By Andrew Irumba
Kampala: If you go to any Umeme offices around the country and you find workers wearing huge smiles, do not wonder why. Happiness is all over Umeme offices across Uganda after government agreeing to extent the power distributor’s concession. Finance Minister, Matia Kasaija revealed this a few days ago, when he said that the government of Uganda will extend Umeme’s 20-year power distribution concession beyond 2025. Kasaija revealed this while reading the budget for the 2019/2020 Financial Year and noted that fresh negotiations with Umeme will be held to ensure continued investment in the national grid. Kasaija, who was speaking at Serena Hotel said that “With respect to power distribution, the distribution concession with Umeme Limited will be renegotiated and extended to ensure further investment and to lower electricity tariffs,”
In November 2018, President Yoweri Museveni wrote to the Minister of Energy minister, Ms Irene Muloni, directing her to start the negotiations. However, Kasaija’s message is likely to prompt prospective investors who were procrastinating over buying the company’s shares to start negotiations. The Renewal of the concession puts Umeme in a better position to get long term debt finance to invest into the network and ensure that electricity reaches most parts of Uganda.
For the lenders, both local and international, it gives them the confidence to extend even more credit facilities to Umeme, now that Umeme will be here over the long haul. It will not be lost on the International Finance Corporation board of directors during its meeting on July 15. The board will take a decision on a $70 million (Shs260 billion) loan management has earmarked for Umeme to invest in the grid.
The money will be for capital expenditure on, among other items, increasing the number of connections to the grid (currently, 1.4 million customers are connected to the grid) to uptake the increased power being generation. Additionally, it will go towards investments in safety and the reduction of commercial energy losses (power theft). In total, according to Umeme’s 2018 Annual Report, the company will spend $450 million (Shs1.6 trillion) on expanding the distribution grid between 2019 and 2025. Part of that will be borrowed from lenders. Following Museveni’s November letter, the government constituted a team that will represent it during the discussions. The team is comprised of bureaucrats from the Energy and the Finance ministries, the Attorney General’s Chambers as well as officials from the Uganda Electricity Distribution Company Limited (UEDCL), Uganda Electricity Transmission Company Limited (UETCL), the Electricity Regulatory Authority (ERA). UEDCL is represented because it is the government agency that in 2005 leased the distribution network to Umeme. UETCL is represented because it is the sole buyer of bulk power from the generation plants and seller to the distribution companies. ERA is the sector’s ombudsman; the Attorney General is the legal adviser to the government while the Finance ministry is on board because UEDCL and UETCL fall under it. Umeme, too, has constituted a team that will represent it in the renegotiations.