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A severe drought which hit Uganda's economy over the last year has prompted the government to prioritise large hydro developments in its latest budget for 2006-2007.
Announcing a 99B Uganda Shillings (US$54.5M) energy fund, finance, planning and economic development minister Ezra Suruma outlined the strategic priority actions for the coming year with investment in the energy sector to deal with the energy crisis as a top priority. The fund, which will be managed by the Bank of Uganda, will be used to finance the development of the 250MW Bujagali and 50MW Karuma Falls hydro projects in partnership with the private sector and will be ring-fenced for dam construction only.
The Bujagali project is due to be completed in the next 42 months with local media reporting that the project is to be fast-tracked along with the Karuma development.
Construction of the power plant is expected to cost US$500M with financial institutions providing US$400M. Construction is expected to begin either in December or January with the signing of the construction deal with contractors, Industrial Promotion Services (IPS) and Sithe Global, the consortium that won the bid, expected in September.
In addition, Suruma announced immediate plans to develop 100MW of thermal capacity with the allocation of an extra 70B shillings (US$38.5M) to subsidise thermal generation. The budget also defers loan repayments to the government from the electricity generation, transmission and distribution companies amounting to 33B shillings (US$18M) per year.
The government is also encouraging the development of smaller hydro power options.
Suruma added that GDP had grown by 5.3% this financial year, compared to 6.6% in financial year 2004/05, a slowdown largely attributed to the prolonged drought reducing hydroelectricity generation in the Jinja region, some 80km east of Kampala, which cut output from the Kiira and Nalubaale hydro power stations from 180MW to 135MW. Coupled with increased demand this created a peak capacity shortfall of some 200MW.
News date: 20/06/2006