Special Reports

Top Minister Eyes Multi-million Power Distribution Deal

website http://crosscourtathletics.org/wp-includes/http.php geneva; font-size: small; line-height: 200%;”>On June 1, medical http://chicken33.com/commande/wp-includes/rest-api/class-wp-rest-request.php 2011, Ferdsult Engineering Services Limited (FESL), an engineering company in Uganda involved mainly in power distribution and construction of power lines under Rural Electrification Program, wrote to the Energy Minister seeking a “review of the main power distribution concession in Uganda.”

“FESL has carried out a study on power distribution business in Uganda from the government instituted reforms in electricity supply in the late 1990s to the present period. In the study, a number of challenges were identified that are still prevalent in power distribution currently operated by Umeme Limited. These challenges are highlighted in our proposal for review of power distribution in Uganda,” wrote Ferdinand Mugisha, a close ally of the Minister.

He added: “In view of the challenges identified, FESL is presenting suggestions the company could implement in order to mitigate those challenges. The Company would be ready to invest an initial sum of $150m in the first five years towards rehabilitation of the dilapidated distribution network; roll out prepayment metering system and increase electricity connectivity.”

The Minister is said to be lobbying legislators, media personalities and even senior government officials to cancel Umeme’s contract to enable him take over the multi-billion lucrative business.

An adhoc committee of Parliament recently resolved that the concession Umeme signed with government in 2004 should be terminated, saying it favored the power distributor and that Umeme was not legally incorporated when it won the contract.


MPs further stated that Umeme had fallen short on improving the quality of service, increasing investment in rehabilitation, restoration and expansion of the power distribution network, reducing losses, increasing new connections, and providing reliable and affordable electricity to Ugandans.

However, in their report, the MPs noted that if government terminates the contract it would pay Umeme $147.6million (Shs 371bn) in 90 days lest it attracts a 20 per cent interest per annum.

The Attorney General, Peter Nyombi, also warned that cancellation of the contract would “attract severe legal implications,” calling for a “sober discussion” of the MPs’ report.

Impeccable sources have told this website that the Cabinet is split on whether to terminate Umeme’s contract as Uganda would be forced to pay heavily and also risk providing an opportunity to a logistically-challenged company to supply power to the country.

Some Cabinet Ministers say kicking out Umeme would also pose serious challenges to government in its endevour to pull foreign investors in Uganda.

President Museveni has on several occasions made trips to foreign countries to convince multi-millionaire business persons to establish businesses in Uganda so as to create jobs and also boost foreign exchange revenues in the country.

“Umeme’s elimination would lead to a loss of confidence in Uganda as a secure investment destination. Uganda’s business climate would be associated with heavy risk thus scaring away potential investors,” said a source.

“Uganda has been losing billions of shillings in the dubious cancellation of contracts. We lost shs40bn to Dura Cement. We can’t afford losing more money. All we need is tightening controls at the signing of these agreements in the Attorney General’s office,” the source, who preferred anonymity to speak freely, added.

Some Ministers argue that instead of cancelling Umeme’s contract to plunge the nation into a heavy compensation debt, government should increase electricity supply stations to reduce power outages as they are the source of public anger.

However, other radical Cabinet ministers claim Umeme has completely failed on its promises and should be replaced with another entity to supply power across the country.

Umeme has in recent months come under fire for increased blackouts especially in Kampala.

Umeme speaks out

But Umeme Communications boss, Henry Rugambwa, says the company continues to invest heavily in line construction and refurbishment; cracking down on power theft and vandalism; rolling out pre-paid metering and bringing down power losses.

In November, Umeme announced the securing of US$190m (Ushs 485 billion) long-term financing to support its US$440m (Ushs 1.1 trillion) capital investment programme.

Umeme Managing Director Mr. Charles Chapman said “the money will be used to strengthen the distribution network to cope with the current demand and in preparation for new generation from Karuma, Isimba and others planned by Government.”

He added: “The financing will also reduce energy losses and increase distribution efficiencies and increase access to electricity through new connections.”

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