Members of the Committee of National Economy have questioned the Ugandan government’s ‘last minute’ request for a US$190 million loan to finance the Umeme buyout.
- •The loan, which is expected to be provided by Stanbic Bank, was introduced just a week before the expiry of the concession agreement with Umeme on 30th March 2025.
- •The funds will finance the compensation of Umeme for unrecovered capital investments in accordance with the lease and assignment agreement.
- •Uganda plans to complete the buyout of Umeme investors before the company’s assets are handed back to the government-owned Uganda Electricity Distribution Company (UEDCL).
In 2022, the Ugandan government said that it had no plans of renewing Umeme’s concession due to high electricity costs. Under the terms of the concession, signed in 2005, Uganda is required to reimburse the power utility company for all unrecovered capital investments at the end of the contract. The draft buyout amount as of 24th February 2025 was US$201 million.
Concerns about the government’s rush to pay off Umeme were also raised by several MPs, questioning why the government was acting so hastily to clear the debt when there are numerous other companies with outstanding debts to the government.
“The private sector has so many debts with the government, totalling over USh 3 trillion. What makes this debt so special that we must act so urgently?” one legislator asked.
The finance minister noted that after the deadline, any delay in payment will incur penalties, potentially in the form of interest charges to Umeme. The concession includes a tight window for the government to audit the investment.
Umeme’s Investments
The Director of Economic Regulation at the Electricity Regulatory Authority added that Umeme had invested about US $832 million in substations, with a recovery period of at least 20 years. As of now, Umeme has recovered around US$680 million of this investment.
In January, the government granted UEDCL two licenses, including that for distribution and sales, marking the end of Umeme’s concession.
Umeme was initially owned by a consortium representing the United Kingdom’s CDC Group plc, before it was acquired by private equity firm Actis in 2009. In 2014, Actis sold two thirds of its stake to South Africa’s Investec Asset Management. By the end of 2023, Uganda’s National Social Security Fund (NSSF) was the largest shareholder with 23.40%, followed by South African investment firm Allan Gray with 14.82%.
Umeme was cross listed on the Nairobi Securities Exchange and the Uganda Stock Exchange in 2012, becoming the most traded counter at the Ugandan bourse.
In 2024, Umeme was the 2nd best dividend stock in 2024 at the Nairobi bourse and the best counter in both capital gains and dividends in 2023.
