UPDATE – Africa bank approves US$110 million for 250-MW Bujagali

The African Development Bank (AfDB) has joined the World Bank in providing funds to develop the 250-MW Bujagali hydroelectric project on Uganda’s Victoria Nile River.

The AfDB board approved financing May 2 of US$110 million for the hydroelectric project and an associated 100-kilometer transmission interconnection project.

The World Bank approved US$360 million in loans and guarantees for the project April 26, (HNN 4/27/07) 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. (HNN 3/12/07)

�Uganda has a comparative advantage in the region with its abundant hydropower potential, although less than 10 percent has been exploited,� AfDB said. �The choice of hydropower remains the only viable option to meet Uganda’s escalating electricity needs.�

The African bank said Bujagali has a strong development effect because it will:
o help Uganda develop its abundant hydrological resources to produce least-cost power for domestic use and for export;
o promote efficient operation of the power sector by increasing private participation; and
o increase direct access to electricity by rural households and generate direct and indirect employment.

�Hydropower is generally cheaper, cleaner, and more environmentally friendly than alternatives such as thermal power,� AfDB said.

The World Bank’s International Finance Corp. (IFC) called the project an integral component of Uganda’s strategy to close an energy supply gap that seriously constrains its social and economic development.

Bujagali to reuse water from upstream projects

The run-of-the-river project is to be built downstream from two existing hydro projects, 180-MW Nalubaale and 200-MW Kiira, at Jinja on Lake Victoria’s outlet. (HNN 1/3/07) Officials said the new dam would not affect lake levels, as alleged by opponents, because it would simply reuse water released by Nalubaale and Kiira.

The 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.

Bujagali tops list of six recommended hydro projects

The Nile Basin Initiative and the World Bank released a assessment strategic social and environmental assessment of power development in the Nile Equatorial Lakes Region on April 17. It recommended the immediate development of six hydroelectric projects in the region, with Bujagali at the top of the list (HNN 4/23/07)

The Bujagali project is one element of the World Bank Group’s support for Uganda’s energy sector strategy. Other elements include a Power Sector Development Operation (US$300 million) approved separately April 26 by the World Bank Group. It provides funding for a set of investments and policy measures designed to reduce the supply-demand gap until the Bujagali hydropower plant comes into service.

The bank also is providing support through three ongoing projects: the Power IV investment project (US$62 million) supporting improved power supply and government capacity to manage sector reform; the Energy for Rural Transformation Project (US$50 million), which supports the development of rural areas’ access to renewable electricity; and US$40 million in investment guarantees for an electricity distribution company.

The Bujagali project has undergone extensive economic, environmental, and social due diligence. Documents made available to the public include an economic analysis and a power purchase agreement. Consultations between Bujagali Energy Ltd. and local communities have been ongoing throughout the project.

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