India’s Tata Consulting Engineers, which is currently assessing whether Umeme Limited has satisfied government’s conditions, is expected to continue with its assignment even though a recent letter written by President Yoweri Museveni, called for the cancellation of the power firm’s 20-year concession.
According to a recent report, Tata, which was commissioned by the Electricity Regulatory Authority, is analysing the performance of Umeme, especially its investment in network. The Indian company is expected to hand over the report to ERA in the next two months, and the regulatory authority is expected to use the contents of the report to set parameters for Umeme Limited for the next six years starting 2019.
Tata’s assessment comes at a time when a number of businessmen are thought to have gotten the President’s attention to cancel Umeme’s contract. The lobbyists, according to different sources, are said to have peddled lies and half-truths, the effect of which culminated in President Museveni’s recent contract cancellation letter.
Negotiations between ERA and Umeme over new terms of its concession, which is expected to wind up in 2025, are slated to start in July this year. Some of those negotiations are expected to focus on how the two calculate the investments that are supposed to be recouped from the power tariff, which is currently a bone of contention.
The process of reviewing Umeme’s contract is critical and nearly everyone should be interested because it ultimately determines how much is paid for electricity. In 2011, ERA hired South Africa’s Parsons Brinckerhoff Africa (PTY) Ltd (PB) to review Umeme’s performance. The report produced questioned some of Umeme’s investment figures, which were to be recouped from the power tariff.
The report showed that there were less investments by Umeme than what was being factored into the tariff. Umeme disputes the contents of that report. Nevertheless, ERA used some of PB’s findings to justify its push for a modification of Umeme’s license.
The financial impact of PB’s report came to light recently when Umeme released its accounts for 2017, where it showed that it had recorded an impairment provision of more than US$31m due to the modification of its license.
The modification of Umeme’s license, which was done in May last year, means the company lost some revenue that it used to make from the capital investments it made in energy purchases from Uganda Electricity Transmission Company Limited.
Umeme’s net profit for 2017 dropped to US$9.8m from US$38.6m in 2016 partly due to the high financing costs, the sources said.
