Uganda, World Bank sign pacts for power sector, other aid

Officials of the Uganda government and the World Bank have signed US$425 million in credit agreements to implement power sector improvements paving the way for the 250-MW Bujagali hydroelectric project, and poverty reduction assistance.

Uganda’s New Vision reported the signing May 27 by Finance Minister Ezra Suruma and World Bank country manager Grace Yabrudy, and attended by Swedish Ambassador Anders Johnson.

The World Bank approved US$360 million in loans and guarantees for Bujagali and a 100-kilometer transmission line April 26. (HNN 5/14/07) Additionally, the European Investment Bank approved 100 million euros (US$135.4 million) and the African Development Bank approved US$110 million for the project on Uganda’s Victoria Nile River.

The first agreement signed, worth US$300 million, is for power sector development, including the government guarantee for the Bujagali project. The second agreement involves a credit of US$125 million for poverty reduction support. Uganda also is receiving a US$6.5 million grant from the Swedish International Development Agency.

Scheduled for completion by 2011, Bujagali is expected to reduce the average cost of Uganda’s electricity by 10 percent and bring an end to load shedding. However, to prevent economic collapse in the short term, Suruma said the government plans to increase energy supply by reducing losses and resorting to thermal power. The government also plans to develop several renewable energy projects such as biomass and small hydropower generation.

The Bujagali project is being developed by Bujagali Energy Ltd., a consortium led by Industrial Promotion Services (Kenya) Ltd., a member of the Aga Khan Development network, and Sithe Global of the United States.

Of the total estimated project cost of US$799 million, the World Bank Group’s support includes US$130 million in loans to Bujagali Energy Ltd. from IFC; a partial risk guarantee of up to US$115 million from the bank’s International Development Association for the benefit of the project’s commercial lenders; and an investment guarantee of up to US$115 million from the Multilateral Investment Guarantee Agency, the World Bank’s political risk mitigator.

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