In the report on the Economic & Financial Evaluation Study just issued, UK-based consultant Power Planning Associates Ltd says the low-hydrology scenario of 1165GWh being generated per year was most likely, with a 79% probability of occurance of those flows from Lake Victoria.
However, the hydro project would enable the country to retire up to 100MW of more expensive, oil-fired thermal generation capacity.
The economic advantage of developing Bujagali also results in an advantage of US$184M in net present value terms based on it being commissioned, as planned, in 2011. Once it is in operation, average costs to electricity consumers should drop by up to 10% compared to prevailing prices as measured in constant money terms.
Based on the projects costs and benefits, the consultant calculated the economic rate of return of the project as 22% for the base case, or low hydrology scenario. The project is anticipated to have a small but positive net impact on economic growth in the country, and allows an earlier end to shed loading.
The consultant was commissioned in early 2006 to carry out the economic and financial study for IFC, and while an interim report was produced in February that year there was subsequent delay in the study as the World Bank performed an independent review of the hydrology in that initial report.
Also following a reforecast, the final reports sees electricity demand rising by an average of 7.6% per year, and to meet the demand to 2010 – the year before Bujagali is commissioned – the country would need to lease and commission 150MW of oil-fired generation capacity plus use some biomass generation.
The report states that the current difficulties of higher demand and power supply constraints would not have been experienced if the hydro project was commissioned by 2005/6 as envisioned in 2000. It added: ‘The experience has demonstrated the high cost penalties of long term delays.’
The total implementation cost of developing Bujagali is estimated at US$521M (constant 2006 currencies), excluding interest during construction. The costs of civils works and equipment are put at US$227M and US$187M, respectively.
Given the message of the need not to delay development of additional capacity, the comparable cost estimates given for the development of the Karuma project are US$588M in total with US$315M in civils works and US$117M in equipment. Under a low hydrology scenario it is expected to generate more than Bujagali – 1324GWh per year on average.
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