Regional Tier for the Kingdom of Buganda was refused many years ago.

 

 With such an arrangement there is no need to have a Lukiiko , or use the name Katikkiro or refer to Kabaka.

 

M/s Mpanga of Buganda Kingdom

 

They can call him Governor or District Head and seat him anywhere but not in Bulange.

 

We may be back to the same old arguments.

 

On 15 Feb 2017

 

By Haji Ahmed,

  1. Central gov't will cede specified powers and rights to the Buganda Kingdom.
  2. The citizens of Buganda Kingdom (who are these?) will elect a Lukiko (parliament) which will make laws to govern Buganda Kingdom.
  3. The Lukiiko will appoint the Katikioro (Prime Minister or President) who will head a government or administration. .

4.The Katikioro  is accountable to the Lukiiko, and the Lukiiko is accountable to Uganda Parliament.

 

So where does this leave the Kabaka? What are his constitutional roles: are they spelt out in the Constitution you keep going on and on about?

 

 

Buganda Government should be restored first with a Katikkiro with

executive powers and Lukiiko with legislative powers, which shall form

a Buganda Land Board, in accordance with the constituion, which will

manage Lubiri on behalf of the Kabaka, who, according to 1955

constitution holds official mailo and public land in Buganda, in

people;s trust.

 

 Mayiga is already a walking "former " Katikkiro.  A lot has happened!

 

 "In tribute to the United Kingdom and the Republic of Uganda, two bastions

 of strength in a world filled with strife, discrimination and terrorism."

 

*Buganda Lukiiko*,

 Katikkiro Mayiga seemed confident that members would rubberstamp his

 plans

 to lease the 132 year old national and cultural palace of the Kabaka of

 Buganda (*Mengo Lubiri*) to foreigners. He spent over an hour of reverse

 psychology, giving examples of how “naturally short-sighted Baganda” fail

 to appreciate any Katikkiro who introduces modernity to Buganda.  At the end, Mr. Mayiga confidently declared that, ultimately, nothing will stop

 his plans. However, his confidence seemed to evaporate when one Mrs.

 Joyce

 Mpanga got the microphone.

 In his marathon speech, Mr. Mayiga made a few highly contradictory

 statements that may have disturbed Mrs. Joyce Mpanga.  For example, as

 usual, Mayiga claimed that Kabaka Mutebi made the decision to lease Mengo

 Lubiri but, sensing negative reception, he later changed to, “The

 decision

 to re-develop Lubiri was made by the *Bataka Supreme Council* at the time

 government returned it.” Also, he aggressively defended construction of a

 hospital and conference facilities in Lubiri but later insisted that

 everything presented by Mengo so far were just concepts, not real plans.

 He

 blamed the press for saying that the project photos that Mengo

 distributed

 in Serena Hotel or on its Facebook page were real plans. He explained,

 “Those picture were just images downloaded from the Internet; one was, I

 think, the American white house.”

After Mayiga finished his long speech, one of the most intelligent,

 well-educated and knowledgeable Baganda alive, Mrs. Joyce Mpanga, threw

 down a “roadblock” against his scheme. When she got a chance to respond

 to

 Mr. Mayiga’s speech, Mpanga systematically, and with some humor,

explained

 why the Katikkiro’s  plans for Mengo Lubiri were poorly reasoned, not

 well

 informed by Buganda history or culture and are dangerous, even to Kabaka

 Mutebi’s reign.

 In his speech, Mr. Mayiga had spoken in the style of a non-Muganda when

 he

 said, “I can never understand Baganda” and claimed that Baganda are

 short-sighted because they opposed former Katikkiros Kawalya Kaggwa “for> bringing electricity” and “killed Martin Nsibirwa for donating Buganda> land> for the now glorious Makerere University”.  He even claimed that the same

 short-sighted Baganda complained when Ssekabaka Muteesa II brought horses

 to Mengo Lubiri, since they were used to cows.

