By Ibrahim Kasita
THE West Nile Rural Electrification Company (WENRECO), the firm that was contracted to develop and distribute power in the West Nile region, has reaffirmed its commitment to complete the construction of the Nyagak hydropower plant by June 30, 2010.
The firm has also agreed to sustain power generation using the heavy-fuel oil (HFO) plant until the Nyagak dam is commissioned.
The Government and the Industrial Promotion Services (IPS) Kenya, owned by the Aga Khan Fund for Economic Development, agreed to set up a 1.5 megawatt heavy-oil thermal plant to provide electricity to West Nile. The firm was also supposed to build another 3.5 megawatt hydro-power project on River Nyagak.
A special purpose company, WENRECO, was formed to operate the two projects.
However, the project that started in 2006 and was expected to be commissioned by December 2008 has stalled due to financial difficulties.
Consequently, last month, the Electricity Regulatory Authority (ERA) threatened to revoke WENRECOâ€™s licence for failure to honour its obligations
ERA asked WENRECO â€œto show cause within 45 days and in any case no later than the October 23 why its licence should not be revoked.â€
WENRECO in its response to the regulator in a document that The New Vision has seen said it â€œremains strongly committed to the projectâ€™s objectives of increasing access to electricity in Uganda.â€
â€œThis commitment was clearly evidenced by the companyâ€™s continued supply, under onerous conditions and at considerable financial loss, whilst discussions with the Government were on-going,â€ the document said.
â€œIt is noteworthy that WENRECO was the sole bidder and has since invested $7.3m in the project.â€
As a result, WENRECO restored the 18-hour supply of power to the region on October 6 after the breakdown of the boiler.
Fabian Ahaisibwe, the WENRECOâ€™s regional manager, noted that whereas it would have taken over six months to order and install a new boiler.
â€œThe intervention by IPS has ensured power was restored within 10 days,â€ he said.
â€œFor the avoidance of doubt, WENRECO will assume responsibility for procuring fuel to sustain power generation using the HFO plant once the existing subsidy agreement lapses on November 23 and until Nyagak commissioned,â€ said an IPS source.
â€œWENRECO intends to meet its regulatory obligations, including supplying power for 18 hours and complete the Nyagak project by 30 June 2010,â€ Dr. Kevin Kariuki, the IPS head of infrastructure, said.
Frank Sebbowa, the ERA boss, confirmed that WENRECO had sent a formal document, reiterating their commitment to the project.
â€œThey are proposing solutions that would ensure completion of the project. We are still evaluating them before we make a final decision,â€ he said.
The new development comes at a time when the energy ministry and the Rural Electrification Agency were considering terminating WENRECOâ€™s contract.
Sebbowa, however, said when notice of revoking a licence is issued â€œas part of the process, we have to involve the Solicitor General to advice the implication of terminating the contract but we have not yet made a decision to terminate the licence.â€
Sources said WENRECO had in the four weeks since the unexpected withdrawal of the Government from its undertaking to co-invest in WENRECO, identified credible sources of funding to bridge the projectâ€™s financing deficit.
The New Vision has established that one of the potential sources of funding is KfW, a German development bank.
â€œWENRECO firmly believes that the public-private partnership model underpinning the West Nile rural electrification project has tremendous potential for increasing access to electricity in rural areas,â€ the IPS submission to ERA added.
â€œThe company has since submitted all the required audited financial statements and undertakes to present these in accordance with the terms of the licence in future.â€
Energy experts argue that WENRECO has access to specialist expertise and gained invaluable experience in operating the West Nile grid and HFO plant, which capacity is necessary to guarantee reliable operations in the future.