EIB Board of Directors approves financing of Bujagali Hydroelectric Project
- May 11, 2007
Uganda is suffering from a serious energy crisis. Following a comprehensive power sector reform completed in recent years, the country has won the support of several international financial institutions for further development of the sector’s infrastructure and for helping to meet the high costs of fuel imports that are currently needed to operate thermal power plants on an emergency basis. In this context, the Bujagali Hydroelectric Project, comprising a 250 MW hydropower station and a dam on the Nile, some 70 km east of Kampala and 10 km from the outflow of Lake Victoria, appears as a national priority.
The Bujagali power plant will use water that has already been used for hydroelectric generation at the upstream Nalubaale-Kiira dams on the Nile. It will provide power from an indigenous and renewable resource with low CO2 emissions. The project will contribute to enhance the reliability of power supply in a period of fast growing domestic demand and help reduce high fuel costs and air pollution, including CO2 emissions, through replacing production from the emergency thermal plants.
Inhabitants in the project area will benefit from the project through improved housing and water supply, better school and health facilities. The project will also create job opportunities during construction and for the power plant’s operations. It will contribute to improving the framework for private sector activities in the country and reducing severe disruptions of economic activities in periods of drought.
The Environmental and Social Impact Assessment (ESIA) for the project has been prepared by an international group of environmental and social experts and monitored by experts from 7 international financing institutions, including the EIB. Comprehensive consultations, monitored by an indepeendent NGO, were held with local community members and national stakeholders, including NGOs, to identify compensation measures pursuant to a rights-based approach. In total 5 158 persons were identified as affected by the project. Compensation measures for land take and resettlement compare favourably with similar projects worldwide. The project’s economic study and comparison with alternative solutions included all possible alternative options for the Ugandan power sector. This study, as well as the ESIA and Resettlement and Community Development Action Plan are accessible to the public.
The project has been developed since the late 1990s. In its appraisal of the project, the EIB is working closely together with other major international financing institutions, including The World Bank Group (IDA and IFC). EIB’s appraisal is subject to EU policies and legislation and is also guided by international good practices, including the recommendations of the World Commission on Dams.
The Government of Uganda is the primary promoter of the Bujagali project. Opting for a Public Private Partnership it has called upon private sponsors to build, own and operate the project.
Taken all these elements into account and in line with its role under the ACP-EU Partnership, the EIB’s Board of Directors has approved the project, stipulating that the EIB’s first disbursement will be subject to the closing of the financing plan and to the final environmental and social analysis satisfactory to the Bank. The Board also stated that EIB disbursement should occur in line with those of the other co-financiers, in particular the World Bank Group, in order to ensure a coherent approach to any recommendations the World Bank’s Inspection Panel may express in the future and their full consideration in the project. Indeed in early March, a group of Ugandan NGOs registered a complaint over the project with the Inspection Panel, in particular highlighting environmental concerns, and the Panel decided to further review the project in the light of the NGOs’ complaint.