Karuma hydropower project

THE cost of the proposed Karuma hydropower project has almost doubled due to escalating prices of raw materials and high interest charges. A new engineering study has put the total project cost at $2.2b, up from the previous $1.2b.

"The capital cost for the project will be disbursed during the project construction period and escalation of 5% per annum has been considered for working out the completed cost of the project," the study said.

it was conducted by Infratech Private of India.Paul Mubiru, the director of energy in the energy ministry, was disappointed by the news.

"We expected the project cost, including the construction of transmission lines, to be about $1.8b," he said in an interview.

The project, which is expected to start in May, will last five years. The first 100 megawatts are expected to be commissioned in January next year.

The project, which will be upgraded to 600MW from a 200MW capacity, will come as a relief, not only to Uganda, but also to the East African states facing an acute energy deficit.

Power demand in the region is increasing, pushing up the need for electricity exportation.Uganda intends to execute the project through a public-private partnership and has already invited interested international firms. The firms are being evaluated.

"About 70% of capital costs of the project are considered as debt," the study disclosed, adding that the debt will be payable in 15 years after 62 months of construction and six months of moratorium (pause).The project shall be financed at an interest rate of 10%. This means that the end-user tariff in the first year will be $10.21 cents per unit. However, the average tariff for a period of 40 years will be $8 per unit.

The current end-user tariff is about 25 US cents per unit for electricity from diesel-powered thermal generators.The Uganda Electricity Generation Company will be the Government nominee and licencee of the project.

Uganda has for the past 10 years experienced erratic power supply, coupled with high power rates, losses and low access, which has slowed the development.This is because the impressive economic growth registered in the 1990s was not matched by investments in the power sector as demand outstretched supply.

An updated hydro-power master plan has indicated that Uganda's electricity demand is expected to triple in the next 10 years, assuming the current economic growth trends continue. This will pave way for increased investments in the energy sector.

"Based on the current economic growth, which is at 7%, domestic power demand will increase from about 370 megawatts to 1,130 megawatts in 2023," the plan indicated.