FINANCE: Review Finds World Bank’s Ugandan Dam Project Overpriced

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Nov 21 2002 (IPS) - A controversial dam project in Uganda financed by the World Bank is overpriced by hundreds of millions of dollars and could cost Ugandans, among the world’s poorest people, millions of dollars in extra expenses every year, says an anti-dam group.

The International Rivers Network (IRN), a U.S.-based organisation, said in a report released Wednesday that Ugandans could end up paying as much as 280 million dollars in extra costs if the World Bank-backed Bujagali Dam on the river Nile proceeds according to plan.

Funding for the project is on hold as the Bank says it is investigating allegations of corruption in the project.

The IRN says it commissioned India’s Prayas Energy Group, a team of independent experts, to review the project’s important document, the power purchasing agreement (PPA), after it obtained a copy of the confidential document.

The PPA sets the terms between Uganda and the dam’s private developer, the U.S.-based power company AES Corporation, for a period of 30 years.

According to the review, the capital cost of the 250-megawatt Bujagali project, particularly the cost of electro-mechanical equipment, is excessively high.

”With a cost of 2.9 million dollars 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 dollars per megawatt,” said Prayas in its IRN-commissioned review.

Moreover, the Bujagali PPA contains ”a number of unusual requirements which are detrimental to Uganda”, says the review.

These include the condition that the Ugandan government make yearly payments of up to 132 million dollars for the project (and not 111 million dollars as stated in the World Bank’s project appraisal document and the PPA), adds the review.

”If the PPA requirements and the capital costs were more in line with international standards, Uganda’s yearly payment obligations for Bujagali would be reduced by about 40 million initially, and by an average 20 million over the lifetime of the project."

This would result in savings for Uganda of 280 million dollars, says the IRN.

”This project represents a serious burden for a highly indebted poor country like Uganda. This study clearly demonstrates that the World Bank has misled the public and provided bad advice to the Ugandan Government,” said Peter Bosshard of IRN.

In a document obtained by IPS, the International Finance Corporation (IFC), the private arm of the Bank that is funding the project, rebuffed the results of the review.

IFC says the dam is the most efficient and least costly way to "satisfy demand for reliable and affordable electricity in Uganda".

The Bank has also defended the project on the grounds that less than three percent of Uganda’s population now has access to electricity.

Although the IFC statement did not address the issues raised in the IRN report directly, it said the project will play a key role in reducing poverty by supporting domestic economic growth, ”thereby helping to raise the income levels of the poor and improve their quality of life”.

The project, the statement says, will lessen the need for public investment in the power sector, ”enabling the government to deploy more funds to address critical social needs in other areas”.

Groups critical of the project have accused Bank staff of manipulating figures to win project approval from the lender’s executive board and contend that the project is not economically and environmentally viable.

Bujagali, at 30 metres high, is said to be the largest private power project in sub-Saharan Africa.

The World Bank and African Development Bank approved loans and guarantees of 230 million dollars towards the project’s total estimated cost of 550 million dollars.

Groups including Uganda’s Greenwatch and National Association of Professional Environmentalists (NAPE) along with IRN have long requested the public release of the Bujagali PPA.

But the World Bank, AES and the Ugandan government have consistently refused to release the confidential document.

In June, the Bank’s Inspection Panel, an independent internal watchdog, called for the release of the document to ensure ”public understanding of the project".

The Panel also faulted the Bank for failing to do a credible environmental assessment study, adding that it neglected to evaluate possible alternatives, chiefly geothermal energy.

On the same day in June, the Bank’s executive board said it was delaying a decision on a crucial political risk loan of 225 million dollars until project documents were released for public debate and ”further discussions carried out".

But international pressure to reveal the document won momentum last week when the Ugandan High Court ruled that the controversial PPA be released to the public.

Till now the Bank has not publicly released the document.

IRN and other groups called on the Bank in a statement Wednesday to cancel funding for the project altogether.

”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,” said Bosshard.

The dam is not in the best interests of the Ugandan people and ”should be cancelled”, said Frank Muramuzi of NAPE in a statement.

Activists are alarmed at other aspects of the project, including its danger to the Kalagala falls, downstream of Bujagali.

FINANCE: Review Finds World Bank’s Ugandan Dam Project Overpriced

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Nov 21 2002 (IPS) - A controversial dam project in Uganda financed by the World Bank is overpriced by hundreds of millions of dollars and could cost Ugandans, among the world’s poorest people, millions of dollars in extra expenses every year, says an anti-dam group.
(more…)