By Our Reporter
Government through the Ministry of Energy and Mineral has reaffirmed plans not to renew the concession of electricity distribution company UMEME and instead form one company that will manage the electricity sector in Uganda.
Government’s position was confirmed by Opolot Okaasai, State Minister for Energy while appearing before Parliament’s Natural Resources and Environment Committee that had summoned the Ministry of Energy to defend a proposal by Government to borrow up to special drawing rights 237.7 equivalent to US$331.5 million and receive a grant of up to SDR 198.2 million equivalent to US$276.5 million about (Shs1.262Trn) from the International Development Association of the World Bank Group to finance the electricity access scale up project.
During the meeting, Emely Kugonza (Buyanja East) tasked the Ministry of Energy to explain what backup plan Government has in managing the electricity sector after the departure of UMEME in 2025 when their concession would come to an end.
“UMEME concession will be ending in 2025 and we are talking about a loan to do with distribution and of course we are expanding the grid, what plans do we have as a Ministry to bridge up when Umeme exits? How are we going to cover up that gap?” Kugonza asked.
In response, the Minister revealed that Cabinet had complied with recommendations of Parliament not to renew UMEME’s concession and plans are underway to form one company to manage the electricity sector in Uganda.
“As a country, cabinet made a decision in line with what Parliamentarians have been talking about UMEME; that Umeme concession must come to an end and Cabinet has already approved termination of Umeme’s concession at the end of the concession period in 2025 and we have actually put in measures to cover the gap and the gap is going to be covered using our own company UEDCL after the creation of the Uganda National Electricity Company (UNEC) which we discussed in the Act,” said Minister Okaasai.
When reports of Government refusing the renew UMEME’s concession hit the public last week, the electricity company issued a statement informing its shareholders that Government hasn’t yet formally informed UMEME of its latest position on the concession talks writing.
“The company shall in accordance with the Listing Rules governing it, promptly issue a public notice once written communication is received from the Government on the future of UMEME concession.”
UMEME’s 20-year concession was first signed in 2005 when Uganda Electricity Distribution Company Limited leased out its assets to the private company.
But the company has had a frosty relation with Government with one moment in March 2018, President Museveni authoring a letter warning the Ministry of Energy against renewing UMEME’s concession arguing that the country should be looking for cheaper ways of modernising and expanding the distribution and distribution lines.
In his letter, the President tasked the Ministry of Energy and Ministry of Finance to furnish him with details regarding financial reports by UMEME’s losses the company was incurred and the investments the Company had undertaken in the country.
The President’s decision to cancel UMEME’S concession was informed by the 2017 audit report by the Auditor General, John Muwanga that indicated that Government lost approximately Shs129Bn to UMEME in depreciation and return on asset since Government entered into contract with the electricity company.
The report revealed that the depreciation cost and return on investment shot to Shs11.1Bn from 2004 to 2015, with the loss having increased to Shs13.6Billion after 2015, bringing the total loss to Shs129Billion.
Minister Okaasai also informed Parliament that as of December 2018, UMEME’s capital investments were to a tune of Shs700Bn against the projected to invest Shs1.5Trn the electricity company had promised to invest at the time.
The Minister also informed Parliament that recommendations had been made to UMEME to halt new investments by energy distributor, Umeme ahead of the expiry of its 25 year concession in 2025.
While interfacing with Parliament, Minister Okaasai revealed that it isn’t only UMEME’s concession that won’t be renewed but all the concessions under the electricity sector like Eskom whose concession is ending in 2023 won’t be renewed.
“The intention as a country is to use our own company to use the electricity systems. We are actually implementing what is in the Electricity Act,” said Minister Okaasai.
The decision by Government to form one company appears to be a walk back on its position earlier taken to end the monopoly of Uganda Electricity Board in 1999 and splitting UEB to form; Electricity Regulatory Authority, Uganda Electricity Distribution Company, Uganda Electricity Transmission Company. If the new company will be formed, the three entities will be merged to form one company.