Uganda: Umeme agreement was badly done - government

After keeping lips tight for as long as the deal has existed, government has finally admitted that the 2004 Concession Agreement with Umeme Ltd, is a ‘liability’ and that the State doled out Shs1 trillion in just two years to electricity companies.

Mr Aston Kajara, the state minister for privatisation, yesterday told the parliamentary Ad hoc Committee on Energy that the money was for loss compensation, subsidies and rebates to Umeme and other electricity companies between 2006 and 2008.

He added that the impact of the subsidies on the economy was ‘grave’ but said without them domestic consumers of power would pay Shs1,000 per unit of energy.

Bad agreement

“This agreement is bad. The negotiators caused a liability to the Government. Luckily, the ‘safety exit’ would be a review of the agreements and set our terms,” said Mr Kajara.

He was appearing before the committee to explain how much the government had paid as loss compensation, subsidies and rebates to Umeme and other electricity firms between 2006 and 2011.

The Umeme Concession Agreements are due for review in February next year.

Should the government choose to terminate the 20-year concession agreement, Ugandans would have to settle the Buy-Out Amount, which according to the agreements, would be calculated as the unrecoverable amount Umeme would claim to have invested multiplied by 120 per cent.

But if Umeme voted for the termination, the amount would be the unrecoverable investment multiplied by 80 per cent, which MPs say is more favourable to the utility than to the country.

Mr Jacob Oboth, the committee chairperson, said the circumstances prevailing at the time of negotiating the agreements ‘could have had an influence on the negotiators’.

Mr Oboth, however, said even though Uganda was experiencing a power crisis, given the low power production, the negotiators might not have read the agreements before committing pen to paper.

Daily Monitor