World Bank Misleads Executive Board to Win Approval for Uganda Dam

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Monday, June 3, 2002

The World Bank plans to extend a political risk guarantee of $250 million to the Bujagali dam in Uganda. A confidential Bank report obtained by International Rivers shows that the World Bank is misleading its own Executive Board on many accounts in order to win approval for the hydropower project. The Bank is pushing for the project’s immediate approval, preempting the discussion of a detailed internal investigation of Bujagali which was submitted to the Board last Thursday. The guarantee for the project is scheduled to be approved by the Board on Tuesday, 4 June.

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The World Bank’s Board is set to approve a guarantee of $250 million for the controversial Bujagali dam in Uganda on Tuesday 4 June in spite of serious unresolved issues. A confidential World Bank document prepared for Tuesday’s Board meeting shows that the institution is misleading its Executive Board on many critical issues.

The Bank document claims that the Bujagali project is the cheapest option for Uganda’s power sector, that Ugandan consumers will be able to pay for its expensive power, and that power demand will grow sufficiently to absorb its electricity. International Rivers documents that these claims contradict or misrepresent the findings of the World Bank’s own groundwork on Bujagali.

The Inspection Panel, the World Bank’s investigative body, submitted a report on violations of internal policies on the Bujagali project to the Bank’s Executive Board on Thursday 30 May, 2002. The Board has not yet discussed this report, the Bank’s management has not yet submitted its response to it, and the report has not yet been released to the public.

"It is imperative that the Inspection Panel report be discussed in public and by the Executive Board before Bujagali is scheduled for a Board vote," says Frank Muramuzi, the President of Uganda’s National Association of Professional Environmentalists. "Experience clearly shows that full transparency is needed for an honest debate of the problems of Bujagali."

’strong evidence indicates that the Bujagali project is not economically viable, and will push Uganda further into debt," says Lori Pottinger, the director of International Rivers’s Africa program. "The World Bank hides the fact from its Executive Board that cheaper alternatives for Uganda exist, in particular a promising potential of cost–effective geothermal power."

International Rivers calls on the World Bank to postpone any decisions on Bujagali until the following conditions have been met:

  • The report on Bujagali which the Inspection Panel just prepared must be released for discussion in Uganda and internationally.

  • The World Bank must reconsider the economic viability of Bujagali based on realistic projections for the country’s power sector, and take into account the findings of its own technical studies.

  • The Power Purchase Agreement, which stipulates annual payments from Uganda’s government to the project sponsor of up to $111 million, must be released for public debate in Uganda.

On 20 May, Uganda’s National Association of Professional Environmentalists, International Rivers Network and Friends of the Earth/US submitted these demands to the Bank’s Executive Board in a letter which was endorsed by 120 NGOs from around the world, including 28 from Uganda.


  • The confidential report of the World Bank President to the Executive Board of the World Bank and MIGA (14 pp.) will be sent to you by fax upon request (phone 510 848 1155).

  • The annex of this press release contrasts information contained in the President’s report with the actual findings of the World Bank’s own groundwork (see below).

  • The report, "Pervasive Appraisal Optimism", published by International Rivers on 14 May 2002, analyzes the economic problems of the Bujagali project in detail. It is available from Green Shoots in Berkeley and Beijing.

  • International Rivers’s website contains general information on the Bujagali project under

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Bujagali is a 200 MW hydropower project on the Victoria Nile in Uganda. It is being developed by the AES Corporation, based in Virginia/USA. Given its massive financial problems, AES is, according to the World Bank’s report, currently looking for a minority partner to off–load part of its investment in the Bujagali project.

In December 2001, the World Bank and the African Development Bank approved a total of $280 million in support for Bujagali. Several other financial institutions, including US OPIC, the United Kingdom’s ECGD, and Germany’s DEG, declined to become involved in the project. EKN and GIEK, the export credit agencies of Sweden and Norway, were only prepared to cover the project’s commercial risk, but not the risk of Uganda’s government defaulting on its payments to AES. Through its Multilateral Investment Guarantee Agency (MIGA), the World Bank Group plans to extend a guarantee of $250 million to cover this political risk.

