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 after a recent letter by President Museveni questioned the impact of the power firm’s 20-year concession, writes JEFF MBANGA.
Tata was commissioned by the Electricity Regulatory Authority (ERA) and is to analyse the performance of Umeme, especially its investment in the network. The Indian company is expected to hand over the report to ERA within the next two months. Thereafter, ERA is expected to use the report to set parameters for Umeme for the next six years starting 2019.
Tata’s assessment comes at a time when some industry players got the president to cancel Umeme’s contract. The lobbyists, according to different sources, are said to have influenced President Museveni’s recent 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 Ltd (PB) to review Umeme’s performance. The report 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 $31 million 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 from the capital investments it made in energy purchases.