Delivering Power to the People

Delivering Power to the People

September 22, 2010—The East African nation of Uganda has posted steady growth and hums with entrepreneurial energy. But, as with most other countries in sub-Saharan Africa, Uganda’s potential for economic growth is stymied by a chronic shortage of electrification with less than 10 percent of Uganda’s population having access to electricity.

The power sector in Uganda was typified by limited generation capacity, poor distribution networks, and operational inefficiencies—resulting in a vicious circle of higher costs, more losses, and even death and injury, as many resorted to crafting illegal connections to the grid.  However more recently, improved network performance, commissioning of new generation capacity, improved rainfall and the planned commissioning of the Bujagali hydro plant in 2012 have led to improved reliability of supply.

In 2002, after extensive consultations and with guidance from the World Bank, the government of Uganda began an aggressive program to help tackle the country’s energy deficit. The first step was to move forward with a comprehensive electricity sector restructuring program. The country’s Electricity Regulatory Authority was established to oversee the sector’s operations and the Uganda Electricity Board was unbundled to create separate companies to handle generation, transmission, and distribution.

Umeme Limited was awarded the 20-year electricity distribution concession from March 2005, becoming the first significant private operator of electricity distribution in all of sub-Saharan Africa. In the same year, MIGA provided $40 million in guarantees to Globeleq (at the time owned by CDC Group and now by Actis, the global emerging markets fund) for its investment in Umeme Limited. This contract was replaced in 2007 when the project was restructured due to the drought-induced power shortages in the country. MIGA is currently providing $40 million in cover to the project against the risks of transfer restriction, breach of contract, and war and civil disturbance.

Click here to view an interview with Sam Zimbe, Umeme's General Manager, Corporate & Regulatory Affairs.

When Umeme set out to begin the enormous task of modernizing infrastructure and improving service, the transmission and distribution infrastructure was in a state of disrepair. Billing collections, at 75 percent, were far below viable levels. In addition, the previous financially strapped state-run distributor had been forced to resort to unsafe measures to provide service—including unraveling conductors to patch lines.

"The legacy of decades-old rotting wood electricity poles was just one of the many challenges we took on with this investment," says David Grylls, Actis Director. "But this is in keeping with our commitment to help the private sector make a positive contribution to society."

Five years into the project, substantial progress has been made in the face of significant challenges. While investing upwards of $85 million in new infrastructure and establishing thoUnited Statesnds of new customer connections, Umeme has had to contend with inadequate generation being supplied to the grid due to droughts, political violence in Kenya that delayed the delivery of new infrastructure, the continued problems of theft and vandalism that plague the sector throughout sub-Saharan Africa, and meeting expectations of a government keen to see a fast turnaround in the sector.

Despite these challenges, Umeme has persisted and its investments are steadily delivering results. The utility has replaced thoUnited Statesnds of rotted wooden poles, built and renovated substations, and replaced overhead power lines with safer technology. One of the many improvements that Umeme has made includes the installation of a $5 million SCADA system that provides operational control of the electricity distribution network. The system replaces a whiteboard that was used to monitor outages and customer service calls. Umeme has also implemented a bulk-metering system to improve network monitoring.  Metering has also been improved for small-scale industries and large institutions like the army, the police force, and universities. The new metering system is bringing down the costs of electricity and improving service delivery. For example, it is estimated to save Makerere University alone about 100 million Ugandan shillings (around $45,000) per month.

Umeme has also introduced a major safety campaign to sensitize the public about the dangers of electricity and to help reduce losses resulting from illegal connections and vandalism.

Throughout the implementation of the project, MIGA and the World Bank have played an active role in helping Umeme and the Ugandan government to keep the project on track to meet their shared vision of providing reliable, affordable, and safe electricity to consumers.