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World Bank to decide on Bujagali dam
Publish Date: Apr 22, 2007
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By Ibrahim Kasita

THE World Bank Group executive board in Washington will examine and make a final decision on the 250MW Bujagali hydro-power project on Thursday (April, 26). A go-ahead by the board will lead to financial approval and disclosure for the project and enable the dam’s construction to start.

Bujagali Energy Limited (BEL), a consortium between Industrial Promotion Services (IPS) of Kenya and Sithe Global, a US power giant, are the project developers.

The World Bank Group through its agencies like the International Finance Corporation (IFC), International Development Association (IDA) and the Multilateral Investment Guarantee Agency (MIGA), is the leading project lender.

The IFC, the group’s private lending arm, is evaluating $130m in form of A and C loans for the construction and operation of the facility. IDA, the interest-free arm, is expected to provide a partial risk guarantee of $115m for the project’s commercial lenders.

And MIGA, the investment risk mitigator, is providing equity risk insurance of $115m for Sithe’s investments in the project. Other major lenders include the European Investment Bank and African Development Bank.

The project’s cost is estimated at $799m. However, the total cost will be known after negotiations on the Engineering, Procurement and Construction (EPC) Contract.

BEL is negotiating with an Italian firm, Salini, about the $467m EPC contract after an international competitive bidding process. The negotiations will ensure the least-cost power tariffs when the project is completed by 2011.

Bujagali Energy has obtained an investment licence from the Uganda Investment Authority and a generation licence from the Uganda Electricity Generation Company.

It has also signed a Power Purchase Agreement (PPA) and Implementation Agreement with the Government.
The project is aimed at solving the energy crisis that has contributed to the decline of Uganda’s Gross Domestic Product to about 5% from 6.5%.

The crisis forced the Government to procure 100MW of thermal power. Another 100MW of thermal power is under procurement. Thermal power is thrice as expensive as hydro.

Selection of the project’s sponsor was done after international bidding.
The sponsor is supposed to ensure that the country has the cheapest electricity price for 30 years.

A Request for Proposals to a broad group of potential developers was announced in January 2004.
Potential developers were requested to present their credentials by March 1, 2004. After reviewing the information received, the Government asked qualified developers to present proposals by March 23, 2005.

In April 2005, the Government selected Bujagali Energy, who entered into agreements with the Government and the Uganda Electricity Transmission Company in December 2005.

The agreements included the Power Purchase Agreements (PPAs) and the Implementation Agreements (IAs), which were made public at the Electricity Regulatory Authority offices in Kampala.

BEL finalised and disclosed a Social and Environmental Assessment (SEA) for the project in December 2006 in accordance with the World Bank Group’s Environmental and Social Standards.

During the SEA preparations, BEL conducted public consultations with communities that would be affected by the project and promised to continue doing so during the project implementation.

Independent consultants assessed the project’s economic viability and confirmed that Bujagali was the least-cost power generation option for Uganda.

Again the strategic/sectoral, social and environmental assessment report of power development options in the Nile Equatorial region confirmed Bujagali as the most advanced.

The National Environmental Management Authority conducted a final public hearing in Jinja and communities affected by the project supported it.

A final verdict is to be made before the end of this month. The Government has secured $100m for the project.

BUJAGALI TIMELINE

1994 – Bujagali hydro-power project conceived as the least-cost project. In April, the World Bank’s inspection panel confirms the project.

1996 –
In February, the Government signs a $450m pact with US power giant Applied Energy Services (AES) Corporation to undertake the project. AES is a joint venture with Madhvani International.

1997 –
In January, environmental and economic viability debates heighten locally and globally. Relying on the Hydropower Development Master Plan, the Government led by the the Uganda Electricity Board sign a letter of intent with AES to continue developing the project.

1999 –
In January, the Government is compelled to buy land at Bujagali. In March, the World Bank’s inspection panel approves the project and AES submits a draft Environment Impact Study (EIS) report to the National Environmental Management Authority (NEMA).

In April, environmentalists led by the National Association of Professional Environmentalists (NAPE) protest the decision and seek a court injunction.
In May, a final EIS is released. AES asks for VAT security.
In July, AES agrees to pay sh1b to the affected people. In August, an anti-Bujagali group asks for an enquiry into AES.
In October, the Government launches Bujagali land resurvey. In November, AES announces that the project will deliver power by 2004. MPs approve the project.
In December, the cost of the project increases to $520m, which the Government and AES agree upon.

2000 - 2001 –
Negotiations for an Engineering, Procurement and Construction (EPC) contract continue as anti-Bujagali groups intensify their campaigns. Veidekke, Skanska International, Alstom Power, GE Energy AS, ABB Distribution, Lahmeyer and Norplan are awarded the EPC contract.

2002 –
In June, the World Bank board approves management response to a report by the independent inspection panel, which includes addressing findings on the environmental issues and increased consultations with the stakeholders.

In July, AES uncovers a bribery scandal and a wrangle erupts between traditional healers and the Bujagali oracle over compensation funds. It is alleged that Richard Kaijuka – the World Bank’s associate director, was bribed $10,000 to support the project. This forces Kaijuka to resign. He is quizzed by the IGG and Cabinet.
In August, MPs begin querying the financial muscle of AES, hence delaying the project.
In September, energy ministry officials clash with the environmentalists over the Bujagali Power Purchase Agreement (PPA) at a summit on sustainable development in Brazil.
In November, Kaijuka is probed, but the probe stalls. In December, Norway clears the IGG to probe Kaijuka.

2003 – In April, minister Daudi Migereko defends the project at a forum in Japan. NAPE warns of more trouble if the construction proceeds. In June, two construction firms Veidekke and Skanska pull out due to bribery and environmental controversies. The Government asks AES to lower the project’s costs. In July, the Government decides to co-fund the project.

In August, the World Bank reassures that it is going to fund the project. AES pulls out as the World Bank board is about to end the financial closure. The Government takes over AES’ assets.
In September, the Government invites new developers and says the project will be developed before the one at Karuma.

2005 –
In February, the Government drafts the evaluation criteria for proposals for the project’s development. Firms submit bids but a consortium of Industrial Promotion Services (IPS) and Sithe Global emerge the best.
In December, UETCL signs a Power Purchase Agreement and Implementation Agreement with the consortium, Bujagali Energy Ltd (BEL).

2006 –
The Electricity Regulatory Authority (ERA) displays the PPA for public review. BEL submits its Environmental Impact Assesment statements to NEMA. In December, NEMA displays the report for the public to forward their input.

2007 – Stakeholders’ consultations intensify as the environmentalists also gear up their campaign against the project. In early April, NAPE conducts a public hearing. In mid-April, NEMA conducts a national stakeholders’ public hearing at Jinja where the affected community is located and promises to release a final verdict before the end of April.

April 26-28 the World Bank’s board discusses the financial closure of the project.

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