BMAU Briefing Paper (9/15) May 2015

THE REPUBLIC OF Power transmission line projects: What delays implementation?

OVERVIEW KEY ISSUES Transmission line projects directly contribute to the major hindrance to timely project Delayedcompletion. way This leaves is due acquisition to: is a firstgeneration priority capacity of the Ministry and transmission of Energy and network. Mineral DevelopmentTransmission (MEMD),line projects which constitute is - To increase the construction electricity 1. of power lines and their associated substations. property rates by the land Untimelyboards. revision of the district 2. Late initiation of procurement Thetransmission Government line of projects, Uganda (GoU)thus registering and development some process for RAPs. partners have made investments in the power 3. Long periods between land continues due to a number of delays associated with achievements. However, slow implementation and project design changes among others. 4. Design changes due to valuations and compensations. way leaves acquisition, capacity of local subcontractors, This policy brief highlights the major causes of delays in the implementation and proposes policy 5. Stringent donor conditions insufficient preparations.

recommendations for improvement.

Introduction The GoU in partnership with the donors has

allocations for the transmission line projects. In TransmissionThe MEMD hands Company over the Limited selected (UETCL). transmission The FY2012/13,increasingly the made allocation significant was Ug developmentshs 238.159 UETCLlines for is a development Public Limited to Company, Uganda Electricitymandated billion; Ug shs365.104 billion in FY2013/14 among others to implement the transmission while in FY2014/15 the allocations is Ug shs line projects. It also has an operational mandate 429.268 billion for the ongoing projects1. These and Transmission system operator. It therefore network thus contributing to easing access to undertakesthat is divided bulk into power the Singlepurchases buyer from business the electricity.investments are aimed at improving transmission generation companies and sales, import and export of energy, operation of the High Voltage The power lines transmit power Transmission Grid and plays the national system distances with minimum losses and distortion operator role. while substations facilitate the step downover of High long Voltage power to Low Voltage for distribution.

1 Bujagali switch yard upgrade; Karuma Interconnection; Nkenda- Hoima; Mbarara-Nkenda; Tororo-Lira; NELSAP; Hoima-Kafu; ESDP;

parks Opuyo-Mororo; - and Electrification of industrial Ministry of Finance, Planning and Economic Development 1 BMAU Briefing Paper (9/15)

Transmission projects performance Major causes of delays 1- Delayed acquisition of way leaves due to: transmission line systems and their associated substationsThe UETCL countrywide. has developed Some of a the number completed of a) Delay by districts land boards to revise property rates Interconnection (Bujagali-Kawanda 220kV, The land act mandates the district land boards 75km;projects Kawanda- over the years include:132kV, Bujagali17km, to among others compile and maintain a list Bujagali-Nalubaale 132kV, 5km) and Project of property rates. The property rates are not Substation at Kawanda. Act. The time lag is normally three or more implementation. The Karuma Interconnection years,reviewed thus, annually the consultants as provided are forusing in old the rates, Land Project,Majority Nkenda-Hoima of the projects transmission however are line still started under which are usually low for compensations. The in 2008 and was expected to end in 2015 but Karuma Interconnection Project (KIP) had low construction works had not started by February compensation packages especially in town 2015. The Resettlement Action Plan (RAP) way councils. An acre in Town council in

shs 2 million to Ug shs 4 million. This rate was leavesSimilarly, implementation Hoima–Kafu line,was commencedstill ongoing. in 2009 lowerKiryandongo than the district market was price valued of the betweensame size Ugin and end date was 2015 but construction works the same location, which was estimated to be and compensations had not commenced. By between Ug shs 10 million to Ug shs 15 million. December 2014, the feasibility study report, and draft tender documents had been submitted and the RAP study concluded. The slow pace rates of a neighboring district whose property was attributed to the contractor’s suspension of Due to lack of revised rates, some consultants use works resulting from the donor freezing project funds. Subsidiaryvalues may Action be low Programme though fairly(NELSAP) current. line for In instance;Mbarara districtthe consultant on the used the Equatorial land rates Lakes for Two projects (Mbarara-Nkenda/Tororo-Lira and NELSAP - Bujagali-Tororo-lessos/Mbarara- by the Project Affected Persons(PAPs) leading to Mirama-Birembo) which started in 2010 and rejectionIsingiro district of packages. which were perceived to be low expected to end in 2015 were under construction in January 2015 but with some RAP challenges, which had not been concluded. The Electricity Delays in updating the property rates have also and associated lines which started in 2011 and Constitution.made it very difficult to implement compulsory expectedSector Development to end in 2017 Project commenced - Kawanda-Masaka construction land acquisition as provided for in the b) Long period between the time of property works in 2014 and RAP implementation, was not valuation and payments leading to rejection Industrial Parks project, which started in 2012, hadyet complete in January by January2015 not 2015. commenced Electrification on the of construction works. KarumaThis varied Interconnection between three orwas more ongoing years resultingin 2015, in loss of value due to inflation. Compensation of

doneusing inthe 2009 valuations and by made 2014; in the2010. compensations Similarly, on hadthe not Mbarara-Nkenda yet been completed. line the valuations were

