AES Pulls Out of Uganda Dam

Wednesday, August 13, 2003

World Bank’s Unflagging Favoritism for Overpriced Bujagali Project Has Helped Put the Brakes on Uganda’s Energy Development.

Today, the US–based energy giant AES Corp. filed a quarterly report with the US Securities and Exchange Commission announcing their decision to "discontinue the construction and development of AES Nile Power in Uganda (Bujagali)."

The proposed $530 million dam on the Nile River has been marred by controversy since the troubled Virginia–based AES was first awarded the right to develop the Bujagali Falls site in the 1990s. The controversy was fueled not only the lack of competitive bidding, but by the refusal to disclose the terms of the contract between the company and the goverment. The project also met with stiff opposition from local organizations concerned that the dam would drown the culturally important Bujagali Falls, and who urged the government to preserve the falls and look to less–harmful and cheaper energy alternatives.

But the World Bank saw the dam as a key element in its effort to privatize the Ugandan energy sector, and for five years championed the dam above all other options. In 2001 the Bank approved approximately $215 million in support for the project. Construction was put on hold when corruption was discovered last year.

Lori Pottinger of International Rivers says:

"AES maintained that Bujagali Dam would help pull Uganda out of poverty, but in reality it was a costly white elephant that would have increased the nation’s debt load, and produced electricity that most Ugandans could not afford. The bloated project has stifled the development of viable renewable energy options such as geothermal."

An independent analysis of the project’s contract, completed in late November 2002, revealed that Ugandans would have paid hundreds of millions of dollars in excessive power payments if the World Bank–financed Bujagali Dam were built according to plan.

Peter Bosshard of International Rivers says:

"AES has lost $75 million in the Bujagali adventure. We hope this sends a message to other power companies, such as South Africa’s Eskom, which might consider investing in the project."

Bujagali and Nam Theun 2 Dam in Laos were the crown jewels in the Bank’s much criticized global strategy of promoting private sector investment in massive dams in the global South. Like Bujagali, Nam Theun 2 is now foundering after the main developer, France’s ED, pulled out in July.

Says International Rivers’s Lori Pottinger,

"The World Bank has said it will step up its funding of what it terms ’high risk/high reward hydraulic infrastructure.’ Bujagali shows yet again that the risks of these projects are huge and the rewards often non–existent for the governments who tie their fortunes to them. The World Bank should learn from these failures and encourage less socially, economically and environmentally destructive forms of development in the world’s poorest nations."

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