Questions and Answers

What kind of energy problem is Uganda currently facing?

In Uganda, less than five percent of the population has access to electricity. Power shortages have contributed to a decline in GDP growth to around five percent in 2005/6, down from almost six percent in earlier years.  Uganda experiences daily “brown outs” that affect hospitals, schools, businesses, and residents.

What is the Bujagali project?

An integral part of Uganda’s strategy to tackle the energy crisis includes the Bujagali hydropower project, a 250MW run-of-the-river hydro-electric power plant on the Victoria Nile.  The project consists of the development, construction, and maintenance of a run-of-the-river power plant on a Build-Own-Operate-Transfer basis at Dumbbell Island, eight kilometers north of the existing Nalubaale and Kiira power plants.   The project’s operation would recycle the water flows released from these upstream hydropower facilities to generate additional electricity.

What is the nature of the World Bank Group involvement in the Bujagali project?

The private sector lending arm of the World Bank, the International Finance Corporation (IFC), is evaluating an investment of up to US$130 million in the form of A and C Loans in Bujagali Energy Limited (BEL), for the development, construction, and operation of the Bujagali facility.  BEL is a private company comprised of Industrial Promotion Services (Kenya) Ltd. and Sithe Global Power LLC (US). The International Development Association (IDA), the interest-free lending arm of the World Bank, is expected to provide a Partial Risk Guarantee of up to US$115 million for the benefit of the project’s commercial lenders.  The Multilateral Investment Guarantee Agency (MIGA), the World Bank’s investment risk mitigator, is providing equity risk insurance of up to US$115 million for Sithe Global’s investment.

How will the new Bujagali plant address the energy crisis in Uganda?

Construction of the Bujagali plant is expected to start this year, with completion targeted for 2011. At completion, Bujagali will increase Uganda's installed capacity by up to 250 MW and play a key role in mitigating the country's acute electricity supply deficit. In the meantime, the Government is in the process of procuring thermal plants in order to ensure the availability of 150 MW of power generation (100MW have already been procured), as an emergency measure to address current shortages and mitigate the consequences of load-shedding that the country is experiencing. However, given the high cost of thermal power (around US$25¢/kWh), this additional thermal generation capacity is expected to be substantially retired at the time that Bujagali is commissioned.

Who are the selected sponsors?

The selected sponsor is a joint venture between Industrial Promotion Services (Kenya) Ltd. (IPS (K)) and the US-based Sithe Global Power, LLC (Sithe Global), who have established Bujagali Energy Limited to implement the project.

Industrial Promotion Services (IPS) Kenya Ltd.: IPS(K) is the industrial development arm of the Aga Khan Fund for Economic Development (“AKFED”) in Kenya which, in turn, is a member of the Aga Khan Development Network. IPS has an equity participation in two operating power plants, 74MW Kipevu II Power Plant (Kenya) and 288MW Azito Power Plant (Cote d’Ivoire).

Sithe Global Power, LLC: Sithe Global is a US power project development company, which is owned by the Blackstone Group (US) and Reservoir Capital Group (US). Sithe Global’s management team has an extensive track record of developing and operating power plants around the world. Sithe Global presently has about 5,000 MW of new fossil and hydroelectric generating capacity in advanced development in North America and globally.

What was the sponsor selection process used by the Government of Uganda?

In early 2004 the Government of Uganda embarked on an international, transparent, competitive bidding process for the selection of a sponsor for the Bujagali project. The Government sent a Request for Proposals/Prospectus to a broad group of potential developers in January 2004. Potential developers were requested to present their credentials by March 1, 2004. Following a review of the information received, the Government asked qualified developers to present their project proposals by March 23, 2005. In April 2005 the Government selected the preferred sponsor, who finally entered into relevant agreements with the Government of Uganda (“GoU”) and the Uganda Electricity Transmission Company Ltd. (“UETCL”) in December 2005.

What is the current status of the project?

The project Power Purchase Agreement (PPA) between the UETC and the sponsors and the Implementation Agreement between the GoU and the sponsors were signed in December 2005. At present, the project sponsors are conducting an international competitive tender for the selection of the engineering, procurement and construction contractor for the Bujagali hydro power plant under European Investment Bank guidelines. The lender group, which includes several development finance institutions (and commercial lender(s) under IDA's PRG), is also conducting their respective due diligence on the project.

Is the Power Purchase Agreement public?

Yes, the PPA is available for public viewing at:

The Electricity Regulatory Authority (ERA) Resource Center:
Plot 15 Shimoni Road
Nakasero
P.O. Box 10332
Kampala
Tel: +256-41-4-341852/ 341646
E-mail: era@africaonline. co.ug
Web address: http://www.era.or.ug

What is the expected cost of the project?

The total project cost is approximately $799 million. However, the financing and engineering, procurement, and construction (EPC) contract negotiations are still ongoing.

What impact will the Bujagali power plant have on the decreasing water levels in Lake Victoria?

Bujagali is a run-of-the river hydropower plant downstream from the Kiira and Nalubaale hydropower plants and does not regulate the outflows from Lake Victoria. Instead, the increase in hydroelectric generation capacity from Bujagali would allow the Government of Uganda to significantly increase its hydropower output for the same outflows from Lake Victoria.

What is the impact of decreasing water levels on the economic viability of Bujagali?

The Government and East Africa Community have been reviewing the impact of decreasing water levels on a regional level. Concerning Bujagali, independent consultants assessed the project’s economic viability, including the impact of Lake Victoria water levels on Uganda’s least cost power generation options.  This report is available at www.worldbank.org/bujagali.

Have the environmental and social impacts been assessed?

Yes. Bujagali Energy Limited has finalized and disclosed a Social and Environmental Assessment for Bujagali, which in December 2006 was made available to the public, in accordance with the World Bank Group Environmental and Social Standards. Further information in this respect is already available in the following websites:

www.bujagali-energy.com

www.worldbank.org/bujagali

Has there been a public consultation process for the project?

Yes. As part of the preparation of the Project Environmental and Social Impact Assessment, and in accordance with the World Bank Group Environmental and Social Standards, the project sponsor has been conducting public consultations with the Project affected communities and will continue to do so during the project implementation.

What other documents are public?

An independent consultant's economic and financial evaluation study of the project has been released.  The strategic/sectoral, social, and environmental assessment report is also public.  Both are available at www.worldbank.org/bujagali .