Home Business Panicky Umeme in Fear as Minister Okaasai Confirms it’s Exit Come 2025

Panicky Umeme in Fear as Minister Okaasai Confirms it’s Exit Come 2025

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Electricity distributor Umeme is in corridors of confusion after Minister Sidronius Opolot Okaasai confirmed its exit from Uganda come 2025.

Okaasai who was addressing Uganda’s Parliamentary Committee of Environment and Natural resources said that the government is working to cut off new investments ahead of the contract expiry, which will result in a buyout.

“To manage the concession buyout and minimize suffocating the expenditure of the Government when the Umeme concession ends, it is important that additional investments by Umeme be regulated and or halted to reduce the final buyout amount,” he said.

His comments confirm president Museveni’s earlier statements where he in January vowed to eliminate middlemen from the power distribution.

Museveni, during the televised address in January, said that the government was successfully eliminating middlemen like UMEME in distributing electricity to industrial hubs hence reducing power costs.

Museveni had since March 2018 blasted UMEME for hiking power tariffs, which has not only kept Ugandans in darkness but also scared away potential investors.

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“We are working hard to evacuate power from Karuma dam to the manufacturing hub and export excess power. There is a group called Umeme. These are private people who want to make high profits. We are debating that if you are looking for high profits, their areas you can go and invest in clubs, casinos, I will not follow,” Museveni said in October 2020.

Museveni informed Umeme that the country has enough electricity which can be sold cheaply to manufacturers “but people who want to make business are the ones pushing up,” 

Museveni while delivering his televised New Year message in Rwakitura said that the government is succeeding in transmitting power to manufacturing hubs in industrial parks.

“This will cut 37.5% of the cost. The cost of production of the electricity for the dams is low as follows: Nalubaale- 1.19US cents, Kiira- 1.19US cents, Karuma- 4.97US cents, and Isimba- 4.16US cents,” he said.

“It is only Bujagaali that was distorted to US cents 8.3per Kwh. By by-passing the middlemen, we shall give cheaper electricity to the factories,” he added,

Recent Data from the Uganda Investment Authority (UIA) indicates that there are currently 4,900 factories in Uganda with an inclusion of the 284 new factories in the Industrial Park at Namanve, 11 in Luzira Industrial and Business Park, 10 in Bweyogerere Industrial Estate, eight in Jinja Industrial and Business Park, 10 in Soroti Industrial and Business Park, 16 in Kasese Industrial and Business Park, and 42 in Mbarara SME Park.

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Umeme Response

In a public notice on Wednesday, Umeme, which is listed at the Nairobi Securities Exchange (NSE) said in a public notice that it was yet to receive written communication from the Ugandan government.

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“As disclosed in its Prospectus at the Initial Public Offering, subsequent Annual Reports, and public disclosures, Umeme Limited holds a 20-year Concession from the Government of Uganda, whose natural term expires on the 30th day of March 2025. To date, this position remains unchanged,” the notice read in part.

“The Company shall, in accordance with the Listing Rules governing it, promptly issue a Public Notice once written communication is received from the Government on the future of the Umeme Concession,” the notice added.

Under the current agreement, Uganda is required to compensate the company for the termination of the contract regardless of the cause or who caused the termination.

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The government of Uganda, according to media outlets, is considering ending the contract upon expiry, and then opting for an alternative service provider with friendlier terms.

Previously, the committee has expressed concerns over the contract which has been termed as skewed to favor the power distributor. The contract requires that the government covers all losses made by the company.

“All three agreements signed between the Government of Uganda and Umeme Ltd regarding the power distribution concession were skewed in favor of the distribution company to the detriment of the Ugandan citizenry. The common denominator across these three agreements are the scandalous provisions like the abnormal “buy-out amounts”, generous working capital allowances, and compensation of Umeme Ltd for making losses among others,” the Committee noted.

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