 Mrs. Mpanga, mother of Buganda Attorney General David Mpanga and Kabaka’s

 Private Secretary Peter Mpanga went straight to the point after thanking

 the Lukiiko speaker. She opened with, “People tell me, sometimes in

 whispers, and others keep phoning me, some anonymously, saying that I

 must

 stop my lawyer sons from selling Kabaka’s palace. They tell me that the

 Katikkiro is my son, the second Katikkiro my son and the other lawyers

 are

 also my sons.

 “It appears that some of these people think that I have easy access to

 Kabaka, which [these days] is impossible. One even warned that [Baganda]

 may replace Kabaka Mutebi, as they have done to other Kabakas in the> past.

 

 The government of Uganda has procured armoured police vehicles for the 2016 General Elections from South Africa:
 
 
 
 

For whom are the youths in UGANDA trained in Masindi at,

 8 September, 2014

In January, about 700 Makerere University students were trained as crime preventers at the same school. The criterion used to select these students is not elaborate and is exclusive to those who are either in the patriotic clubs or the youth league of the National Resistance Movement (NRM).

Several student groups have attended these courses at Kabalye. Another one of about 2,400 students from several universities and tertiary institution was passed out last week.

We are told the course content includes ideological orientation, self-defence, martial arts, and security skills, among others. I am not sure of how this programme is supposed to add value onto the lives of students, and Ugandans as a whole! Further, I don’t know whether the police budget should be diverted to this kind of exercise.

What exactly does a crime preventer do? Is he/she a security operative who gathers information on certain offenders and then confront them? Is this a voluntary exercise or it is a paid- for, job? If so, it, therefore, calls for certain regulations, obligations and responsibilities.

Is this an auxiliary group to the security organs? Are these students specifically trained to prevent crimes in universities or in the entire country? Sometimes, armed people commit crimes. So, will the crime preventer be armed in order to counter any armed attack?  It is not clear whether all the national tertiary institutions will be equipped with crime preventers. Once, the dubious Kiboko squad described itself as crime preventers.

So, should Ugandans worry that another dodgy group is being prepared, perhaps for the expected intense political activity in 2016?

What is the relationship between these crime preventers and the police, army, and other security agencies in the country? Many of these questions still remain unanswered.  Inspector General of Police Kale Kayihura says the course is good because it has equipped the young people with ideological direction.

The Oxford Advanced Learners Dictionary defines ideology as a system of ideas and ideals, especially one that forms the basis of economic or political theory and policy. It further defines it as the ideas and manner of thinking characteristic of a group, social class, or individual. So, if the course is supposed to orientate the students in ideology, in whose ideology are they inculcated? Who determines the correct ideology, and anyway, what ideology was being marketed to these students?

Again, there is a trend that one cannot be a complete cadre or patriot without being equipped with military skills. Everything in Uganda is being militarised. Agriculture has to be run by the military. The police have to be steered by a military man. The immigration and national identification process has to be conducted by the military. A military man runs the highest office in the land.

Ruling party MPs have to conduct their annual retreat in a semi-military camp. Early this year, they (MPs) were all clad in attires that resembled military uniforms! Even the beauty contest is a candidate for military takeover! At their pass-out, the youths gleefully displayed their skills of dismantling and assembling guns. Others performed martial art drills.

Some of these youths are, actually, mere opportunists. They are using this training as a pedestal to clutch on better things in future. Many of them have realised that keeping closer to the party means instant wealth. They have seen how those youths who originally backed Amama Mbabazi for president, but later crossed to President Museveni’s camp, have become instant millionaires.

They know that when time comes for recruiting mobilisers for votes in 2016, priority will be given to those who trained at Kabalye.  Instant, and sometimes unexplained, wealth has become the major motivation of joining NRM programmes. I don’t know the exact ideological direction of the NRM. Even if one asked these youths what NRM’s ideology is, the likelihood is that the answer would not be given. And if it is given, the one who asks the question would remain uninformed.

This exercise in Kabalye is as inoperable as the youth representation in Parliament. The lives of the youth in Uganda have not improved as a consequence of being represented in Parliament. I have not seen bills being sponsored by youth MPs, specifically targeting issues that youths grapple with.

