The Umeme buyout heat that is threatening to turn chaotic

The current rope pulling and shoving offer an insight into what is turning out to be an interesting twist in the exit of Umeme. 

Until a few days ago, the events around the exit of the company that has been part of Uganda’s electricity sub-sector for 20 years, had been largely silent. 

However, in the weeks to the end of the concession due on 31^st March 2025, voices emerged and have become louder, threatening to tear apart a relationship – despite the existence of some knocks here and there – that has been cordial over the 20 year-course of the concession. 

Umeme had largely remained silent as government officials threw around figures relating to the buyout amount. 

In fact, in the last two weeks, government has been running around seeking approval of $190 million by Parliament as the buyout amount. 

The loan, which will be arranged by Stanbic Bank, was eventually approved despite the absence of supporting documents to ascertain the actual amount that government needed to pay Umeme.

However, five days to the end of the concession, Umeme, through Shonubi, Musoke & Co. Advocates, on 25^th March 2025, released a statement in which it cryptically indicated it expected much more than what had been suggested.  

“Umeme’s rights to the distribution system (including the right to operate the distribution system) under the Concession Agreements will only terminate at the end of the Retransfer Transition Period, which shall only occur once the buyout amount is paid …Umeme submitted an estimated buyout amount of $234 million, which is currently undergoing audit … upon receiving the audit … Umeme will review the findings and determine the necessary course of action, if any,” the statement noted.

The statement had come just a day ahead of the release of the audit report by Auditor General Edward Akol, which, in a new twist, slashed Umeme’s expected buyout amount by more than half to $118 million. 

The Auditor General’s figure is as well lower by $72 million of what the Ministry of Finance – $190 million – is seeking to borrow from Stanbic. 

From the look of things, it is highly probable that Umeme knew what was coming. 

The cryptic nature of its statement, which unilaterally notes that “the distribution system will only be retransferred to UEDCL or its nominee upon receipt of the buyout amount,” is deeper than what meets the eye.

But what is more telling that the cracks are deeper is how government has taken on a cryptic, but aggressive approach. 

In a transition notice released Thursday, Uganda Electricity Distribution Company Limited (UEDCL) emphasised that “all Umeme operations, including the sale and distribution of electricity in Uganda will terminate on 31th March 2025, after which, “UEDCL will become the power operator effective 1^st April 2025, as per the licences”.

And as if to endorse UEDCL’s maneuvers, Energy Minister Ruth Nankabirwa posted on her X handle, formerly Twitter on Thursday that government was “in receipt of [a statement] from [Umeme] and shall ONLY execute what the Auditor General has audited, which is $118m as the buyout amount for [Umeme], before noting that we expect by 1st April 2025 [Umeme] to have handed over to [UEDCL].

“Umeme is free to petition,” she noted as if aware that Umeme is going to challenge the Auditor General’s figure.

Ms Nankabirwa’s tone suggests that the battle lines have now been drawn, but what could be holding back a full confrontation is a review of the findings of the audit report referenced in the Thursday Umeme statement, upon which, Umeme will “determine the necessary course of action, if any … update shareholders and inform them of any proposed actions, if necessary”.

From the look of things, it is going to be some interesting days ahead, as the primary beneficiaries – customers – look on in a battle where they have very little control.

Already, customers are experiencing unexplained blackouts, as the two principles – government and Umeme – puff hot and cold.

Umeme, according to the concession agreements, expects government to have paid the buyout amount within 30 days, following the end of the concession term, specifically by 31st March 2025, failure of which a penal interest will apply. 

Thus, it will be interesting to see how government quickly settles the buyout amount since the $190 million loan was only approved just over a week ago. 

Otherwise, a chaotic Umeme exist from Uganda’s electricity distribution subsector, is becoming more feasible than it had been thought – and assured by government officials – as the natural end of the concession comes to an end.