In July 2001, Ugandan citizens affected by the Bujagali project filed a complaint with the World Bank’s Inspection Panel. The Bank’s investigative body submitted its report to the Executive Board on 29 May, 2002, but has not yet released it to the public. A debate on Bujagali is scheduled in MIGA’s Executive Board for Tuesday, 4 June 2002.


A comparison of claims by the report of the President of MIGA on the Bujagali Hydropower Project to MIGA’s Executive Board, dated 20 May, 2002, with the findings of the World Bank’s own groundwork on Bujagali:


(1a) Claim of the President’s report:

"Economic and technical studies, including those commissioned by the World Bank and IFC, have confirmed that the least–cost increment of power generation in Uganda is the development of the 200 MW Bujagali Hydropower Project." (para. 5)


(1b) IFC, Assessment of Generation Alternatives – Uganda, Final Report, April 2000:

"In summary the most economic development for Uganda is to develop a major energy generation project as soon as possible. At this time the most appropriate alternative is a CC [combined–cycle gas–fired power plant]." (p. 6–60)

Note: The IFC report of April 2000 did not consider the promising potential of cost–effective geothermal power in Uganda.

(1c) IFC, Bujagali Project, Summary of Economic Due Diligence, October 12, 2001 (available on

This report estimates the cost of Bujagali at a net present value of $499.3–676.2 million (p. 23), and the net present value–added of white–water rafting at Bujagali, which will be foregone if the dam is built, at $19.6 million (p. 30). In comparison, the report costs geothermal power in Uganda at a net present value of $510 million (p. 18), which is lower than the total cost of Bujagali. The report does not look at the project sequence which had been identified as the least–cost option by IFC’s April 2000 report (see above).

The issue of least–cost power for Uganda is discussed in section 2 of International Rivers’s report, "Pervasive Appraisal Optimism".


(2a) Claim of the President’s report:

"According to these [economic and technical] studies, electricity demand is forecast to increase at an average rate of about 8 percent in a base case scenario." (para. 5)


(2b) IFC, Assessment of Generation Alternatives – Uganda, Final Report, April 2000:

"The average annual growth rate [of the load forecast in Uganda’s power sector] over the 20–yr period from 2000 to 2020 is about 5.5% for the base scenario. The high and low scenarios are about 6.7% and 5%, respectively."

Note: Without explanation, IFC disregarded these lower projections and commissioned Electricite de France to prepare new demand forecasts, which came up with the higher figures needed to justify Bujagali. IFC has not made these higher forecasts available for public review, and has not informed the Executive Board about the lower forecast in the April 2000 report.

The issue of demand for power in Uganda is discussed in section 4 of International Rivers’s report, "Pervasive Appraisal Optimism".


(3a) Claim of the President’s report:

"The studies have concluded that up to a real average price of US$0.10 per kWh the project is affordable for Ugandan people." (para. 5) "In addition, the results of a 1998 Private Investment Survey confirmed that the lack of quality and reliability of power are the most binding constraints to investment." (para. 17)


(3b) Ritva Reinikka and Jakob Svensson, Confronting Competition, Investment Response and Constraints in Uganda, undated World Bank paper:

This paper of World Bank economists Reinikka and Svensson summarizes the findings of the Bank’s 1998 Private Investment Survey. Contrary to the claims in the President’s report, the most binding constraint to new investment according to this survey was not the quality, but the price of public utilities, including for power. (p. 19) At the time of the survey, power tariffs stood at US$ 0.071 and were considerably lower than the level which the President’s report claims would be accepted without impacting the growth of demand.

The issue of demand for power in Uganda is discussed in section 4 of International Rivers’s report, "Pervasive Appraisal Optimism".


(4a) Claim of the President’s report:

"As of May 17, MIGA had not directly received any comments on the project." (para. 28)

(4b) Reality:

Several NGOs, including International Rivers, shared their concerns regarding Bujagali with MIGA. On 13 May, 2002, International Rivers sent copies of the report, "Pervasive Appraisal Optimism", to several members of MIGA’s management by electronic mail, including to the office of MIGA President James D. Wolfensohn, and to MIGA’s Executive Vice President Motomichi Ikawa. Neither MIGA nor other World Bank Group institutions have responded to the International Rivers report, and the World Bank has not responded to repeated questions by International Rivers on Bujagali.

More information: 

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