Uganda’s Umeme Eyes Sierra Leone Power Distribution Deal After Concession Loss Premium

Uganda’s power utility firm Umeme is hunting for a new power distribution business in Sierra Leone as part of fresh measures to strengthen its earnings, which have been battered by the termination of its 20-year concession with the Ugandan government in March last year (2025). The Ugandan Securities Exchange (USE)-listed company says through its latest annual report (2025) that it is exploring an opportunity to support the Government of Sierra Leone with its electricity distribution system, a deal it says, if successful, will be subjected to shareholder approval. “The Company is actively exploring new opportunities that build on its 20-year track record, including an opportunity to support the Government of Sierra Leone with its electricity distribution system. Any such venture would be subject to shareholder approval before commitment,” the company says. Umeme, which is cross-listed on the Nairobi Securities Exchange (NSE), has not traded as an electricity distribution business after the expiry of its 20-year concession and has, instead, limited its activities to the recovery of amounts owed to the company, settlement of continuing obligations, compliance with statutory and listing requirements, pursuit of new business opportunities and preservation of shareholder value. “The Board’s post-concession strategy is guided by two priorities. The first is to recover the outstanding Buy Out Amount for shareholders as fully and efficiently as possible. The second is to explore new business opportunities that build on Umeme’s 20-year record, technical capabilities and institutional reputation, without compromising the primary duty to protect shareholder value,” the company says. Read:Umeme concession dispute leaves staff pension scheme in limbo Umeme’s interest in Sierra Leone’s power sector comes at a time when Freetown’s power sector is undergoing a transition, characterised by persistent challenges and emerging opportunities, with electricity access remaining limited. It is estimated that only 30 percent of the country’s population is connected to the national grid, with less than five percent in rural areas. The country’s power supply is unreliable and tariffs are high according to the US International Trade Administration Department. Sierra Leone’s total installed generation capacity is under 250 megawatts (MW) of which between 100 MW and 150MW is available at any given time, with energy consumption dominated by fuelwood and petroleum imports. The country’s outdated grid infrastructure and poor utility performance have led to significant electricity transmission and distribution losses. “Looking ahead, Umeme has streamlined its operations to ensure efficiency while maintaining regulatory compliance and pursuing the recovery of the outstanding Buy Out Amount. At the same time, the company is evaluating new opportunities in electricity distribution and related sectors where it can leverage its extensive experience,” Umeme says. “The Board will only commit to new ventures where the expected returns are clearly higher than returning that capital to shareholders. Shareholders will be updated on these initiatives, and any such investment will be subject to shareholder approval.” Umeme is pursuing recovery of the disputed balance of the final buy out amount through arbitration before the London Court of International Arbitration. This is an amount over and above the $126 million received from the Government of Uganda as a partial payment without prejudice. The company utilised part of the cashflows realised from the partial settlement of the buyout amount to pay an interim and final dividend of Ush222 ($0.06) per share to shareholders in July 2025. In addition to the buyout amount, the company is pursuing outstanding claims against the Government of Uganda arising from cutover (handover) activities at the end of the concession. Under the Privatisation Agreements, the ‘Buy Out Amount’ shall be paid in cash with a five percent additional return and hence the amounts receivable are accounted for as a financial asset. Until such time as the buyout amount t is paid by the Government of Uganda to Umeme, Uganda is obliged to pay interest on any outstanding portion of the buyout amount equal to 10 percent per annum, for the period 30 to 45 days after the end of the natural term, increasing to 15 percent per annum for the period from 46 to 90 days after the end of the natural term, and then 20 percent per annum, after 90 days until the buyout amount is ultimately paid in full by Uganda. Umeme’s right to payment of a buyout amount on termination of the concession is set out in the Distribution Support Agreement dated May 17 2004 between the Government of Uganda and Umeme Ltd, as amended. The payment by the Ugandan Government to Umeme of the buyout amount t is one of conditions for transferring by Umeme of the Distribution System back to Uganda Electricity Company Ltd (UEDCL) at the end of the Concession term. The outstanding claim of $266.4 million excluding contractual interest, damages, and applicable taxes is the subject of a dispute that will be resolved through the dispute resolution mechanisms as provided for in the Privatisation Agreements.