The parliamentary Committee on National Economy has recommended a halt to the approval of a $190 million (about Shs700 billion) loan from Stanbic Bank, intended for the government's buyout of electricity distribution company, Umeme.
The committee's call is rooted in significant discrepancies in the financial figures presented by the government, prompting demands for a thorough audit.
John Ikojo, chairperson of the committee, presented the report to Parliament, outlining the committee's concerns.
MP Ikojo said given that the Auditor General has not determined the final buyout amount and considering the period remaining to come to the end of contract, the Auditor General expeditiously reconciles figures from the Electricity Regulatory Authority and that of Uganda Electricity Distribution Company Ltd to determine the final Umeme buyout cost and submit to Parliament to guide approval of the loan request.
The core of the issue lies in the fluctuating figures surrounding Umeme's buyout cost.
Mr Ikojo revealed that Umeme initially demanded Shs864.791 billion ($235,978,667), a figure significantly higher than the Shs699.938 billion established in an initial special audit report.
"In line with the Lease and Assignment Agreement, Umeme submitted a claim of $235,978,667 (Shs864.791) (which is above the $225.75 million earlier estimated by the Ministry of Energy and Mineral Development," he said.
"The draft special audit report for end of the Lease and Assignment Agreement between Umeme and UEDCL has estimated the buyout amount at $190,988,566."
Adding to the confusion, the Electricity Regulatory Authority (ERA) has presented varying estimates.
"Electricity Regulatory Authority (ERA) indicates that their initial estimate of the Umeme buy out amount in September 2023, communicated to the Ministry of Energy was $225.75 million and it has since reduced to $127.66 Million in March 2025.
The amount keeps changing based on the additional investments made by Umeme and recoveries from the end user tariffs.
The total estimated investments by Umeme as approved and verified by ERA amount to $746.798 Million inclusive of $10.84 million to be invested by end of March 2025.
"The total amount recovered by Umeme $625.22 million leaving a balance of $127.66 unrecovered,” said Ikojo.
The financial implications of the proposed loan itself have also raised red flags. Parliament was informed that the total repayment over five years would reach $235.41 million.
"The present discounted value of the loan of $213.37 million is higher than the nominal value of the loan $190.988 million," he said.
"This implies that the total future payment of the loan is costlier than the proposed amount to be borrowed in present terms."
"The total future payment of the loan will amount to $235.41 million after the loan period of 5 years. The loan is commercial since its grant element (-11.7%) is significantly lower than the concessional limit of 35%.
The loan agreement includes a 2% annual default interest rate and a 1.2% arrangement fee demanded by Stanbic Bank.
Parliamentarians have raised additional concerns about the transparency and process of the buyout. Charles Tebandeke, representing Bbaale County, called for shareholder briefings and a thorough audit.
"I do recommend that this House gives the committee ample time to scrutinize this request to totality as; The Auditor General Office be given the time requested to audit this transaction and establish the exact amount of buyout. The committee on National Economy visits all projects under UMEME. UMEME is a listed company, Ugandans who own shares in Umeme should be briefed on the status of their shores,” remarked Tebandeke.
Denis Oguzu of Maracha County questioned the government's decision to pursue a loan, highlighting the existence of alternative funding mechanisms.
"There is what we call Liquidity Facility in the Leasing and Licensing Agreement what that facility does, if Government isn’t ready to meet any obligations to Umeme, the guarantee under that Facility can actually be evoked. Up to now, we can’t understand why we have chosen to do borrowing when the option,” noted Oguzu.
He also demanded clarity on the funds held in the Escrow Account. "In the Leasing and Assignments Agreement, there is an account called the Escrow Account on which Umeme has been paying rent and other incomes.
To date, nobody in this country knows what that account is holding and yet this same agreement provides that if there are any obligations, they can be paid from that account,” said Oguzu.
Oguzu further accused some cabinet members of delaying the buyout process, despite a presidential directive.
"I have information that the President directed some people to work on this two years ago, in 2022, but they slept on job. That is why we are in a situation of emergency. You can imagine, all these documents, we received yesterday. I read through these documents the whole night, that is why I am able to raise these things,” he said.
The Umeme contract is scheduled to close on 31st march 2025.