Latest news with #Umeme
Zawya
26-05-2025
- Business
- Zawya
Uganda: Umeme suspension on USE hits investors
Umeme's continued suspension from the Uganda Securities Exchange (USE) trading floor has deepened uncertainty among investors amid lack of consensus between the power distributor and government over the final buyout amount and legal transfer of property leases to Uganda Electricity Distribution Company Ltd. The company's 20-year electricity distribution agreement expired on March 31, 2025, following the government's decision not to renew its commercial contract. Whereas Umeme handed over electricity distribution operations to power utility on April 1, 2025, the government's failure to agree on a suitable, final buyout amount with the power distributor triggered a series of negotiations that are yet to bear fruit. The USE suspended Umeme's shares from trading activity for two weeks at the beginning of April to enable the firm to secure a compromise deal with the government without causing severe distortion in its share price. But the absence of a commercial settlement from the two parties compelled the USE to extend the suspension window for an extra 30 days starting April 14. Despite lengthy, boardroom negotiations that lasted more than 40 days, a final consensus over contentious matters surrounding Umeme's exit from the power distribution arena remains elusive. Nonetheless, the USE extended the suspension period to May 31, 2025 in a decision meant to enable the utility company to finalise negotiations with the government and also publish its latest financial statements prior to resumption of trading activity. Umeme Limited's share price stood at Ush415 ($0.11) at the USE prior to its suspension from the trading floor, according to trading reports. While Umeme Limited issued a final buyout figure of $234 million, the Electricity Regulatory Authority (ERA) reportedly offered a sum of $201 million. The Auditor General's Office, an entity obliged to audit Umeme Limited's financial claims filed with the government, arrived at a final buyout amount of $118 million. Another issue of contention lies in the transfer of leases for office and residential space previously inherited by Umeme Limited in 2005 from UEDCL. Though the value of those leases is not captured in Umeme's previous financial statements, the government's stance on the transfer of those assets remains unclear. The biggest issue surrounding the negotiations is the determination of the final buyout amount within the provisions of our contract with the government. Failure to resolve this issue in the coming days will automatically lead us into arbitration proceedings. There is also an issue of legal transfer of leases for certain assets that has not been resolved. That means UEDCL cannot access those assets until the transfer issue has been resolved, even though we handed over operations some time back. But we feel it is more important to secure shareholders' funds during the negotiation process than rushing to publish financials,' said Selestino Babungi, Umeme Limited's Managing Director.'Negotiations with Umeme are still ongoing. Negotiations are negotiations! They gave us their ideas and we gave them our ideas. We want to give them an amount that reflects the outcomes of the government's audit report that was generated from their operations before the concession agreement expired. But I wouldn't encourage them to opt for arbitration because it is a bad thing. Those negotiations will not affect our budget for next financial year,' observed Patrick Ocailap, Deputy Permanent Secretary at Uganda's Finance Ministry. Umeme Limited's total investments in the electricity distribution network are estimated at $800-$900 million, a figure set to determine its final buyout amount subject to various technical factors such as asset depreciation ratios.'Investors are eagerly awaiting Umeme Limited's full-year financial results for 2024. They are hopeful about a bigger payout amount compared to what the government initially proposed. The market is filled with anticipation at this time, and we haven't received any calls from investors worried about Umeme's exit process for some time. We haven't received any market bids or offers for Umeme shares in the pipeline before the release of its financial results,' noted Calvin Bateme, an equity analyst at Crested Capital Limited.'Umeme Limited entered the industry at a difficult time when power cuts had become a nightmare to us, but has excelled on the job. It is therefore unfair for the government to indulge in a breach of its contractual obligations. This situation will affect future financing arrangements in the power sector. For example, if the government chooses to borrow money for the expansion of UETCL's network tomorrow, many investors would choose to either demand a higher interest rate on a loan facility or refuse to provide the loan altogether. Umeme Limited also made certain politically driven investments in the final year of its concession agreement in some areas, and failure to recognise them would lead to a loss of around $100 million against its buyout amount,' said an energy industry executive who requested anonymity, citing confidentiality rules.
Reuters
31-03-2025
- Business
- Reuters
Umeme receives $118 million from Uganda for unrecovered investments
KAMPALA, March 31 (Reuters) - Ugandan private power utility Umeme Limited ( opens new tab said on Monday it had received $118 million in compensation from the government for unrecovered investments, following the expiration of its monopoly rights to distribute electricity in the country. Umeme signed a 20-year concession agreement in 2005. But as it was nearing its end in 2022, the government rejected Umeme's request to renew the deal amid complaints it had been slow to expand new power connections and lower prices for consumers. here. Under the terms of Umeme's agreement, the government is required to compensate the company for any capital investments in the power distribution network that it had not recovered by the end of the concession period. Umeme said in a statement that Monday's payment represented what government auditors determined the company was owed. Umeme, however, is claiming $234 million in total unrecovered investments. It said its board remained "optimistic that the matters in dispute will be resolved during the ensuing 30-day good faith negotiations period or in any event subsequently by an arbitral tribunal in London." A spokesperson for Uganda's energy ministry was not immediately reachable for comment. Umeme's concession ended on Monday. The monopoly will now be returned to the state-owned Uganda Electricity Distribution Company Limited.
Reuters
21-03-2025
- Business
- Reuters
Ugandan parliament approves $190 million loan to pay power distributor Umeme
KAMPALA, March 21 (Reuters) - Uganda's parliament has approved a government request to borrow $190 million from Stanbic Bank ( opens new tab to compensate power distributor Umeme Limited ( opens new tab for unrecovered investments after its concession expires, the energy minister said. "Parliament has approved our request as @GovUganda (government) to borrow $190 million from Stanbic Bank for the buyout of Umeme," Ruth Nankabirwa said in a post on social media platform X late on Thursday. Umeme is listed on both the Ugandan and the neighbouring Kenyan stock exchanges, and has monopoly rights to distribute electricity in Uganda through the concession which started in 2005. The company was notified that the licence, which is due to expire at the end of this month, would not be renewed. According to the terms of the concession, however, the government must compensate Umeme for any capital investments in the power distribution network that the company has not recovered by the end of the concession period.
Reuters
19-02-2025
- Business
- Reuters
Uganda seeks to borrow $190 million to compensate power distributor
KAMPALA, Feb 19 (Reuters) - Uganda is seeking to borrow $190 million from Stanbic Bank to compensate power distributor Umeme Limited ( opens new tab for its investments in the national grid after its concession expires next month, a senior finance ministry official said. Umeme, which is listed on both Uganda and the neighbouring Kenyan bourses, has been running a power concession in Uganda that started in 2005. The Ugandan government declined Umeme's request to extend its 20-year concession that expires next month. The concession's terms require the government to pay Umeme all unrecovered capital investments when the agreement ends. State Minister for Finance Henry Musasizi has sent to parliament a request to allow the government to borrow the money, he said in a post on social media platform X late on Tuesday.
