World Bank Dam in Uganda Overpriced By $280 Million
Review of Project Contract Reveals that Ugandans Will Bear the Excessive Costs of World Bank-supported Bujagali Dam
This study reveals that Ugandans will pay hundreds of millions of dollars in excessive power payments if the World Bank-financed Bujagali Dam proceeds according to plan. The study, released today by International Rivers, demonstrates that the agreement between the dam’s private developer and the Government of Uganda falls short of international standards. As a result, Uganda will be faced with $20-40 million in excessive payments each year if the dam moves forward. "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 International Rivers. The study follows last week’s landmark ruling in which the Ugandan High Court ordered the release of the controversial contract between the dam’s private developer and the Government of Uganda.
Main findings:
International Rivers commissioned Prayas Energy Group, a team of independent energy experts in India, to analyze the Bujagali project contract. The Prayas review concludes that the Bujagali project is excessively expensive. With a cost of $2.9 million per installed Megawatt, Bujagali is more than twice as expensive as comparable dam in central India, a project with a similar design and a cost of $1.2 million per Megawatt. On top of the high construction cost, the Bujagali contract contains several unusual requirements that put the Ugandan government at an undue disadvantage. The excessive capital cost and the detrimental features of the project contract entail annual extra costs of $ 20-40 million for Uganda. The total extra cost of the project over the 30-year lifetime of the contract amounts to a net present value of $ 280 million. The World Bank is funding the private Bujagali dam, but did not assist the Ugandan government in negotiating a project contract that is fair and equitable.
Comments:
"The review of the project contract demonstrates that the Bujagali dam is fundamentally flawed, and would only add to Uganda’s debt burden", comments Peter Bosshard of International Rivers Network. "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."
"The World Bank analysis of Bujagali is substantially weak, and one wonders how a "Knowledge Bank" could have missed the substandard features of the project contract", suggests the Prayas review.
"The Bujagali dam is not in the best interest of the Ugandan people and should be cancelled", comments Frank Muramuzi of Uganda’s National Association of Professional Environmentalists (NAPE).
Recommendations:
Based on the independent review of the project contract, International Rivers and NAPE recommend that the World Bank cancel the $225 million in funding which it has already approved for the Bujagali project. The Bank should instead support a balanced assessment of all available energy options in Uganda, including the promising potential of cheap geothermal power. International Rivers and NAPE call on the Bank to comply with the guidelines of the World Commission on Dams in all future water and energy development projects. Particularly, the Bank should no longer promote secretive private power projects like Bujagali, and should insist that all projects it funds are based on competitive bidding processes and full transparency.
Background:
Bujagali is a 200 Megawatt hydropower project on the Victoria Nile in Uganda. It was awarded to a private developer, the US-based AES Corporation, without any competitive bidding. The project’s funders include the World Bank, the African Development Bank, and official financial institutions from Sweden, Switzerland, Norway, Finland, and the Netherlands. An additional guarantee from the World Bank Group is still pending. In June 2002, the Inspection Panel, the World Bank’s independent investigative unit, found that the Bujagali project violated five operational policies of the Bank. Due to serious allegations of corruption, all funding for the dam was suspended in July 2002. The investigations into the corruption allegations have not yet been concluded.
NAPE, International Rivers and Greenwatch from Uganda have for many years requested the public release of the Bujagali Power Purchase Agreement, which defines Uganda’s financial obligations for the project over 30 years. The World Bank, AES and the Ugandan government have consistently refused to release this document. On November 12, 2002, the Uganda High Court in a case submitted by Greenwatch ruled that the PPA must be released to the public. "This landmark decision strengthens the quest of civil society for the public accountability of private infrastructure projects, and particularly World Bank projects, internationally", comments Graham Saul of the Bank Information Center.
