The government has declared its plan to obtain a big loan totaling Shs2.920 trillion, marking a significant financial move. This large loan is being taken out in order to make the proposed acquisition of the Umeme concession possible.
Emmanuel Otaala, the head of Parliament’s Natural Resources Committee, disclosed to the Budget Committee on Monday that negotiations are underway to obtain US$765.75 million (Shs2.920 trillion) in foreign funding to enable the government to assume control of the Umeme concession, which is set to expire in March 2025.
“The government ought to obtain the required funding to guarantee a seamless handoff and takeover from Umeme. According to UEDCL, it has been in consultation with global financial institutions to support this cause and they are in favor of the US$765.75M that the organization needs. Thus, this funding will come from outside sources rather than the government directly, according to Otaala.
Uganda Electricity Distribution Company Limited (UEDCL) is seeking US$540 million (Shs2.059 trillion). Of this, US$190 million is needed as an initial investment during the takeover process, and Umeme is owed US$225.75 million (Shs860.806 billion) for the buyout.
The Ugandan government, however, decided against giving Umeme an extension because the concession was about to expire in 2025. This decision represents a substantial change in the country’s energy sector.
The agreement’s completion requires the government to pay Umeme back for all capital investments that are not recovered in accordance with the concession terms. However, in an unexpected development, Umeme Limited’s asset value dropped significantly by Sh9.96 billion in the year preceding June 2023. This recession affects possible capital gains that stockholders could have expected at the end of the concession.
When the concession formally ends in March 2025, Umeme’s activities and assets are scheduled to be given back to the Ugandan government. A five percent premium will be added to the net asset value to determine the payout for private owners.
Notably, as Umeme moves closer to the final surrender back to the State, elements like corporate transfers and amortization have been gradually lowering the present value of the company’s assets. The way this is playing out makes one think about the financial ramifications and long-term effects of this shift in power distribution from a private company to the Ugandan government.