The irony is that the very youths who have trained in crime prevention may be the harbingers of crime. There is a temptation to look at crime as mainly a physical thing such as murder, treason, theft and rape. We forget that there is an unemployed youth likely to engage in forgery in order to access someone else’s account in the bank.

And more threatening is the fact that honesty is no longer something taken seriously, as the strength of youths. So, the economic pressures, which Kabalye never addressed, may turn these cadres of crime prevention into victims of the very mischief they intended to cure. It would be stretching the restraint of a hungry hyena to entrust it with the servicing of a loaded butchery. 

 

pmkatunzi@

observer.

ug

Twitter: @piuskm

 

 

THE EUROPEAN UNION IS WAKING UP THE TROPICAL AFRICAN COUNTRIES TO THE GREAT POTENTIAL OF SOLAR POWER:

December 14, 2016

Written by Justus Lyatuu

If Uganda is to provide cheap and clean electricity, the government of Uganda should invest more in solar technology, a European Union envoy has said.

Kristian Schmidt, the head of delegation at the European Union in Uganda, said the country is a good place to invest in solar energy, and that the private sector should be supported in order to make more investments.

Speaking during the inauguration of a 10MW solar plant in Soroti recently, Schmidt observed that solar energy is an alternative to hydroelectric power, which is expensive to set up and takes longer to be connected to the grid.

“Solar energy is a good alternative to hydropower that fluctuates with water availability. If the grid stability is enhanced, allowing more solar plants to be connected to the grid, we are sure this technology will represent a very good option for affordable energy in Uganda,” he said.

 

Schmidt said the regulatory framework should be conducive to attract more investments.

“It is great that this is now triggering private sector interest in solar power generation. The European Union is proud that our grant contribution ensures the realisation of the Soroti solar plant, and I hope this is only just the beginning for many more to come,” he said of the project, which is the largest in East Africa.

 

This is one of the great solar project in the tropical regions of Teso, Uganda, in East Africa

 

 

Christophe Fleurence, the vice president of Eren Renewable Energy, said the country has vast renewable energy resources for energy production and solar alone can produce an estimated 30 per cent of the country’s energy needs.

Simon D’Ujanga, the minister of state for Energy and Mineral Development, said Uganda is set to fast-track up to 15 small-scale renewable energy generation projects (1MW-20MW).

“We have policies to attract more investors in the sector. While we focus on hydroelectric investments, the private sector should come and take on smaller renewable energy,” he said.

THE PROJECT

The $19 million Soroti solar plant is part-funded by the European Union under the Africa Infrastructure Trust Fund through the GET FiT solar facility, an initiative between the government and development partners.

The plant is made up of 32,680 photovoltaic panels. It is the first grid-connected solar plant and will generate clean, low-carbon, sustainable electricity to 40,000 homes, schools and businesses in the area.

The project was developed under the Global Energy Transfer Feed in Tariff (“GET FiT”), a support scheme for renewable energy projects managed by Germany’s KfW development bank in partnership with Uganda’s Electricity Regulatory Agency (ERA) and funded by Norway, Germany, the United Kingdom and the European Union.

Eng. Ziria Tibalwa, ERA’s chief executive officer, said the GET FiT programme helps renewable energy sources become affordable.

“The project [in Soroti] is financed by a mix of debt and equity with the senior debt facility being provided by the Netherlands Development Bank and the Emerging Africa Infrastructure Fund (EAIF); as government, we will continue getting partnerships to increase our electricity on the national grid,” she said.

Uganda has joined countries such as Rwanda and Kenya, which have commissioned similar solar projects with an aim of improving quality and reliability of power to spur development.

Vahid Fotuhi, the managing director of Access Power Uganda Ltd, the firm that constructed the Soroti project, said that EU contributed $9 million while Access Power and Eren Renewable Energy contributed $10 million. The two companies will manage the project for 20 years.

 

Nb

The Teso communal lands are in danger of an encroaching Northern desert climate from the Sahara. Promoting a natural forest cover around the peripheral of this wonderful project would up grade this expensive environmental project over the next 20 years! Solar energy is best than nuclear and hydro energy for the poor countries subsisting on the Equator of Planet Earth.

