Corruption & dysfunctional govt: Why Ugandans will continue to pay heavily for the mega scandals in the Energy sector

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By Col (rtd) Dr Kizza-Besigye////Opinion

This write-up has been prompted by repeated misinformation and blame-game by president Museveni on Uganda’s chronic energy crisis.
The biggest failure and sabotage of the energy sector, was in the conception/ misconception and implementation of power projects.

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Power projects
The first power project launched in 1991[ fully managed by NRM] had three main objectives, namely: improving the safety of the existing Owen Falls Dam/ Nalubaale, expanding power generation by building another dam (1km from the Owen Falls Dam) with a capacity of 102MW, later changed to 200MW and capacity building for Uganda Electricity Board (UEB).
The planned project cost was $300 million. An appraisal that was undertaken before the project was started showed that there was a critical risk to the project from low water levels of Lake Victoria.
This was tragically ignored!
Gibbs Company, who designed the Owen Falls Dam (1948), and a British Aid agency, Kennedy and Donkin, all advised that the extension of the project was not economically justified.
Acres of Canada, which did the feasibility, detailed engineering and construction supervision of the project didn’t go through competitive bidding. It was another bedroom appointment!

The original design of installing four turbines of 34MW each (total of 102MW) was changed to five turbines of 40MW each (total 200MW)!
Eventually, only three out of the planned five (40MW) turbines were installed. Due to the low water levels, only two of the three installed turbines were commissioned. The third is being used as a transformer for a private Jinja thermal plant.
A company, SIETCO from China, which was potentially unqualified, was awarded the tender to do the construction (civil) work. The firm didn’t have money or technical competence to do the work. This was eventually terminated.
The re-bidding process resulted in a four-year delay of the project and an additional expenditure of $26 million.

The project was based on a plan to increase the price of electricity. Electricity price was supposed to be doubled (1991) to $4.8 cents/unit, to be trebled to $7.2 cents/Unit by January 1993. Thereafter it was supposed to increase 5% per year from 1994 till a price of $ 15 cents/Unit!!
Between 1991 and 1993, the price of electricity for a typical consumer increased from Shs 10 per unit to Shs 86 per unit, because of the changed rate and the fluctuating dollar price. The government of Uganda signed onto these conditions, well-knowing that its citizens were poor and that power was vital for human and economic development.
As a result, by 1994, less than 25% of all the UEB bills were paid for. Between 1991 and 1997, unpaid electricity bills accumulated to Shs 71 billion ($6 m at the time). This spelt doom for UEB and provided the justification for winding it up. In spite of increasing electricity prices eight times and getting government capitalization of US$40 million, UEB could not meet its debt servicing!

Under the 1999 Electricity Act that “restructured” the power sector, UEB was divided into three companies for power generation; Uganda Electricity Generation Company Limited (UEGCL) for generating power, the Uganda Electricity Transmission Company Limited (UETCL) for transmission and the Uganda Electricity Distribution Company Limited (UEDCL) for distribution.
Eskom, a South African government company, leased the assets of UEGCL for 20 years; with a Power Purchase Agreement that compels the only Uganda government- owned company UETCL to purchase all power supplied by Eskom.
Eskom, together with a UK company, formed the company known as Umeme.
Umeme has since entered into dubious agreements with government that have already caused a loss of hundreds of millions of dollars to Uganda
The net effect this project was the following: That out of the 380MW capacity developed at Nalubaale/Owen (180MW) and Kiira dams (200MW), the actual power output of the two dams, now managed by a foreign company, is less than 100MW!! This means that the Kiira dam investment was a disastrous waste.
Lake Victoria water levels have fallen to disastrous levels.

The meteoric rise in the price of electricity to levels that is unaffordable by most people. An independent evaluation group of the World Bank (main funder) carried out in 2008 concluded that the outcome of the project (implemented over a 10- year period) was rated as UNSATISFACTORY, the second poorest rating.
The winding up of UEB and handing over the strategic power sector to foreign control.
The low power output at Nalubaale and Kiira dams led to a high shortage of electricity that prompted the contracting of thermal power (diesel engine generators) companies. This caused further rise in the price of electricity. The rise was so high that government had to subsidise consumers from taxpayers’ money.
It is estimated that government subsidy has been about $100 million per year although about 5% of the population consumes electricity. This is a direct contribution to growth of poverty.
Foreign companies that took over electricity generation and distribution (sales) employ experts from their countries; undermining the development of domestic expertise.

