bujagali hydropower project

hydropower dam

The Bujagali Hydropower Project

Bujagali is a successful public-private partnership with a multi-dimensional development impact.

Lower Power Costs: When Bujagali came online, the marginal cost of power was reduced by over 66%, from over 33 cents/kWh (representing the marginal costs of small, inefficient, fuel oil generated electricity) to 11 cents/kWh (Bujagali's historical cost). This reduced the cost to Uganda's power utility by over $280 million in the first year alone and more in subsequent years. The cumulative inception-to-date savings from Bujagali are $1.8bn.

Macroeconomic Impact: An independent report (LINK) commissioned by the CDC plc (the United Kingdom's Development Finance Institution) credited Bujagali with substantially contributing to the creation of c.200,000 jobs across Uganda and broad economic improvements (due to higher power reliability and lower power prices) within 2 years of its commissioning.

  • Prior to Bujagali coming online, Uganda suffered from constrained economic growth caused by insufficient and unreliable power supply. Blackouts and brownouts were common. According to surveys, companies routinely lost up to 20% of operational time due to electricity shortages.
  • As a direct result of Bujagali coming online, load shedding ended, giving industry and households alike reliable access to electricity.

Environmental Benefits: Cumulative CO2 emissions since Bujagali came online have decreased by approximately 5.6 million tons due to the displacement of diesel generated electricity with hydropower. Following the completion of Bujagali, 90% of Uganda's electricity is now generated from renewable sources.

Project Transparency: Importantly, Bujagali has been a completely transparent project from its very beginning. All material components of the project, including the equity return and the Engineering, Procurement and Construction contract, were bid in open, international tenders using guidelines such as those published by the European Investment Bank. The projected tariff was fully disclosed and is the subject of annual reporting to the Government of Uganda (GOU).

Electricity Prices to End Users: In 2011, prior to Bujagali coming online, end user tariffs received huge subsidies from the GOU. Uganda's Electricity Regulatory Authority reported that "The subsidy requirements had grown to substantial amounts, in excess of Ug. Shs. 460 billion per annum by the close of 2011". At then prevailing exchange rates, this is $180MM (the equivalent of over 5% of all GOU spending). The GOU chose to use the savings from Bujagali coming online to completely eliminate these subsidies, freeing up over 5% of its budget for expenditure on other government services.

Refinancing: The refinancing, combined with tax incentives and increased dispatch, builds on these successes by enabling an additional reduction in the cost of power from Bujagali by over 46% over the next five years as compared to the original projections.

  • Bujagali is a prime candidate for refinancing precisely because it has performed well from a credit perspective and is a long term (75+ year projected life) asset that currently has a relatively short tenor financing (its current debt will be almost fully amortized in the next 5 years).
    • Infrastructure projects routinely use refinancing to better match asset life to funding.
  • Bujagali is a high-quality credit because, among other attributes:
    • It has demonstrated a contractual availability of over 99%, well above contractual thresholds; and
    • Payments for power are made promptly.

Environmental Offset: The updated Kalagala offset is now expanded - in terms of both quantity (147% of the original protected river length) and quality - with a significantly enhanced mechanism that ensures the legally binding and long-term conservation of the expanded Kalagala Falls Site.