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MPs urge government to terminate Umeme’s power contract

President Museveni accuses UMEME of being a price distorter (PHOTO /Courtesy)

KAMPALA — Pressure is mounting on government to terminate its contract with Umeme Ltd, the country’s sole power distributor.

Umeme is majority-owned by Actis, a London-based private equity investor in emerging markets with around $8 billion in assets under management.

The MPs accuse Umeme of exaggerating its investments in the sector and failing to reduce power losses, the difference between kilowatt-hours generated and those distributed to end-users due to problems such as inefficiency.

UG Standard understands that the MPs are already hatching a plan to introduce a motion urging Government to terminate the contract with Umeme

Bukkoli Central MP Solomon Silwanyi was this week quoted by the authoritative online news, the LiveChatroom confirming he was leading the protest against the power distributor.

The MPs say the concession terms were heavily skewed in Umeme’s favour in the contract, which was negotiated without the involvement of Uganda’s attorney general.

A recent report said Uganda had committed to a “raw deal”, with what it described as “scandalous provisions,” including generous working capital allowances and compensation of Umeme for losses.

Umeme previously said it invested $130 million to revamp the distribution infrastructure between 2005 and 2012, but the lawmakers said its spending claims were unfounded.

“This exaggerated level of investment is aimed at upping Umeme’s ‘buyout amount’ in case of early or natural termination of the concession,” the report said.

Umeme entered the industry after the government decided to end a state monopoly in energy and turn it over to private players, who were expected to attract fresh investment and improve its efficiency.

Although the company has promised to rapidly expand the grid, cut losses, reduce power failures and stabilize the cost of power, widespread complaints have persisted about high tariffs, outages and faulty billing.

With the matter taking a new twist, Members of Parliament this week blocked Energy Minister Ruth Nankabirwa from presenting a government statement on the performance of UMEME, insisting that it would be a wasted effort because the House already recommended termination of the contract with the power distribution company.

Nankabirwa was scheduled to present a statement on the general overview of the performance of UMEME in the plenary session chaired by the Speaker of Parliament Jacob Oulannyah.

However, Kira Municipality MP Ibrahim Ssemujju Nganda objected, saying that it was procedurally wrong to discuss a matter which had been concluded.

Deputy Attorney General, Jackson Kafuuzi also told parliament that the concession of UMEME runs up to 2025 and that terminating their contract would create a liability of close to USD 600 million.

Speaker Jacob Oulanyah closed discussions on the matter saying that the item currently stands withdrawn from the order paper pending consultations.

President Museveni publicly accused Umeme of being a key “distorter” in the energy supply chain, stifling government attempts to bring down the cost of power to the end user.

Museveni says the generation, transmission and distribution cost account for 8 percent and 11 percent of electricity supply cost in Ethiopia and Kenya.

That means UMEME’s distribution cost quadruple and triple Ethiopia and Kenya transmission and distribution costs respectively.

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