Uganda to get cheaper power after 13 years

6-Feb-2012

The loans advanced to construct the 250 megawatt (MW) Bujagali hydropower plant will be repaid in 13 years of operations, state minister for energy Simon D’Ujanga has said.

Appearing before the parliamentary committee on government assurances D’Ujanga said when the loan has been repaid, the unit cost from the Bujagali plant will reduce, making power cheaper.

“The loan is in excess of $600m. This money was borrowed by private investors and it is supposed to be factored into the end-user tariffs,” D’Ujanga explained.

“The loans from numerous lenders will be paid by consumers of electricity through the tariffs. When that loan is repaid, then power from Bujagali will be cheaper.”

Bujagali Hydropower Project is sponsored by Bujagali Energy Ltd (BEL), a project-specific company owned by Industrial Promotion Services (Kenya) and US Sithe Global Power.

The minister explained that the Government signed a build operate and transfer agreement with BEL, in which the Government undertook to repay the loan for 13 years. The World Bank Group, European Investment Bank, African Development Bank, Netherlands Development Finance Company (FMO), Germany’s KFW and Absa Capital are among the many Bujagali project lenders.

When asked by the MPs why the Government had to service a loan taken up by the contractors, D’ujanga said: “The generator supplies power and the consumer pays everything.”

D’ujanga explained that power tariffs in Uganda drastically increased in 2005 with the introduction of diesel powered thermal generators to mitigate the acute power supply shortage.

He added that: “To mitigate the high power tariff, the Government under took to provide subsidies towards the end-user tariffs but the subsidies are not sustainable.”

The minister noted that from 2005 to January 30 this year, a total of sh1.5 trillion had been paid as subsidies towards end-user tariffs.

“This level of subsidies is unsustainable in a situation where only about 12% of the population is connected to the national grid, while the rest are yearning to get access to the power grid,” D’ujanga said.

He also disclosed to the committee chaired by Aruu County MP Odonga Otto that BEL would take up the running and development of the Bujagali energy plant for 30 years before it can be given back to the Government for running.

“We signed a public private partnership agreement with BEL, which will own the project for 30 years before it hands over the power plant to Ugandans,” he explained.
He noted that under the agreement, $75m that was advanced to BEL was refunded to the Government and the money was deposited under the energy fund.

Unlike former energy minister Hillary Onek who ruled out the capacity for the Bujagali power dam to produce 250MW, D’Ujanga assured MPs that the power plant had the capacity to produce 250MW per five hours.

“The water level will be enough to produce 250MW during peak hours. The power systems react according to the demand,” he explained.

At the same meeting, the MPs quizzed D’Ujanga on why the Government keeps on postponing the dates on which the power plant is projected to be finished “Who is responsible for the dates you continue setting. Why are you taking Parliament and Ugandans for granted?
You must assure us when this project will be finished,” demanded Bundibugyo MP Harriet Ntabazi. But D’Ujanga explained that in project construction there are deadline targets sets but they can change due to unforeseen curcumstances.

“You cannot swear upon a deadline. But there are bonuses if the project is completed earlier as well as penalties if the project is delayed,” he said. D’Ujanga also attributed the delay to the soft rock which was found at the gate spillway and had to be replaced with concrete apron of three metres deep by 100 meters long.

D’Ujanga, however, assured the MPs that the first 50MW machine will be commissioned this Tuesday, followed by the second unit on March 16.

The third unit will be launched on May 31, which he said is likely to reduce the current load shedding. Other units will be commissioned between June 30 and July 31.



By Ibrahim Kasita and Henry Sekanjako: The New Vision Newspaper.