Uganda: Government Confirms End of Umeme Contract

8 December 2022
The Independent (Kampala)

Kampala, Uganda — Electricity distributor, Umeme's contract will run its full course but will not be renewed by government in 2025. Fears that the Umeme concession would be terminated before 2025 have therefore been put to rest.

Government is going ahead with plans to form its own company to take on distribution of power in the areas that Umeme is currently covering.

Umeme confirmed the development in a statement to the stock exchange today. "Pursuant to Rule 36 (1) (a) and (b) of the Uganda Securities Exchange (USE) Listing Rules, 2021 the Company is required to amongst others disclose to its shareholders and the general public new developments in its sphere of activity which are not public knowledge and which may lead to material movements in the ruling price of its listed securities," Umeme said in a press statement today.

"The Company has 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," Umeme said.

Umeme added that "The Company remains committed to performing its obligations as per the existing Concession Agreements and will continue to operate and maintain the electricity distribution system in line with prudent utility practice to ensure continued service delivery through to the end of the Concession."

According to sources, Uganda will form a state-owned electricity distributor to take over when Umeme Ltd.'s concession expires in March 2025, in a reported bid to reduce power tariffs by cutting out the intermediary.

Umeme has 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. pic.twitter.com/1vcRw6XdlN

-- Peter H Kaujju (@SpoxOfUmeme) December 8, 2022

The government will work on a payout for Umeme under a buyout clause ahead of the expiry, Minister of State for Energy Sidronius Okaasai Opolot said recently, without giving details. The planned Uganda National Electricity Co. will also assume generation responsibilities when the 20-year contract ends, he said.

Umeme Limited holds a 20-year Concession from the Government of Uganda, whose natural term expires on 30th March 2025.

Uganda's National Social Security Fund (NSSF)is the biggest Umeme shareholder with a 23.34% stake. Other top share holderes include Allan Gray Ltd., Kimberlite Frontier Africa Master Fund and Utilico Emerging Markets Ltd., according to the company's latest annual report.

Experts say that once "the payout/cash" to Umeme account is recieved, then the latter will go ahead to pay all its shareholders appearing on its register at that particular time.

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