Parliament queries last minute loan request for UMEME buyout

KAMPALA, February 26, 2025 – Members of Parliament [MPs] on the Committee of National Economy have queried government’s ‘last minute’ request for a US$ 190 million loan to finance the UMEME buyout after it declined to renew the contract of electricity distributor in the country.

According to the MPs, the loan request was presented for consideration hardly a week before the expiry of the lease agreement between government and the power distributor on March 1, 2025.

While appearing before the committee on Tuesday, State Minister for Finance, Planning and Economic Development [General Duties], Henry Musasizi said the loan for the buyout would be provided by Stanbic Bank.
“The funding is intended to finance the compensation of UMEME Limited for the unrecovered capital investments in accordance with the lease and assignment agreement,” Musasizi said.

The Deputy Chairperson of the Committee, Robert Migadde described the timeline for the loan as unrealistic, citing penalties in form of interest to UMEME if government delays to pay the buyout.
“The amount to be borrowed is an estimate and I do not know if we have the Auditor General’s report confirming this amount of money. The timelines we are working with cannot allow us effectively scrutinise this information,” said Migadde.

Stella Atyang, the Moroto District Woman Representative called for adequate assessment of the exact amount needed for the loan to facilitate the UMEME buyout.

The Dokolo North County MP, Moses Ogwal questioned government’s hurried move to pay off UMEME adding that there are many other companies which have outstanding debts.

“The private sector has so many debts with government of over Shs 3 trillion. What is special with this debt? Are you encouraging the private sector to also take government to court and bring you to this level,” Ogwal asked.

Koboko County MP, James Baba questioned the compensation to UMEME saying the company ought to have made profits over the last 20 years of its operations.

“Why are things being hurried when we have not fully comprehended the nature of this buyout? We knew that UMEME’s contract was going to expire so why are we doing it at the last minute?” Baba asked.

Denis Oguzu Lee, the Maracha County MP said that UMEME should have recovered its expenses through the tariffs it charges. “Government has been pursuing a feed-in tariff policy where entities like UMEME should have recovered the expenditures from the tariffs and this has been approved by Electricity Regulatory Authority from time to time,” Oguzu Lee said.

The State Minister for Energy, Sidronius Okaasai clarified that the Auditor General procured an independent auditor in July 2024 and assigned Grant Thorton Uganda to audit and determine the final buyout of UMEME. “Following further submission of the required documentation, the draft buyout amount as of 24 February 2025 is now US$ 201 million as reflected in the latest report received by the Office of the Auditor General,” Okaasai said.

He added that the Finance Ministry is seeking US$ 50 million to capitalise the government–owned Uganda Electricity Distribution Company Limited [UEDCL] to enable it take over the implementation of the commitments of UMEME.

Okaasai also clarified that the due date for the buyout is March 31, 2025 after which the penalties for delay in paying the buyout, will apply.

The Director, Economic Regulation at the Electricity Regulatory Authority [ERA], Geoffrey Okoboi said that UMEME invested in substations with a minimum recovery period of 20 years which he added, cannot be achieved with the current deadline of the concession agreement.

“UMEME has made cumulative investments in the last 20 years of about US$ 800 million and has recovered about US$ 680 million from these investments. What is remaining is the amount that is to be paid. This because a company cannot recover the full amount of its investments at once,” Okoboi added.

https://thecooperator.news/udb-bosses-quizzed-over-loan-distribution/

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