BUSINESS

Anxiety as Umeme faces disgraceful exit

Umeme has earmarked USD $3 million (Shs11 billion) for power reliability projects in Lugazi, Jinja, Iganga and Kamuli districts

Selestino Babungi, Umeme MD speaking during a stakeholder engagement in Iganga (PHOTO /Courtesy)

Uganda’s biggest electricity distributor Umeme is facing an unceremonious exit following a fallout with the government, which accuses it of expensive rates.

Umeme, which distributes about 97 percent of all Uganda’s electricity, will have its contract with the government come to an end in March 2025.

While addressing Uganda’s Parliamentary Committee of Environment and Natural resources, Minister of State for Energy Sidronius Okaasai Opolot revealed that the government is working to cut off new investments ahead of the contract expiry, which will result into a buyout.

“To manage the concession buyout and minimize suffocating the expenditure of the Government when the Umeme concession ends, it is important that additional investments by Umeme be regulated and or halted to reduce on the final buyout amount,” Okaasai said.

Umeme’s statement

The firm which is listed at the Nairobi Securities Exchange (NSE) said in a public notice that it was yet to receive written communication from the Ugandan government.

“As disclosed in its Prospectus at the Initial Public Offering, subsequent Annual Reports and public disclosures, Umeme Limited holds a 20-year Concession from the Government of Uganda, whose natural term expires on the 30th day of March 2025. To date, this position remains unchanged,” the notice read in part.

“The Company shall, in accordance with the Listing Rules governing it, promptly issue a Public Notice once written communication is received from the Government on the future of the Umeme Concession,” the notice added.

Under the current agreement, Uganda is required to compensate the company on termination of contract regardless of the cause or who caused the termination.

The government of Uganda, according to media outlets, is considering ending the contract upon expiry, and then opting for an alternative service provider with friendlier terms.

Previously, the committee has expressed concerns over the contract which has been termed as skewed to favour the power distributor. The contract requires that the government covers all losses made by the company.

“All three agreements signed between the Government of Uganda and Umeme Ltd regarding the power distribution concession were skewed in favour if the distribution company to the detriment of the Ugandan citizenry. The common denominator across these three agreements are the scandalous provisions like the abnormal “buy-out amounts”, generous working capital allowances and compensation of Umeme Ltd for making losses among others,” the Committee noted.

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