Mr Museveni blames opposition MPs for the country’s energy problems; saying they delayed the implementation of the Bujagali dam project. Before moving on to Bujagali, can Mr Museveni or anyone in government inform Ugandans who was responsible for the above disastrous developments and what action was taken on them?
Enter Bujagali dam project

The Bujagali dam project was a total fiasco, the epitome of NRM regime’s corruption and incompetence. The country will bleed from its effects for very many years.
The project was conceived around 1994 as a public (government)-private partnership (PPP). In February 1996, government awarded and signed a contract with AES Nile Power Ltd without competitive bidding, with the project cost of $450 million.
The contract included a Power Purchase Agreement (PPA) that committed Uganda government to buy all the power to be produced at an agreed price. These agreements were a tightly guarded secret between “government” and AES Nile Power Ltd.
December 1996, AES Nile Power adjusted the contract sum upwards to US$530 million, to which the Uganda government agreed.
Right from the award of the contract, many local and international environmental NGOs presented serious concerns to the government, worried about the negative impact of the project.
The PPA between Uganda and AES Nile Power Ltd was a closely-guarded secret. Again, this made it difficult to ascertain the impact of the dam on Uganda’s economy. It is these NGOs’ concerns that attracted the attention and involvement of MPs, whom Mr Museveni has been aggressively and incessantly blaming for Uganda’s power crisis.
Three developments caused the delay of Bujagali dam, namely: In 2002, a corruption/ bribery scandal broke out, where AES Nile Power Ltd officials were alleged to have corruptly influenced government officials.

This led to an investigation by the US Justice Department (based on US Foreign Corrupt Practices Act) and the World Bank Fraud and Corruption Unit. The World Bank financing was withheld from mid-2002 pending the outcome of the corruption investigations. Consequently, dam construction was suspended.
In June 2003, two construction firms on the project, Veidekke and Skanska pulled out, citing bribery and environmental controversies.
As the problems in Uganda were ongoing, AES Corp, the main shareholder of AES Nile Power, developed problems leading to a drastic collapse of its share value.
In August 2003, AES Corp announced that it was discontinuing the construction and development of AES Nile Power project in Uganda.
In November 2002, after the suspension of the project, the High court made a historic ruling which declared the “PPA” a public document and forced the government to make it public. An independent review of the PPA between Uganda government and AES Nile Power Ltd was carried out (after the forced release) by Prayas Energy Group.
The review determined that the project cost was inflated more than double. The agreement would make the Ugandan people pay $20-40 million extra per year compared to similar projects in other parts of the world. The 2003 pull-out of the project by AES was therefore a blessing for Uganda- short-lived as it turned out to be. Bujagali dam was re-bidded in 2005.

A consortium led by Industrial Promotions Services (IPS), a holding company of the Aga Khan was awarded the contract, ahead of three other consortia. It was reported that IPS lagged behind the others at the technical evaluation. Mr Museveni and State House were again very involved in deciding the contract award.
The project partners, IPS, Sithe Global Power (USA) and the government set up a new company- Bujagali Energy Ltd (BEL) to operate and run the project. IPS and BEL signed a Power Purchase Agreement (PPA) and an Implementation Agreement with government (UEGCL) respectively. These agreements were signed before Parliament approved the government’s obligation as required by law. The project cost was put at $860 million!!
The government advanced BEL $90 million to kick-start the project. The project also inherited the $75million asserts forfeited by defunct AES Nile Power Ltd.
Construction work resumed in 2007 and was planned to be completed in three years.
At the inauguration, Mr Nazir Juma, the chairman of BEL, reported that the total project cost was $902 million! Investigation by a parliamentary adhoc committee on energy, showed that the actual cost of the dam project was $1.3 billion.
The committee recommended a forensic audit of the project. Bujagali dam, even at the official $902 million, is the most expensive dam in the world today [given its limited power capacity]!
Construction of hydropower plants in Africa and other continents cost between $1.0- 1.7 per MW capacity. Bujagali, at the officially declared project cost stands at $3.6 per MW. If the parliamentary committee findings are correct, this will go up to $5.2 per MW!

Worse still, whereas the installed capacity of Bujagali dam is 250MW, the actual output of the dam since inauguration has not exceeded 130MW on average! and the country is saddled with debts from the white elephant projects.
Karuma dam
This is the latest scandal, whose extent is still unfolding. Karuma dam project is supposed to generate 600MW of power. Corruption allegations started even as the project was being drawn up. It may be recalled that a Norwegian company that had interest in getting the Karuma contract allegedly paid a Ugandan senior government official a $10,000 bribe.
The bids for Karuma dam were eventually invited in August 2010. Eight major bidders were shortlisted. All the others except three companies (two Chinese and one Iranian) were eliminated at the pre-qualification stage. Immediately after this, allegations of bribery started. It was alleged that the contracts evaluation committee received $1.2 million from the Chinese.
It has also been reported that Mr Museveni has now personally taken over the procurement process to “fast-track” it. Yes, hold your breath!!

Theft/ corruption and dysfunctional government systems and institutions in the Energy sector are responsible for the power crisis in Uganda. Mr Museveni/ State House’s hand is pervasive in all the project scandals. The Ugandan people are, and will continue, paying heavily for the mega scandals in the Energy sector.
What is presented here regarding the energy sector is certainly replicated in all sectors of government. This is why roads in Uganda are the most expensive to construct and take forever to complete yet they disintegrate in a very short time.

read: Umeme officials, ‘’say sorry over high tariffs’’ to Museveni, want to renegotiate the concession agreement

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