Uganda Plans Joint Venture for National Grid Post-Umeme Concession to Reduce Costs and Boost Energy Capacity

The Minister for Energy and Mineral Development, Ruth Nankabirwa, announced that the government plans to form a joint venture or partnership to operate the national grid after the current concession with Umeme Ltd ends. Umeme Ltd, a private power distributor, has been managing a 20-year power distribution concession since 2005, which includes a 20 percent return on investment. The government has chosen not to renew this concession, which is set to expire early next year.

Nankabirwa believes that a joint venture or partnership could be more beneficial for the government, potentially reducing electricity tariffs and avoiding the high buyout costs for a successor to Umeme Ltd. Speaking at the inauguration of the Electricity Regulatory Authority (ERA) Northern Regional offices in Gulu City, she emphasized that her Ministry is working to ensure there will be no future buyout costs after Umeme exits the sector.

The concession is scheduled to end naturally on February 28, 2025, at which point the government is expected to pay approximately $215 million (about 798 billion shillings) to cover all unrecovered capital investments by Umeme Ltd. Nankabirwa pointed out that the proposals aim to prevent another double-digit return on investment, as the Umeme Ltd concession was costly due to its commercial basis.

She suggested that after Umeme’s exit, the return on investment should be reduced to 9 percent to help lower electricity tariffs. Currently, the state distributor, Uganda Electricity Distribution Company Ltd (UEDCL), has been authorized to represent the government in the absence of a national electricity company, which her Ministry plans to establish.

A recent report by Irene Bateebe, the Permanent Secretary of the Ministry of Energy and Mineral Development, indicates that UEDCL needs US$158 million (about 586 billion shillings) to invest in the distribution system over the next three years. This would reduce the final buyout amount payable to Umeme to US$7.1 million when the concession naturally ends next March.

The government has also proposed merging UEDCL, Uganda Electricity Transmission Company, and Uganda Electricity Generation Company Ltd (UEGCL) to create a national utility company responsible for distribution, transmission, and generation.

During the commissioning ceremony in Gulu, Nankabirwa outlined the government’s energy strategy to significantly boost electricity generation by 2040, aiming to provide reliable and affordable electricity to the growing population. The government intends to generate a total of 52,481 megawatts of electricity by 2040, including plans for 1,000 megawatts of nuclear power by 2031, 5,000 megawatts of geothermal power from Kasese district, and 4,000 megawatts of solar power.

Currently, Uganda’s installed electricity capacity stands at 2,048.50 megawatts, with the complete synchronization of all six turbines at the Karuma Hydropower station to the national grid. The 600-megawatt Karuma Hydropower station, valued at $1.7 billion, has been under construction since August 2013, funded 15 percent by the Ugandan Government and 85 percent by a soft loan from the Export-Import (Exim) Bank of China. The Hydropower dam successfully passed a load rejection test this month, with its official commissioning expected in September.