Uganda ignores donor concerns on Karuma

Sunday January 08 2012

East-West rivalry is emerging as a possible factor in the controversy surrounding the sizing of Uganda’s 660MW Karuma power project, which Western donors want built at a much lower rating of 450MW.

Speaking off the record about a debate that has seen donors argue that the power project is oversized relative to the available stream and the excess capacity is a wastage of scarce resources, Ugandan officials now suspect Western opposition to the project could be motivated by the role Chinese finance and civil contractors are likely to play in the project.

Ignoring donors who argue that the proposed capacity will be available only partially during the year, Uganda will this month proceed to receive bids for the power station, which it urgently needs to bridge a rapidly growing energy gap.

Uganda is apparently sticking to its guns because — in a departure from previous power projects, where it has had to deal with donors from project design to financing, — the country will go it alone this time, building the power station from its own resources and financing from friendlier partners.

The turnkey project will be funded by the government while Scandinavia is the preferred technology source.

With only 9 per cent of its population connected to the power grid, Uganda still has an official supply gap of 130MW. With demand increasing by 40MW annually and the economy expected to grow at an average of 5.5 per cent over the next five years, experts say power supply will still be chasing demand even if the new power station were to deliver to its design specification.


Consumers now have to endure 12 hours of power rationing at a time as contracts for thermal generation tail off in anticipation of the 250MW power station, which is running a year behind schedule.

Now a permanent feature of Uganda’s energy mix, accounting for up to 30 per cent of available energy, thermal electricity has seen the domestic tariff rise to Ush426 ($0.21).

Given the initial investment cost for new power projects as well as the proposed removal of a government subsidy that would see the consumer tariff double, new hydro capacity is not expected to bring about a reduction of tariffs in the short to mid-term.

Ministry of Energy officials said the controversial 660MW installed capacity is at optimum usage. However, they conceded that the 700MW initially proposed was not sustainable in the long run, but insisted the 400-450MW that the donor community proposed is not supported from a technical point of view.

Echoing his permanent secretary, who in an earlier interview told this newspaper that donor concerns were not informed by feasibility studies, Henry Bidasala, Assistant Commissioner of the Electrical Power Division in the Ministry of Energy and Mineral Development, commented: “We had a presentation by the contractor who did the feasibility study and the energy donor technical team in attendance asked all the questions they wanted and seemed okay with it.”

Energy Infratech Pvt Ltd of India carried out the feasibility study and environmental impact assessment in 2010.

Energy Permanent Secretary Fred Kabagambe Kaliisa had earlier argued that even if 450 or 500MW were the target generation output, it made sense to factor in redundancy to assure constant supply at those times when some units have to be shut down for maintenance.  

National Planning Authority officials said Uganda needs to increase its power generation capacity to 3,500 MW by 2015 as the country experiences a steadily rising population and economic expansion. According to the Electricity Regulatory Authority, demand has been growing by nine per cent per annum since 2009. This translates into an increase of 40MW per annum. 

An independent source said whatever decisions the technocrats were making in respect of Karuma were feasible and the donor community are only crying foul because of the possible participation of China and its rising profile in other projects in Africa. 

The donors, led by key financier KfW, at one time said they would engage a new firm to do an independent feasibility study, but have yet to do so. 

The source said without a new feasibility study, the donors are still referring to the Norwegian consortium Norpak Power Ltd study that had developed a “conservative design” in the mid-1990s, informed by the notion that there was low demand for electricity in Uganda.

Keith Muhakanizi, Deputy Secretary to the Treasury, said the projected cost would be lower than the initial estimates of $2.2 billion because of a “new approach.”

Initial design proposals suggest a dam with a headrace, tailrace and an underground facility housing 6 turbines each with nominal rating of 100MW and a spinning reserve of 10 MW.

It will be located about 3km upstream of Karuma Bridge and 80km downstream of Lake Kyoga on the River Nile.

Construction of the project will be supervised and managed by the Uganda Electricity Generation Company, the government nominee and licensee of the project.