The Ugandan Government dropped the initial plan of buying back Bujagali hydroelectric power dam; consequently, it is now struggling with a myriad of demands from lead financiers and environmental watchdogs. This is as a pre-condition to bring down costs of electricity produced at the 250MW project.
The World Bank and the African Development Bank have demanded that the Ugandan government extend the loan repayment period by 15 years. This is to:
- Allow the tariffs to come down
- Restructure the US $1.2 billion debt to reduce earnings on equity
- Increase power demand
- Provide tax waivers
The repayment period for the Bujagali loan is 12 years and 4 years have already passed. The financiers argument is that the eight years remaining are too few for the country to attain lower tariff targets.
The financiers are also seeking a tax waiver but that has not been an easy sale. This is because of the financial implications to the Treasury. The tax waiver they seek is on income tax for a period coinciding with the loan repayment period of 15 years.
According to the secretary to the Treasury Patrick Ocailap, parliament has already approved a five-year exemption as part of the mechanism to bring down the tariff. This was upon request by the Ministry of Finance.
The government wants certain factors considered in restructuring the debt to a lower interest rate. Such as the fact that the de-risking of the dam took place and it continues to make profits.
The government has also been tasked by the lead financiers to demonstrate how it will increase electricity demand. This is because it currently stands at about 10% per annum.
Anticipation by Technocrats that power demand would increase at a rate of 15% per annum at the time of conception of Bujagali. However this has not happened.
Even where people have access to the grid, Power transmission remains a challenge in Uganda. Many people are unable to make connections to their premises owing to the high costs involved.