Electricity review; Contract dilemmas, Umeme and new Power lines dominated 2013

KAMPALA: The two year’ melodrama of protracted legal battles, kickbacks, indecorous procurement processes and intrigue, from State House to the Ministry of Energy, was finally brought to end with a ‘surprise' giveaway of the Karuma contract.

The contract was awarded in June to a Chinese State firm, Sinohydro Corporation Limited, which was yet to sign contract with government at the time of commissioning; in disregard of a report by Inspector General of Government, Justice Irene Mulyagonja recommending a redo of the entire procurement process.

Works on the $1.4b Karuma dam project started early this month and the 600 megawatts (MWs) is expected after 2018-the completion date.

But the contractor was dubiously awarded contract through a Public Private Public Partnership directly by President Museveni, reportedly after signing bilateral agreements between Uganda and the Chinese government, which will finance 85 percent of the project

Hot off the shelf in the days leading to Karuma was Ayago hydroelectric dam which also has an estimated capacity of 600MWs.

The contract to the $1.9 billion dam project located in Nwoya district was also awarded by President Museveni to a Turkish firm without necessarily any procurement process conducted.

According to a statement from State House, a Memorandum of Understanding between Mehmet Nazif Gunal on behalf of the investor Mapa Construction Company and government represented by Energy minister Irene Muloni was signed on April 21.

Little else was said about the deal but it was also revealed the project would be developed in two phases with Ayago North to have a capacity of 350MW, and Ayago South with an expected capacity of 250MW.

“The most important thing in this project should be efficiency”, the President was quoted saying, however no progress has since been reported on the project and unverified reports claim the contract later withdrawn from the Turkish firm.

Buseruka Mini hydro dam which has an installed capacity of 9MW was commissioned in January to boost electricity access in the districts of Hoima and Masindi. Works on $30M dam located on River Wambabya in Buseruka Subcounty-Hoima started in 2008 by Hydromax Ltd.

President Museveni flagged off work on 183MW Isimba Hydro power dam on River Nile in Kayunga District. The Shs1.2 trillion project was awarded to China International Water & Electric Corporation (CWE), which lost out in the Karuma bidding and later petitioned for a review of the process citing corruption and intrigue.

Under the rural electrification programme the President commissioned the Shs5.2 power line in Nakaseke district; Shs 710 million powerline in Fort Portal, and another Shs21 billion electrification project in Mubende district respectively.

However despite the developments, electricity access around the country remained low concentrated in urban areas majorly and only 14 percent are connected to the grid.

An estimated 90 per cent of Ugandans live in rural areas with less than three per cent access.

Statistics from the Rural Electricity Agency (REA), a government body tasked to steer the programme show that by end of 2012 about 7,968 households of the projected 109,000 had been connected.

REA still maintained that more than 6,000 solar connections and 426 grid extension projects have been implemented countrywide-so far to support social and economic projects for rural transformation but access remains thin.

Similarly, Umeme the main distributor and operator of the main grid warned Ugandans about the possible (and imminent) return to load shedding citing insufficiency of electricity capacity generated.

With darkness already biting hard in some places, the warning came against heels of a technical fault in two of the five turbines at Bujagali dam.

The dam produces a reported capacity of 250MW.

The UK firm which supplies 97 percent of the countries power said load shedding estimated to go up to 2018 (if generation does not increase) can only be averted by switching to thermal plants, to supplement current capacity of 516MW against a demand of 490MWs.

The thermal generation plants are; Aggrekko Lugogo (50MW) Namanve (50MW) and Mutundwe (50MW).

Government had switched off thermal plants in 2012 citing the high cost per unit of electricity produced (after subsidies had been scrapped). But towards festive holidays it (government) was propelled to backtrack on the move to guarantee supplementary.

Thermal power costs Shs779.5 a unit compared with Shs268.8 for hydropower.

Industry players however rubbished Umeme’ claims as “nonsensical” and that of the company bosses merely wanted to recoup their investments in some of the thermal plants.

A Parliamentary Ad hoc Committee sanctioned by Speaker Rebecca Kadaga in 2011 to investigate the nationwide electricity crises, notably high electricity tariffs and load shedding, also released  its report recommending “cancellation of Umeme’ contract” citing incompetence.

In its 159 paged report the committee questioned the manner in which the company came into existence and was awarded contract; its monopoly, and concerns over the high electricity tariffs amidst poor service delivery and a faulty billing system.

The Attorney General, Peter Nyombi, however advised against termination of Umeme’ contract citing several unsavory clauses in the contract with government in which premature cancellation of the agreement implies paying Umeme Shs371 billion [buyout amount], payable within 91 days or else attract additional 20 percent per annum money which is unavailable.

Ms Muloni, who then as managing director of Uganda’ electricity distribution arm (UEDCL), oversaw awarding Umeme the contract stressed: “The company is going nowhere.”

Umeme, which in 2012 issued its first IPO and floated up to 622, 378,000 shares which constitutes 38.6% of the company’s issued share capital upon listing with a view of raising at least ShsShs171billion to pay off debts and use the other part of harvests to invest in distribution, also paid its first interim dividends.

The company also raised call to the Capital Markets to raise over $170 million (about Shs438 billion) to finance its investments in the next five years.

Umeme early this month, further, made proposition that end-user tariffs for domestic consumers be increased by 9.95 per cent starting next year. The proposal once approved by the Electricity Regulatory Authority (ERA), the price of electric power used in homes will rise from Shs524.5 to Shs576.69 per unit consumed.

It equally wants tariffs for maize mills and water pumps increased from Shs487.6 to Shs568.48, that for small industries from Shs458.9 to Shs571.24 and for large industries Shs389.63 instead of Shs312.8 per unit consumed.