 

In Tropical Uganda, the very powerful solar energy that exists regularly in this country, has just brought in new foreign investors:

By Vision Reporter

 

Added 28th November 2016

 

 President Yoweri Museveni with Fenix International delegation at State House, Entebbe.

Fenix International, the largest provider of off-grid solar in Uganda has presented the ReadyPay solar power system and their plan to bring renewable energy to 1 million households in Uganda to President Yoweri Museveni.

 

The President promised to offer greater tax exemptions on solar to ensure more than 6 million Ugandans can benefit from safe, affordable ReadyPay solar power.

CEO Lyndsay Handler, demonstrated to the President how a customer can benefit from bright lights plus phone charging, radio and more even if they are living off-grid without mains power.

She also revealed that the ReadyPay solar power system allows customers to make a small deposit from just 49,000/- to take the system home and then they can make payments from just 500/- per day over mobile money to complete payment over a number of years.

Handler said: "ReadyPay Solar transforms quality of life in two ways. First, ReadyPay eliminates the need for dangerous kerosene lamps, improves air quality in the home and increases time students have to read at night.  Second, ReadyPay payments are flexible and more affordable than kerosene and candles, enabling Ugandans to save money on energy and build a credit score with Fenix that will unlock a wider world of financing."

 President Museveni urged Fenix to use their unique technology to develop a solar-powered water pump in Uganda, stating that if solar-power water pumps are made in Uganda, the Government will make them accessible for farmers, especially in rural areas.

He said this would help rural farmers tend to their crops and improve harvest production.

“I encourage you to domesticate the technology to manufacture solar-powered water pumps. We want to solve the problem of irrigation using solar-powered water pumps to stabilize agriculture,” he told the Fenix delegation.

 
An electrician works on a transformer

The feud between power distributor Umeme and Electricity Regulatory Authority over unrecognized investments has deepened, with the former saying the regulator's behaviour has hampered its ability to mobilise funds internally.

In its application letter to ERA for the 2016 power tariff, Umeme wants the money it spent between 2009 and 2013 factored into the tariff for it to recover its investments.

Umeme says, in general, the investments unrecognized are $35.7m (Shs 112bn). For the most part of this year, Umeme has written numerous letters to the regulator but it says the latter’s response has often been delayed or sometimes not coming at all.

“Umeme disagrees with the authority’s decision to disallow investments on low-voltage lines, as the allocation under direct operating and maintenance costs (DOMC) is inadequate to cater for the full requirement of low-voltage upgrades to restore and improve the distribution network,” the power distributor writes.

“It should be noted that these assets exist on the network and benefits have accrued to the consumers. And, therefore, Umeme requests that these investments are rightfully included in the company’s asset base for purposes of computing the return on investment and that the associated loss of revenues for the periods is recognized,” one letter reads.

NEVER RECOGNISED

Umeme says between 2009 and 2011, investments worth $8.7m were never recognised. It adds that in 2012 and 2013, it invested $86.5m. And when determining this year’s tariff, the regulator included only $70.7m, disputing the remaining $15.4m.

When it submitted documents to show that it had actually invested the $15.4m, it took the regulator two months to respond, Umeme alleges. Even when it responded, ERA made matters worse in a letter dated June 10, 2015, in which it cut the investments recognised to $59.5m only.

“The amount disallowed here is $27m,” writes Umeme, adding that this amount represents 30 per cent of the initial investment of $85.6m made in 2012 and 2013 period.

“Umeme reiterates that the above behaviour is inconsistent with the fact that the investments have been completed and benefits have accrued to the respective customers,” Umeme says.

“[This] undermines the company’s investment program and ability to raise internally-generated funds to improve reliability and meet the growth requirements of the distribution network.

“Umeme, therefore, requests the authority to review the above investments and include them in the company’s rate base.”

ERA chief executive officer Dr Benon Mutambi told The Observer in an interview last month that the authority’s relationship with Umeme was “a normal arm's-length.”

