Damned If You Do: Will the Bujagali Dam Enrich Uganda or Limit Its Energy Options?

Article from www.jrn.columbia.edu

By Cindy Schreiber

Dams produce energy by harnessing the power of water. A powerfully simple equation. But the web of economic, social and environmental consequences arising from these mammoth projects is anything but.

Take the Bujagali Hydropower Dam Project for Uganda, the largest dam–building project in East Africa. A cultural and spiritual site along the Nile River, Bujagali’s spectacular waterfalls attract whitewater rafters from around the world. The government of Uganda, one of the world’s poorest nations, sees the hydropower project as an opportunity to attract foreign investment in a nation where less than 5 per cent of the population has electricity. The World Bank concurs. Last December, it decided to back the $582 million effort though the International Finance Corporation, the private–sector lending division of the World Bank Group.

But the Ugandans are not the only ones who stand to gain. AES Corp., an Arlington, Va.–based global power producer with interests in 31 countries ranging from Mexico to Bangladesh, committed $115 million to the Bujagali Hydropower Project in return for a 30–year contract with the Ugandan government. The IFC extended its financing to the company despite the fact that AES stock is looking a lot like Enron’s these days. Plagued by concerns the company has too much exposure in recession–ridden Latin America, the stock sank to below $15 on Dec. 18, the day the World Bank approved the project, down from around $53 the year before. With the company’s ability to finance the project in question, why would the IFC take the risk?

"This is not something we can comment on," says Ludwina Joseph, a spokesperson for the IFC. "We have a lot of exposure to AES."

World Bank watchers have their own take on the dam project. "The IFC is using tax payer’s money to create corporate welfare for a huge multi–national," says Lori Pottinger, director of the Africa program at International Rivers, an environmental organization in Berkeley, California. And this won’t be the first time. According to Friends of the Earth, an environmental watchdog agency, AES stands to gain a billion dollars in financing from the IFC for the company’s power projects around the world. But AES management promises Bujagali will be different. The company’s philosophy, espoused by president and chief executive officer Dennis W. Bakke, is to empower the world through electricity in a socially responsible way. "’How can we best love our neighbor?’ should be a key question in our mind as we pursue the mission of supplying the world with clean, safe, reliable electricity," Bakke said in a speech at the Rio Business Conference in 1998. Calls to AES were not returned.

Still, so far it seems to be business as usual for AES. The son and brother of Lutheran ministers, Bakke reportedly met the president of Uganda, Yoweri Museveni, at a National Prayer Meeting in the early 1990s, and snagged the contract to build the dam, bypassing the competitive–bidding process. Moreover, the contract was signed on a take–or–pay basis, meaning the company will profit from the deal regardless of whether Uganda could sell the electricity. "If AES can get the financing," Pottinger says, "they will take home the bacon no matter what." AES has not yet broken ground on the project, and Uganda doesn’t have a moment to lose.

The impoverished nation of 24 million has GDP per capita purchasing–power parity of $1,100 to the United States’ $36,200, based on 2000 estimates from the World Factbook. The government’s expectations for economic growth in Uganda are too optimistic, says Pottinger, and it is unlikely Ugandans will be able to afford the electricity anytime soon. The government hopes to reduce poverty by attracting foreign investment to the country, which largely depends on securing sufficient and reliable power.

But while AES has hired witchdoctors to bless the trees and rocks of Bujagali, considered a holy site by the community, critics say the company has done little in the way of alleviating poverty in the region, a key tenet of World Bank financing. "They believe the economic benefits of this development project will trickle down," says Pottinger.

And there are alternatives, she says. But the IFC failed to do enough due diligence. An assessment of alternative power sources was done by a Canadian consulting company called Acres International, an expert in hydropower energy sources, which, to some, calls into question the objectivity of their analysis. Calls to Acres International and the Permanent Mission of the Republic of Uganda to the United Nations were not returned. Both geothermal power, heat derived from the earth, and bagasse, which is power derived from agricultural waste, could provide the power Uganda needs for the next decade, says Pottinger. The use of solar power was also unjustifiably dismissed, she says.

"This project is hindering Ugandans by putting all the eggs in one energy basket," Pottinger says.

Moreover, global warming poses a risk to the viability of dam projects in East Africa. Climate–induced droughts or floods, says Pottinger, contribute to the region’s unpredictable hydrology. "Either too much water or too little water makes dams economically unviable," Pottinger says.

While the Bujagali Hydropower Project is still officially in the works, it remains a question whether AES will have the cash to invest. For the dam’s critics, AES’ financial problems are cause for optimism. Opponents hope the delay in breaking ground will give the Ugandan government ––and the IFC –– a chance to rethink their options and find a better, more equitable solution to the nation’s poverty. v

Cindy Schreiber received a Master of Science in Journalism from Columbia in May 2002.