Dr Ruth Nankabirwa Ssentamu, Uganda’s Minister of Energy and Mineral Development is between a rock and hard place
HABARI DAILY I Kampala, Uganda I The Government of Uganda and Umeme, a former partner in the electricity distribution business are now reading from different record cards, following the recent peaceful handover of power to the Uganda Electricity Distribution Company Ltd (UEDCL).
The Umeme Concession for electricity distribution and sale recently came to its natural and on April 1, and the company officially handed over its operations to UEDCL, a government parastatal.
The point of departure came when Umeme submitted an estimated buyout amount of $234 million. After scrutiny by the Auditor General, Edward Akol, he submitted a report to the Speaker of Parliament and recommended the payment of only $118 million.
Inflated amount?
With an investment bill of $800m (Shs 2.9 trillion) it claims to have invested into Uganda’s electricity network over a 20-year period, Umeme definitely did not walk away empty handed when the distribution concession that has spanned two decades came to an end on March 31st.
According to documents Habari Daily has seen, Umeme has invested substations, feeders and interconnectors, transformers, network automation, new connections and smart metering.
Other areas where they invested include information and communication technology, human capacity development as well as community safety and corporate citizenship.
Peter Kaujju, the former Umeme’s former Head of Communications and Marketing confirmed that up to $850m had been invested into Uganda’s electricity sector since 2005 todate.
A former Umeme employee on duty
“Our records show that over $850 million has been since we were entrusted with the distribution sub sector in 2005. There is money that has been recovered through the tariff, but also there is money that is yet to be recovered,” he said in an interview.
He said that most of that money doesn’t belong to them as a company but to creditors.
“We have to recover that money and pay whoever has given it to us. A big chunk of it came from banks, as well as different associations. So, what they call the buyout amount is the money at the point of exit as per the agreements, and so far $120m (Shs 440 billion) was put in Umeme’s bag by the Ugandan Government as a portion of the buyout amount,” said Kaujju.
As per the agreement, the government was required to pay Umeme the money the company had not recouped from the investments it had made in Uganda’s electricity infrastructure, which is known as the buyout amount.
Patrick Bitature, the Umeme Chairman, expressed dissatisfaction with the government’s buyout offer, saying it fell short of their expectations. “This is not what we expected,” he said during the recent handover ceremony.
Diplomacy at work
But Dr Ruth Nankabirwa Ssentamu, the Minister of Energy and Mineral Development has moved in to defuse the stalemate before it escalates into a legal battle, whose verdict would be reached by the court of arbitration in London.
He said in the Auditor General’s report, it was clear that that the buyout amount wasn’t the conclusive one.
“This is because there is work that Umeme is still doing. They mentioned incomplete work worth $9.78 million, which is recognized as being work in progress. There could be another portion which will need harmonization,” she said during the recent handover ceremony.
She said they are now looking at the period of harmonization, which will last from 1st April -30 April. “The auditor General and everybody concerned will be sitting with Umeme to harmonize,” said Nankabirwa.
Ugandan taxpayers will suffer heavy interest charges if the harmonization period exceeds one month.
If Umeme is not paid on time, it will result in a 10% interest rate. for the first 30 to 45 days, increasing to 15% between 46 and 90 days. It will rise further to 20% after 91 days.
Umeme however informed the government that it will issue a Notice of Dispute over the buyout amount that it was compelled to receive which is way below its expectations.
In a recent public notice, Umeme revealed that though government has compelled it to handover the distribution rights to UECDL after payment of the $118 million, it intends to issue the notice.
What is a Notice of Dispute?
It is a formal written communication from one party to another, signaling a disagreement or issue with the terms, execution, or interpretation of a contract or other agreement’ It serves as the first step in the process of resolving the dispute.
