Umeme Limited has officially declared a dispute with the government of Uganda over the buyout amount, signaling a potential legal proceeding, if the issue is not resolved within 30 days.
Government and Umeme have 30 days – from 11 April, 2025 – within which they must resolve the dispute, failure of which the matter will head into arbitration in London.
The Concession Agreement, under which Umeme had distributed electricity in Uganda until 31st March, 2025, provides for arbitration in the event that government and Umeme fail to agree on the final buyout amount.
Thus, the public notice issued on Monday, kickstarts another long process that is expected to play out in the public for some days, weeks or months.
In the notice, Umeme noted that the dispute arises under the terms of the Support Agreement between the company and the government.
The power distributor references clauses 9.1 and 9.2 of the agreement that guides on how a dispute should be handled and also demands that Umeme must serve a formal Notice of Dispute on the Government of Uganda through the Ministry of Finance.
The dispute centres on the interpretation and payment of the buyout amount, a key component of the Concession Agreements governing Umeme’s operations in the country.
The notice was officially served on April 11, 2025.
As stipulated in the dispute resolution clauses of the Concession Agreements, both parties are required to engage in good faith negotiations for a period of 30 days in an attempt to resolve the matter.
However, if the negotiations do not yield an agreement within the stipulated timeframe – or any extended period agreed upon – the dispute will be escalated to arbitration in London.
Umeme has advised shareholders, potential investors, and the general public to exercise caution when dealing in the company’s shares and to seek professional financial advice, which is in line with Rule 36 and Rule 38 of the Uganda Securities Exchange Listing Rules, 2025, and Regulation 89 (2) & (6) of the Capital Markets (Public Offers, Listings, and Disclosures) Regulations, 2023 of Kenya.
The outcome of the dispute could have significant implications for the energy sector and investor confidence in Uganda’s privatization agreements.
Following Umeme’s decision, Uganda Securities Exchange (USE) has also extended the suspension of Umeme’s trading counter on the USE for another 30 days.
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In late March, Umeme issued a statement in which it indicated that it expected an estimated buyout amount of $ 234 million (UGX 858 billion).
The Auditor General was by then conducting an audit into Umeme investments that were key in determining the buyout amount.
Umeme had indicated that upon receiving the audit report from government, it would review the findings and determine the necessary course of action.
“Once audit is complete, Umeme is expected to update its shareholders and inform them of any proposed action. The Buyout amount is expected to be paid in 30 days following the end of the concession term, specifically March 31st, 2025,” the statement reads in part.
However, on 31 March, 2025, Umeme confirmed it had been paid $118.3 million (UGX429.2 billion), which was almost half of what the power distributor had expected.
Umeme indicated it was not satisfied with the buyout amount that had been wired on its accounts, before noting that it would formally dispute the payout within the stipulated period.
The private power distributor has also delayed publication of its financial results due to the ongoing dispute.
Umeme’s 20-year concession for electricity distribution ended on February 2025, leading to the handover of power distribution assets to UEDCL on April 1st, 2025.
An inside source at the Ministry of Energy recently revealed to the CEO East Africa Magazine that, some of Umeme’s unrecovered investments lacked supporting documents.
“We acknowledge that government didn’t pay all the funds requested for but we are not satisfied with certain submissions,” the source said.
