MIGA has issued a guarantee of $39.6 million to Globeleq Holdings (ConCo) Limited of Bermuda, covering its equity investments in and shareholder loan to Umeme Limited of Uganda. This is a modification of a previous contract signed in FY05.
The modification of the previous contract reflects the restructuring of this project due to current power sector problems in Uganda. The guaranteed percentage is 90 percent for both the equity and shareholder loans. The modification is for a period of 18 years and two months against the risks of transfer restriction, breach of contract, and war and civil disturbance.
The project involves the operation of the electricity distribution system in Uganda. The government of Uganda leases the electricity grid to the joint venture partners (Globeleq and Eskom) in exchange for periodic lease payments. In turn, Umeme buys bulk electricity from the government-owned transmission company, UETCL, under an agreed tariff arrangement.
Umeme and the government of Uganda have negotiated a new agreement on required energy supply levels for 2007-2013, as well as an agreement on how to share the risk (and benefits) related to losses and collections.
MIGA’s participation in the project will support critically needed investments in the power sector in Uganda and strengthen the government's capacity to manage reform, privatization, and development in the sector. The project addresses two of MIGA’s priority areas: an investment in an IDA-eligible country (among the world’s poorest) and in sub-Saharan Africa. MIGA’s participation in the project also complements the World Bank’s country assistance strategy for Uganda, which focuses on directly increasing the ability of the poor to raise their incomes; improving the quality of life of the poor; creating an enabling environment for economic growth; and ensuring good governance and security.
