UMEME staff at work
On October 22, this year, the Uganda Electricity Distribution Company Limited (UEDCL) presented its detailed plans for the country’s electricity supply industry, at a public hearing in Kampala called by the Electricity Regulatory Authority (ERA).
The hearing was arranged to gather the public’s view on UEDCL’s applications for: a license for the distribution of electricity in Uganda, a license for the sale and supply of electricity in Uganda plus the applicable tariff performance parameters.
The government chose UEDCL, a state company, to take over from Umeme – the company that has been distributing electricity – once its 20-year concession ends on March 31, 2025.
To do so, the company will need just over UGX 4 trillion for the three years it has applied to ERA for, starting April 1, 2025.
In this interview, UEDCL Managing Director, Paul Mwesigwa, breaks down this budget and demonstrates why he believes electricity users will appreciate UEDCL’s control of the power supply industry going forward:
What informs this budget of UGX 4.02 trillion?
The UGX 4.02 trillion will be spread over 3 years, and we are convinced it will be enough to serve our needs, which include network and non-network investment costs, direct operating and maintenance costs plus finance costs (to fund the loans).
Remember UEDCL never receives a cent from the Consolidated Fund. Our business model is a self-sustaining one, similar to that of any private entity. This means our staff and suppliers need not worry about the government not sending us money directly – since we generate our own revenues daily.
Our operations, just like loans financing, will be funded by the revenues from selling electricity.
We are lucky that the Ministry of Finance on behalf of the Government will help us acquire the loans; but it is up to us to clear them.
Where will this money be borrowed from?
We are getting money from institutional banks – both international and local banks.
These entities are set up to work with the government. On the contrary, money from individual investors would be fairly expensive and not aligned to our objectives.
Remember UEDCL intends to ensure electricity is the backbone of our economy. Whenever electricity is commercially viable, is of good quality and low-costed, the production sectors are boosted.
These are big loans to finance. How do you intend to pull it off?
We have worked out an arrangement called a business financial sustainability model; which we believe will create sustainability of the energy sector and enhance growth within the sector.
We appreciate the government of Uganda that has decided to assist us secure the funding at relatively cheap interest rates (below 10 per cent), before lending to UEDCL.
The government has assessed our governance, financial sustainability concepts plus our operational efficiencies and it has been left convinced that we shall be in position to pay back this money comfortably.
Won’t these loans adversely impact the cost of power?
Not at all. This is because the debt is estimated to be at an interest of 10 per cent and below (vis-a-vis the 20 per cent interest). That alone is a game changer; as we will save a lot.
That money saved will be used for investment into the network and it will be a benefit to the taxpayer and the population at large.
So rest assured that because we are going to borrow low-interest money, the power tariff will remain competitive.
How ready is UEDCL to handle a much larger portfolio compared to what you have been used to?
We are set; and I would think we are already there. The UEDCL team including myself, as the managing director, the chief financial officer, the chief technical officer and many others are already managing things competently. Besides we intend to expand the team.
Will this expanding team include the current Umeme staff?
Definitely. We intend to give Umeme staff first priority when recruiting new workers. You have to understand that the task that awaits us needs at least 3,175 workers. So, when we add Umeme’s 2,500 workers to the 515 currently employed at UEDCL, we will be close to that figure.
Umeme staff should not worry; we will reach out to them in January 2025 and by the end of February they will have received appointment letters.
The catch is that one’s file must be clean and devoid of any integrity issues for them to be considered for recruitment by UEDCL.
Importantly, they should fear less as regards their salaries as we are that parastatal with attractive remuneration terms.
How will the experience gained in managing other distribution licenses help when you take over from Umeme?
It should come in handy, no doubt. That is why I said our team is set for the task at hand.
UEDCL has since acquiring power concessions from Ferdsult Engineering in 2017, also taken over the same from Bundibugyo Electricity Cooperative Society (BECS), Kyegegwa Rural Energy Co-operative Society (KRECS), Pader-Abim Community Multi-Purpose Electric Co-operative Society (PACMECS) and Kilembe Investments Limited (KIL).
We took their former workers under our wing as well and together with the clientele they had been serving, no one has complained since.
Revenues from these areas has since increased, because power purchasing is easier, connecting new customers is smoother and we have fixed all the meters and transformers that were non-functional.
The technology is also improved with all the areas digitally accessible. It does not matter whether the area is Karamoja or Kasese, as we can now digitally monitor them and ascertain how much energy they are receiving and the like. We can also switch the line on or off remotely. All these additions mean our engineers are able to easily serve our customers.
Usually, these modern methods are never associated with a government entity, like ourselves.
What is the fate of the Umeme suppliers with running contracts? Some have even ordered items that may arrive after March 31, 2025.
Luckily some of these Umeme suppliers are contracted to UEDCL as well. As such they will only need to shift those materials to us instead.
Only the few who are not contracted to UEDCL may face challenges. Whatever they have already procured for Umeme but not delivered yet is likely not to be accommodated by us – I am sorry.
However, our procurement policy is open and we are always growing our suppliers’ list. As such, when we advertise for new suppliers, they should endeavour to apply.
This year we had a suppliers’ conference and in 2025, we shall host the same. Let them come and participate. Our suppliers are very happy with our terms. For instance, one can secure a loan off our contract (provided they honour the contract) and we will happily pay them within 30 days of presenting their invoice.
How much change will electricity consumers endure as the transition happens? Will the metering system change?
The meters will remain the same. At midnight, when UEDCL takes over, the client will receive a message saying, “you are not connected to UEDCL; enter this number to enable your meter to function…”
We are confident that none of the electricity consumers will find any issues seeing that we have already carried out similar exercises as noted above.
To reiterate, UEDCL has taken over five territories that were originally getting their power from private suppliers and their clients switched over to our system without any encumbrances.
Of course the distribution infrastructure like cables, transformers and any other equipment will always need to be upgraded or changed regularly to maintain steady and adequate power supply. This we have done and we will continue to do including with the larger, national licenses.
Damage to the infrastructure due to adverse weather conditions will be managed promptly as well via our thorough contingency plans.
What we have done, though, going forward is to ensure we budget enough for electricity infrastructure refurbishment. Today the electricity distribution network is wearing out, with at least 20 per cent of it needing restoration.
We hope our budget is approved by the government (regulator) to enable us replace the worn-out cables and transformers so that our clientele enjoy uninterrupted electricity supply.
We also plan to install more than one supply line everywhere so that when one line experiences a fault the area will remain connected via the other line.
Importantly, we intend to model a new state-of-the-art network, going forward.
CREDIT: Deep Earth
