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The World Bank Group executive board in Washington will examine and make a final decision on the 250MW Bujagali hydro-power project on Thursday (April, 26). A go-ahead by the board will lead to financial approval and disclosure for the project and enable the dam’s construction to start.

Bujagali Energy Limited (BEL), a consortium between Industrial Promotion Services (IPS) of Kenya and Sithe Global, a US power giant, are the project developers.

The World Bank Group through its agencies like the International Finance Corporation (IFC), International Development Association (IDA) and the Multilateral Investment Guarantee Agency (MIGA), is the leading project lender.

The IFC, the group’s private lending arm, is evaluating $130m in form of A and C loans for the construction and operation of the facility. IDA, the interest-free arm, is expected to provide a partial risk guarantee of $115m for the project's commercial lenders.

 

And MIGA, the investment risk mitigator, is providing equity risk insurance of $115m for Sithe’s investments in the project. Other major lenders include the European Investment Bank and African Development Bank.

The project’s cost is estimated at $799m. However, the total cost will be known after negotiations on the Engineering, Procurement and Construction (EPC) Contract.

BEL is negotiating with an Italian firm, Salini, about the $467m EPC contract after an international competitive bidding process. The negotiations will ensure the least-cost power tariffs when the project is completed by 2011.

Bujagali Energy has obtained an investment licence from the Uganda Investment Authority and a generation licence from the Uganda Electricity Generation Company.

It has also signed a Power Purchase Agreement (PPA) and Implementation Agreement with the Government.
The project is aimed at solving the energy crisis that has contributed to the decline of Uganda’s Gross Domestic Product to about 5% from 6.5%.

The crisis forced the Government to procure 100MW of thermal power. Another 100MW of thermal power is under procurement. Thermal power is thrice as expensive as hydro.

Selection of the project’s sponsor was done after international bidding.
The sponsor is supposed to ensure that the country has the cheapest electricity price for 30 years.

A Request for Proposals to a broad group of potential developers was announced in January 2004.
Potential developers were requested to present their credentials by March 1, 2004. After reviewing the information received, the Government asked qualified developers to present proposals by March 23, 2005.

In April 2005, the Government selected Bujagali Energy, who entered into agreements with the Government and the Uganda Electricity Transmission Company in December 2005.

The agreements included the Power Purchase Agreements (PPAs) and the Implementation Agreements (IAs), which were made public at the Electricity Regulatory Authority offices in Kampala.

BEL finalised and disclosed a Social and Environmental Assessment (SEA) for the project in December 2006 in accordance with the World Bank Group’s Environmental and Social Standards.

During the SEA preparations, BEL conducted public consultations with communities that would be affected by the project and promised to continue doing so during the project implementation.

Independent consultants assessed the project’s economic viability and confirmed that Bujagali was the least-cost power generation option for Uganda.

Again the strategic/sectoral, social and environmental assessment report of power development options in the Nile Equatorial region confirmed Bujagali as the most advanced.

The National Environmental Management Authority conducted a final public hearing in Jinja and communities affected by the project supported it.

A final verdict is to be made before the end of this month. The Government has secured $100m for the project.

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