MIGA has issued $40.5 million in guarantees to Globeleq Ltd. of Bermuda and Eskom Enterprises (Pty.) Ltd. of South Africa covering their $45 million equity investment in, and shareholder loans to, Umeme Ltd. of Uganda. The guarantees are for 20 years and cover against the risks of transfer restriction, war and civil disturbance, and breach of contract.
Umeme will operate an electricity distribution concession in Uganda for 20 years. Globeleq will bring commercial and financial expertise to the consortium, while Eskom will provide much of the technical expertise required to turn around the underlying business. The distribution network consists of 13,000 km of high and low voltage overhead lines extending throughout the country, with most of its customers concentrated in the semi-urban strip from Entebbe through Kampala to Jinja.
The concession calls for Umeme to provide up to 60,000 new connections, reduce losses, and improve collection rates within the first five years. Service delivery will be improved by easing the overloading of lines and substations and replacing weak line poles. Access to electricity will also expand for households, schools, clinics, hospitals, and water systems. The more accessible and reliable power is expected to foster economic activity and generate fiscal revenues for the government.
MIGA’s participation in this project promotes South-South investments into an IDA-only country. The World Bank is also participating in this project via a $5 million guarantee serving as a backstop to the letter of credit facility, which forms part of the security package for the project.
