Bujagali power project to come on stream unit by unit in 2011

Monday April 12 2010

By JULIUS BARIGABA

The French development finance institution, Proparco — a key financier of the 250MW Bujagali Hydropower dam has asked the government to urgently address the rising power demand in Uganda, in order to avoid costly ventures in the long term.

On a recent tour of the dam in Jinja, 80 kilometres east of the Ugandan capital, Proparco chief executive officer Luc Rigouzzo said the project is well on course to address the country’s power deficit in the short and medium terms.

He said though costly, it was an important venture that would boost Uganda’s economy.

“It will relieve industrialists of the expensive thermal power and reduce power tariffs by half. Since it is green energy, there is no risk of pollution as well,” said Mr Rigouzzo.

Experts say Uganda’s energy deficit has been growing at 40MW per year.

This means that in the next three-four years, the demand will outstrip supply from the existing sources at Kiira and Nalubaale dams upstream of Bujagali, whose combined capacity is 380MW.

Future needs

A number of leading industrialists in the country, for instance, are set to ramp up production, meaning they will consume more electricity.

Nile Breweries Ltd consumes 2.2MW but will soon need nearly 10MW; steel and roofing materials maker Roofings Ltd consumes 3MW but will require 27MW in another three years, while Tororo Cement consumes 12MW and will need 18MW by the end of this year.

The French financier provided $72.8 million, with some $2.8 million in concessionary funding for the project’s social and environmental aspect.

This included the provision of piped clean water for the community around the dam and the establishment of health centres.

Other financiers include the International Finance Corporation, the European Investment Bank, African Development Bank, the German DEG/KfW and the Netherlands Development Finance Company (FMO).

The project’s cost ballooned to some $860 million after prices of construction materials shot up during the tendering process in 2006.

The steel, for instance, is imported from Turkey, while the cement comes from Mombasa in Kenya. The cost of transportation is high.

Sithe Global, IPS and the Ugandan government are providing up to $180 million equity while $680 million is the development and financing cost.

The developer, Bujagali Energy Ltd hopes to commission the first of its five units in the powerhouse in the first quarter of next year and the rest, every two months till late 2011.

By this time next year, some 50MW of power will be flowing from Bujagali.

“Most electricity projects are commissioned in their entirety but we will do it unit by unit,” said Kevin Kariuki, the project’s head of development.

The country is currently relying on a mix of hydro and thermal power and owing to its high costs the government is forced to offer subsidies to industrialists.

Instead of US30 cents per unit, industrialists pay nine cents — but this is still expensive, compared with the projected tariff of US6-7 cents per unit for Bujagali during the first years when the project sponsors, Industrial Promotion Services and Sithe Global will be repaying the loans.

Officials say works on the embankment to the blocked side of the river are almost complete; those on the dam’s siphon spillway which can discharge 1300cc of water are nearly done while the power house is at an advanced stage.

So far, 2,200 people out of 2,674 have been compensated to pave the way for the transmission line.

It is anticipated that as the debt grows smaller, the tariff will proportionately come down to settle at US3-4 cents.

Initially, Virginia based AES Corporation was to develop Bujagali dam at a cost of $530 million but the firm withdrew its interest just a week before the financial bid closed, due to opposition from local and international environmental lobby groups.

AES had received approvals in December 2001 and was to complete construction in 2005.