Months after US$ 902M Hydro Plant kicks in…Uganda forced to increase electricity tariff

…Sithe Global rate of return on project similar to Guyana’s 19%

Sithe Global, the developer for the Amaila Falls Hydro Electric Project, also built the US$902M, 250MW Hydro Plant in Bujagali, Uganda, and the power company in the African nation is once again being forced to ask for an increase in electricity tariff.
The request comes just months after that Hydro Electric Plant would have been commissioned.
In April this year it was reported in the international news that the Uganda Electricity Regulatory Authority (ERA)’s board of directors was considering a power tariff increase.
That increase in electricity is being considered just after huge increments of 69 per cent and 36 per cent for large scale and domestic consumers respectively early last year.
The Ugandan ERA was seeking a further increase of between five and 15 per cent this year.
The Plant was commissioned last year.
The increase requested in Uganda is the second such request this year to raise the prices paid for electricity in that nation.
Consumers under the Uganda Electricity Users Association have gone to court to protest.
This request follows a trend of tariff increases registered in the previous years. In 2005, prices increased by 24 per cent; by 35 per cent in June 2006 and 41 per cent in November of the same year.
Among the reasons proffered for the increase in tariffs on the Ugandan people for electricity is the inefficiency of that country’s Power Company, Umeme, the Ugandan equivalent of the Guyana Power and Light Inc. (GPL).
According to reports, the power company needs an influx of cash through the increasing of its tariff in order to rehabilitate the sick distribution network and reduce system losses.
Umeme’s power losses are at 26.1 percent of the energy produced.
The technical and commercial losses incurred by GPL stand collectively at 31 per cent.
Umeme says it plans to reduce its distribution losses to 23 percent in 2013 by rolling out prepaid metering, replacing old equipment and also connecting more people to the grid.
“This does however require money, and lots of it. Prepaid metering in total requires about US$300M.”
This is only for prepaid metering, but then there are additional costs like improving the network. Celestino Babungi, the Chief Financial Officer for Umeme, says the utility is also looking to “secure long term financing from various lenders.”
With Bujagali on, much of the Ugandan thermal generators would be switched off in favour of the much cheaper hydro option. But the other reality was that hydro, although largely thought to be cheap, needs humongous amounts of capital outlay, US$902M in the case of Bujagali, money that the government was unable to raise. This therefore called for private-public partnerships. Private investors, including Sithe Global, called for a 19.2 per cent return on its investment.
It charged Guyana a 19 per cent rate of return for the US$158M that it said it would have invested in the Amaila Falls Hydro Electric Project.