Umeme exit is already adversely affecting Ugandans
Government is expected to pay electricity distribution company, Umeme US$215M (approximately Shs800bn) upon its exit as of December 2022.
The revelation was made by Irene Bateebe, Permanent Secretary Ministry of Energy and Mineral Development while appearing before Parliament’s Committee on Environment and Natural Resources to present the Ministry’s 2023/2024 ministerial policy statement.
This followed a concern raised by Polycarp Ogwal (Agule County) on why UMEME has reduced on its investment, noting that some people have been taken off the electricity grid due to malfunctioned electricity transformers, and despite pleas for replacement, UMEME has paid a deaf ear, with the legislator arguing that Ugandans are already suffering before Umeme’s exit.
“Ugandans have started suffering, as we talk right now, Umeme says they aren’t allowed to invest and they aren’t giving transformers that blow off because they aren’t allowed to invest,” said Ogwal.
Further questions were posed by Eddie Kwizera (Bukimbiri County) who tasked the Ministry of Energy to reveal how much money Government will pay in buyout for Umeme asking, “Supposing UMEME is going today, what amount could we pay?”
Bateebe said, “UMEME is investing but because they know they are exiting, they are investing at a reduced rate compared to previously. The way the concession agreement works, at an opportune time before the concession ends, the Auditor General will give an opinion on what is the buyout amount for UMEME, the way we did for ESKOM. The Electricity Regulatory Authority approves the investments; we will provide the figure but the reporting we have by the end of December 2022 was about US$215M.”
According to the Ministry of Energy, for Uganda Electricity Distribution Company Limited (UEDCL) to build the capacity to the level of UMEME, Government would need to capitalize UEDCL to a tune of Shs242Bn.
But in order to reduce the buyout amount, Government has unveiled a plan with the consent of UMEME to invest US$158m over a period of three years starting with 2022/2023 that will require US$68m, while in 2023/2024 Government will require to invest US$54.4M and lastly US$40.3m in 2024/2025 in order to bring down Umeme’s buyout amount to US$7m.
She said: “Electricity Regulatory Authority (ERA) has a recovery system where they recover some of this investment through the tariff so we are computing and it is an ongoing. So the idea is that if we are able to attract concessional funding which discussion we are having with Ministry of Finance through UEDCL and therefore you are in a gradual manner reducing on Umeme’s investment come 2025 and therefore, the ultimate amount that would be recovered is manageable.”
Kwizera however expressed fears over the capacity of the Office of the Auditor general to conduct an audit into Umeme’s investment remarking, “Our worry is, the Auditor General may not have capacity, we want the ministry to say there will be an expert to evaluate what UMEME has invested otherwise, there will be a conflict, you may talk about US$215M, and UMEME comes with about US$500m.”
However, Bateebe said that should the auditor general determine that they need some expertise, they will engage a third party, the way they have done for the ESKOM concession, noting that it’s not a matter the Ministry of Energy can pronounce itself on as that is the discretion of the Auditor General.
Upon the end of UMEME’s concession in 2025, Government intends to form one electricity company named Uganda National Electricity Company (UNEC), an indication to return to the monopoly of Uganda Electricity Board that was split up in 1999 to form; Electricity Regulatory Authority, Uganda Electricity Distribution Company, Uganda Electricity Transmission Company.
The development comes at the time Parliament has just approved Shs45.7Bn for the buyout of ESKOM by the Ministry of Energy.
