Uganda’s Parliament has approved a $190 million loan from Stanbic Bank Uganda to compensate electricity distributor Umeme Limited.
The funds will cover unrecovered investments as the company’s 20-year concession nears its March 2025 expiration.
The government previously announced it would not renew the contract, opting instead to take over power distribution operations.
Since its management of Ugandan electricity distribution in 2005 Umeme invested considerable capital into the sector.
The concession agreement states that the government must pay compensation to the company regarding outstanding infrastructure investments.
Despite warnings from Parliament’s Committee on National Economy that an audit should precede the loan approval process members of Parliament continued with the decision.
The government promised that final audit results would determine the compensation amount so the company could save any remaining funds from the loan.
Government officials will manage five-year payments for the loan with both interest and principal components.
Several Ugandan legislators express debt-related worries about the rising national debt while advocating for transparent compensation practices.
The Auditor General must finalize their examination by March 31, 2025 to determine accurately the amount that needs to be paid to Umeme.
The energy sector of Uganda undergoes its most significant transformation.
Government takeover of electric power distribution has created increasing pressure for supply system optimization along with reduced tariff rates.
The state faces challenges regarding its preparedness to operate the sector independently of private sector participation.
Uganda advances in its move to transform its electricity industry after receiving the loan approval.
The governmental transition’s outcome will determine how it influences customer prices, corporate operations and investor decisions.
