A heated dispute has emerged between Umeme Limited and the Ugandan government over the buyout amount following the expiry of Umeme’s 20-year concession in power distribution.
The government, through a loan from Stanbic Bank, offered Umeme USD118 million, approximately Shs432 billion as the buyout price.
However, Umeme’s Board of Directors, which includes Selestino Babungi, Gerald Majera Ssendawula, Dr. Silver Mugisha, Ricardo Ridolfi, Anthony Marsh, Florence Namatta, Stephen Emasu, Patrick Bitature, and Andrew Buglass, has rejected this amount, deeming it insufficient, and demands more money.
Background of the Dispute
The controversy surrounding the buyout amount has been brewing for some time. Initially, the buyout price was estimated at USD190 million (over Shs700 billion), but an audit by the Auditor General Edward Okol reduced it to USD118 million over Shs432 billion.
But Umeme’s expectations were higher, with estimates suggesting USD339 million, over Shs124 billion as of December 2023, and a projected USD283 million, over Shs1.3 trillion by March 2025.
Implications for Shareholders
The ongoing dispute has created uncertainty for Umeme shareholders. Following the takeover by Uganda Electricity Distribution Company Limited (UEDCL), the Uganda Securities Exchange (USE) suspended Umeme’s trading counter.
The suspension, initially for two weeks, has been extended for an additional 30 days, effective April 14, 2025, to allow for a good faith settlement between Umeme and the government. If no agreement is reached, the matter will be referred to arbitration in London.
Potential Outcomes
The dispute’s resolution will significantly impact Umeme shareholders and the future of power distribution in Uganda, and the possible outcomes include:
Negotiated Settlement
Umeme and the government may reach a mutually acceptable agreement, potentially involving additional compensation.
Arbitration
If negotiations fail, the dispute will be referred to arbitration in London, which could lead to a binding decision, although this may take longer than anticipated.
Impact on UEDCL
The outcome may affect the UEDCL’s plans to revamp the distribution network, which requires significant investment.
The dispute between Umeme and the government, therefore, raises questions about the future of power distribution in Uganda and the implications for shareholders.
As the situation unfolds, stakeholders will be closely watching for developments that may impact the country’s energy sector.