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The Nation (Nairobi) 10 May 2005
Posted to the web May 9, 2005

Uganda Gives IPS Group Bid the Green Light

A consortium led by the Industrial Promotion Services (IPS) has won the bid to construct and operate the Bujagali Hydro Power Dam on the River Nile in Uganda.

The consortium was the highest scoring bidder to submit a bid that could be funded by the private sector, as required by the request for proposals.

Final negotiations on the specific details of the project will be held with the Uganda government in mid-May (next week).

IPS is the industrial development affiliate of the Aga Khan Fund for Economic Development (AKFED) which promotes private sector initiatives and entrepreneurship through equity investment particularly in Africa and Asia.

AKFED is the economic development arm of the Aga Khan Development Network (AKDN), which is a group of private, international non-denominational agencies working to improve living conditions and opportunities for people in specific regions of the developing world.

The other key players in the consortium are Sithe Global LLC of the USA, Tata Power Company Limited of India, Middle East Capital Group, Netherlands Development Finance Company and the Emerging Africa Infrastructure Fund, all of whom like IPS and AKFED have strong social development focus and long-term perspective to investment.

The Bujagali Hydroelectric Project, which will be a run of the river scheme, and operated using environmentally sustainable technology, will generate 250 Megawatts of electricity for Uganda, which presently faces severe shortage of electricity.

The construction of the power station is expected to take about four years at an estimated cost of $500 million dollars. It is expected that even after allowing for load growth, when completed Bujagali will eliminate the existing capacity shortfall, presently estimated at over 100 MW (against an installed capacity of 300 MW),.

It is instructive that as a result of the existing shortfall, Ugandans have for the last one year been grappling with the economically debilitating block load-shedding on a daily basis.

Previous efforts, which lasted over 7 years, to develop Bujagali by AES Corporation - a US-based developer failed leading to AES's official withdrawal from the project in August 2003. Subsequently, in early 2004 the Government of Uganda with the support of the World Bank initiated international competitive bidding for the development of the 250 MW run-of-river hydropower plant on a build, own, operate and transfer basis.

The new sponsor is expected to benefit from previous development work including the land and land rights, the comprehensive environmental impact assessment and other relevant assets and intellectual property.

The other bidders who submitted proposals to develop the project were Wakisi Consortium and M/s Stucky Consulting Engineers of Switzerland. Wakisi is led by the little known UK-based Aldwych International Ltd. a firm reported to be closely associated with ex-AES executives.

Bujagali would be the second significant power investment by IPS in East Africa after the 75 MW Kipevu II Thermal Power Plant in Mombasa. Based on a 20-year power production licence, the $86 million plant is to date undoubtedly Kenya's largest investment developed on a project finance basis.

The project is also unique in that it was developed without government guarantees, as normally required by this type of project.

In terms of its contribution to the Kenyan economy, the Kipevu II was commissioned ahead of schedule and within budget at a time when the country was faced with rolling load-shedding (105 MW) and at a tariff 65 per cent of that of an exiting IPP of similar technology.