International Finance Corporation earmarks $70 million for Umeme

The International Finance Corporation (IFC) has earmarked a $70 million loan for power distributor Umeme to upgrade the distribution network.

According to a 30 May IFC disclosure, the upgrade is meant to enable hasten additional connections to the grid to consume the additional power being generated.

Additionally, the loan, which is pending approval by the IFC board of directors, will be spent on safety measures, enhancing reliability and reducing commercial losses.

While IFC, a sister organisation to the World Bank, has a 2.8 per cent stake in Umeme, this latest loan it is lining for Umeme is not only a vote of confidence in the utility; it could prompt other lenders to come on board.

According to Umeme’s 2018 Annual Report, the company projects it will spend at least $450 million from 2019 to 2025 to scale and expand the distribution system to cope with new generation capacity and additional consumers.

The utility intends to finance the investments through both debt financing and shareholder equity.

In the case of debt financing, the extension of the distribution concession is critical for Umeme to mobilise the capital required for distribution network.

Umeme board chairperson, Patrick Bitature, said as much during the company’s Annual General Meeting in Kampala on May 9.

“To mobilise additional capital, the extension of the existing concession beyond 2025 becomes critical. I am pleased to note the willingness of the government to engage with the company and agree on terms of an extended concession,” Mr Bitature said then.

During the same event, Mr Richard Byarugaba, the Managing Director of the National Social Security Fund, said it was clear from Umeme’s 2018 Annual Report that the company had reduced on debt financing due to uncertainty on the concession renewal.

NSSF, which holds 23.2 per cent of the shares in Umeme, is the single largest institutional investor in the distribution company. 

President Museveni in November 2018 wrote to the Energy minister, Irene Muloni, directing her to commence negotiations on renewing Umeme’s concession.

Still, the Ministry of Energy ministry has since constituted a technical team that will engage with Umeme’s representatives.

The government side is composed of officials from the Uganda Electricity Distribution Company Limited (UEDCL) – which leased the network to Umeme in 2005, Uganda Electricity Transmission Company (UETCL) – the company that buys power from generation plants and sells it to the distribution companies, the Electricity Regulatory Authority and officials from the Finance ministry and the Attorney General’s Chambers.

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