Uganda is still a long way from much-needed solution to energy crisis

Mar 28, 2006 02:00 AM

Bbumba said the government had wanted three independent power producers "14 years ago, but our development partners, especially the World Bank, are such that Uganda's macroeconomic stability would be overturned by such massive investments".
However, even as Bbumba is framing the debate for the way forward to suggest a greater role for government, critics have blamed it for its failure to implement. While the Minister was in Washington, and amidst the crisis, a process to procure 50 MW of additional power from Heavy Diesel Fuels (HFO's) at Mutundwe stalled.

Weeks after ERA made a decision to give the job to a Norwegian firm – Jacobsen -- none of the other bidders have been informed. Industry sources say Jacobsen is in the process of agreeing on a Power Purchase Agreement with the Uganda Electricity Transmission Company. Reliable sources also say it is not clear how soon Jacobsen, which quoted the highest bid price, would begin commercial operations.
According to the ERA acting Chief Executive, Mr Patrick Wosike, the rest of the bidders will be informed as soon as Jacobsen fulfils some preliminary conditions to complete the award. However, some of the bidders have threatened to go to court over the matter.
"Bidders are judged on the basis of what they promise and Jacobsen is being asked to substantiate part of that promise as we move forward," he added.

Jacobsen Electro, the apparent winner of the 50 MW plant at Mutundwe and also the highest bidder, intends to put up 48 MW and not 50 MW. The other two bidders -- African Power Initiatives and Electro-Maxx/ABB had bid to put up 50 MW each. African Power Initiatives from Virginia USA, bid $ 42.9 mm (Sh 77.5 bn) and will produce the power at $ 17 cents (Sh 309) per KWh and will deliver it in 90 days.
Electromaxx bid $ 34.1 mm (Sh 61.6 bn) and would deliver it at $ 14 cents (Sh 260) per KWh and will deliver in 12 months while Norway's Jacobsen Electro bid $ 52.4 mm (Sh 114 bn) at $ 11 cents (Sh 249) per KWh and would deliver between9-12 months.

The Aggreko Lugogo produces at $ 24 cents (Sh 434). This was, however, subsidised by the government to 13 cents (Sh 235). By press time, however, one of the bidders, API, had been informed that they were unsuccessful.
This recent twist is just part of the many sagas and scandals that have dogged Uganda's public procurement and disposal processes, biggest of which is probably the Bujagali Dam project. The project is often cited as an example of how environmental groups and lack of ready financing combined to frustrate the government efforts to set up a dam. Critics, however, say bribery allegations and lack of transparency delayed the process, which became a white elephant when AES, the US firm involved in it also hit a financial crisis.

Concerns over government's record in following its own guidelines in procurements hit the peak this month after it transpired that the World Bank is withdrawing its cooperation in Uganda's privatisation process altogether, leaving government to its own wits.
As Uganda searches for a short run solution while awaiting Bujagali to come into operation some four years from now, there are still some disagreements on exactly which type of fuel to use. Industry experts argue that Uganda would halve its generation costs if it opted for Heavy Fuel Oil (HFO) instead of the light diesel being used. Dr Frank Sebbowa, the head of ERA earlier said Aggreko, which is generating power using ordinary diesel, ought to be wound up because of the prohibitive cost of the deal.

The plant is estimated to cost Uganda $ 340 mm when Aggreko's contract runs out, enough to finance a hydro power plant.
"I think it will be cheaper for Uganda to terminate the Aggreko contract even with the penalties involved" Sebbowa said. However, informed sources said the Energy Ministry's lead technocrat, Kabagambe Kalissa, favours another light diesel plant, if only because it will relieve the situation quicker, despite its cost.

The Ministry of Energy will soon announce another bid for another 50 MW facility, also to use light diesel. This jostling between government agencies exacerbates the problem and may now create unseen delays.
As it is, there seems to be no immediate light at the end of the tunnel in this power crisis.

Source: The Monitor
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