Uganda’s main power distributor, Umeme Limited, has officially declared a dispute with the government over the amount it should be paid as its 20-year electricity distribution concession comes to an end. The company says there is a huge difference between what it believes it is owed and what the government is willing to pay.

In a public notice released on April 14, Umeme confirmed that it had sent a formal Notice of Dispute to the Ministry of Finance on April 11. This notice starts a 30-day negotiation period as stated in the 2005 agreement between the two parties. The company said it disagrees with the government’s valuation of the buyout amount, which is the money owed to Umeme for investments it made but did not fully recover during its time as Uganda’s power distributor.

The dispute comes after months of disagreement over how much the government should pay Umeme. The company had earlier submitted a claim of $234 million, arguing that this was the value of its unrecovered investments. However, the government asked the Auditor General to conduct a special audit to verify this amount. The Auditor General’s report later put the figure at $118 million (about Shs430 billion), which is almost half of what Umeme had asked for.

The Ministry of Energy accepted the Auditor General’s figure and rejected Umeme’s earlier claim, as well as another estimate of $190 million (about Shs700 billion) that had been considered at one point. Energy Minister Ruth Nankabirwa publicly stated that the government would stick to the Auditor General’s findings, saying, “The Auditor General has audited and determined $118 million as the buyout amount.”

Umeme, however, insists that this amount is too low and does not reflect the true value of its investments. The company argues that the government’s valuation goes against the terms of the original 2005 agreement, which promised fair compensation for any unrecovered investments at the end of the concession period.

Under the agreement, if the two sides cannot resolve the dispute through negotiations, the matter can be taken to international arbitration in London. The 30-day negotiation period will end on May 11, and if no agreement is reached by then, the case will move to arbitration. This process is meant to ensure a fair and neutral resolution, as both parties had previously agreed.

The disagreement has caused concern among investors, with Umeme warning shareholders to be careful when trading its shares until the dispute is settled. The company’s board issued a statement advising, “Shareholders and investors are advised to exercise caution when dealing in the Company’s securities until the outcome of the Dispute is known.”

The dispute also raises questions about Uganda’s handling of public-private partnerships, especially in critical sectors like electricity. The government had earlier presented the handover of power distribution from Umeme to the state-owned Uganda Electricity Distribution Company Limited (UEDCL) as a smooth transition that would help reduce electricity costs and give the government full control over the power grid. However, the unresolved buyout issue has cast doubt on this process.

Umeme’s 20-year concession, which began in 2005, saw the company invest more than $600 million in upgrading Uganda’s power distribution network. While the physical assets have now been handed over to the government, the argument over how much Umeme should be paid for its investments remains unresolved.

The outcome of this dispute could have major implications for future private investments in Uganda’s infrastructure. If investors feel that agreements are not being honored, they may be reluctant to put money into similar projects in the future. On the other hand, the government’s stance suggests a push for stricter financial scrutiny and a desire to avoid overpaying for services.

As the 30-day negotiation period begins, both sides will be under pressure to find a middle ground. If they fail, the case will head to arbitration, which could be a lengthy and costly process. For now, the standoff leaves Uganda’s energy sector in a state of uncertainty, with investors, consumers, and policymakers all waiting to see how the dispute will be resolved.

The situation highlights the challenges of transitioning from private to public control of essential services. While the government aims to take full charge of electricity distribution, the financial and legal complexities of ending such a long-term partnership cannot be ignored. The next few weeks will be crucial in determining whether Uganda and Umeme can reach a fair settlement or if the dispute will drag on in international courts.

For ordinary Ugandans, the most important question is whether this conflict will affect electricity supply or prices. The government has promised that the handover will lead to lower costs, but if the dispute results in a large payout to Umeme, it could put pressure on public finances. As the negotiations continue, all eyes will be on how this high-stakes financial battle unfolds.