“It is a well-known fact that a regulator will always have to stand up sometimes and disappoint the various stakeholders,” Mutambi said. “It is not the intention of the regulator to disappoint, but the regulator is accountable to the public and all the other stakeholders. Accountability requires that whatever I am going to allow is going to be supported by convincing evidence... When it comes to their capital investments, we always want to make sure that there is no double-counting; that the money we allowed for repairs is actually used for that purpose. ”

“Where the justification provided by a licensee is not convincing enough, it is the duty of the regulator not to allow that kind of cost to be paid by the consumers of the electricity… But of course there are other arguments. One of the examples is a transformer blowing up before its useful life.

So the question is: when it is replaced, who is responsible? Is it a capital investment or a repairs and maintenance? Then we also have a debate of why didn’t the company comprehensively insure those assets so that when those unfortunate events happen, the company is compensated. Our argument is that the consumer is not an insurer to the company,” Mutambi added.

This is not the first time Umeme and ERA are disagreeing on issues concerning the industry. Before the Electricity Disputes Tribunal (EDT), the two institutions have, for a couple of years, been battling the manner in which power tariffs should be set. ERA accuses Umeme of exploiting certain privileges – being allowed to factor all its costs within the power tariff – to ‘fleece’ Ugandans.

The regulator says, for instance, sometimes Umeme’s submission of the amount of money it intends to pay government in income tax is higher than what it actually reimburses to Uganda Revenue Authority.

For instance, ERA says that while in 2008 Umeme wrote to government that it would pay a tax of Shs 12.1bn that year, only Shs 2.9bn was received by the tax body even after the money had been integrated into the tariff.

In 2011, Umeme said it would pay Shs 18.8bn in income tax, but URA received Shs 3.5bn. The regulator says in doing so, Umeme subjected Ugandans to high power tariffs yet more money went into its coffers. The tribunal is yet to resolve these matters.

On unrecognized investments, Mutambi said: “We are not saying that the investments were not done; we are simply saying that we are not convinced by the justification, as of now provided by Umeme that those investments should be capitalized and should, therefore, find themselves within the tariff.”

amwesigwa@observer.ug

How Umeme made free money from River Kiira and Lake Nalubaale, but could later face tougher times:

