After negotiations over compensation broke down at the end of the company’s 20-year concession, electricity distributor Umeme Ltd. has taken the Government of Uganda to an international arbitration court in London.
The government was required by the 2005 concession agreement to pay Umeme back for investments it had made in Uganda’s electrical distribution system that had not been recouped through revenue or tariffs.
Following an internal assessment, the government agreed to pay $118 million, and an additional $9 million is currently being verified. Umeme, however, maintains that its audited records support a $293 million claim, which is almost three times the sum the state has admitted.
Months of talks ended without a settlement being reached by either party. In order to seek legal recourse, Umeme has now filed for international arbitration in London, which is the location specified in the concession terms.
UEDCL Assumes Control
The Uganda Electricity Distribution Company Limited (UEDCL), a state-owned company, has formally assumed responsibility for electricity distribution activities following Umeme’s departure. For the first time in twenty years, the transition represents a complete return to public management of power distribution.
Although UEDCL has assured the public that the handover will go smoothly, stakeholders are closely monitoring how the government handles the arbitration case, which could have an impact on investor confidence and the financial stability of the energy sector.
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