190M Dollar Loan for Umeme Buyout Puzzles MPs

The Parliamentary National Economy Committee has questioned the government’s request for a $190 million loan to finance the buyout of power distributor Umeme. 

Legislators raised concerns that the loan request was brought for consideration just days before the lease agreement between the government and Umeme expires on March 1, 2025.

While appearing before the committee, Henry Musasizi, the State Minister for Finance – General Duties, stated that the buyout loan would be provided by Stanbic Bank. “The funding is intended to finance the compensation of Umeme Limited for the unrecovered capital investments under the lease and assignment agreement,” he said.   

Robert Migadde, the Deputy Chairperson of the Committee, described the timeline for the loan as unrealistic, citing penalties in the form of interest to Umeme if the government delays paying the buyout.  “The amount to be borrowed is an estimate and I do not know if we have the Auditor General’s report confirming this amount of money. The timelines we are working with cannot allow us to effectively scrutinize this information,” said Migadde.  

Stella Atyang, the Moroto Woman MP called for adequate assessment of the exact amount needed for the loan to facilitate the buyout.  Moses Ogwal, the Dokolo North MP questioned the government’s hurried move to pay off UMEME adding that many other companies have outstanding debts.   

“The private sector has so many debts with government of over 3 trillion Shillings. What is special about this debt? Are you encouraging the private sector to also take the government to court and bring you to this level,” he asked.  

James Baba, the Koboko County MP, questioned the compensation to UMEME saying the company ought to have made profits over the last 20 years of its operations.  “Why are things being hurried when we have not fully comprehended the nature of this buyout? We knew that UMEME’s contract was going to expire so why are we doing it at the last minute?” Baba asked.  

Denis Oguzu Lee, the Maracha County said that UMEME should have recovered its expenses through the tariffs it charges.  “The government has been pursuing a feed-in tariff policy where entities like UMEME should have recovered the expenditures from the tariffs and this has been approved by the Electricity Regulatory Authority (ERA) from time to time,” he said.

Sidronius Okaasai, the State Minister for Energy, clarified that the Auditor General procured an independent auditor in July 2024 and assigned Grant Thorton Uganda to audit and determine the final buyout of Umeme.  “Following further submission of the required documentation, the draft buyout amount as of 24th February 2025 is now US

Dollars 201 million as reflected in the latest report received by the office of the Auditor General,” Okaasai said.  

He added that the Ministry of Finance is seeking US Dollars 50 million to capitalize Uganda Electricity Distribution Company Limited (UEDCL) to enable it to take over the implementation of the commitments of UMEME.  Okaasai also clarified that the due date for the buyout is 31st March 2025 after which the penalties for delay in paying the buyout, will apply.  

Geoffrey Okoboi, the Economic Regulation Director at the Electricity Regulatory Authority (ERA), said that UMEME invested in substations with a minimum recovery period of 20 years which he said, cannot be achieved with the current deadline of the concession agreement.

“UMEME has made cumulative investments in the last 20 years of about US Dollars 800 million and has recovered about US Dollars 680 million from these investments. What is remaining is the amount that is to be paid. This is because a company cannot recover the full amount of its investments at once,” Okoboi added.

The government in January officially took over the power distribution and sales from UMEME which had been privatized for 20 years. This was after Uganda Electricity Distribution Company Limited (UEDCL) received two licenses, including that for distribution and sales, from ERA, marking an end of UMEME Limited’s concession.