Tuesday, 28 October 2014
 
Written by Jeff Mbanga
 
  • ERA recovers Shs 37bn in tax revenue
  • Umeme makes an extra Shs 32bn on additional power sales
  • Umeme says it could lose $50 million in seven years if ERA wins
  • ERA claims Umeme Holdings share-sale violates license requirements
After years of raking in free money through inflated projections of some of its costs, Umeme is finding it difficult to make easy money, with the company in the process of making one last stand against government’s proposals on how electricity tariffs - the power supplier’s main cash cow - should be set.
The Observer has looked at dozens of documents – some of which are labeled ‘strictly confidential’ – that show the Electricity Regulatory Authority’s dissatisfaction over how Umeme made free money, even when the company enjoyed a cool 20 per cent investment return over and above its costs.
That tension has boiled over to the Electricity Disputes Tribunal, where the two institutions have for the last two years contested the manner in which power tariffs should be set. The tribunal resumes tomorrow after a three-week break, and could have the matter resolved before the end of this year.
At the centre of the dispute are two items that ERA says Umeme has exploited to set higher power tariffs for its own financial benefit: the income tax and power purchases. As part of the agreement with government, Umeme is allowed to factor all its costs within the power tariff. The company sets the tariff by making projections of its costs based on what it spent the previous year. It sends that figure to ERA for approval.
However, ERA discovered that Umeme’s submission of the amount it intended to pay in, for example, income tax for a given year, which it factored in the electricity tariff, was usually higher than what it reimbursed government, leaving Ugandans with the burden of paying higher power bills.
The tax numbers are startling. For example, in 2008, Umeme wrote to government and said it expected to pay a tax of Shs 12.1bn that year, which it wanted integrated into the power tariff. Instead, Umeme paid only Shs 2.9bn that year, with the rest of the money going to its coffers. The widest variance, however, came in 2011. In that year, Umeme said it would pay Shs 18.8bn in income tax.
But when URA finally received Umeme’s income tax filings for that year, the company had only paid Shs 3.5bn, while the other Shs 15.3bn had been pocketed. By the time ERA added up the tax numbers from 2005, when Umeme’s 20-year concession started, to 2011, Umeme had made an extra Shs 37.3bn in revenue from setting a higher tax within the power tariff. Umeme disputes these numbers, and says the figure is lower.
To be fair, Umeme cannot be faulted for failing to come up with the exact projection of its costs. However, the margin of error in the figures it presented was usually so wide it pointed to potential abuse by the power firm over the privilege it enjoyed.
On energy purchases, Umeme used almost a similar trick. ERA has found out that over the years, Umeme had purchased more power than it had projected. ERA has recovered up to Shs 32bn ($11.8m) from Umeme’s accounts as a result of an increase in the energy purchase the company had made.
If ERA had not intervened, the authority said Umeme would have placed higher electricity tariffs and made Shs 351bn ($130m) through energy purchases between 2013 and 2018. Ugandans pay one of the highest power tariffs in Sub Saharan Africa. Domestic consumers pay a tariff of Shs 518 per KwH, which is $0.19, far higher than the Sub Saharan Africa average of $0.13.
Uganda produces about 800MW of power today, which is shared by less than 15 per cent of the population, far below the Sub Saharan average of 24 per cent, according to the World Bank. At the tribunal tomorrow, ERA, through its lawyers, Ligomarc Advocates, will push for amendments on Umeme’s license, especially on how the tariff is set and the inclusion of a reconciliation mechanism if there is a difference in the financial figures of the income tax and energy purchases.
The reconciliation mechanism would offer ERA the power to always claw back any revenues that Umeme made outside what it had projected, and probably bring electricity tariffs down. The lawyers are expected to argue that the revenues Umeme is reaping from the income tax and energy purchases are not special benefits for meeting its performance targets.
“The use of projections without providing for reconciliation mechanisms results in an unjustified windfall for [Umeme] whenever the actual outturn exceeds the projection. This creates an additional and unjustified burden with the tariff to the consumer,” Benon Mutambi, the chief executive officer of ERA, wrote in a witness statement, dated March 7, 2014.
Umeme is expected to make strong objections. The company says it is acting within its license requirements. If anything, Umeme warns of dire consequences if ERA continues to dip its hands into this revenue kitty. In its application to modify its licence to ERA, published in February this year, Umeme complained that ERA’s continued pursuit of those extra revenues leaves it with two options: “forgo an equivalent amount of the capital investment, or borrow more money.
The combined impact of these modifications, in increasing Umeme’s costs and reducing its revenues from future addition electricity sales, places a serious strain on Umeme’s ability to raise sufficient debt finance, on commercially reasonable terms.”
Life could turn out tougher for Umeme given that the escrow account, one of the company’s fallback positions remains empty because the Uganda Electricity Distribution Company Limited is too broke to meet its part of the deal of financing that account.
In fact, Mutambi, in September 2013, accused Umeme for illegally tapping into the escrow account after the company argued that it had not recovered all its costs. He said Umeme had been compensated for its costs in the tariff, and therefore it was “erroneous” for the utility firm to withdraw money from the escrow account as that amounted to double recovery.

