By Julius Mugaga Tukacungurwa/Umoja Standard.
Kampala, Uganda: The Ugandan government is gearing up for a significant transition in the electricity distribution sector, marking the end of Umeme’s 20-year concession. As the majority distributor, Umeme’s exit will pave the way for the Uganda Electricity Distribution Company Limited (UEDCL) to take over.
According to Eng. Ziria Tibalwa Waako, the Chief Executive Officer – Electricity Regulatory Authority (ERA), this shift is expected to reduce the cost of financing within the distribution segment, ultimately benefiting the end-user.
She noted, one of the primary objectives of this transition is to decrease the financial burden associated with Umeme’s concession. Currently, the company’s investments in the distribution network attract a 20% return on investment. In contrast, the government plans to access concessional funding, which would significantly reduce the cost of financing to around 8% or lower. This reduction will have a direct impact on the end-user tariff, making electricity more affordable for Ugandans.
The transition is also driven by the government’s decision not to renew Umeme’s concession. Instead, the Uganda Electricity Distribution Company Limited (UEDCL) will take over, ensuring that the operation, management, and care-taking of the electricity supply industry are entrusted to Ugandans. This move is expected to create employment opportunities, drive industrialization, and improve the overall well-being of society.
Key Benefits of the Transition
Reduced Cost of Financing: The government’s access to concessional funding will decrease the cost of financing, making electricity more affordable for end-users.
Increased Employment Opportunities: The transition is expected to create employment opportunities, driving industrialization and economic growth.
Improved Service Delivery: The UEDCL will prioritize reliability, ensuring that the power supply is consistent, safe, and secure.
Direct Sale of Electricity: The amended Electricity Act allows for the direct sale of electricity from generators to industries, promoting efficiency and reducing costs.
The buyout amount, estimated to be around $200 million, will be determined by the Office of the Auditor General after March 31, 2025. The government has already made provisions for the payment, with the Minister of Finance working to secure the necessary funds.
As the transition approaches, the government is committed to ensuring a seamless handover. The UEDCL is poised to take over, bringing with it a new era of efficient, reliable, and affordable electricity distribution.