Ugandan authorities have been racing against time to ensure that the exit of Umeme does not disrupt the country’s power supply.
Parliament on Friday approved a government request to borrow the $190 million from Stanbic Bank Uganda needed to pay off the utility for its unrecovered investments before its 20-year concession expires on March 31.
A further $50 million is needed as an initial investment for the Uganda Electricity Distribution Company Ltd (UEDCL) to take over operations.
This financial burden follows the government’s decision not to renew the concession signed on March 1, 2005. However, the final payout remains uncertain as the amount could fluctuate based on the Auditor-General’s findings before the funds are disbursed.
According to Geoffrey Okoboi, the director of economic regulation at the Electricity Regulatory Authority (ERA), Umeme has made cumulative investments of about $800 million over the past two decades, earning about $680 million in return.
The company has invoiced Uganda for $223 million in unrecovered costs, including ongoing expenditures such as repairs and new installations to serve additional customers.
The Energy ministry says it is committed to honouring the contract. Ziria Tibalwa, chief executive officer of the ERA, cautioned that the final payout could be higher due to ongoing maintenance and vandalism. She cited a recent incident where extensive damage in western Uganda and Entebbe led to power outages.
“If we were to say, in the last month Umeme did nothing, we would be stuck,” she told the Parliamentary Committee on National Economy.
Speculative investors
The looming transition has also unsettled investors. Umeme’s shares have remained stagnant on both the Uganda Securities Exchange (USE) and the Nairobi Securities Exchange (NSE), where it is cross-listed, with prices trading in a tight range.
The lack of movement has frustrated speculative investors hoping to capitalise on the buyout.
On the USE, the stock price has hovered at Ush415 ($0.113) per share for the past 90 days leading up to March 19, 2025, down slightly from Ush420 ($0.114) a year earlier.
Similarly, on the NSE, the stock has traded between Ksh16 ($0.123) and Ksh17.60 ($0.13) per share, failing to generate the anticipated speculative gains.
Trading data shows that a total volume of 5.55 million shares worth Ush2.3 billion ($682,099), was exchanged during the period, a stark contrast to the Ush11.4 billion ($3 million) traded between October and December 2024.
“Essentially, the market is waiting for an announcement of the buyout amount,” said Grace Semakula, CEO of Standard Bank Group Securities.
According to Martin Erone, an energy and infrastructure lawyer, the transition process has been complicated by a contractual clause that requires Umeme to continue investing in power distribution until the very end of its concession. This has caused the buyout figure to keep rising as Umeme injects more capital.
While Umeme initially submitted a $234 million claim, the Energy ministry countered with $191 million, ERA revised it down to $127.7 million, and the Auditor-General’s preliminary estimate landed at $201 million.
“We request a few more days, not beyond March 28, 2025, to finalise our review. It is better to pay interest on the loan knowing it is based on precise figures,” Joseph Hirya, director of audit at the Office of the Auditor-General had told the parliamentary committee, requesting for a delay in the loan approval.
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