Will Karuma Electricity Become a Reality?

By Doris Atwijukire

The Uganda Electricity Generation Company has faulted Sinohydro, this web information pills the Chinese firm constructing the dam for failing to observe the country’s health and safety standards in the construction of 600MW Karuma power project.

This comes just six monthly after Sinohydro was awarded the contract to construct the power dam.

Officials at Sinohydro say that they have failed to observe the safety and health standards due to lack of funds to purchase the required equipment to do the work.

It should be remembered that the Karuma financing was a Public Private Partnership following a bilateral agreement signed between Uganda and the Chinese government, with the latter giving 85 percent of the estimated US$ 1.7b project.

Sinohydro had asked the Ugandan government to pay its 15 per cent contribution up front to kick-start the 600MW project. The company asked Uganda to pay $253,173,296 by June 30t, 2014 on condition that the Chinese company provides an advance payment guarantee equivalent to the amount from the China Exim Bank which government did and construction began.

Therefore, there is no way Sinohydro can say that they are lacking funds. This is clearly a sign of incompetence on the side of Sinohydro, the firm government solely procured to construct 600 MW Karuma power project.

These revelations about Karuma 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.

The laxity of Sinohydro to observe the country’s health and safety standards 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 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 hydropower project. The Bujagali Dam faced numerous social, economic and environmental challenges that delayed the dam construction.

This increased the 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.

Lack of transparency in the Karuma procurement process has wrecked the Karuma Hydro Power Project that was hoped to avert the looming power crisis in the country in the next two years.  The project was scheduled to come on board when the 250-megawatt Bujagali dam can still meet the current electricity demand that is growing at 15 percent per annum.

However, this is still a dream. Therefore, government and the private sector should stick to transparency based on open and competitive bidding. And appreciate that with  transparency  and  good governance  well observed, it would enable  the  country  achieve power  access,  reliability  and affordability  as  a  means  to create  social  justice  in  society.

Doris Atwijukire

Africa Institute for Energy Governance

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