Case Study: Energy – Bujagali Hydro-power project
Uganda’s macroeconomic performance is threatened by an acute electricity crisis which is affecting its rate of economic expansion. In 2006, only 5% of the population had access to electricity, resulting in one of the lowest per capita energy consumption rates in the world. The chronic power shortages are caused by increased demand, a prolonged period of drought,
an unreliable distribution system and delays in commissioning additional generation capacity.
The Bujagali project aims to provide least-cost power generation capacity that will eliminate power shortages. The project will result in a 250 Megawatt hydropower facility on the Victoria Nile and will address both medium and long-term needs.
In 2006 a doubling in the price of electricity was experienced in Uganda caused in part by the country’s existence reliance on thermal power to alleviate current shortages. The Bujagali project involves the construction and maintenance of a run-of-the-river power plant at Dumbbell Island located eight kilometres north of the existing Nalubaale and Kiira power plants. The hydropower plant will reuse water ﬂowing from these power plants to generate additional electricity.
Role of involved parties
The Industrial Promotions Services Ltd. (Kenya) and the US-based Sithe Global Power, LLC have come together to form a joint venture, Bujagali Energy Limited (BEL), tasked with the implementation of the project. The initiative is being ﬁnanced by the Government of Uganda and the following World Bank institutions: IDA, International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency. (MIGA).
Funding and timelines
In July 2007, the Government of Uganda made available an advance of $75 million to enable work on the project to commence while the donors put together the required ﬁ nance. Financial closure for the project was reached in December 2007 with the World Bank group advancing a total of $275 million in loans and
political risk guarantees and the EIB providing a loan of up to $136 million (EIB and the IFC are the two main lenders of the project). The total project cost is estimated at around $875 million and involves a large number of donors, including also European bilateral agencies and the African Development Bank, along with private sector money (equity and commercial bank loans). The power plant is scheduled to be commissioned in 2011.
Construction of the power plant was supposed to have begun in 1994. The project met with tough opposition from those who argued it would displace many people and submerge the Bujagali Falls, a popular tourist attraction and environmental asset. The key lesson learned is that multi-stakeholder dialogue to include civil society concerns should have started earlier.