What next after Umeme’s exit?

by Musa Hashim Kasibante
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Umeme will received a written communication from the Government of Uganda confirming that it will not renew its concession after its contract expires on March 25, 2025.

According to Peter Kaujju, Umeme’s Spokesperson, the utility company (Umeme) has received a notice from the government confirming that “there will be no renewal”.

Umeme exit
Umeme spokesperson Peter Kaujju(PHOTO/Courtesy)

This, therefore, implies that Umeme’s contract will expire in 2025 and the government says there won’t be any reconnection – effectively pulling the plug from the long-serving power supplier – subsequently leaving it in darkness.

“Umeme has formally received written communication from the Government of the Republic of Uganda, notifying it that the current Concession will continue to run until its natural end in March 2025 as stipulated in the Concession Agreements after which, there will be no renewal,” Kaujju said.

A statement from Umeme indicates that the time until the concession runs out, the company will continue to perform its obligations and “maintain the electricity distribution system in line with prudent utility practice.”

Since November 2021, Umeme was expecting President Yoweri Museveni to renew their concession, but has since criticised the electricity company for its continued failure to solve Uganda’s power problems like consistent blackouts or power outages that affect both homes and commercial enterprises.

In the event of Umeme’s exit from Uganda, the role of power distribution will revert to Uganda Electricity Distribution Company Limited (UEDCL).

This December, Ruth Nankabirwa the energy minister, tweeted that the formation of the UNECL followed a cabinet decision not to renew the contracts of the two companies.

Minister of Energy and Mineral Development (PHOTO/Courtesy)

Nankabirwa revealed that the recent developments were part of bigger reforms in the energy sector.

According to reports by Daily Monitor, “The government has said it is forming the Uganda National Electricity Company Limited (UNECL) to minimise private capital investments in the electricity sub-sector. This follows its decision not to renew the contracts of Umeme and Eskom Uganda Limited.”

“Today, I unveiled my ministry’s new reforms in the power sector as per the Cabinet directive of October 3, 2022,” she wrote, adding, “We are committed to enhancing sector performance and providing affordable power to the people of Uganda,” Nankabirwa said in a recent tweet.

The Minister’s tweet was subsequently followed by a communication issued by Solomon Muyita, who is the Principal Communications Officer at the Ministry of Energy.

In a written statement, Muyita said the decision targets to enhance the electricity sub-sector performance and provide affordable power to the people of Uganda.

Efforts to Minimise private capital

“The reforms are expected to minimise expensive private capital in the electricity sub-sector investments in generation, transmission and distribution. It will culminate in creating the UNECL as a state-run entity with majority shareholding under a Public Private Partnership (PPP) arrangement,” states Muyita.

On October 3, this year, the Cabinet of Uganda directed the ministry of energy not to renew the concession and privatization agreements for Eskom Uganda Limited and Umeme after they expire in 2023 and 2025 in that order.

The ministry’s spokesperson also clarified that the energy ministry has already notified Eskom and Umeme in a formal communication of the government’s decision not to renew their concessions agreements when they come to their natural end in March within the next two years 2025 and one that will end sooner in 2023.

Muyita also made the public aware of this fact that: “The Electricity Regulatory Authority (ERA), the Uganda Electricity Distribution Company Limited (UEDCL) and Uganda Electricity Generation Company Limited (UEGCL) have equally been directed to make appropriate arrangements for the transition.”

Two decades have passed since Uganda in bold reforms unbundled and privatized large parts of the power sub-sector.

These energy sub-sector reforms were supported by the World Bank Group alongside other international development agencies as part of a Public Sector Restructuring and Privatization Strategy.

These reforms were projected to make Uganda’s power sub-sector to become more efficient and financially sustainable.

Following these changes, the management of existing generation assets was effectively transferred to Eskom Uganda in 2003 before the main distribution grid was also transferred to Umeme in 2005 under a 20-year concession.

These sweeping adjustments created the first unbundled electricity distribution network in sub-Saharan Africa.

But there have been notably great milestones during Umeme’s reign, the electricity distribution network, which covers a large percentage of the country, has significantly grown in asset capacity and complexity and now provides employment to about 2,000 workers.

The Energy ministry has kicked off the process to establish a joint committee that will handle the Eskom Concession.

