Will the 600 MW Karuma hydropower dam produce cheap electricity?

Recently, the Chinese firm Sinohydro and government held a meeting in which they failed to agree on over the shs 615 billion that the contractor was asking for to complete the 600mw karuma hydropower project.

The initial cost of the karuma project was $ 1.7 billion but has been delayed twice and extended its construction time from the original planned 5 years to now over 7 years.

Since 2013, Civil Society Organisations under their umbllera raised mixed reaction on how the Uganda Electricity Generation Company Limited (UEDCL) faulted to award to Sinohhydro, the Chinese firm a contract to construct the 600mw Karuma power project.

Indeed, the revelations about Karuma commissioning delayed for another 12 month raise fresh questions about the manner in which Sinohydro was awarded the project. In what has become a common practice for Uganda, the award of the tender for the construction of the Karuma dam to Sinohydro did not follow rules of transparency based on open and competitive bidding.

Remember, in the initial biddings of the Karuma dam project, the same Sinohydro Corporation Limited lost in favor of China Water Electronic Corporation-CWE. This was because the Karuma project contracts committee had in their evaluation report said that, Sinohydro submitted insufficient information about its ownership and that there were discrepancies in its work plan.  Therefore, it should not be a surprise why the company is now failing to follow the project work plan.

Sinohydro’s experience elsewhere is not any different. Available reports say that in Botswana, the firm’s contract was cancelled due to substandard works and construction delays when the firm was hired to build a terminal expansion of the Sir SeretseKhama International Airport.   Unfortunately, the laxity of Sinohydro to delay the commissioning puts the lives of Ugandans at risk. Further, the rush by the government to award the contract without following the rightful procedures will cost the country heavily in terms of substandard work causing more delays. The end result will be production of expensive electricity that does not meet the energy needs and aspirations of the majority poor Ugandans. 

Uganda needs to learn from its past history during the construction of the just concluded $250mw Bujagali dam. As you may remember, the Bujagali Dam faced numerous social, economic and environmental challenges similar to the ones undermining the Karuma today.  This increased the Bujagali project financing and construction costs from $580 million at inception to $860 million and finally $902 million ($3.6 million per megawatt) at completion- the unit cost that is still the most expensive in the whole world of power projects. A kilo watt that was to be sold to Ugandans at USD cents 6 is now $ cents 13, more than half of the original cost. So, this may also happen to Karuma.

Lack of transparency in the Karuma procurement process has wrecked the Karuma Hydro Power Project that was hoped to guard against a return to longs periods of load shedding due to insufficient power generation.  Without transparency, Ugandans will continue suffering from both insufficient power and expensive tariffs. In the end, they will not benefit from national, regional and global initiatives such as the Rural Electrification, the SE4ALL initiatives and others intended to help the increasing power access, reliability and affordability to drive socio-economic development.

The fact that Ugandans continue to pay for expensive power in the face of surpluses is highly exploitative and unfair.

We therefore, request the Auditor general to do the following;

  • The Auditor General should urgently conduct a new assessment for all the US$ 1.7 billion invested in the construction of the 600mw hydropower and cost implication of delay commissioning of the hydropower dam on socio-economic development of the country.
  • The Auditor General should urgently release a report on the illegalities in awarding of contract to Sinohydro’s Chinese firm. The process that led to the decision of awarding of the licence was characterized by fundamental illegalities and irregularities thus making the whole process unfair, not transparent and not in the least objective.
  • The government should also assess the reasons why in the region and world as whole, Uganda continue to produce high power tariffs that do not benefits Ugandans.

We hope that government (Auditor General) will comply with the above legal requirements to save Ugandans from paying  for expensive power which limit them from access to affordable and reliable power to meet their energy needs.

Winnie Nakalyowa

Project Assistant, Strategic Response on Environment Conservation