$100mn investment in Uganda's electricity distribution network

Uganda's retail power distributor Umeme says it has to date invested over $100mn in expanding and refurbishing the country's electricity distribution network and plans an additional 32 million dollars in 2011.

The company says this is in accordance with its concession agreement with the government that required Umeme to have invested $65mn in expanding the network by March 1, 2010.

Umeme, while outlining its achievements in 2010, adds the Uganda Electricity Distribution Company Limited (UEDCL) has verified that it has attained its investment obligations for the first five years.

From the beginning of the concession, Umeme was given a target of connecting 60,000 new customers in the first five years. Today, Umeme has exceeded that target by connecting over 172,000 new customers. In 2011, the company expects to make over 50,000 new connections at a cost of about six million dollars," it says.

The company says it has also worked with communities to reduce electricity losses since these losses if unchecked, can drive up the price of electricity. "Losses have reduced from over 38 per cent when the company started operations in 2005 to an average of 30 per cent for the current year and expect to reduce losses to 28 per cent in 2011."

It adds that loss-reduction measures include the introduction of bulk metering which enables small-scale industries come together to achieve electricity consumption of at least 500 kVa which enables them to qualify for a cheaper tariff citing beneficiaries like millers' associations in Kampala, Lira and Jinja as well as shopping malls and commercial buildings.

Additionally, a pilot prepaid metering project is in the process of being introduced to over 10,000 customers and a $3.4mn project will use a "split" prepayment metering solution.

Arrangements are also underway by the company to establish vending outlets at their office in Kitintale, supermarkets, petrol stations and other places after which prepayment meters will be rolled out countrywide at a cost of $100mn.

The company notes in its review that while power supply costs and price have increased significantly over the past five years due to the high cost of generation, its contribution to the tariff has reduced significantly over the past five years noting that in January 2010, retail electricity tariffs were reduced by an average of six per cent for all customers of all categories.

"Retail tariff is driven mainly by the cost of power generation including fuel, transport and transmission costs, system and foreign exchange rate variations," it explains adding that only 28 percent of the price of electricity is related to the company.

It has however applied for a distribution price of 190.76 per kwh in 2011 and says the distribution tariff will fund the priority investment projects worth $32mn.The

projects will include safety related projects, substation upgrades, prepayment metering, loss-reduction projects, increased new connections, customer service improvements and debt servicing obligations.

The Managing Director of Umeme, Charles Chapman says they have invested more than $100mn and plan to invest more in 2011 adding that it is anticipated that government subsidies will continue to be availed and applied against the power supply price in order to maintain end-user tariff for domestic consumers at 386.5 shillings.

"The reliance on the more expensive diesel generation and the movements in the currency exchange rates will continue to have a significant impact on the end-user tariff and this will necessitate continued provision of government subsidies in order to maintain the end-user tariffs," he states.

Uganda is currently experiencing rapid growth in the demand for electricity and the company says until the Bujagali dam now under construction is completed, the increased demand is being met by thermal generation which is expensive.

"We recognise the government's effort to increase hydro power and renewable generation capacity in the short and long term. This will relieve and remove the reliance on the more expensive thermal generation," it notes.

Geoffrey Muleme

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