According to Sunday Monitor, “this committee is in the process of making a similar arrangement for the Umeme concession.”

Irene Batebe, the energy ministry’s Chief Accounting Officer says that the committee has been tasked with the planning and management of the end of the concessions to ensure seamless handover of the operations of the assets.

“Government is committed to avail the necessary financing to ensure it fulfils its obligations in the related agreements. UEDCL and UEGCL will be supported to enable them manage the transition and operation of the concessions as happened with the 50MW Namanve Thermal Power Plant that has reverted to UEGCL in 2021,” says Batebe.

Daily Monitor also published that, “while the electricity distributor (UEDCL) currently runs its business with at least 380 manpower bases, Uganda’s grid has found itself grappling with a number of problems. In recent times, what the government has classified as power infrastructure vandalized has surged to the fore.”

“We are experiencing vandalism where the vandals leave the infrastructure in place without chopping it and carrying it away,” Minister Nankabirwa lamented recently.

She said the body the government has put together is pointing to a classic case of “economic sabotage.”

Vandalism still a rampant vice countrywide

“Our steady progress is being attacked by bad people. We are losing money and the country is now at risk of darkness because we have to apportion power,” she said, adding: “We have to load shed some parts so that the other areas can also get power—what we call load-shedding. It is quite unfortunate,” the line minister was recently quoted by the media.

Within the course of this year and prior to this, almost 100 suspects were arrested by Uganda police working in close partnership with sister security agencies. The detainees were alleged to have been involved in malicious damage and theft of electricity powerlines and other utility infrastructure in different parts of Uganda.

In November 2022, Police reports indicated, that an intelligence-led operation that was mounted after 132kV transmission lines from the Jinja-based 180MW Nalubaale and 200MW Kiira hydro plants were vandalized, leading to massive blackouts in the western region and central parts of Uganda which paralysed businesses and livelihoods in most homes and workplaces. 

Vandalism has also consumed transmission lines of the 132kV Owen Falls-Lugogo transmission lines which were vandalised at Kivuvu Village in Mukono District.

Daily Monitor reports that, “this ultimately led to the collapse of four towers.” The police report further indicates that the Owen Falls-North-Mulago transmission line was also vandalised at Nasuuti in Mukono District, forcing one tower to collapse.

The Minister in charge of Energy says that the National Security Committee is probing the matter and will release its initial findings on December 14, 2022 before generating a comprehensive report to be furnished with the House.

“I will not rush to give a statement to Parliament before concluding the debate with the National Security Committee because the MPs will ask what we are doing about it. I requested the Speaker of Parliament that I issue the statement having concretized all this intelligence information that I have,” Nankabirwa said on Friday last week.

Among the points addressed by the Minister for Energy is the issue of Parliament backing a motion of reinstating the Rural Electrification Agency otherwise known as (REA).

“I was surprised to see this motion moved by an MP who supported the mainstreaming of REA back into the ministry of Energy,” she said, adding, “This is unacceptable especially at a time when Parliament has just passed a very important loan for Electricity Access Scale-up Project (EASP). Anything stepping in the way of electrifying communities will be vehemently opposed.”

The Parliament of Uganda recently approved a motion by the Finance ministry in August this year that was intended to transfer close to Shs500billion of a World Bank loan that had been allocated to REA to its parent ministry of Energy. REA has since been malformed to now function as a subset of the ministry of Energy as opposed to an autonomous or independent entity that it was once.

Mr Paul Mwesigwa, the UEDCL managing director, revealed that the required structures had been put in place to take over the electricity distribution business from Umeme Ltd once their concession expires, revealed in an interview with Nation Media Group’s Daily Monitor.

“Operationally, we have a technical department that is headed by experienced engineers managing network activities, and planning for the network including connectivity across the country,” he said, adding, “There is no need to worry about matters of governance once Umeme exits.”

According to UEDCL’s Mwesigwa, since 2013 the company has successfully operated in more than 74 districts that Umeme found not to be commercially viable.

“These are districts majorly outside the Umeme grid since they were hard to reach areas,” said Mwesigwa who also listed, Adjumani, Kagadi, Kyenjojo, Moyo, Moroto and Nakapiripirit among other districts that were previously written off by Umeme.

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