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Bujagali Hydro Power Plant Project in Uganda

Project cost and funding mix

According to the World Bank (2018), the project was a public-private partnership between:

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  • The private project sponsors include Industrial Promotion Services (Kenya) Ltd. and Sithe Global.
  • The Government of Uganda.
  • Multilateral and bilateral development agencies.
  • Commercial lenders, including Absa Capital and Standard Chartered Bank.

Total project costs amounted to $891.5 million. $199.76 million represented equity financing, including project sponsors’ contribution of $179.76 million and a government contribution of $20 million. $703.47 million in debt were provided by:

  • European Investment Bank (EIB) – $136 million.
  • International Finance Corporation (IFC) – $128.37 million.
  • Commercial Banks (IDA guaranteed lenders) – $115 million.
  • African Development Bank (AfDB) – $111 million.
  • European DFIs (including Netherlands Development Finance Company (FMO), Proparco, German Investment Corporation (DEG), and French Development Agency (AFD)) – $213.1 million.

Therefore, the total debt and equity are $903.23 million. There is an inconsistency between the project’s actual cost and the cost of funding. According to the contractual agreements, the two categories of expenses were prohibited and, therefore, were not considered part of the final project’s cost. It is about $800 thousand for the EPC cost and $10.8 million, which exceeded the allowed development costs.

Demand, supply, and risks

The World Bank (2018) notes that Uganda’s energy sector suffered from severe power shortages caused by a severe drought in 2004 at the Nalubaale and Kiira fields, on which power generation depended. The crisis was exacerbated by rapid growth in demand and high levels of technical and non-technical losses.

According to the World Bank (2018), risks for Bujagali HPP have increased due to logistical problems associated with transporting large-scale equipment to a landlocked country and infrastructure shortcomings. Moreover, the government had no experience in the private production of electricity in the face of a severe power supply crisis in the field of electricity. Furthermore, Kimbowa and Mourad (2019) assert that risks include severe projects’ impact on water resources, the environment, the surrounding population, and the development of more sustainable sources of energy.

Initial problems with the project and final restructuring

According to Kimbowa and Mourad (2019), initial problems included increased prices for electricity, absence of stakeholders’ engagement, disrespect for places of worship, negative public attitude to the project, insufficient assessment of the project’s financial feasibility, and lack of proper monitoring of project’s progress. In turn, the World Bank (2018) states that power plant construction faces many severities specific to hydropower projects. The initial problems were unfavorable geological conditions and delays in delivering and commissioning some facilities due to some factors, including a ship hijacking occasion and several electromechanical faults.

According to the World Bank (2018), the Bujagali HPP began commercial operation in August 2012. However, in October 2012, the plant was handed over to BEL in entire compliance with the contract and international technical standards. The project was accompanied by considerable cost overruns and delays in implementation, but it has performed satisfactorily since its completion. The Bujagali HPP’s commissioning made a significant contribution to increasing the installed generating capacity of energy to the national grid, reducing the electricity deficit, and improving the reliability of service.

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World Bank (2018) affirms that the main factors contributing to the satisfactory performance of the plant were:

  • Compliance of contractual agreements with industry practice in limited recourse financing transactions.
  • The managerial and technical competence of the individuals involved, including qualified sponsors and the EPC contractor.
  • The Government’s obligation to the project went beyond its formal commitments of providing a bridging loan to fix the EPC contract cost and start constructing without delay and establishment and operation of a Multi-stakeholder Bujagali Environmental Monitoring Committee.
  • Well-coordinated supervision of lenders, which is characterized by biyearly joint lender missions.

References

Kimbowa, G. & Mourad, K. (2019). Assessing the Bujagali Hydropower Project in Uganda. Modern Approaches in Oceanography and Petrochemical Sciences, 2(4), 157-168.

The World Bank. (2018). Implementation completion and results report (IDA guarantee NO. B0130) on an International Development Association partial risk guarantee in the amount of up to US$115 million to the Republic of Uganda for a Private Power Generation (Bujagali) Project [PDF document].

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StudyCorgi. 2023. "Bujagali Hydro Power Plant Project in Uganda." January 26, 2023. https://studycorgi.com/bujagali-hydro-power-plant-project-in-uganda/.

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StudyCorgi. (2023) 'Bujagali Hydro Power Plant Project in Uganda'. 26 January.

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