Museveni takes over Karuma power project, gets funding from China

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Posted  Saturday, March 30   2013 at  21:55

In Summary

  • President Yoweri Museveni reportedly secured Chinese funding for the 600MW power station.
  • Angered by the failure by Ministry of Energy officials to recruit an engineering, procurement and construction (EPC) contractor for the power station, President Museveni reportedly shunted aside officials at the centre of the unending saga and assumed control of the project, just before boarding his flight to Durban.

According to sources, Mr Museveni’s discussions with Chinese President Xi JinPing took place in the afternoon on Thursday, March 28, and concluded with China committing to provide funding for Karuma. But Uganda was reportedly left to select a contractor.

Faced with severe funding shortfalls in the wake of withdrawal of aid by a number of Western donors, and the government having severe cash flow constraints, the President had directed that the $600 million ring-fenced for the Karuma project be made available in the recurrent budget.

Chinese commitment

The new reports of the Chinese government’s commitment corroborate earlier information that Exim Bank of China had agreed to fund the project.

But, it appears that, embarrassed by the fight for the Karuma contract by two Chinese contractors, Beijing’s embassy in Uganda is in the process of introducing a policy where it will in future vet Chinese contractors before allowing them to bid for projects in the country.

The embarrassment for China stems from revelations that in its bid to win the Karuma contract, CWE made false claims about its experience.

According to the IGG’s findings, CWE presented the 70MW Dayingjian second tier hydropower dam as having a capacity of 600MW, and the 20MW Qingshan as a 640MW power station.

“There was a deliberate effort on the part of CWE to conceal the fact that the Qingshan HPP and Dayingjian II HPP were cascade dams. This fact would have rendered the two projects different from the Karuma Hydropower Project and was therefore a material fact not disclosed in the bid,” the IGG said.

Ms Mulyagonja further stated that the irregularities were known to Ministry of Energy officials and the due diligence that was carried out had not been effective.

Although she found no evidence to support allegations of bribery in the bidding process, Ms Mulyagonja faulted the re-evaluation committee for finding CWE’s bid compliant in spite of material omissions. The re-evaluation was ordered by the court after multiple appeals by a whistleblower and aggrieved bidders.

In her recommendations, the IGG proposed restricted international bidding of reputable international EPC contractors who have carried out similar projects.

New contractor

While President Museveni’s efforts to seek funding and a new contractor for Karuma are in line with this recommendation, Ms Mulyagonja has prescribed punitive action against CWE in line with section 94 of the Public Procurement and Disposal of Assets Authority Act.

It states that “a provider who does not comply with this Act, regulations or guidelines made under this Act, shall be suspended by the Authority from engaging in any public procurement or disposal function for a period to be determined by the Authority on a case by case basis.”

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