2 Ministry of Finance, Planning and Economic Development BMAU Briefing Paper (9/15)

the same geographical in Katerema C in Rubongi is also compounded by the delay in the Sub-County in Tororo district for the Bujagali- The time lag between valuation and payments Tororo line and Tororo-Lira line. approval of the compensation report by the In Lira district, a similar scenario was affecting Chief Government Valuer (CGV). On the KIP, the compensations on the KIP for the Karuma– Decemberthe valuation 2013. report, which was submitted to Lira section and the line for Tororo-Lira section. the CGV in September 2012, was approved in Compensation rates ranged from Ug shs 30-90 c) Late initiation of procurements for RAPs Million for Tororo-Lira section while those for Karuma-Lira section ranged between Ug shs10- The RAP implementation consultants were 30 million per Acre. not on board for a number of projects like KIP, Nkenda-Hoima and Mbarara-Nkenda; Tororo- 2- Donor financing conditions

RAP implementation consultant for Karuma InterconnectionLira. The advertisement for instance for procurement was published of the in majority of the transmission line projects with May 2014 almost a year after commencement aGoU large and proportion development of partnersfunding jointlycoming finance from of the RAP implementation. The consultant’s procurement process was at post negotiation conditions between GoU and China EXIM bank, stage for the Nkenda–Hoima as at the end the latter. The delay to finalize the financing of FY2013/14 long after commencement of of Industrial Parks. Similarly, the Hoima- the compensations. Those that had a RAP Kafufor example transmission affected linethe KIPproject and Electrificationwas delayed implementation consultant like NELSAP and

Minister’sby the freezing loss of of donor financing funds by allegations. the Norwegian The ESDPThe contractor were relatively for the performing construction better. of houses for contractors’government schedule following of theworks Office came of to Primestand the physically displaced persons was similarly still. not on board. 3- Low capacity of local contractors During compensations, some Project Affected International contractors usually subcontract

Persons (PAPs) are identified as Vulnerable, and physically displaced. Such individuals include subcontractedlocal firms. These works. however The result have is inadequatea delay in contractorthe very old, to theconstruct disabled, for andthem widows. resettlement As an projectfinancial implementation and technical capacity as was tothe execute case thefor houses.equity dimension,By February UETCL 2015, the usually procurement procures had a Bujagali switchyard upgrade. not commenced for the Karuma Interconnection 4- Design changes after contract award project for construction of houses for Physically Displaced Persons (PDPs). d) Lack of uniform compensation rates for toThe install Bujagali in the switchyard project. Similarly, upgrade the required RAP projects in the same geographical area implementationchanges in the designs for Karuma- and type of equipment section on the KIP has not commenced due to the property rates from either districts or carry proposed design changes from 132kV to 400kV Every contracted valuation consultant uses the transmission lines to reduce on the power loss market rates. This results into non-uniformity ofout the market property research rates. toRejection establish of compensationthe prevailing and to enable meeting of the current and future packages was experienced among the PAPs in powerrates associated demand. with a lower voltage power line

Ministry of Finance, Planning and Economic Development 3 BMAU Briefing Paper (9/15)

Conclusion 4- Timely approvals of the compensation reports Construction of power transmission lines is area prerequisite facing implementation to effective challenges, distribution which and The Chief Government Valuer’s office should be access to grid energy. However, the projects reportsstrengthened for all toprojects facilitate in timelythe country. approvals of the procurement planning and management; as valuation report as it handles all the valuation wellinclude; as low delayed capacity way of leaveslocal contractors acquisition, among poor 5- Timely compensations others. These are not insurmountable. The UETCL should ensure timely compensations Recommendations 1- Effective mobilization and securing of to the PAPs once land valuations are done to avoid6- Early inflationary initiation effects. of procurements donor financing UETCL should fast track the procurements for Ministry of Finance Planning and Economic projects. The RAP implementation consultant should fast track securing of funds for forservices instance to enableshould timelybe procured completion before of the transmissionDevelopment line (MFPED), projects. MEMD, The andcontractors UETCL contractor for construction works. agreements. should be engaged after conclusion of financing References: 2- Secure project site before signing of 1. Annual Budget Monitoring Reports FY the Engineering Procurement and 2013/14 and FY 2014/15 Semi-annual. Construction Contracts 2. MEMD (2014) Ministerial Policy Statement FY 2014/15 process before engagement of the contractors. 3. ThisUETCL would should minimizecomplete wayredundancy leaves acquisition of the MFPED(2013 and 2014); Approved 4. MEMD; UBOS ;( 2014) Uganda Rural –Urban Estimates of Revenue and Expenditure equipment on site and possible interest charges on3- thePeriodic idle equipment. revisions of property rates 5. Ministry of Lands, Housing and Urban Electrification Ministry of Lands, Housing and Urban Land Policy development (2013); The Uganda National 6. Republic of Uganda (1995), The constitution Districtdevelopment, Land Boards District to Councils update the and property District of the republic of Uganda Executive Committees; should support the 7. http://www.uetcl.com/ Cap 227 to enable fair compensations rates annually as provided for in the Land Act 8. Uganda land Act Cap 227 , section 59

Budget Monitoring and Accountability Unit (BMAU) Ministry of Finance, Planning and Economic Development P.O. Box 8147, Kampala www.finance.go.ug

4 Ministry of Finance, Planning and Economic Development