By the 1990s, Uganda had long suffered from a lack of electricity supply, and the problem had become more acute over the years. While the Ugandan government's emergency thermal generation programme in the early 2000s was expected to help to address short-term needs, there was still a need for economical, large-scale, power generation over the medium and long term.
During the early 2000s Uganda started to suffer serious power shortages arising from a combination of the following:
- Delays in developing additional generation capacity;
- A lengthy drought in the region that reduced the generation output of the existing hydropower plants at the time (i.e., Nalubaale and Kiira);
- A high level of technical losses in the distribution system;
- Annual demand growth of around 8 percent, which was putting additional pressure on the country’s power system.
The government initially approved the Bujagali hydropower dam on the River Nile in Uganda in 1994 as the lowest-cost option to increase power production, and thus increase access to electricity in the country while reducing cost. It was finally completed in 2012 after 18 years of controversy that delayed the dam's construction.
The project involved the development of a 200-250MW hydropower plant on the Nile, about 8 kilometres downstream of the existing Kiira Power Station. It also included construction of a 100 kilometre transmission line, substations and other associated works.
AES Nile Power (AESNP) was intended to be the first company to undertake the project, but in 2001 a World Bank inspection panel found AES to have “performance shortfalls in the dam implementation in relation to social, economic and environmental aspects, including evidence of corruption and failure of financial disclosure to the World Bank Group. AES pulled out of the project in 2002, and as a result, the dam project stalled for five years."
After the withdrawal of AESNP, the Ugandan government decided to split the project into two separately funded but connected projects. In 2005, the project was restarted, and consisted of two parts:
- The Bujagali Hydropower Project (BHP), commissioning Bujagali Energy Limited (BEL) to construct and operate the dam and power plant;
- The Bujagali Interconnection Project (BIP), under the responsibility of the Uganda Electricity Transmission Company Ltd. (UETCL), a state-owned enterprise.
These projects had their own funding arrangements. “The African Development Bank (ADB), the World Bank and other lenders finance the BHP, while the African Development Fund and the Japanese Bank for International Cooperation finance the BIP.”
The cost of the project increased from USD580 million at inception to USD860 million and finally USD902 million (USD3.6million per MW) at completion. Independent investigations by the Ugandan parliamentary ad-hoc committee on energy put the dam’s actual cost at USD1.3 billion (about USD5.2million per MW).
The public impact
The project was completed in 2012, but was widely criticised for being a questionable investment given the expense. It missed some of its major goals, and had serious repercussions on the environment and on surrounding communities:
- Electricity prices in the country actually increased. “Unfortunately, the expected reduction in electricity costs has not been realised and instead the average cost of electricity increased after commissioning [the] dam, to be the highest average cost of hydro in Africa, thus making it unaffordable for many Ugandans.”
- The large expenditure on the project could have been used to invest in more sustainable energy sources. “Local environmentalists say the costly dam harmed Uganda’s chances of pursuing more sustainable energy alternatives, pointing out that the Bujagali dam failed to help the 86% of Uganda’s population who are not connected to the national grid.”
- The amount of electricity that the project would actually be able to produce was less than half of the 250MW was initially proposed. “The maximum amount of electricity it can generate under the current and future hydrological conditions is 121MW, based on a natural run-of-the river flows and Lake Victoria water elevations.”
- There was serious impact on the environment and surrounding populations. “The lake, which has dropped 1.2 metres since 2003, was, at the end of 2005, at its lowest level since 1951. The receding shoreline has caused serious harm to water supply systems, boat operators and farmers. It is estimated that the lake catchment supports about one-third of the total population of Kenya, Uganda and Tanzania.”
- “Approximately 8,700 people (about 1,288 households) had either been resettled or had lost assets for which they were entitled to compensation because of the project.”
Public Confidence Weak
The Bujagali project was perceived almost overwhelmingly negatively by the public and Ugandan civil organisations – despite the promises that it would alleviate the country’s energy crisis.
When the project started, members of the public immediately identified problems. "Ugandan citizens filed a complaint with the World Bank's Inspection Panel in July 2001, documenting the violation of the Bank's social, environmental and cultural policies, says Frank Muramuzi, the President of NAPE [Uganda's National Association of Professional Environmentalists]. ‘It would be scandalous if the World Bank approved further support for Bujagali before the Panel presents its findings'."
Once the project was under way, hundreds of people were adversely affected by the resettlements and related impacts of the project. Some of them sought legal compensation and others looked for an out-of-court settlement with the government. In 2007, "557 people filed a complaint in court (class action) against Uganda Electricity Transmission Company limited (UETCL), on the basis of the Constitution and the Land Act, which provided for fair and adequate compensation. They applied for a temporary injunction, and the injunction was granted."
