UMEME seeks arbitration over alleged coercion to hand over electricity distribution to UEDCL

Kampala, (UG):- Uganda’s departing electricity distributor, UMEME Limited, has revealed that it was “compelled by the Government” to hand over the national electricity distribution system, even as disputes over its buyout compensation loom.

In a public notice dated March 30, 2025, Umeme acknowledged receiving USD 118.4 million (approximately UGX 433 billion) from the Government of Uganda. The payment was made as the officially recognized Buyout Amount, determined by the Office of the Auditor General (OAG) after a detailed audit.

While handing over its assets to UEDCL on Monday, March 31, Patrick Bitature, Chairman of Umeme, told stakeholders that the Auditor General’s verification process was essential to ensure that financial decisions were based on accurate and verified figures.

“After a detailed audit, the Auditor General finalized the buy-out amount for Umeme, ensuring financial decisions are based on verified figures and the government has already paid the agreed amount of USD 118.4 million,” Bitature said.

However, in the Sunday notice issued via its socials, Umeme maintained that this figure significantly undervalues its unrecovered infrastructure investments made over the course of its 20-year concession, which officially expired on February 28, 2025.

The company initially claimed USD 234 million, asserting that its investments in grid expansion and modernization had not been fully compensated.

Additionally, the OAG’s assessment excluded an extra USD 9.8 million still pending verification. Umeme has formally notified authorities of a dispute under Section 9.1 of the Support Agreement and is now considering pursuing arbitration in London if negotiations fail.

“Umeme disputes, amongst several things, the audited figure in the OAG’s Report,” the notice reads. It further states that “Umeme remains optimistic about resolving the matter during the 30-day mandatory good-faith negotiations period.”

However, UMEME said it is prepared to escalate the dispute to an arbitral tribunal in London if necessary. Given that Uganda is a signatory to the International Centre for the Settlement of Investment Disputes (ICSID) convention, arbitration proceedings could potentially escalate into another high-profile case for the nation, following past disputes in the oil, gas, and infrastructure sectors.

The Board for UMEME maintains that it is committed to ensuring a fair and appropriate return for its shareholders. “We are hopeful that our concerns will be addressed amicably, but we are also prepared to pursue arbitration if necessary,” the notice concludes.

Transition Amidst Disagreement

Despite the ongoing dispute, Umeme said it complied with the government’s directive to transfer the electricity distribution system to the Uganda Electricity Distribution Company Limited (UEDCL) as of March 31, 2025, and the latter will officially take over operations on April 1, 2025.

The transition comes after Umeme’s 20-year concession, which began in 2005, saw the company expand electricity access from less than 5% to over 25% of the population. Over the years, Umeme invested over USD 800 million in infrastructure, significantly improving reliability and reducing energy losses from 38% to below 15%.

Selestino Babungi, Managing Director of Umeme, Monday said that they worked closely with the Government of Uganda, UEDCL, and the Electricity Regulatory Authority (ERA) to ensure a seamless transition.

“Our goal was to ensure customers continue to access power without disruption. The grid infrastructure remains intact for continued investment and reliability,” Babungi said.

The Minister for Energy and Mineral Development, Hon. Dr. Canon Ruth Nankabirwa Ssentamu, also confirmed that Umeme’s assets have been handed over to UEDCL to ensure a smooth transition. She emphasized that former Umeme customers should now look for “UEDCL Light” on telecom menus, as “Yaka” has been replaced.

UEDCL Managing Director Mr Paul Mwesigwa assured Ugandans of the company’s commitment to uninterrupted service delivery, emphasizing that UEDCL will enhance infrastructure through immediate repairs, installation of new transformers and substations, and replacement of all faulty poles.

“We are ready to embrace the opportunities and challenges that come with taking over electricity distribution assets. Our focus will be on improving service reliability and investing in modern technology to enhance electricity distribution,” Mwesigwa said.