Manufacturers win as Bujagali financing extended

Monday July 9 2018

An aerial view of the Bujagali hydroelectric

An aerial view of the Bujagali hydroelectric power plant. It generates about 50 per cent of hydro power in Uganda. FILE PHOTO | NATION 

By DICTA ASIIMWE
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Uganda's large electricity consumers will soon start enjoying close to 20 per cent reduction in tariffs after the government signed a deal will see the loan repayment period for the Bujagali hydropower project loan extended by 15 years.

Uganda’s big manufacturers will get reduced power tariffs, like their counterparts in Kenya, who have since December 2017 enjoyed discounted night-time tariffs.

In Ethiopia, manufacturers have since 2014 enjoyed special tariffs of as low as $0.03 per kilowatt hour.

Ziria Waako, chief executive officer of the Electricity Regulatory Authority (ERA), said that over the past six years, Bujagali Energy Ltd (BEL) had used the tariff to pay back about half of the $900 million loan that was used in the construction of the dam.

The deal by BEL and its lead financier the International Finance Corporation with the government means that the remaining $450 million will be paid at a slower pace, allowing ERA to reduce the tariff paid to BEL.

Electricity from Bujagali has been cited as a contributor to the high power tariff, as the government signed a buy-or-pay agreement with BEL.

By reducing the cost of power from BEL, Energy Minister Irene Muloni believes that the amount of electricity being consumed will increase, allowing Uganda to get stop oversupply.

The government has embarked on a plan to boost demand by reducing the electricity tariff. According to ERA, this plan is expected to start in a week’s time, when new consumer tariffs will be announced.

Even if all users were to shoulder the burden of the extended payment period for the BEL loan, Ms Muloni says this reduction would only benefit the 39 “extra-large industrial consumers” because they soak up Uganda’s extra electricity supply.

“When we implement this initiative, the tariffs for extra-large industrial manufacturers will reduce by about 20 per cent, from the current average of Ush385 (10 US cents)/kWh,” she said.

The “extra-large” industrial users already benefit from the July 2017 waiver of income tax, which led to the reduction in the cost of electricity supplied by BEL from Ush531.821 (13.83 US cents)/kWh to Ush408.4 (10.62 US cents)/kWh.