Stakeholder Engagement Weak
The project was led by the World Bank and the Ugandan government and obtained significant support and funding from other international organisations and NGOs. AES Nile Power and Bujagali Energy Limited were the two main companies involved in the construction and feasibility analysis for the dam, and the government and other international organisations provided financial and operational backing. “The project was undertaken as a Public Private Partnership (PPP) between the Government of Uganda and International Financial Corporation (IFCs), the World Bank Group, the European Investment Bank (EIB), the ADB in collaboration with dam construction companies – Industrial Promotions Services (IPS), a holding company of the Aga Khan, and Sithe Global Power."
However, there was little involvement of the local population. Although the project sponsors did engage in consultation with stakeholders, the latter argued that the process was inadequate because they were not offered true participation in the decision-making.
Similarly, community leaders protested that places of worship were not respected. “While there is some evidence of consultations in the project documents, the manner in which the consultations were conducted is still lacking. For example, the rightful Cultural and Spiritual Leader of the 250 Basoga Clans attached to Bujagali Falls, Nabamba Budhagali, was not consulted by the dam developers on the impact of the dam on the Spiritual Shrines at Bujagali Falls.”
There were also considerable objections from environmentalists and other groups regarding the potential impact of the project as well as the management of the resettlement. “The Bujagali dam Resettlement and Compensation Action Plan, and Community Development Action Plans was criticised by citizen groups locally and internationally for being shallow, shortsighted and focusing only on short-term impacts of the project. The dam was nevertheless approved by the [government] and the international financial institutions, and construction started, ignoring the outstanding concerns."
There were also concerns about the project’s impact on water resources and the development of more sustainable sources of energy. “NGOs are pressing for the development of alternative renewable energy sources, a sustainable fuel wood programme, and improved efficiency to reduce the very high levels of waste in the existing system. Groups are also concerned about the dam’s impact on the health of Lake Victoria, which supports millions of people and extensive biodiversity.”
Political Commitment Good
Throughout the development of the Bujagali project, the commitment of the government was strong, and they obtained significant support from international actors. The Ugandan government and AESNP were the main parties involved in the project and, after AES withdrew, the government remained committed to the development.
After a few years of delay, the government revived the dam project in 2005 through a PPP model with a consortium of the Aga Khan Fund for Economic Development and US Blackstone affiliates. The partnership created the single-purpose company Bujagali Energy Limited (BEL), which was to own the plant for a 30-year concession period before transferring it to the Ugandan government.
For this second attempt at the project, the government made sure that all obstacles were addressed in order to move forward. “The dam development under BEL was fast-tracked, resulting in many shortcuts taken to ensure that the project was approved as fast as possible, ignoring outstanding concerns about the project. The Government of Uganda used the country’s spiralling electricity deficit… as justification to speed up the process."
As for international organisations, they provided most of the funding as well as other supervising support. The ADB’s board approved a private sector loan of USD 55 million to finance the construction of the project in 2001, while the EIB participated with a EUR95 million loan. However, as problems with the project started to surface, they advised the government to take action, but with little response.
Clear Objectives Good
The objectives of the Bujagali project were stated in the original World Bank project report, and remained relatively consistent as the project developed, despite changing the company responsible for implementation.
The main objectives were:
- To build a power plant to achieve the lowest-cost power generation for domestic use in an environmentally sustainable and efficient manner.
- To promote growth, and mobilise private capital by promoting private sector ownership and management of the power sector, and sector reform.
The World Bank's original project description stated that the project involved the development of a hydropower plant with capacity of 200MW, including about 100 km of 220kV and 132kV transmission lines and associated substations to be developed on a Build-Own-Operate-Transfer basis. The objective did not change significantly over the course of the project, regardless of several other difficulties such as changing the schedule and the implementing company.
There was some evidence available to both the Ugandan government and the institutions involved, from previous dams built in the vicinity and from the project development of the cancelled Bujagali dam project in the early 2000s.
The failure of the first Bujagali project provided some lessons to the government about shaping the later dam project. It also provided the opportunity for institutions such as the World Bank Group to evaluate the lessons, including the outcomes and recommendations of the World Bank Inspection Panel review, in order to better understand the concerns of stakeholders within and outside Uganda.
Similarly, it indicated the need for greater public disclosure. “This project’s Power Purchase and Implementation Agreements have been disclosed by the [government], and the World Bank Group on behalf of all the lenders has disclosed the project’s Economic Study… Tools and means for outreach have included internet websites (where the public can read the Social and Environmental Assessment and the Economic Study, for example), in-country disclosure (advertised in local media), proactive consultations, and dissemination events to ensure that this information is widely available.”
The project benefited from the social and environmental due diligence that had been performed for the previous project under AES, and it also retained the original environmental footprint. Building on that, BEL conducted further field studies and analyses, where needed. The World Bank had formerly provided funds to restore the Nalubaale dam, and in 2001 the World Bank Inspection Panel found that the first Bujagali project fully complied with the World Bank safeguard requirements on dam safety.
Despite the close project support from international banks during the planning of the Bujagali project, there were significant cost overruns, indicating that the financial feasibility of the project had not been adequately assessed.
