Since 1994, AES (Applied Energy Services) the leading American company in global power, has been pushing for the construction of a hydroelectric dam on the Bujagali Falls. Due to continuous allegations of corruption, however, the procedures have been halted many times over. Construction of the plant is expected to take 44 months, after
which it will be owned and operated by AES Nile Power Limited (AESNP), a subsidiary of the AES Corporation. AESNP would maintain the Bujagali plant and sell electricity to the Uganda Electricity Transmission Company under a 30-year power purchase agreement. This would be the largest foreign investment ever to take place in East Africa.

Although the alleged mission of AES is to help serve the world’s need for electricity, the World Bank itself acknowledges that grid-based electricity generation will not meet basic human needs: “No more than 7% of the total population [in Uganda] can afford unsubsidized electricity‚Ķ‚Äù Nevertheless, the World Bank also states that the project
is a “key investment” in reducing poverty in Uganda, a country where less than 3 percent of the population has access to the national grid.

The evaluation of Uganda’s energy alternatives–which include various sized hydro projects, thermal options, bagasse, and geothermal, wind and solar applications– commissioned by the IFC, was carried out by a dam engineering firm, Acres International, that is already uilding dams on the Nile. According to IRN, the International Rivers Network, a dam on the Bujagali Falls would submerge highly productive agricultural land, resulting in “further watershed degradation and deforestation and a loss in soil productivity.”

The Bujagali Hydroelectric Project is accompanied by a separate power sector reform and development program in which the distribution business will be a private sector concession. The Bujagali Falls, which are important not only for their cultural value but also for their role in the Ugandan tourism industry, would be drowned by the  construction of such a massive dam. Martin Musumba, who is coordinating the Save
Bujagali Crusade in Uganda, states that “if Uganda retains the tourism (for the rapids), in the long run (there would be) a lot more benefits to a larger segment of society.”

The issue of the hydroelectric project on the Bujagali Falls is at once controversial and complex. With so many arguments against its construction, it is still not clear why the Ugandan government is supporting the decision to move forward with it. While researching this project, I discovered that the main web site on the subject (is in fact
put out by AES, the same company that hopes to build the dam. In the case of the Bujagali Hydroelectric Project, it is very difficult to distinguish between the concern for actual need, and the more obscure notion of corporate greed. “It’s impossible to develop a country without power,” said Girmai Abraham, who represents Uganda on the World Bank’s board. Then again, it’s impossible to make just decisions when power itself is abused.

Facts on the Bujagali Hydroelectric Project

• Uganda is one of the poorest countries in the world.

• 97% of Ugandans do not have access to electricity.

• Even with a free connection, most Ugandans could not afford electricity.

• The US-based AES corporation Рone of the largest hydroelectric
companies in the world– is planning the construction of a US$530
million hydroelectric dam on the Bujagali Falls, along the Nile River
in Uganda.

• The Bujagali Falls are a very beautiful and important site of cultural heritage in Uganda.

• The project is now being considered for funding from the ADB (African
Development Bank), the IFC (International Finance Corporation), the
World Bank, and many other creditors.

• There has been no competitive bidding over this project, which is favoured only by the US and Ugandan governments.

‚Ä¢ Under a “Take or pay” contract, Uganda has committed to buy a set
amount of power every year regardless of how much is actually produced.

• The project design and projected outputs are based on highly optimistic hydrological studies of the river, regardless of the fact that there is a significant “Hydrological risk” due to chances of increased droughts in the area. Therefore, it is probable that Uganda will end up paying for power that is not produced.

• The damn would be built a few miles away from two other dams, and the cumulative effects on the river are not known.

• Mats of water hyacinth could accumulate behind the numerous dams and
kill fish in the area. Other cumulative impacts include dessication of
wetlands and forests along the river.

In response to a letter written by a supporter, criticising the
World Bank’s support of the Bujagali Hydroelectric Project, Mr. Paul
Martin, Canada’s Governor to the World Bank, wrote the following letter
on 6 November 2001.

Dear XX:

Thank you for your correspondence regarding the proposed Bujagali Hydroelectric Project and its eligibility for World Bank support. I am pleased to have this opportunity to respond.

An important dimension of Uganda’s poverty is its lack of basic infrastructure, such as electricity. Ninety-seven percent of Ugandans lack access to electricity (99 per cent in rural areas) and it is estimated that businesses lose 90 working days per year from inadequate power‚Äì compromising economic growth by as much as two per cent per
year. Therefore, a strong case exists for World Bank involvement in this sector.

However, I share your concern that large infrastructure projects to address the problem, particularly dams, may have negative effects on the people of the region and their environment. You correctly highlight the need to consider the impact on tourism and local culture, in which the river system pays an integral role.

With respect to the Bujagali project, World Bank analysis on electricity generating options for Uganda concluded that from a cost, technology, engineering, environment and social perspective, hydropower is the best option for Uganda, and that the Bujagali project is the
most cost-effective hydro option. These findings were confirmed by separate studies, including the environmental impact assessment prepared for the primary investor. Detailed information on these findings can be found at http://www.ifc.org/bujagali.

I can assure you that Canada will participate fully in discussing the effects of this project when it is presented to the World Bank’s Board of Directors for approval. We will focus on the adequacy of the public consultation process in the project’s design and the envisioned
resettlement and community action plans (including the need for, and impact of, any electricity tariff increases as a result of this project). In recent years, Canada has been active in discussions of this nature at all of the multilateral development banks to ensure
these issues are explicitly integrated in program decision-making.

Thank you for contacting me.

Sincerely,

The Honourable Paul Martin, P.C., M.P.