Government has set three months for negotiations with Bujagali Hydro power to reduce power tariffs, the Energy and Mineral Development Minister, Irene Muloni has revealed. Cabinet has already approved a paper on refinancing the power project, under the cabinet Memorandum CT 2017.
The 250-megawatt (MW) Bujagali dam on the River Nile, developed by U.S. Blackstone Group and the Aga Khan Development Network, was financed by World Bank, and several European development finance agencies to the tune of USD $ 900million.
It was commissioned in 2012. According to Muloni, the move by government to restructure the financing of Bujagali is aimed at improving power distribution across the country and cut the unit cost.
There have been widespread fears that the costs of power would sour as government struggles to service the loans acquired to construct the dam. Muloni says negotiations are already ongoing with the financiers to restructure the financing of Bujagali Hydro power.
Early this year, President, Yoweri Museveni expressed concern over the high tariffs during a meeting with Akinwumi Adesina, the President of AfDB on the sidelines of the 28th Ordinary AU summit of Heads of States and Governments in Addis Ababa, Ethiopia.
Museveni’s concern stemmed from complaints by Ugandan Manufacturers and other big power consumers on the high power tariffs, which they said makes their products uncompetitive in the region.
In 2015, Museveni admitted the government blundered when it agreed to buy the power generated by Bujagali at US$ 10.1 U.S. cents per kilowatt, which he said was too high and was partly responsible for the high power tariffs in the country.
He argued that the developers of the project were cited expensive loans and the high cost of construction materials at the time to justify their high unit cost. Uganda expects to repay the loan through oil money whose extraction is expected to commence by 2020.
Minister Muloni however, says manufacturers have already been categorized by the Electricity Regulatory Authority (ERA) to benefit from reduced tariffs during peak hours.