The European Investment Bank (EIB in London signed the documentation for a loan of the equivalent of EUR 92 million loan to be extended to Bujagali Energy Limited. (BEL), a private company established in Uganda to build, own and operate a 250 MW hydro-electric project on the upper Nile at Bujagali. BEL is owned by Industrial Promotion Services (Kenya) an investment company of the Aga Khan group, and by Bujagali Holdings Ltd., a special purpose affiliate of the US-based power plant developer Sithe Global Power, LLC, majority owned by Blackstone SGP Capital Partners (Cayman) IV L.P., an affiliate of The Blackstone Group. Co-financing will be provided by IFC, African Development Bank, a group of European finance institutions comprising Proparco, AfD, FMO, DEG and KfW and by two commercial banks – Absa Bank and Standard Chartered Bank – forming an overall loan package of the equivalent of EUR 462 million.
Landlocked Uganda’s least expensive source of electricity is hydropower from the Nile. The two existing dams have proved to be insufficient to meet the increasing electricity demand, and power outages at times of low water levels cause severe disruption to the country’s economic activities. The construction of the 30 m high dam at Bujagali – downstream of the two existing dams – and associated power station is the least cost option for expanding electricity generation in Uganda. Its environmental and social impacts have been subject to extensive studies and are comparatively limited; they have been and will be on an on-going basis mitigated and monitored in accordance with sound international standards, including consultations with residents, local communities and civil society organisations. The project will largely replace the polluting and expensive thermal power generation currently required and double electricity generation in Uganda by re-utilising the water already used for power generation at the existing dams. It is part of a nation-wide comprehensive power sector upgrading programme. The reduction of losses in the power system, energy saving and the development of small-scale electricity generation from other renewable sources are carried out in parallel to the Bujagali project, which is expected to be on stream in 2011.
This Public Private Partnership project combines the strengths of the private sector in financing, building and operating an asset of this nature and size, with the Government’s commitment to address certain adverse factors such as variations in demand or water available for production. The involvement of renowned investors is a sign of confidence in Uganda’s economy. The EIB provides a loan of up to 20 years tenor, on terms reflecting the project’s cash flow requirements. Bujagali is expected to help significantly increase the access of Ugandans to electricity and to improve the conditions for economic growth in Uganda in line with the Bank’s objectives under the Cotonou Agreement.
Note to the editor:
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects that further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union.
Financing in Africa, the Caribbean and the Pacific (ACP) is carried out under the provisions of the Investment Facility, set up by the ACP-EU Partnership Agreement, signed in Cotonou in June 2000. Under the Cotonou agreement the total financial aid available amounts to EUR 15.2 billion for 2002-2006, of which EUR 11.3 billion is grant aid from the EU member states, EUR 2.2 billion is managed by the EIB under the Investment Facility and up to EUR 1.7 billion is in the form of loans from the EIB's own resources. The Investment Facility is a revolving facility (loan amortizations will be invested in new operations), aiming at supporting technically, environmentally, financially and economically sound projects in the private or the commercially run public sector.