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UMEME to leave mark on power sector

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By John Mubiru

Fear of job loss by Umeme employees, fate of contractors and suppliers and the future of individual and institutional investors holding the firm’s stock is the talk of town lately. This follows the recent Government of Uganda pronouncement that it did not intend to renew the 20-year concession it handed over to Umeme in 2005. The lease is set to expire in March 2025. But as the company prepares to exit, issues of what legacy it will leave behind for its successor to emulate continue to rise. Good News newspaper takes a sneak peek into the topical issues which will dent or build the firm’s legacy as it makes its last dance on the stage.

Transition plan
Was there ever a succession plan that would ensure a smooth transition from one guard to another, without interruption to the electricity service sector in Uganda?

Is there a possibility that the Government just became a spectator and watched as Ugandans faced some of the highest power tariffs in the region?

These are some of the cardinal questions being asked in various circles and on different platforms.

The Uganda Electricity Distribution Company Ltd (UEDCL), which leased the distribution infrastructure to Umeme, is now the likely successor.

As days turn into weeks and weeks to months, time appears to be ticking so fast for Umeme, yet issues of capacity to run the distribution network whose size has tripled from the time Umeme took over, remain at the forefront.

Since Umeme’s entry, UEDCL has had a golden opportunity to revolve, grow and be able to take to the throne.

UEDCL has for a decade, been running an electricity distribution business in areas where Umeme did not reach.

Basking in near flesh memories of the devastation meted out on the power-consuming public by its predecessor–Uganda Electricity Board (UEB), the electricity consuming public is cautiously watching the proceedings.

Learning on job
UEDCL has since 2013 successfully operated in more than 74 districts that Umeme found not to be commercially viable. These include Kyenjojo, Kagadi, Moyo, Adjumani, Nakapiripirit, Moroto, among others.

It has also been playing the watchman role – monitoring on behalf of the government, the distribution network investment run by Umeme.

According to UEDCL managing director, Paul Mwesigwa, the firm has been learning on the job.

However, Mwesigwa says they are now nearing perfection and ready to take over the network once Umeme exits.

“Our technical department, which is headed by engineers has experience to manage network activities, plan and handle the logistical requirements needed to run a sophisticated countrywide network,” Mwesigwa says.

He notes that they would urgently embark of a recruitment drive to beef up their manpower once they take over the distribution role.

According to Mwesigwa, it is being envisaged that they would have to take up Umeme staff and office facilities.

Umeme has held the lease for electricity education in Uganda since 2005. (Photo/Umeme)

Shareholders
Umeme was registered as the second most traded stock on the Uganda Securities Exchange (USE) between September and December 2022.

The number of issued ordinary shares currently stand at 1.6 billion. Currently, the firm serves approximately 1.5 million customers.

About 56.7 per cent of its clients are industrial customers, 29.7 per cent are individual customers and 13.6 per cent are commercial customers.

According to USE latest figures, some of Umeme’s biggest shareholders include the National Social Security Fund with 378 million shares, Allan Gray with 240 million shares, The Rock Creek Group LP with 144 million shares, ICM Investment Management Ltd with 135 million shares, among others.

Umeme’s board chairman, Patrick Bitature, explained that should the government choose to terminate or not to renew the concession, it would have to pay any unrecovered investments made by the company within a period of 180 days.

Bitature said the pay-out would be between shs 600 and shs 700 per share, meaning government would dish out up to $350m to Umeme in a final pay out.

Contractors
During its tenure, Umeme perfected the art of contracting out sophisticated work to private firms as it maintained skeleton staff who largely played monitoring role.

According to Umeme’s Corporate Affairs Manager, Peter Kaujju, their contractors have up to 6,000 direct employees, with thousands of dependents to look after.

Although Umeme has committed to paying for all goods and services supplied to them before exiting the market, it distanced itself from guaranteeing continued employment.

This leaves the fate of the 6,000 employees hanging in balance.

Energy loss down
According to the Energy Regulatory Association of East Africa (EREA), Uganda is among the top performers in reducing energy losses in the region; an achievement attributed to Umeme.

But despite this achievement, government says the grid remains horrible. They say the hiccups hve complicated efforts to evacuate more electricity to Ugandans.

A June 2022 EREA document on EAC Electricity Sector Performance, indicates Uganda has the second lowest power leakages after Tanzania.

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