In a significant financial move, the government has announced its intention to secure a substantial loan amounting to Shs2.920 trillion. The purpose of this substantial borrowing is to facilitate the planned takeover of the Umeme concession.
The revelation was made by Emmanuel Otaala, Chairperson of Parliament’s Natural Resources Committee who on Monday informed the Budget Committee that the Government is in talks to secure external funding worth US$765.75 Mn (Shs2.920Trn) to facilitate the takeover of the Umeme concession that is slated to end in March 2025.
“Government should avail the necessary financing to ensure smooth transition and takeover from Umeme. The US$765.75M that UEDCL requires, it says it has been consulting various financial institutions in the world to support it in this cause and they are positive about it. So, this money will not be coming from the Government directly, but from external funding,” Otaala said.
Uganda Electricity Distribution Company Limited (UEDCL), wants US$540M (Shs2.059Trn), of which an initial investment of US$190Mn is required during the takeover process, while the estimated buyout amount of US$225.75Mn (Shs860.806Bn) is due to Umeme.
Umeme, a company dual-listed on both the Ugandan and Kenyan stock exchanges, has been at the helm of Uganda’s power distribution under a 20-year concession that commenced in 2005. However, with the expiration of this concession looming on the horizon in 2025, the Ugandan government opted not to grant Umeme an extension, a decision that marks a significant shift in the nation’s energy landscape.
In adherence to the concession terms, the conclusion of the agreement mandates the government to reimburse Umeme for all unrecovered capital investments. Yet, in a turn of events, the net value of Umeme Limited’s assets experienced a notable decline by Sh9.96 billion in the twelve months leading up to June 2023. This downturn has implications for potential capital gains that shareholders might have anticipated upon the conclusion of the concession.
Come March 2025, when the concession officially concludes, Umeme’s assets and operations are slated to be returned to the Ugandan Government. The compensation for private shareholders will be determined based on the net asset value, with an additional premium of five per cent.
Notably, factors such as amortization and corporate transfers have been steadily diminishing the present value of Umeme’s assets as the company inches towards the eventual handover back to the State. This unfolding scenario prompts contemplation on the financial intricacies and future implications surrounding this transition of power distribution from a private entity back into the hands of the Ugandan government.
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