New National Electricity Company Mooted As Umeme Plans Exit

The Ministry of Energy and Mineral Development has commenced implementing Power Sector Reforms to enhance sector performance and provide affordable power to the people of Uganda.

The changes will lead to the creation of the Uganda National Electricity Company Limited (UNECL) as a state-run entity with majority shareholding under a Public Private Partnership (PPP) arrangement as a possible option. It is not yet clear how different Uganda National Electricity Company Limited will be from Uganda Electricity Board which was disbanded in the late 90s during the first electricity reforms.

The reforms that came with the enactment of the Electricity Act 1999 and the earlier liberalization of the electricity sector saw the unbundling of the Uganda Electricity Board (UEB) and the creation of three entities; Uganda Electricity Generation Company, Uganda Electricity Distribution Company and Uganda Electricity Transmission Company, which ushered in ESKOM and Umeme.

Eskom is the country’s largest energy generator on a 20-year concession effective March 1, 2003, for managing and maintaining the 180MW Nalubale and 200MW Kira Hydropower Plants, while Umeme is Uganda’s main electricity distribution company, holding a 20-year electricity distribution concession from the Government of Uganda, effective March 1, 2005.

However, the concession with Eskom comes at the end of March 2023 while that of Umeme ends in March 2025. While Umeme has been lobbying for an extension of the Concession, the cabinet, according to the statement directed the Ministry of Energy not to renew the concession and Privatization Agreements for Eskom Uganda Limited and UMEME Limited after their concessions come to their natural end.

The Ministry has already formally notified Eskom and UMEME of the Government’s decision not to renew their concessions agreements when they come to their natural end in March 2023 and March 2025, respectively.

Umeme confirmed on Thursday in a tweet that it had formally received written communication from the Government of the Republic of Uganda, notifying it that the current Concession will continue to run until its natural end in March 2025 as stipulated in the Concession Agreements after which, there will be no renewal. 

The Electricity Regulatory Authority (ERA), Uganda Electricity Distribution Company Limited (UEDCL) and Uganda Electricity Distribution Company Limited (UEDCL) have also been directed to make appropriate arrangements for the transition.    

Ruth Nankabirwa Ssentamu, the Minister of Energy and Mineral Development, appreciated UMEME and Eskom for the years of continued support and investment in Uganda’s Energy Sector.

On behalf of the Government of Uganda, I take this opportunity to appreciate UMEME and Eskom for the Operation and Maintenance of the Government assets on behalf of UEDCL”

The Minister noted that the electricity distribution network under UMEME covers a large percentage of the country, has grown in asset capacity and complexity and employs about 2,000 staff. “To this effect, I call upon the parties to the concession agreements to ensure a smooth transition of all the relevant responsibilities and asset handover in close coordination with this Ministry,” Said Nankabirwa

She said the Ministry would spearhead the transition process and engage all concerned parties, including the shareholders, to ensure that the Government of Uganda’s decision to end the concession naturally is executed reasonably.

The Ministry has already constituted a Joint Committee to handle the Eskom Concession and is in the process of making a similar arrangement for the UMEME concession. The respective Committees are tasked with the planning and management of the end of the concessions to ensure seamless handover of the operations of the assets.

“Government is committed to avail the necessary financing to ensure it fulfills its obligations in the related agreements,” elaborated Irene Bateebe, the Permanent Secretary in the Ministry.

“UEDCL and UEGCL will be supported to enable them to manage the transition period and operation of the concessions as happened with the 50MW Namanve Thermal Power Plant that has reverted to UEGCL in 2021.”

The Permanent Secretary said the Ministry, with the support of the Auditor General, would undertake a valuation of the companies’ investments to determine any outstanding obligations by Government.

A statement from the Ministry says the reforms are expected to minimize expensive private capital in the electricity sub-sector investments in generation, transmission and distribution.

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