Uganda's Power Sector Faces Severe Financial Distress, Ministry Warns

The Ugandan electricity sector is in a precarious financial state, with critical utilities accumulating vast liabilities that pose a substantial risk to the government’s finances. According to the Ministry of Finance’s Contingent Liabilities Annual Report for 2024/25, the energy sector represents the largest source of financial exposure among state-owned enterprises, largely due to the financial distress of key players like the Uganda Electricity Generation Company Limited (UEGCL) and the Uganda Electricity Transmission Company Limited (UETCL).

Collectively, UEGCL, UETCL, and the Uganda Electricity Distribution Company Limited (UEDCL) account for a staggering Shs11.41 trillion in liabilities, representing 84% of the total Shs13.56 trillion owed by all state-owned enterprises. This concentration means that financial instability in the power sector has a disproportionately large impact on public finances.

UETCL, responsible for transmitting power across the nation, is flagged as particularly vulnerable. The company exhibits a stark lack of short-term assets to cover its obligations, with liabilities exceeding assets and insufficient cash flow to service its debts. This situation sharply contrasts with its previous year’s performance, moving from a profit to a significant loss, exacerbated by underutilised infrastructure and substantial outstanding receivables.

UEGCL, the entity managing major power generation assets like Karuma and Isimba, also faces considerable financial strain. The underperformance of the Karuma Hydropower Plant, operating at only 30% of its capacity, has significantly impacted its earnings. Coupled with escalating receivables from UETCL, UEGCL is described as “extremely illiquid and highly leveraged,” heavily reliant on government support.

UEDCL also contributes to the fiscal risks, reporting losses and holding substantial non-debt liabilities. Although its asset and customer base have expanded dramatically, the company grapples with inherited financial and operational pressures.

These financial woes extend to the reliability of power supply. Issues such as equipment failures, vandalism, and weak transmission systems have led to persistent grid interruptions. The government has incurred significant costs for electricity that could not be transmitted due to inadequate infrastructure, resulting in decreased transmission capacity utilization and a diminished system reserve margin, increasing the risk of blackouts.

The Ministry of Finance warns that the continued deterioration of the electricity sector’s financial health, marked by rising losses, weakening liquidity, and poor debt servicing, could necessitate government intervention, threatening both national revenues and economic stability.

Source: Daily Monitor (Uganda)