The discovery of commercially viable oil and gas deposits in Uganda has glaringly revealed the inadequacy of the current legislative framework to deal with this new resource. The Government of Uganda, on the back of the Oil and Gas Policy, has tabled new legislation to address this.
The legal market in Uganda is relatively stable. A number of the
firms have associations with international law firms including SNR
Denton, DLA Piper, Norton Rose, Bowman Gilfillan and Werksmans (through
the Lex Africa network)....
[more]
The legal market in Uganda is relatively stable. A number of the
firms have associations with international law firms including SNR
Denton, DLA Piper, Norton Rose, Bowman Gilfillan and Werksmans (through
the Lex Africa network).
Unlike in many other jurisdictions, there is no clear market leader
and most of the top tier and second tier firms have strong corporate
firm structures in place, with various strong partners and associates.
In 2011/2012, Uganda has been preparing for the prospect of
commercial oil export and a booming business in the petroleum sector.
"The main thing that is driving it is the excitement for oil; everyone
is training in that, the law society is training in that and we are
training in that and sending our lawyers to Aberdeen," says a local
lawyer.
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CONTEXT AND TRENDS
"I went there myself to go down to the wells and they have sink pipes and drills and are putting up rigs in places, the whole thing is real," says a lawyer. The looming oil industry continues to drive much activity and fill firms' deal pipelines with potential deals, at least....
[more]
CONTEXT AND TRENDS
"I went there myself to go down to the wells and they have sink pipes and drills and are putting up rigs in places, the whole thing is real," says a lawyer. The looming oil industry continues to drive much activity and fill firms' deal pipelines with potential deals, at least. So far, big companies have been arriving and there have been a few panel appointments.
Another question that has been doing the rounds is over whether an oil refinery will be constructed. "The alternative option is a heated pipe from there all the way to Mombasa" says one partner, adding that the refinery option is more likely. However excitement has dampened a bit with the more feasible prospect that commercial exploitation will probably not happen until about 2015 to 2016.
In project finance, development finance institutions continue to be active in the country with the government taking the lead on infrastructure projects especially in the energy sector. According to one lawyer, a government fund has committed about $1.2 billion for a 600MW hydro power damn at Karuma, with a target operation date of 2018. Such a damn would mark the biggest project ever in Uganda. There have also been developments in terms of private equity involvement in independent power producers (IPPs).
"The private equity market is young but we are seeing a lot more now in the energy sector and it is picking up in agri-business," says a lawyer.
In banking, the lending market for local currency has been crippled by the high interest rates, implemented to tackle spiralling inflation. The inflation was caused by a combination of factors which included lavish expenditure in the last presidential elections and the government's acquisition of two defence aircrafts. "Due to reckless expenditure by the government banks have stopped lending," says a lawyer. Commercial bank interest rates in mid-2012 stood at about 27%. There have been a few syndicated lendings involving Ugandan banks however to a steel manufacturer and in the sugar industry.
A number of new players have arrived onto the banking scene, including NIC Bank and Imperial Bank, both with some Kenyan backing, and firms note that microfinance institutions are slowly converting into banks.
M&A in 2011/2012 was driven by a number of large deals in the telecoms sector, which saw companies pooling their infrastructure assets (telecommunication towers), and there were also deals in the oil, insurance and agribusiness sectors. The capital markets remained quiet, note firms.
On the legislative side, a new Petroleum Exploration Development and Production Bill was being negotiated. The Bill will consolidate existing regulations into one Act and provide a stable framework for the industry. It is also planned that a national oil company will be established.
MAJOR LEGISLATION CHANGES
Mortgage Act
Passed 2011
Petroleum, Exploration, Development and Production Bill
Pending
Income Tax (amendments)
Effective 2012
Land Act (amendments)
Pending
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