Potential investors in the Ugandan electricity industry have reason to be optimistic as the government has passed several power sector reforms to attract investment in the distribution and generation sectors. This constructive government involvement and a hybrid electricity industry structure have completely liberalized and unbundled the Ugandan electricity industry, allowing for the operation of private participants.

New analysis from Frost & Sullivan, Strategic Analysis of the Ugandan Electricity Industry, finds that the market earned revenues of US$144 million in 2007 and estimates this to reach US$323 million in 2014.

"Private investments have already begun to trickle in, despite concerns about the risky political situations in Uganda and its neighboring countries," notes Frost & Sullivan research analyst Moses Duma. "This pace of investment will considerably speed up with the government encouraging private-public partnerships to develop new generation capacities."

The government has also guaranteed the security of private investments, which will further attract investors to an industry that presents significant opportunities due to its high electricity tariffs (the highest in East Africa). Investors will also be pleased with East Africa's plans to develop interconnected power grids to facilitate power sharing among countries in the region.

"This programme will include the trading of electricity among countries and cross-border electrification," Duma says. "For the power pool to be effective, member states are expected to upgrade their power networks and generation capacities, creating business opportunities for power transmission companies."

Perceptive investors will also identify untapped opportunities in Uganda's identified geothermal and fossil fuel reserves. The country is highly dependent on hydropower generation, although it is highly susceptible to changes in water levels and minor geological changes.

During dry periods, Uganda generates less than 50 percent of its installed capacity of hydropower. During the drought periods of the 1990s, the government could only avert a total blackout by investing in expensive diesel-powered generation.

"The government's immediate focus should be to diversify its power sources to avoid over reliance on hydropower," notes Duma. "Detailed feasibility studies and project planning should be done to ensure that the hydropower projects in development will not be easily affected by changes in rainfall patterns."

However, there is still over 2,000 MW of unused potential for hydropower which could be explored alongside the country's geothermal and fossil fuel reserves. Investors and international organisations have already started leveraging these resources and devised strategies to develop additional generation capacities.