The project cost doubled from the time it was first proposed until it was approved. “At one time, the cost of the Bujagali project was reported to be USD430 million, then USD550 million and then USD580 million. From January 2007 to end of March 2007, the Bujagali cost has risen from USD735 million to USD860 million and is expected to escalate even higher when other additional costs are included... In a meeting between the World Bank and NAPE [the National Association of Professional Environmentalists] held on the 28 February 2007 in Kampala, the World Bank acknowledged that the cost of Bujagali project had increased by 30 percent.”
The project’s high cost further limited the funds available for rural electrification, and was likely to lead to reductions in tariff subsidies for grid-connected users. “Uganda already has the most expensive power in the region, and recent tariff hikes have pushed more people out of the already limited market for electricity.”
Whereas proponents of the project cited the example of a dam already operating on the Nile to indicate feasibility, others warned of the potential risks. “There were no studies to assess the cumulative impacts of having one or more hydropower dams in a short stretch (8km) of River Nile. This raises doubt on the suitability of Dumbbell Island as [the] site [of the] Bujagali dam.”
Several hydrologists and climatologists argued that the project would make Uganda more vulnerable to drought, as the dam would increase Uganda’s dependence on a short stretch of the Nile for all of its electricity for some time to come. Many accused those responsible of downplaying the project’s hydrological risks. “The World Bank’s least-cost analysis ignored extensive evidence that global warming will reduce outflows in the Nile; it also proposes a new hydrological flow pattern for operating the dam complex that could slow the recovery of Lake Victoria."
Finally, one of the most important objectives of the project, which was to increase the accessibility of electricity, was seen as likely to fail. “Due to overestimation of the dam capacity, together with the terms of the Power Purchase Agreement, there is a high risk that the electricity produced will come at a price much higher than expected, and will only be affordable to the wealthiest segments of the Ugandan population.”
The private company BEL was responsible for implementing the project. “BEL’s contract involved the development, construction, and maintenance of a run-of-the-river power plant with a capacity of up to 250MW. BEL also managed the construction of approximately 100 kilometres of 132kV transmission line on behalf of the Uganda Electricity Transmission Company Ltd (UETCL) to evacuate electricity from the plant."
It brought in a consultancy to address social and environmental issues. "BEL hired a consultant, Burnside, to prepare the Social and Environmental Assessment (SEA) Study for the project. This included the preparation of several documents and plans required by the ADB’s policies and procedures, including the 'Assessment of Past Resettlement Activities and Action Plan', which dealt with the outstanding resettlement and compensation issues from the first project and other resettlement and compensation issues that may arise from the BHP, the Summary SEA, and the Resettlement and Community Development Action Plan."
The resettlement and compensation of affected people was expected to be completed by December 2007. However, it faced delays according to the project plan, so BEL appointed a witness NGO, Inter-Aid, to observe the resettlement and compensation process.
The overall project was overseen by several institutions – principally the Ugandan government and the World Bank – which created overlaps and confusion about procedures and responsibilities. A review panel from the ADB in 2008 concluded that: “The Panel gained the impression from its interviews with the Bank staff responsible for the Bujagali projects that they seemed to have been overly confident in the policies and procedures of cofinanciers, in particular the World Bank, and in their supervision and due diligence. However, as the operations of the ADB are governed by this Bank’s own policies, the Panel recommends that the Bank take appropriate action to ensure that the Bank staff have an adequate knowledge of the Bank’s polices and how they are applied in its operations, including cofinanced operations."
Given that there were several institutions cofinancing and monitoring the Bujagali project – mainly the World Bank and the ADB – they collaborated in the evaluation of the initiative. However, they each followed their own independent procedures for reviewing compliance. There is no evidence of an ongoing internal monitoring of the progress of the project.
Following a Board of Directors’ meeting in 2009 on the ADB’s Management Action Plan, the Independence Review Mechanism (IRM) Monitoring Team conducted a mission to Uganda from 24 to 29 May, 2009. The mission was undertaken in conjunction with the World Bank’s Inspection Panel. “The IRM Panel and the World Bank Inspection Panel coordinated their field investigations of the Bujagali projects and shared consultants and technical information during this investigation in order to enhance the efficiency and cost-effectiveness of each of their investigations. While this collaboration between the Panel and the World Bank Inspection Panel worked to the mutual benefit of both parties, each Panel focused its compliance review on its own Bank’s policies and procedures and each Panel has made its own independent judgments about the compliance of its Management and staff with its Bank’s policies and procedures.”
Despite significant concerns on the part of the public, environmentalists and civil society, both the Ugandan government and international financiers were supportive of the implementation of the project.
There appeared to be alignment and agreement between the various financial institutions overseeing the project: “The [EIB’s Board] stated that EIB disbursement should occur in line with those of the other cofinanciers, in particular the World Bank Group, in order to ensure a coherent approach to any recommendations the World Bank’s Inspection Panel (see below) may express in the future and their full consideration in the project. The EIB’s lending will be from the Investment Facility managed by the Bank under the Cotonou Partnership Agreement between the ACP States and the EU, the resources of which are provided by the EU Member States through the European Development Fund."