UEDCL prepares to take Umeme’s space
The Uganda Electricity Distribution Company Limited says it is ready to run Uganda’s power distribution network when Umeme Limited’s 20-year concession expires at the end of March 2025.
At a recent public hearing, Paul Mwesigwa, the managing director of UEDCL, said the company has built enough experience within its set up, especially after acquiring five electricity distribution concessions outside Umeme’s operational areas over the last 10 years. He said customer numbers and revenues has grown.
He added that the company had built enough expertise, while its model of operation had achieved commendable results, all of which were enough to attract the confidence of the market as it seeks to acquire the sixth and largest electricity distribution concession in Uganda –Umeme Limited’s.
UEDCL is seeking licenses from the Electricity Regulatory Authority to run Uganda’s distribution network of 33kV lines and under. Uganda’s government has decided not to renew Umeme Limited’s 20-year electricity distribution concession when it expires at the end of March 2025.
That decision completed a cabinet plan to have all the three major components of the country’s electricity supply industry – the generation, transmission, and distribution – operated and maintained by government companies.
Before it takes up the assignment of being Uganda’s biggest electricity distributor, UEDCL has tabled a revenue requirement of Shs 4.02 trillion ( just over $1 billion) to finance the operational and capital costs for three years starting April 2025.
This revenue requirement will be sourced through the two main components: the power tariff and debt. UEDCL is seeking a loan of $435 million from the ministry of Finance, Planning and Economic Development, whose expenditure will be split in two.
The biggest portion of this debt - $225 million – will go towards the compensation of Umeme Limited’s unrecovered investments, otherwise known as the buyout amount. [However, the Electricity Regulatory Authority is yet to compute the exact amount of this component.]
The second component of the loan UEDCL is looking for - $210 million - will be channelled towards capital investments in the network. Under its computations, UEDCL is looking at borrowing this amount at no more than 6.4 per cent per annum. And it is hoping the loan tenure will be at a minimum of 10 years.
UEDCL says it needs this money to revamp a large part of the distribution network. The company said 36.7 per cent of the distribution transformers have surpassed their expected lifetime of 30 years. It added that the network still has transformers that are more than 80 years old. The company added that 10 per cent of the utility poles require immediate replacement.
One of the tough questions UEDCL has to answer is where the money will come from. Uganda is already burdened by a high public debt stock, totalling $25.6 billion as at June 30, 2024, which is 46.9 per cent of the country’s gross domestic product. The level is close to the East African cap of 50 per cent.
Already, Uganda’s electricity industry eats up the lion’s share of the country’s debt component. The ministry of Finance says more than 90 per cent of the loans it has amassed over the last five years have been channelled to the electricity generation and transmission companies.
Government is now managing some key generation assets it took over from private developers such as the 380MW Nalubaale-Kiira complex from South Africa’s Eskom Limited, and the 50MW Namanve thermal power plant from Jacobsen Elektro. Government plans to take up the thermal plant from Electromaxx.
The electricity transmission network has always been under government’s ambit, although some space is being ceded to the private sector. Already, three private companies have applied to government to put up transmission lines.
It is not clear how government intends to finance UEDCL’s activities, considering it has limited space to take up more debt. One thing is clear though: if Umeme Limited’s buyout amount is not paid out before March 2025, then UEDCL will not be able to take up the concession of running Uganda’s electricity distribution network.
