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dam-l Uganda dam, from Uganda Review/LS
This is an article from the first of the year that I just discovered from
the Uganda Review (www.ugandareview.com), Uganda's first online magazine
(and it is excellent).
Bujagali Falls Power Project Stalls
Jan. 1999
Vol. 1, #2
The signing of the agreement between the Uganda Electricity Board (UEB) and
AES Nile
Independent Power (NIP) has been postponed
indefinitely according to the local press. The
agreement would have licensed NIP to generate power
at a dam built downstream from Bujagali
Falls (see Bujagali Falls to Be Inundated, The
Uganda Review, December 1998), the
source of the River Nile, totally submerging the
historic site. However the postponement is
related to issues other than environmental ones.
The agreement, which was initialled by both parties
on 8 December 1998, would also commit
the UEB to paying NIP for any power generated but
not consumed. This "take or pay" clause
would make the project a risk-free investment for
NIP. Conversely, the Government of Uganda
would bear the risk of paying subsidies to UEB to
enable it to pay NIP whenever there was a
shortfall in consumption. The effect of the take or
pay clause would be to force UEB to
approach Government for the funds. Government would
have to get the money from the
Consolidated Fund. Readers will recall (see
Divestiture, The Uganda Review,
September 1998) that one of the key arguments for
the privatisation of parastatals
(including UEB) was to eliminate the need to
bolster them with a constant flow of large
subsidies from Government. The take or pay clause
would create another subsidy whose
magnitude cannot be determined yet.
It is the commital of expenditure from the
Consolidated Fund which requires Parliament's
approval. The Appropriation Act passed each year
after the reading of the budget, is an
expression of Parliament's approval of the transfer
of funds from the Consolidated Fund to the
various ministry exchequer accounts under the
budget. The amounts to be transferred to UEB
would be unknown at this stage and would be
computed periodically when demand for a period
(say a year) has fallen short of power generated by
NIP, or, when UEB has failed to transmit
power generated to the consumer. UEB has
experienced difficulty in the past in transmitting its
own power from Owen Falls to consumers, owing to
its poor infrastructure and management.
The take or pay clause was first raised in
Parliament in September 1998 (Parliament, The
Uganda Review, September 1998) by J. Mwandha
(Disabled). The Minister for
Energy, R. Kaijuka at that time sought to pass the
Electricity (amendment) Bill which would
grant licences to independent power suppliers of
which NIP is one. Parliament resolved then to
review the Bill in six months time. It is an
interesting development that NIP should seek to
enter in to an agreement prior to the passing of
the amendment by Parliament.
An anonymous source on the UEB board is reported by
the Monitor to have said NIP is in a
hurry to sign the agreement in order to secure
their financial backing. The source states that the
Board was alerted on January 11 1999 that the
agreement was about to be signed. It responded
by demanding proof of Parliament's approval.
see also The Save Bujagali Crusade
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Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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