Gov’t turns to Absa Bank for UGX 183 billion loan to fund UEDCL’s takeover from Umeme

Government, through Ministry of Finance is seeking about $ 50 million (UGX 183 billion) from Absa Bank as capital investment into the Uganda Electricity Distribution Company Limited (UEDCL) to fully take up power distribution operations from Umeme by April 1, 2025. 

Paul Mwesigwa, the UEDCL Managing Director confirmed the details of securing funds from Absa Bank which will cover a year of operations. 

The Ministry of Energy and Minerals Development on Wednesday dismissed fears that its transmission agency would not be able to take over operations from Umeme in time due to unavailability of the said funds that were recently approved by Cabinet. 

A Wednesday statement released by the Energy Ministry reaffirmed government’s readiness to take over the electricity distribution concession from Umeme through UEDCL by April 1 2025 when it officially expires.

The Ministry of Energy also noted that there were ongoing efforts to secure funding locally as early as possible.

“The Ministry of Finance, Planning and Economic Development is in advanced stages of securing $50 million through internal borrowing to support UEDCL through capital investment. By the end of next week, these funds will be available to ensure that UEDCL is financially equipped to improve the quality of service,” the Ministry said. 

The ministry’s position comes at the backdrop of several voices raising concerns over government’s readiness to take over responsibility for electricity distribution after Umeme’s 20-year concession expires on March 31, 2025.  

Among these voices is that of the Chief Executive Officer of the statutory Electricity Regulatory Authority (ERA), Ziria Tibalwa who earlier this week noted that key concerns included the delay by government to secure the required initial investment of $50 million to capitalise UEDCL. 

Sector analysts, however, say that this amount remains small for initial capitalization even as government contends it will be enough for the start.

The recapitalisation of UEDCL just a few days to the expiry of the concession, has also raised concerns, partly signaling the haste and unpreparedness on the side of government. 

Other concerns have been the poor staffing at UEDCL that could hinder the transition, continued load shedding in some parts of the country, and the delay in the approval of the Umeme buyout payments by Parliament. 

Umeme’s concession will expire on March 31, 2025 after government, acting on an earlier Presidential directive that all private distribution concessions must not be renewed upon their natural expiration, in 2023 noted it would not renew the power distributor’s concession.

In turn , Umeme now seeks a total of more than UGX 692.688 billion ($190 million), which has already been submitted to Parliament for approval, as the buyout for unrecovered capital assets .

The Ministry of Finance says that the buyout amount will be locally mobilized from Standbic Bank Uganda Limited. 

The amount, however, attracted attention from the Office of the Auditor General, which raised concerns over how the distribution company came to that figure and has called for a delay in Parliament’s approval of the loan until a thorough audit of the figures submitted by Umeme is completed.

It was not immediately clear when the Auditor General is expected to release the audit report.

However, Parliament is yet to approve the loan. 

In the Wednesday statement, the Energy Ministry said that the approval of the buyout amount by Parliament was in advanced stages to provide for the timely payment to Umeme. 

“The buyout amount is a claim by Umeme for capital investments made and not recovered by the end of the concession. This further confirms the government’s unwavering commitment to meet its contractual obligations while ensuring a smooth transition in the electricity distribution sector,” the ministry said. 

Data from the ministry indicates that Umeme has made cumulative investments in the last 20 years of about $800 million and has recovered about $680 million from these investments. 

On the issue of staffing shortfalls, the ministry emphasised that there is an already ongoing restructuring process at UEDCL, which is aimed at enhancing efficiency, avoiding duplication of roles and ensuring cost effectiveness in electricity distribution, with a fair and transparent recruitment process.

The country generated a total of 6,032.3 GWh by all the grid-connected generation plants in 2023, according to data by the Electricity Regulatory Authority. 

National consumption remains low at 868 MW, according to the same source. 

As of March 19, 2025, Uganda’s electricity access rate is around 57%, with 19% on-grid and 38% off-grid connections, according to the Ministry of Energy.  

The country, however, has an ambitious target of achieving universal electricity access by 2030 and plans to increase electricity generation to 52,000 megawatts by 2040, focusing on renewable energy sources like hydropower, solar, and wind, while also investing in mini-grids and regional power interconnections.

Additional reporting by Jonathan Kamoga.