation losses payable to UETCL for bulk power purchases. The loss resulted from power evacuation losses due to the absence of transmission lines to evacuate electricity from PA Technical, Siti 1, and Arpe Power Plants, which resulted in wheeling power over a lower capacity and weaker distribution lines operated by UEDCL. 

The latest Auditor General’s report reveals that 56 percent of the PAPs for GERP and Mputa projects were not properly identified. This resulted in a mismatch between the number of PAPs appearing on the payment files and the survey reports.

“I noted several inadequacies in the construction of the resettlement houses which include several irregular payments to contractors, discrepancies in drawing specifications, poor materials used for construction, and several defects that were not rectified,” Auditor General John Muwanga revealed.

UETCL network
UETCL’s network currently consists of 2,989.2km of high voltage lines distributed as 1,008km of 220kV; 1,946km of 132kV; 35km of 66kV and 25 substations with a transformation capacity of 2829.5 MVA.

This is, however, still low given that Uganda still has one of the lowest per capita electricity consumption in the world at 215 KWh per capita 2 per year. Sub-Saharan Africa’s average is 552Kwh.