Washington, D.C., December 19, 2001—The
Board of Directors of the World Bank Group today agreed to support the
Bujagali Hydropower Project in Uganda, describing it as a key investment
in poverty reduction in Uganda where less than 3 percent of the population
has access to grid supplied electricity. The Board approved the International
Finance Corporation’s provision of an A-loan of up to $60 million, a potential
B-loan of up to $40 million, and a risk management facility of up to $10
million to support the project. Also, the International Development
Association (IDA), the World Bank’s concessional lending institution,
will provide a $115 million partial risk guarantee to commercial banks.
Located on the Victoria Nile River, the Bujagali project—consisting of
a 200-megawatt run-of-the–river hydropower station—will increase and
improve the supply of electricity in Uganda. It is accompanied by a separate
power sector reform and development program in which the distribution business
will be a private sector concession. The project will facilitate significant
transformation in the country by supporting domestic economic growth,
increasing the ability of the poor to raise their income levels, and improve
their quality of life.
The hydropower station will be built, owned, and operated by AES Nile Power
Limited (AESNP). The sponsor is the AES Corporation, a public corporation
headquartered in Arlington, Virginia. AES owns and operates electricity
generation facilities and distribution companies in many countries.
AESNP will develop, construct, operate, and maintain the Bujagali hydropower
plant and sell electricity to the Uganda Electricity Transmission Company
Limited under a 30-year power purchase agreement. The construction
of the dam is likely to be completed in 44 months.
Peter Woicke, IFC Executive Vice President and Managing Director of the
World Bank Group for private sector development said, “The project
will provide an efficient, low-cost, and well-managed electricity generation
facility that promises substantial economic benefits to Uganda. It
will reduce the need for public investment in the power sector, enabling
the government to deploy more funds to address critical social needs in
other areas. Private consumers will greatly benefit from increased
access to reliable and affordable electricity.”
The total project cost will be financed through a combination of equity,
debt, and internal cash generation. Equity of about $115 million
will be provided by the sponsor through its various subsidiaries. Debt
facilities of $468 million will be provided through an IFC A-Loan of up
to $60 million, a loan from the African Development Bank of $55 million,
a commercial loan facility supported by export credits amounting to $234
million, and the IDA partial risk guarantee. IFC may potentially
provide up to $40 million in B-loan financing and a risk management instrument
for $10 million.
Several allegations of corruption concerning the project have been brought
to the attention of the Bank’s Department of Institutional Integrity (INT).
The INT investigated these allegations as fully as possible within its
power. The Bank Group concluded that there is no corroborated evidence
of corruption that directly affects the merits of the Bujagali project.
The Bank Group has legal rights and remedies in case of improper payments;
and contracts and payments in connection with the Bujagali Project will
be monitored carefully. World Bank President James D. Wolfensohn told the
Executive Board, "Lack of electricity has severely impeded development
in Uganda. This is a first class development project. But we take corruption
very seriously. Should corruption be discovered, IFC has the right to stop
disbursements, and to demand repayment of the loan. In addition, relevant
national authorities will be informed as appropriate."
Included in the project is a community development action plan that will
help ensure that the people affected by the project will reap tangible
benefits in terms of improved living standards and access to better services.
The project will also directly benefit the people in the project
area by providing employment opportunities during the construction phase.
The economic analysis of the project confirms that Bujagali is the least
cost generation option to satisfy expected demand for electricity in Uganda.
The major generation alternatives considered include small and medium-sized
hydro projects, large hydro projects, thermal options, bagasse, geothermal,
wind, and solar applications. Alternative hydropower development
sites were considered. After much analysis, the present site was found
to be the overall preferred location due to its relatively favorable cost
profile and comparatively lower social and environmental impacts.
For further information on the project, please visit www.ifc.org/bujagali
for a summary of the economic due diligence, environmental and social impact
assessments, a fisheries study, and notes on consultation meetings with
local stakeholders and civil society, people affected by the project, and
the international NGO community.
The Government of Canada through the Canadian International Development
Agency (CIDA) funded a technical assistance study on the identification
of an appropriate development strategy for the Ugandan power sector, taking
into consideration the electricity needs of the country and the environmental
and social impacts of the proposed developments. The technical assistance
assignment reviewed and discussed generation options available to Uganda
and related environmental and social issues.