By As the government prepares to take over electricity distribution from Umeme at the end of this month, a heated dispute has emerged over the exact buyout amount due to the power distributor. The Ministry of Energy and Umeme executives are locked in negotiations behind closed doors, with conflicting figures and last-minute financial assessments adding complexity to the transition.
Since late 2022, when the government directed Umeme to scale down investments in the distribution network to keep the buyout amount in check, large areas of Uganda have suffered intermittent power supply. Power outages have been attributed to various factors, including transformer breakdowns, slow replacement of aging infrastructure, and disruptions caused by adverse weather conditions. The increasing frequency of these outages has fueled speculation among critics, who suggest either deliberate sabotage or a manufactured crisis.
Despite these challenges, a recent report from the Auditor General indicates that Umeme has continued investing in the network, thereby increasing the government’s financial liability under Section 12 of the Support Agreement. This agreement, established in 2004 as part of the 20-year concession that commenced in 2005, stipulates that the government must compensate Umeme for any undepreciated and unrecovered investments.
Government’s Takeover Plans and the Disputed Buyout Amount
With the Uganda Electricity Distribution Company Ltd (UEDCL) set to take over the distribution network on April 1, the government has been actively working on transition strategies. Several meetings at Amber House, the Ministry of Energy’s headquarters, have been held by a joint technical committee to oversee the shift. Meanwhile, reports suggest some officials are leveraging the transition to push for joint ventures and alternative investment schemes.
The assets under Umeme’s management include 60 substations, 15 switch stations, 32,794 km of low-voltage lines, 18,756 km of medium-voltage lines, and 19,319 distribution transformers. Additionally, non-network assets such as 22 office buildings, ten Very High Frequency (VHF) sites, and eight parcels of open land are part of the takeover.
However, before the official handover, a significant impasse remains: the exact buyout amount. Last month, the Ministry of Energy sought Cabinet approval to borrow $191 million (Shs700 billion) from Stanbic Bank to finance the buyout. The loan, payable over five years, carries a 4.7% interest margin per annum and an additional 1.2% (Shs8 billion) in arrangement fees.
Meanwhile, the Electricity Regulatory Authority (ERA), often criticized for its close ties with Umeme, initially estimated the buyout at $155.5 million (Shs567 billion), excluding applicable taxes. ERA, which approves or disallows Umeme’s annual investment plans, had arrived at this figure after evaluating the company’s recoverable capital investments.
Revised Estimates and Umeme’s Pushback
ERA’s calculations, based on September 2024 data, placed Umeme’s total gross investments at $756.7 million (Shs2.7 trillion). Of this, $608.6 million (Shs2.2 trillion) had been recovered, while $148 million (Shs540 billion) was deemed unrecoverable, leading to the initial $155 million buyout amount.
However, this figure faced scrutiny from the Ministry of Energy, which raised concerns over last-minute investments, including a recent upgrade to the Yaka meter system. Following this review, ERA revised its estimate downward to $127.7 million (Shs465 billion), sparking protests from Umeme. The power distributor formally expressed its dissatisfaction to both the Ministry of Energy and the Solicitor General, arguing that its investments were being undervalued.
According to Umeme, its total investments between 2005 and 2024 stand at $735 million (Shs2.6 trillion), with an additional $10 million (Shs36 billion) injected between January and March 2025. This brings the total to $746 million, of which $625 million (Shs2.2 trillion) is classified as capital recoverable, and $121 million (Shs443 billion) as unrecovered investments.
Documents reviewed by this publication indicate that Umeme is pushing for a buyout of $234.7 million (Shs856 billion), exclusive of applicable taxes. This estimate is based on the Net Accumulated Capital Investments of the Lease and Assignment Agreement. The company asserts that it has invested approximately $832.1 million (Shs3 trillion), with $603 million (Shs2.2 trillion) recoverable and $223 million (Shs815 billion) classified as unrecoverable.
Final Auditor General’s Audit and Pending Resolution
When questioned about the conflicting estimates, ERA’s Head of Communications, Mr. Julius Wandera, defended the regulator’s position, stating that the verification process is ongoing.
“Even as I write, there are ongoing projects. Their license requires them to continue investing. ERA has been approving and retiring investments annually. Otherwise, the current estimates would be as high as $500 million. The regulator is fully aware of the buyout obligations and remains the best-positioned authority on the matter,” Mr. Wandera explained.
He further clarified that the $191 million figure approved by Cabinet was based on a draft position from the Office of the Auditor General (OAG) in January 2025. However, the final figure is still under review and will be officially confirmed on March 31.
Meanwhile, a draft audit from the Auditor General estimates the buyout at $201 million (Shs736 billion), inclusive of $9.7 million (Shs35 billion) for work-in-progress. The OAG also outlined key requirements for Umeme’s exit, including handing over customer records, licenses, spare parts inventory, insurance policies, and employee details to UEDCL.
Concerns Over the Escrow Account and the Road Ahead
A longstanding issue in the Umeme concession has been the management of the Escrow Account held at Citi Bank in London. The account was established in 2005 to cushion Umeme against financial shocks. However, findings indicate that no significant deposits have been made since June 17, 2013, when Umeme used the account to offset government debts, effectively reducing its balance to near zero.
Under Clause 12 of the Support Agreement, the government is obligated to pay the buyout amount within 30 days of March 31. Failure to do so would trigger escalating penalties: 10% for payments delayed up to 45 days, 15% for delays of 46–90 days, and 20% for delays beyond 90 days.
Looking Ahead: What Happens Next?
Since President Museveni reaffirmed the government’s decision to reclaim the distribution network, a joint technical committee comprising officials from multiple government agencies has been preparing for the transition. While some had proposed keeping Umeme in place during the transition, the idea was rejected outright.
However, the recent wave of power outages has left many Ugandans concerned about the future of electricity distribution. Some fear a return to the inefficiencies of the defunct Uganda Electricity Board (UEB), which was dismantled in 1999 as part of World Bank-backed power sector reforms. At the time, only 180,000 households had electricity access, representing just 12% of the population. Today, approximately two million households are connected, out of the country’s nine million total households.
As for Umeme, which listed on the Uganda Securities Exchange in 2012 to raise capital, its options are limited. The company may choose to delist and transition into a private entity, diversify into other business ventures, or wind up its operations entirely. Whatever the outcome, the buyout negotiations will play a crucial role in determining its next steps.
