Uganda’s government is seeking a massive loan to finance the buyout of Umeme Limited, the country’s main electricity distributor, as its 20-year concession comes to an end on March 31, 2025.
The government is negotiating with Stanbic Bank to secure a loan of at least Shs700 billion, with the biggest percentage of the money for the buyout expected to be raised by the bank.
Umeme Limited is set to receive approximately USD 200 million (Shs925.9 billion) in compensation for its investments during the time of the concession, which is good news for Patrick Bitature, Riccardo Ridolfi, Celestino Babungi and other stakeholders in the company.
This move is part of the government’s plan to take full control of the electricity distribution company, marking the end of a key revenue stream for Umeme. However, it provides funds for potential reinvestment, especially for shareholders.
Impact on Shareholders
The buyout is expected to have a significant impact on Umeme’s shareholders. With the company’s concession coming to an end, NSSF and other shareholders will receive compensation for their investments in Umeme. However, the exact amount of the buyout is still uncertain, as it will be confirmed after an audit by the Auditor General in consultation with parliament.
What Next After Umeme Exit?
The government’s decision to take over Umeme’s concession is part of its broader strategy to streamline the energy sector. The Uganda Electricity Distribution Company Limited (UEDCL) will take over electricity distribution responsibilities from Umeme, with the goal of reducing tariffs, expanding rural electrification, and improving service delivery.
Umeme’s History in Uganda
Umeme was formed in 2004 when the government of Uganda leased the Uganda Electricity Distribution Company Limited to a consortium belonging to Globeleq Holdings (56 percent), a subsidiary of the Commonwealth Development Corporation of the United Kingdom, and Eskom of South Africa (44 percent). However, Eskom later pulled out in 2005 and in 2006 sold all its shares to Globeleq Holdings.
Economic Benefits of Umeme’s Operations
Umeme’s operations have contributed significantly to Uganda’s economic growth. The company has invested heavily in the country’s energy sector, with a total of USD 440 million spent between 2013 and 2018 to overhaul equipment, buy technology, and add distribution points.
Additionally, Umeme has provided employment opportunities for thousands of Ugandans, both directly and indirectly. As of 2024, the company had a workforce of 2,502 employees.
Overall, the buyout of Umeme Limited marks a significant shift in Uganda’s energy sector. While there are challenges ahead, the government’s decision to take control of electricity distribution is expected to lead to improved services and more affordable tariffs for consumers.