Uganda Seeks $190 Million Loan to Compensate Power Distributor Umeme as Concession Ends

The Ugandan government is seeking approval to borrow approximately $190 million from Stanbic Bank to compensate power distribution company Umeme Limited for its investments in the national electricity grid. This move follows the government’s decision not to renew Umeme’s 20-year concession, which is set to expire next month.

Umeme, a company listed on both the Uganda Securities Exchange (USE) and the Nairobi Securities Exchange (NSE), has been responsible for power distribution in Uganda since 2005. Under the terms of the concession agreement, the government is legally required to reimburse Umeme for any unrecovered capital investments made during its tenure.

The decision not to extend Umeme’s contract aligns with Uganda’s broader plans to overhaul its electricity distribution sector. Authorities have cited the need for greater efficiency, cost reduction, and improved service delivery as key reasons for reclaiming control over the power grid. As a result, the Uganda Electricity Distribution Company Limited (UEDCL) is expected to take over the operations currently managed by Umeme starting in April 2025.

The estimated amount for Umeme’s compensation has been under review, with the Ministry of Energy and Mineral Development previously suggesting a figure of around $215 million as of December 2022. However, the final payout will be determined following an official audit by Uganda’s Auditor General to verify the exact value of Umeme’s investments.

To ensure a smooth transition and mitigate the financial burden, UEDCL has also requested $158 million to invest in the distribution infrastructure over the next three years. This investment is expected to help strengthen the government’s ability to manage power distribution while also reducing the total amount owed to Umeme.

With the concession set to expire in a matter of weeks, Uganda’s energy sector is at a pivotal moment. The shift in management will significantly impact the country’s electricity supply, and stakeholders are closely monitoring the transition to ensure stability and reliability in power distribution for Ugandan consumers.