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Ug. Terminates Eskom’s Power General Contract

The government of Uganda has finally decided to terminate the power generation concession for the South African power firm, Eskom. The decision takes effect in March 2023.  

In 2019 Uganda legislators asked the government to terminate this contract on the basis of a lack of compliance with the terms of the concession.   

In March 2019, the Parliamentary Natural Resources Committee went on a fact-finding visit to Eskom’s facilities and accused the company of failing to make investments in maintenance as much as they emphasized the generation aspect.  Eskom is charged with both managing and maintaining the two power generation plants( Kiira and Nalubaale). 

When the government divested the power sector, it hoped for the private sector efficiency and reduction in end-user power tariffs. The two plants have $1.5 ¢ per kilowatt. which is the lowest in the country. 

While speaking recently during a mineral wealth conference, Minister for Energy and Mineral Development,  Hon. Ruth  Nankabirwa said that the government is aware of its responsibilities in providing a conducive business environment and requisite infrastructure such as reliable and affordable electricity and assured delegates that they were under consideration.

She acknowledged the bottleneck of high energy tariffs. “It is because of the money that we borrowed for electricity generation. When you borrow money expensively, you churn out expensive electricity,” she explained. 

“The money you invest in generation contributes 60% of the end-user tariffs.  But that will change when government takes over the electricity generation at Kiira and Naluubale stations in March 2023”. She said, further adding that the tariffs will be less than $2 ¢ for both dams while Isimba and Karuma will respectively charge $5 ¢.

The decision puts the government back into the power-generation business after it disbanded the mother company- Uganda Electricity Board  (UEB) in 2004 to private players. Three companies were created: Uganda Electricity Generation Company (UEGCL), Uganda Electricity Transmission Company Limited, and Uganda Electricity Distribution Company (UEDCL).      

In 2004, Eskom, which is a locally registered subsidiary, of Eskom South Africa won a 20-year concession to manage the 200MW Kiira power station and 180MW Nalubaale power station. 

Under the deal, Eskom was to inject $ 50 million into the assets over the 20-year concession period but information on Eskom Uganda’s website shows the company had invested $ 34.5 million to date. While the plant performance was rated at 98.11%. 

Operation background

Nalubaale Dam also known as the Owen Falls Dam was constructed in 1954. It had a lifespan of 50 years which has since expired although, with maintenance,  the dam could continue generating electricity. The dam has shown cracks already. 

Eskom is restricted to supply only 38% of the power it generates from both dams in spite of the low tariffs. 

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