KAMPALA, UGANDA | NOWVIBA — The Uganda Electricity Distribution Company Ltd (UEDCL) has outlined a comprehensive plan for a smooth transition following the expiration of Umeme Ltd’s power distribution concession in March 2024.
In 2022, the government decided not to renew Umeme’s 20-year concession due to concerns over performance in electricity distribution, high payments to the concessionaire, and a desire to reduce private sector involvement in public services.
UEDCL, a state-owned entity, is one of the companies vying to take over Umeme’s operations. Its application for a new license is currently under review by the Electricity Regulatory Authority (ERA) and other relevant government bodies.
During a public hearing on UEDCL's proposed takeover, Managing Director Paul Mwesigwa stated that the company not only intends to assume control of Umeme's assets but is also committed to retaining its entire workforce of 2,502 employees. “The business is expanding, and we plan to take back the assets operated by Umeme, as they belong to us,” Mwesigwa said, noting that additional job vacancies will also be created.
UEDCL’s plans, if approved, include connecting all customers, both private and government, to the prepaid metering system known as Yaka. This has raised concerns among some corporate consumers, such as ATC, who have requested exceptions, arguing that migration to the new system may be cumbersome despite their consistent payment records.
Mwesigwa emphasized that the transition to smart metering is a global trend and that UEDCL will provide assistance to those encountering difficulties. He reassured stakeholders that there would be no service interruptions during the transition, adding that customers would receive notifications on how to check and top up their tokens on the day of the takeover. “We want to ensure that there is no noticeable disruption at the changeover,” he stated.
According to the transition plan being discussed between UEDCL and ERA, Umeme will maintain normal operations until the final day, including processing new customer connections.
UEDCL aims to connect at least 300,000 new customers annually and expand its office network from 65 to 100 locations across the country, including some currently occupied by Umeme. The company also intends to reduce national energy losses from 16.4% to 15.2% by 2027 and decrease the time taken to pay transmission companies from 45 days to enhance the overall energy supply ecosystem.
To fund these initiatives, UEDCL plans to raise 4 trillion Shillings over the next three years, which will be partially used to buy out Umeme and invest in new projects. Chief Finance Officer Jacqueline Kiwanuka announced that part of this funding will come from a proposed $435 million (1.6 trillion Shillings) loan, with a 6% annual interest rate and a 10-year repayment period.
The buyout of Umeme is projected to cost $225 million (827 billion Shillings), while $210 million (772 billion Shillings) will support new investments over the next three years.
Many stakeholders expressed concerns about the quality and reliability of services under UEDCL, questioning the company's capability to replace Umeme effectively. ERA Executive Director Ziria Tibalwa Waako reassured them that UEDCL has built the necessary capacity and that the government’s involvement as the owner bolsters its readiness.
Waako dismissed any fears that the transition process violates government policies for rationalizing ministries and agencies. “The decisions made and the subsequent processes align with amendments to the Electricity Act in 2022, which support our rationalization efforts,” she explained.
Under the Cabinet Memorandum on the Rationalization of Agencies and Public Expenditure (RAPEX), all electricity companies are set to merge into a single entity. Waako also noted that the Second Generation Reforms in the Electricity Supply Industry mandate the non-renewal of private sector concessions, including Umeme’s.
As part of its credentials, UEDCL has successfully managed distribution in areas where other providers have struggled. This includes taking on concessions like the Pader-Abim Community Multipurpose Electricity Cooperative Society (PACMES) and Kyegegwa Rural Electricity Cooperative Society.
“UEDCL has demonstrated its capability and will bring valuable experience to the broader concession,” she asserted, indicating strong confidence in the company's ability to succeed.
The concession for electricity distribution in Umeme's current areas was advertised in public media last October, prompting concerns among Umeme shareholders about the future of their investments.
Umeme, listed on the Uganda Securities Exchange, has 39.2% of its shares held by Ugandans, with another 7% by East Africans. Overall, African investors hold 23.6%, while international investors account for 30.1%.
Waako assured stakeholders that Umeme will remain operational after the concession ends, and shareholders will be compensated according to the buyout plan. “Umeme is a corporate entity that will continue to exist, and shareholders can expect dividends from the buyout amount exceeding 800 billion Shillings,” she said.
At the end of 2023, Umeme reported revenues of 2.2 trillion Shillings, with a net profit of 11.5 billion and total assets valued at 2.35 trillion Shillings.
