Bujagali finally comes on stream, eases power crisis

The $900 million Bujagali hydropower plant has been commissioned, injecting an extra 250 Megawatts into Uganda’s electricity grid.

The plant, whose construction has taken about five years, has doubled Uganda’s power generation capacity to 509MW.

Bujagali was commissioned by the Aga Khan and Uganda’s President Yoweri Museveni at the Jinja site two months after it started commercial production.

The project has seen the country cease relying on the 100MW of costly thermal power required to meet a 170 MW power deficit that resulted in frequent blackouts lasting up to 12 hours a day.

Bujagali is billed as a game-changer for Uganda’s economic prospects at a time when its electricity demand has been growing at 10 per cent annually, outpacing supply and causing losses to businesses.

“Availability of electricity is a major factor in improving the economic growth of any country and the amazing mistake is that many African leaders neglect this,” said President Museveni, whose country is celebrating 50 years of Independence.

“Uganda’s GDP has been growing at a steady rate of six per cent per year without adequate supply of power and this will now be faster with commissioning of Bujagali.”

Funding for the project consisted of $200 million in equity from the project’s shareholders who include Industrial Promotions Services (IPS), Jubilee Insurance and Blackstone Capital/Sithe Global Power.

The Ugandan government chipped in with a $20 million contribution in form of land.

The balance of $700 million was sourced through credit from a consortium of lenders such as the International Finance Corporation (IFC), the African Development Bank (AfDB), KfW and Barclays Bank.

Speaking at the commissioning ceremony, the Aga Khan described the occasion as timely since it coincided with the country’s Independence anniversary.

“Bujagali is a momentous accomplishment that will open the door for continuing and expanding progress,” he said.

“It is not only a transformative development in the economic life of Uganda and the continent, but it is also an inspiring model of how change can be best accomplished,” he added.

Bujagali has five units each producing 50MW with the first having been commissioned in March this year and the fifth, which was the last to be inaugurated, on June 3.

Its commissioning has saved the government approximately $9.5 million monthly in subsidies for keeping electricity tariffs at an affordable level.

The subsidies dampened the high cost of thermal production, which saw the cost of power produced peak at Sh251 per kilowatt hour (kWh).

The Bujagali output is projected to cost the power distributor approximately Ush8.6 per kWh. This amount is expected to reduce and settle at approximately Ush7.1 per kWh at the end of the concession when the project’s loans are fully repaid.

Operations

The plant will be operated by Bujagali Energy Ltd (BEL), a company established by the project and the Uganda government to develop and subsequently operate it for 30 years.

The power plant will be transferred to the Uganda government for $1 when this concession comes to an end.

However, the project has had its fair share of political, financing and environmental-related challenges that slowed its implementation.