History

So, how did Umeme find itself with all these benefits? Why did ERA allow all the things it accuses Umeme of to go on for so long?
The answers can be traced back to the first few years of Umeme’s operations in Uganda. Before Umeme came to Uganda, the energy industry had been mired in all sorts of scandals. The Uganda Electricity Board, then the managing body for the sector, was saddled with high debts, poor management, and political interference.
On top of that, UEB was the regulator, the generator, and distributor of power, roles that pointed to a conflict of interest. UEB was also choking from a huge number of redundant staff, so much so that when the body was unbundled into three separate companies in 2001, more than 300 staff were laid off. Power theft was at its most rampant, while a number of government institutions blatantly refused to clear their power bills.
Even the available power, which was exposed to theft, was not enough, with less than 5 per cent of the population getting access to electricity. Matters were not made any easier when AES, the American firm that was awarded the deal to build the country’s biggest power plant, the 250MW Bujagali project, in 2001, pulled out two years later after being implicated in a corruption scandal back home.
The World Bank, which had agreed to finance the plant, also pulled out of the project. With the collapse of the Bujagali project, government was desperate to reduce its role in the energy sector and hand that task to a private investor.
In March 2005, Umeme was handed a 20-year concession to be Uganda’s main power distributor. Umeme had just been created 10 months earlier through a consortium between Eskom Enterprise Limited PTY and Globeleq (Conco) Holdings of Bermuda.
In 2006, Uganda faced its biggest power shortage. A long spell of drought led to a drop in water levels at Lake Victoria, where much of the power generation was taking placing. Power generation dropped by more than a half. A schedule to ration power supply was instituted. Some areas went an entire day without power.
A number of factories that could not stand this madness relocated to other countries where power was available. The power problem almost brought Uganda’s economy to its knees. It is at that point that Umeme threatened government that it would terminate the concession and leave the country if the power shortage, which threatened its revenue streams, continued.
Uganda was in a desperate corner. The country made some concessions to Umeme, which, it now turns out, the company would later use to its advantage.

Special provisions

With its business at risk, Umeme proposed some amendments to its supply license back in 2006. Umeme requested government to give it the freedom to make forecasts on energy purchases, which it would factor in the power tariff.
The deal was simple: if government failed to generate enough power that Umeme needed to supply and make its return on investment, the company would be compensated. However, if power generation improved beyond what Umeme had projected, the consumers would be relieved through lower tariffs. Government agreed to the conditions.
ERA, by that time, was barely five years old. The regulation of the sector was weak. And they were about to get a painful lesson from a company that had just received more than enough freedom to set power tariffs.

Power supply improves

Between 2006 and 2010, Uganda was in a race to save its economy from buckling under the weight of less hydroelectricity. The country invited companies such as Aggreko, Jacobsen and Electromaxx to produce the far more expensive thermal power. The companies demanded for subsidies before they could switch on their generators.
While Uganda was looking for money to deal with its energy problem, the World Bank’s Multilateral Investment Guarantee Agency was channeling millions of dollars to Umeme through Globeleq’s office in Bermuda. Bermuda, an island dripping with all sorts of illicit financial flows, is known to be a tax haven. Companies, some dubious, open up offices there mainly to pay lower tax on their investments.
There is no evidence, however, that pointed to Globeleq engaging in any illicit financial activities while it channeled money to Uganda. In October 2009, Globeleq Holdings changed its names to Umeme Holdings Limited which moved its head office to a nearer tax haven, Mauritius, a country that has a double taxation treaty with Uganda.
Thereafter, the United Kingdom’s Commonwealth Development Corporation, which was the main shareholder in Globeleq, transferred its stake to Actis, a private equity firm, to take over Umeme Holdings Limited. Heavy rains were back in Uganda, which spurred electricity generation, while other smaller hydro power plants had been launched. The 250MW Bujagali power project had just been revived and approved.
The situation had normalised. Things had turned for the better that government, in 2009, set up a five-man committee, led by the president’s brother, General Salim Saleh, to look at Umeme’s investments in Uganda. The team was suspicious of Umeme’s investments and wanted that verified, among other things.
(That report, which had a damning assessment of Umeme, would later be criticised by some government officials, and shelved. Members of Parliament would have the same suspicions over Umeme and have said as much in another disputed 2013 report about the energy sector. )
In 2010, government decided to stop the special provisions that Umeme enjoyed. That decision would lead to a long protracted battle.

