IFC & MIGA Propose Corporate Welfare for World’s Largest Power Producer

Thursday, April 13, 2000

The U.S.–based AES corporation, the largest independent power producer in the world with assets of $11 billion, is currently in line to receive a partial–risk guarantee from IDA and loans from the IFC to construct a US$520–million dam near Bujagali Falls on the Nile. The dam would create a socially and environmentally destructive reservoir, and would drown the spectacular Bujagali Falls. Worse, the project’s power would not meet the needs of the vast majority of the country’s population.

The IFC is currently appraising the project, and is expected to decide within six months whether or not to lend for the project. The project is being used as a "carrot" in the World Bank’s efforts to privatize Uganda’s energy sector.

Local environmentalists believe the dam will harm Uganda’s chances to pursue true renewables like solar and wind, and point out that this project will do nothing to help the 95% of Uganda’s population who are not connected to the national grid.

In addition to affecting the livelihoods of about 6,800 people, the reservoir is expected to increase serious water–borne diseases like malaria and schistosomiasis. The creation of a reservoir could also permanently harm fisheries. The project will permanently submerge highly productive agricultural land on the river’s banks as well as islands of extreme biodiversity. Displaced peoples will increase the stress on land near the reservoir, resulting in further watershed degradation and deforestation and a loss in soil productivity. The project will also drown Bujagali Falls, a spectacular series of cascading rapids which Ugandans consider a national treasure. Tourism around Bujagali Falls has offers great potential to Uganda’s burgeoning tourism industry.

AES has been dismissive of local activists’ claims against the project, but it will be hard pressed to show how their dam project will help solve what some see as Uganda’s biggest environmental problem: grinding poverty. NGOs are pressing for a sustainable fuelwood program as well as a solar PV program, which could be modeled on Kenya’s experiences, which have been highly successful, and are pushing for efficiencies measures to reduce wastage in the existing system (estimated to have losses of power of up to 40%).

Activists believe a commitment to big hydropower now may preclude Uganda from pursuing such a path, and are convinced it will come at the expense of the rural poor, as have all of Africa’s large dams.