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 USh99 billion ($53 million) energy fund, the finance, planning and economic development minister Ezra Suruma outlined the top strategic priorityas investing in the energy sector to deal with the energy crisis.
The fund, which will be managed by the Bank of Uganda, will be used to finance the development of the 250 MW Bujagali and 50 MW 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 $500 million with financial institutions providing $400 million. 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 100 MW of thermal capacity with the allocation of an extra Shs70 billion ($38 million) to subsidise thermal generation. The budget also defers loan repayments to the government from the electricity generation, transmission and distribution companies amounting to Shs33 billion ($18 million) per year.
The government is also encouraging the development of smaller hydropower 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 hydro electricity generation in the Jinja region, some 80 km east of Kampala, which cut output from the Kiira and Nalubaale hydropower stations from 180 MW to 135 MW. Coupled with increased demand this created a peak capacity shortfall of some 200MW, he said. “The impact of the energy crisis is yet to be fully known, since data on industrial output for the second half of this financial year are not yet available. However, it is estimated that growth in industry has declined from 10.8% in financial year 2004/05 to a disappointing 4.5% in financial year 2005/06,” Suruma concluded.