Payback time

When government decided to end the special provision period in 2010 in order to reconcile the projections Umeme made, and also change the way the tariff was set, the company decided to block that move. Umeme, according to the documents The Observer has seen, first pointed to the agreements it signed with government.
“Some of those agreements contain provisions which restrict the Authority from amending or modifying the Tariff code regulations in a way that affects the financial position which Umeme enjoyed,” the company wrote to ERA in 2012, and even threatened to terminate its license if the regulator got its way.
Umeme used some numbers to prove its point. The company argued that for every $1m of investment that is not included in the tariff, it would lose $31,000 of revenue each month. For an annual capital programme, it added, this equated to just under $1m per month.
“In simplistic terms, the amendment, as proposed by the Authority would reduce Umeme’s free cash flow by approximately $50m over the next seven years. This would reduce Umeme’s ability to make capital investments and would result in Umeme being in breach of multiple financial covenants under its loan agreement with the IFC (International Finance Corporation, the finance arm of the World Bank).
The company added: “Umeme’s view is that the disadvantages it would suffer based on some of the proposed modifications outweigh the benefits of the public interest.”
ERA would not relent. Instead ERA sought a different way of setting the tariff – pegging the rate to inflation, the exchange rate and fuel prices. Umeme also had reservations about this method. And yet, Umeme’s resistance is not the only problem that the regulator faced.
ERA, it now appears, suspected that Umeme was not just inflating its tax and energy purchase projections; The company was doing the same with its other costs. In 2012, a consulting firm from South Africa, Parsons Brinckerhoff Africa (PTY) Ltd issued a report for ERA that showed how Umeme was very likely to balloon some of its future costs, which it intended to pass on to consumers through the tariff.
For example, according to the report, Umeme said it would spend Shs 57.4bn in staff costs for the year 2015, and yet PB’s opinion is that the figure would be Shs 42.3bn. Umeme also said it would spend Shs 15.1bn in repair and maintenance costs in 2015, and yet PB says the amount will actually be Shs13.9bn. Umeme objected to the report’s findings.
It might not be easy for ERA to pin Umeme on these numbers. The authority has already complained that Umeme was reluctant to send its financial data to the authority whenever a verification exercise took place.
In September 2013, ERA’s boss Mutambi, wrote to Umeme assuring the firm that “The failure/refusal by Umeme Limited to submit monthly statistics which are vital data for use in reconciliations impedes and inhibit the Authority’s mandate to prescribe the end user electricity tariffs.”

Tough times ahead?

If Umeme’s half year results to June 2014 are anything to go by, then perhaps the company could face some tough time ahead. The company recorded a drop in net profit of Shs 38.2bn ($14.1m) in the first six months of 2014 compared to Shs 47.3bn ($17.5m) over the same period last year.
Yet, these numbers have done very little to dampen the mood on the Umeme counter at the Uganda Securities Exchange. This point was made clear in the first two weeks of this month when investors dashed for the company’s share, driving the price to a new high. Deals worth billions of shillings were being inked in a day, something that is rare at the securities exchange.
For example, on the second day of October, an investor bought four million Umeme shares at a deal worth Shs 2bn (about $740,000). Five days later, an even bigger stake was bought. An investor cashed in Shs 21bn (just more than $8 million) and walked away with slightly more than 42 million shares of Umeme.
And less than a week later, a block of 14 million Umeme shares changed hands in a deal worth Shs 7.17bn ($2.6 million). These deals saw Umeme’s share price shoot to a new high of Shs 510, up from its Initial Public Offer price of Shs 275 two years ago.
A top chief executive officer of a brokerage firm told The Observer that it was likely that investors were targeting the stock in anticipation of the half year dividend of Shs 9.4 that the company will be issuing a few days before Christmas. What the investors might not know is that ERA has also written to Umeme over the manner in which Umeme Holdings divested its stake, which led to a new company, Investec, to become a majority shareholder.
ERA says that by Umeme Holdings relinquishing its majority stake, it has violated the terms of its licence since the company might not be able to make critical decisions about the sector. That battle over Umeme and ERA is quietly picking up storm, with meetings taking placing between the two institutions.
For now, the attention is on the power tariff, the power supplier’s cash cow, where ERA intends to bite a sizeable pound of Umeme’s flesh. 

jeff@observer.ug