Uganda Secures Massive Loan to Buy Out Umeme as 20-Year Concession Ends

The government of Uganda is in negotiations with Stanbic Bank to secure a loan of at least Shs700 billion to facilitate the buyout of Umeme Limited, the country’s primary electricity distributor. The biggest percentage of the funds for the buyout is expected to be raised by Stanbic Bank, marking a significant milestone in Uganda’s efforts to take full control of its electricity distribution.

Umeme’s Compensation and Impact on Shareholders

Umeme Limited is set to receive approximately USD 200 million (Shs925.9 billion) in compensation for its investments during the concession period. This comes as good news for key stakeholders, including Patrick Bitature, Riccardo Ridolfi, and Celestino Babungi, who stand to benefit from the buyout package. The National Social Security Fund (NSSF) and other institutional and individual shareholders will also receive compensation for their investments. However, the exact amount of the buyout is still subject to confirmation after an audit by the Auditor General in consultation with Parliament.

The Government’s Plan Post-Umeme Exit

The buyout is part of a broader government strategy to streamline the energy sector. With Umeme’s 20-year concession set to expire on March 31, 2025, the Uganda Electricity Distribution Company Limited (UEDCL) will take over electricity distribution responsibilities. The government aims to leverage this move to achieve key objectives, including:

Reducing electricity tariffs to make power more affordable for households and businesses.

Expanding rural electrification to increase access to electricity in underserved regions.

Improving service delivery by enhancing efficiency and minimizing power outages.

A Look Back: Umeme’s History in Uganda

Umeme was established in 2004 when the government leased the Uganda Electricity Distribution Company Limited (UEDCL) to a consortium owned by Globeleq Holdings (56%), a subsidiary of the Commonwealth Development Corporation (CDC) of the United Kingdom, and Eskom of South Africa (44%). Eskom later withdrew in 2005, selling its shares to Globeleq Holdings, which went on to manage Umeme’s operations in Uganda.

Over the years, Umeme has played a significant role in modernizing Uganda’s electricity infrastructure. The company invested approximately USD 440 million between 2013 and 2018 to overhaul equipment, acquire new technology, and expand distribution networks.

Economic Impact of Umeme’s Operations 

Umeme’s presence in Uganda has contributed substantially to economic growth. Key benefits include:

Employment opportunities: As of 2024, Umeme had 2,502 employees, contributing directly and indirectly to job creation in Uganda’s energy sector.

Increased electricity access: The company expanded Uganda’s electricity distribution network, boosting economic productivity.

Investment in infrastructure: Through continuous upgrades, Umeme improved efficiency and reliability in power supply.

Challenges and Future Prospects

While the transition from Umeme to UEDCL presents opportunities, challenges remain. The government must ensure that the transition is smooth to prevent service disruptions. Additionally, the success of the new arrangement will depend on the government’s ability to manage the sector efficiently and maintain financial sustainability without relying excessively on borrowing.

The move to take control of electricity distribution is expected to provide long-term benefits, including lower electricity costs and improved service delivery. However, the government must also address concerns about transparency, efficiency, and financial prudence in managing the energy sector.

The buyout of Umeme Limited marks a turning point in Uganda’s electricity sector. As the government finalizes negotiations for the Shs700 billion loan from Stanbic Bank, stakeholders, including Patrick Bitature and other shareholders, anticipate fair compensation for their investments. Meanwhile, the government’s decision to hand over electricity distribution to UEDCL signals a commitment to reducing electricity tariffs and improving service delivery.

The coming months will be crucial in determining how well the transition is executed and whether it will yield the anticipated benefits for Ugandans.

UMEME Board of Directors

Patrick Bitature

Patrick is the Board Chairman of Umeme Limited and the Chairperson of the Nominations Committee. He is also a member of the Strategic Review Committee.

Selestino Babungi

Selestino is the Managing Director and member of the Board since March 2015.

Riccardo Ridolfi

He was elected a Non Executive Director on the 17th day of May, 2018. His experience derives mainly from advising corporates, sovereigns and multinational organizations in matters relating to finance, energy and foreign investment. He also matured significant experience negotiating concessions and tariffs for off-grid investments in the region.