The Uganda Government has lost approximately 129 billion shillings to the electricity distributor, UMEME in depreciation and return on asset since 2004 when the latter signed a contract to take over power distribution.
The loss has been revealed by the Auditor General’s 2017 annual report to parliament. Depreciation cost is the money that government would have billed UMEME for repair of electricity transmission infrastructure. Return on asset is the percentage of UMEME annual profit that government should have banked from the distributor for use of its infrastructure.
The Government leased electricity distribution to UMEME in 2004 for a 20-year period. This left Uganda Electricity Distribution Company Limited (UEDCL), a government company that would be distributing electricity, with a passive role of administering lease compliance.
The Auditor General’s report reveals that the depreciation cost and return on investment would amount to Uganda over 11.1 billion shillings from 2004 to 2015 and increase to 13.6 billion shillings after 2015. This totals to approximately 129 billion shillings up to date according to the report.
“From the review of the Lease Assignment Agreement (LAA) entered into by and between Uganda Electricity Distribution Company (UEDCL) and UMEME Limited on May 17, 2004, UEDCL is entitled to Depreciation and Return on Investments on the Assets assigned for use to UMEME Limited by UEDCL on the date of signing of the agreement and subsequent investments made by UEDCL,” the report reads.
The report however adds that UEDCL has neither invoiced nor received such income from the commencement of agreement up to date.
The Auditor General says this non-compliance with the Lease Assignment Agreement provisions negatively affects future investments of Uganda Electricity Distribution Company Limited.