The electricity sub-sector is facing mounting financial stress, with the Ministry of Finance warning that financially distressed power utilities could require government intervention.
The warning is contained in the Ministry of Finance’s Contingent Liabilities Annual Report 2024/25, which identifies the energy sector as the single largest source of risk within the state-owned enterprise portfolio.
The report specifically flags Uganda Electricity Generation Company Limited (UEGCL) and Uganda Electricity Transmission Company Limited (UETCL) among the country’s highest-risk state enterprises and warns that continued financial deterioration among electricity utilities could ultimately force government intervention.
The assessment is reinforced by findings in the Auditor General’s report released earlier in the year, which shows that key electricity companies are struggling with underutilised infrastructure, weak cash flows, mounting liabilities, and operational inefficiencies.
Dominating the debt burden
The scale of the risk is reflected in the concentration of debt and liabilities within the electricity sector, with the report showing that UEGCL, UETCL, and UEDCL together carry liabilities amounting to about Shs11.41 trillion, making the electricity subsector by far the biggest source of financial exposure among state-owned enterprises.
The report shows that total liabilities across all state-owned enterprises stood at Shs13.56 trillion in the 2024/25 financial year, which means that the three utility companies account for 84 percent of the entire liability stock.
UEGCL carries liabilities of about Shs6.83 trillion, UETCL Shs3.98 trillion, while UEDCL holds roughly Shs597b.
The concentration means that financial distress within the electricity sector poses a disproportionate threat to public finances and makes power utilities the largest source of financial risk facing government’s revenues.
UETCL: Vulnerable enterprise
Among the most alarming cases is UETCL, which is responsible for transmitting electricity across the country.
Ministry of Finance identifies UETCL as one of the most financially vulnerable state enterprises, with the Contingent Liabilities Annual Report showing that the company had a current ratio of just 0.31, meaning it had only 31 cents in short-term assets for every shilling of short-term obligations.
Its leverage ratio stood at 1.08, indicating that liabilities exceeded assets, while its debt-service coverage ratio turned sharply negative because operating cash flows were insufficient to meet debt obligations.
The report warns that such weaknesses increase the likelihood that government could eventually be called upon to support the utility.
The findings are supported by the Auditor General’s report, which in January reported that UETCL’s financial performance deteriorated sharply, moving from a profit of Shs82.25b in the 2023/24 financial year to a loss of 293.1b in the 2024/25 financial year.
The Auditor General also reported that UETCL was burdened by Shs1.48 trillion in outstanding receivables, while significant portions of its transmission infrastructure remained underutilised or incomplete.
Impact of Karuma on UEGCL
The financial strain is also evident at UEGCL, the government-owned power producer responsible for Karuma, Isimba, and other generation assets.
UEGCL reported a profit of Shs25.02b in the 2024/25 financial year, falling sharply from Shs54.28b in the previous year.
The decline was largely linked to the underutilisation of the 600MW Karuma Hydropower Plant, which, according to findings of the Auditor General, generated only 808.27 GWh, equivalent to about 30 percent of available capacity, and realised only Shs148.16b against projected earnings of Shs316.42b.
At the same time, UEGCL’s receivables increased from Shs118.66b to Shs156.91b, largely because UETCL had failed to settle power purchase obligations amounting to Shs108.94b.
Thus, the Ministry of Finance in its Contingent Liabilities Annual Report notes that these challenges have translated into serious financial vulnerability, classifying UEGCL among the country’s highest-risk entities and describing it as ‘extremely illiquid and highly leveraged.’
The report shows that UEGCL had a current ratio of just 0.05, a debt-service coverage ratio of 0.75, and a leverage ratio of 1.45, which means that liabilities significantly exceeded assets.
It also notes that the company relies heavily on government on-lent debt, warning that companies in such positions pose a growing risk to public finances because failure to meet obligations may require government support.
UEDCL in the troubled mix
The Ministry of Finance’s report also places UEDCL among the electricity companies contributing to growing fiscal risks.
While the report focuses more on UEGCL and UETCL, it also identifies UEDCL as one of the state-owned enterprises that recorded losses during the 2024/25 financial year, warning that continued deficits in critical utilities could jeopardise service delivery.
The Contingent Liabilities Annual Report indicates that UEDCL carries approximately Shs597.3b in non-debt liabilities, including deferred tax obligations, trade payables, deferred income, and capital grant obligations, which put it in a distressed financial position.
This is partly blamed on the dramatic expansion of UEDCL’s asset base, which grew from Shs113b to Shs2 trillion, while its customer base and revenues rose from 166,000 to 2.2 million and Shs111b to Shs661b, respectively.
The report suggests that while UEDCL inherited a much larger business, it also inherited significant financial and operational pressures.
Growing risk of power disruptions
The financial pressures, by extension, risk efficient power supply, which the Auditor General had earlier identified as a challenge not only to the electricity sub-sector, but to the entire country.
The Auditor General has previously reported persistent grid interruptions due to line faults, vandalism, transformer failures, equipment breakdowns, and weaknesses in transmission systems.
As a result, these challenges forced government to incur Shs26.94b on generated but unused electricity in the 2024/25 financial year due to the non-existence of transmission infrastructure, which the Auditor General said had meant that major transformers at substations in Namanve, Mutundwe, Lugazi, Owen Falls, and Agago remained idle for periods ranging from eight months to more than three years.
This resulted in a decline in transmission capacity utilisation, which fell to 43.4 percent, while the system reserve margin, a key safeguard against blackouts, dropped from 32.2 percent to 12.83 percent.
Rising exposure
The Ministry of Finance, therefore, warns that deterioration in electricity-sector finances poses greater risks to both government revenues and economic stability.
It notes that while total revenues across state enterprises rose from Shs3.06 trillion to Shs4.03 trillion, combined net income swung from a Shs212.9b profit to a Shs325.8b loss, with the proportion of loss-making entities rising from 22 to 33 percent.
The report warns that rising losses, weakening liquidity, growing liabilities, and poor debt-servicing capacity could ultimately force government to intervene in some cases.