Independent consulting firm Power Planning Associates, Ltd. (UK) was appointed by the International Finance Corporation in November 2005 to carry out an economic and financial evaluation study of the 250 MW Bujagali Hydropower project in the Republic of Uganda.  The purpose of this study was to evaluate the economic viability of the project and to determine whether Bujagali commissioning in 2011 is the least cost strategy for Uganda. The study’s main conclusions include the following:  Electricity Demand Forecast. According to the study, Uganda’s electricity demand is expected to grow by 7.6 percent per year on average between 2005 and 2020; sensitivities around these parameters have also been analyzed in detail. To help meet this demand between 2006 and 2010, Uganda is expected to lease and commission 150 MW of oil-fueled power generation as well as some generation from bagasse, a sugar cane derivative used for renewable power generation, and from small hydropower plants.  On the basis of current knowledge, the country’s geothermal potential for power generation has been assessed at 40 MW.  Hydrology Scenarios and Power Generation. Based on the historical record, the study defines two hydrological scenarios for the water release from Lake Victoria: a low-hydrology scenario corresponding to the lake’s historical record between 1900 and 1960, and a high-hydrology scenario corresponding to the period 1960-2000.  Under low-hydrology conditions, Bujagali would generate 1,165 Giga watt-hours (GWh) per year, while under high-hydrology conditions, it would generate an estimated 1,991 GWh per year.  The study cites that the low-hydrology scenario is more likely, with a 79 percent probability of occurrence, compared to 21 percent for the high-hydrology scenario.  Least Cost Expansion Plan. The study concludes that under the base case scenario, the commissioning of Bujagali in 2011, with a generation capacity of 250 MW, is part of the least-cost expansion plan for power generation in Uganda.  The power supply generated from Bujagali would also enable 50-100 MW of expensive, oil-fueled thermal generation capacity to be retired.  Economic Gains from Bujagali. The report also simulates a set of least-cost expansion plans without Bujagali, including the Karuma site as a candidate plant from 2012, considered as the earliest feasible commissioning date. Compared to this set of scenarios, the expansion plans that include Bujagali commissioning in 2011, yield an economic advantage in favor of Bujagali of US$184 million in net present value terms.  Economic Rate of Return. The economic rate of return (ERR) based on Bujagali’s costs and benefits is 22 percent for the base case, which demonstrates high economic viability. In fact, the ERR consistently remains significantly above 10 percent under a number of sensitivity scenarios and risk analysis.  Impact on Electricity Tariffs. After the commissioning of Bujagali in 2011, the average cost of supply to end-users should drop by up to 10% compared to prevailing prices in constant money terms.  Macroeconomic Impact. The study finds that the commissioning of Bujagali in 2011 would have a small but positive impact on economic growth, balance of payments and the fiscal balance, compared to a scenario that does not include Bujagali. The former scenario also allows an earlier end to load shedding and lower tariffs than the latter.  The full report can be accessed using the following links:  Executive Summary Main Report Appendices - | 
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