Review of Project Contract Reveals that Ugandans Will Bear the Excessive Costs of World Bank-Supported Bujagali Dam

A new study reveals that Ugandans will pay hundreds of millions of
dollars in excessive power payments if the World Bank-financed Bujagali
Dam proceeds according to plan. The study, released today by
International Rivers Network (IRN), demonstrates that the agreement
between the dam’s private developer and the Government of Uganda falls
short of international standards. As a result, Uganda will be faced
with $20-40 million in excessive payments each year if the dam moves
forward. “This project represents a serious burden for a highly
indebted poor country like Uganda. The study clearly demonstrates that
the World Bank has misled the public and provided bad advice to the
Ugandan Government”, said Peter Bosshard of IRN. The study follows last
week’s landmark ruling in which the Ugandan High Court ordered the
release of the controversial contract between the dam’s private
developer and the Government of Uganda.

Main findings

International Rivers Network today released a review of the key project
document of the World Bank’s Bujagali dam in Uganda, the Power Purchase
Agreement (PPA). IRN had commissioned Prayas Energy Group, a team of
independent energy experts in India, to analyze the project contract.
The Prayas review concludes that the Bujagali project is excessively
expensive. With a cost of $2.9 million per installed Megawatt, Bujagali
is more than twice as expensive as a comparable dam in central India, a
project with a similar design and a cost of $1.2 million per Megawatt.
On top of the high construction cost, the Bujagali contract contains
several unusual requirements that put the Ugandan government at an
undue disadvantage. The excessive capital cost and the detrimental
features of the project contract entail annual extra costs of $ 20-40
million for Uganda. The total extra cost of the project over the
30-year lifetime of the contract amounts to a net present value of $
280 million. The World Bank is funding the private Bujagali dam, but
did not assist the Ugandan government in negotiating a project contract
that is fair and equitable.

Comments

“The review of
the project contract demonstrates that the Bujagali dam is
fundamentally flawed, and would only add to Uganda’s debt burden”,
comments Peter Bosshard of International Rivers Network. “It is
disturbing to see that the World Bank has supported such a sweetheart
deal for a private company, and has misled the public about the true
cost of the project.” “The World Bank analysis of Bujagali is
substantially weak, and one wonders how a `Knowledge Bank’ could have
missed the substandard features of the project contract”, suggests the
Prayas review. “The Bujagali dam is not in the best interest of the
Ugandan people and should be cancelled”, comments Frank Muramuzi of
Uganda’s National Association of Professional Environmentalists (NAPE).

Recommendations

Based on the independent review of
the project contract, IRN and NAPE recommend that the World Bank cancel
the $225 million in funding which it has already approved for the
Bujagali project. The Bank should instead support a balanced assessment
of all available energy options in Uganda, including the promising
potential of cheap geothermal power. IRN and NAPE call on the Bank to
comply with the recommendations of the World Commission on Dams in all
future water and energy development projects. Particularly, the Bank
should no longer promote secretive private power projects like
Bujagali, and should insist that all projects it funds are based on
competitive bidding processes and full transparency.

Background

Bujagali is a 200 Megawatt hydropower project on the Victoria Nile in
Uganda. It was awarded to a private developer, the US-based AES
Corporation, without any competitive bidding.