The Ministry of Finance has warned that failure to approve a Shs 696.621 billion loan for Umeme Limited’s buyout will lead to high interest penalties.
The buyout loan, to be provided by Stanbic Bank, is intended to finance compensation for Umeme Limited’s unrecovered capital investments in line with the lease and assignment agreement.
Henry Musasizi, Minister of State for Finance, appearing before Parliament’s National Economy Committee, stressed that timely payment will ensure a smooth transition and facilitate the transfer of distribution network assets and operations to Uganda Electricity Distribution Company Limited (UEDCL).
The minister outlined severe interest penalties for delayed payment of the US$190,988,565 (Shs 696.621 billion) buyout: 10% interest if payment is delayed beyond February 2025 for up to 30 days.; 15% interest for delays between 46 to 90 days and 20% interest for delays exceeding 91 days.
“This financing should be made available by the end of February 2025. If delayed, the government will incur escalating interest penalties on any outstanding buyout amount,” Musasizi stated.
Deputy Chairperson of the Committee, Robert Migadde, criticized the proposed timeline as unrealistic and warned of potential financial penalties if the government fails to meet deadlines.
Stella Atyang (NRM, Moroto District Woman Representative) emphasized the need for an accurate assessment of the required loan amount before approval.
Dokolo North County MP, Moses Ogwal, questioned the urgency behind settling Umeme’s buyout while other companies also await government payments.
“The private sector has unpaid government debts exceeding Shs 3 trillion. Why is this buyout being prioritized? Are we setting a precedent for other companies to sue the government for unpaid debts?” Ogwal asked.
Concerns Over Umeme’s Profits and Investment Recovery
Koboko County MP, James Baba, questioned the necessity of compensating Umeme, arguing that the company has profited over the past two decades.
“We knew Umeme’s contract would expire. Why the last-minute rush?” Baba inquired.
Maracha County MP, Denis Oguzu Lee, argued that Umeme should have already recovered its investment through tariffs.
“The government has followed a feed-in tariff policy, enabling Umeme to recover expenditures via approved electricity tariffs,” Oguzu Lee noted.
State Minister for Energy, Sidronius Okaasai, clarified that an independent audit was conducted by Grant Thornton Uganda, commissioned by the Auditor General in July 2024.
“As of February 24, 2025, the draft buyout amount stands at US$201 million, according to the latest Auditor General’s report,” Okaasai stated.
He also revealed that the Ministry of Finance is seeking an additional US$50 million to capitalize UEDCL for a seamless transition of Umeme’s commitments.
The buyout deadline is March 31, 2025. Any delay beyond this date will trigger the stipulated penalty interest rates.
Geoffrey Okoboi, Director of Economic Regulation at the Electricity Regulatory Authority (ERA), detailed Umeme’s investment history.
“Umeme has invested approximately US$800 million in substations, with a minimum recovery period of 20 years. So far, it has recovered US$680 million. The remaining amount is what needs to be settled,” Okoboi explained.
