46506
Report No. JDNR2008-0296
International Bank for Reconstruction and Development
Public Disclosure Authorized International Development Association
INSP/449 77 -UG
Public Disclosure Authorized MANAGEMENT REPORT AND RECOMMENDATION
IN RESPONSE TO THE
INSPECTION PANEL INVESTIGATION REPORT
UGANDA
Private Power Generation (Bujagali) Project Public Disclosure Authorized (IDA Guarantee No. B0130-UG)
November 7,2008 Public Disclosure Authorized MANAGEMENT REPORT AND RECOMMENDATION IN RESPONSE TO THE INSPECTION PANEL INVESTIGATION REPORT OF THE UGANDA: PRIVATE POWER GENERATION (BUJAGALI) PROJECT (IDA GUARANTEE NO. B0130-UG)
Pursuant to paragraph 23 of the Resolution Establishing the Inspection Panel (IBRD Resolution 93-10 and IDA Resolution 93-6), attached for consideration by the Executive Directors is Management’s Report and Recommendation in response to the findings set out in the Investigation Report No. 44977-UG, dated August 29, 2008, of the Inspection Panel on the Uganda Private Power Generation (Bujagali) Project, IDA Guarantee No. BO 130-UG.
11 MANAGEMENT REPORT AND RECOMMENDATION IN RESPONSE TO THE INSPECTION PANEL INVESTIGATION REPORT NO. 44977-UG OF THE UGANDA: PRIVATE POWER GENERATION (BUJAGALI) PROJECT (IDA GUARANTEE NO. B0130-UG)
CONTENTS
Abbreviations and Acronyms ...... iv List of Operational Policies/Bank Procedures (OPDP) and Operational Directives (OD) ...... v Executive Summary ...... vi I. Introduction ...... 1 11. Background and Status ofthe Project ...... 1 111. Findings ofthe Panel ...... 10 IV. Special Issues ...... 13 Introduction and Summary ...... 13 Lake Victoria, Climate Change, and the Kalagala Offset...... 15 Cultural and Spiritual Issues ...... 20 Involuntary Resettlement ...... 24 Environmental Issues ...... 29 Economic and Financial Analysis...... 3 1 Power Purchase Agreement ...... 35 V. Management’s Action Plan in Response to the Findings ...... 38 VI. Conclusion ...... 40
Annexes Annex 1. Findings, Comments and Actions Annex 2. SEA Summary - Excerpts Annex 3. Indemnity Agreement
Tables Table 1. First Buj agali Project Inspection Panel Management Action Plan - Update Table 2. Proposed Management Action Plan Table 3. Ongoing Actions and Supervision
Figures Figure 1. Lake Victoria Level in the Case of Low Release - Low Hydrology Scenario
Maps Map 1. IBRD 3653 1 - Uganda Private Power Generation (Bujagali) Project
... 111 ABBREVIATIONS AND ACRONYMS
AfDB Afi-ican Development Bank AMSL Above Mean Sea Level APL Adaptable Program Loan APW Assessment of Past Resettlement Activities and Action Plan BP Bank Procedures BEL Bujagali Energy Limited BIU Bujagali Implementation Unit CDAP Community Development Action Plan CPMP Cultural Property Management Plan co2 Carbon dioxide DPL Development Policy Loan EA Environmental Assessment EAC East African Community EL4 Environment a1 Impact Assessment EMP Environmental Management Plan EPC Engineering, Procurement and Construction ERA Electricity Regulatory Authority GDP Gross Domestic Product GoU Government ofUganda GWh Gigawatt hour HPP Hydropower Project IA Indemnity Agreement IDA International Development Association IFC International Finance Corporation IPN Inspection Panel KJCN International Union for Conservation of Nature JICA Japan International Cooperation Agency kWh Kilowatt hour LC Local Council LVEMP I1 Lake Victoria Environmental Management Project I1 MEMD Ministry of Energy and Minerals Development MIGA Multilateral Investment Guarantee Agency MW Megawatt NAPE Ugandan National Association of Professional Environmentalists NBI Nile Basin Initiative NBS Net Basin Supply NEMA National Environmental Management Agency NFA National Forestry Authority NGO Nongovernmental organization NWSC National Water and Sewer Company OD Operational Directive OP Operational Policy PAD Project Appraisal Document PAP Project Affected Person PEAP Poverty Eradication Action Plan
iv PoE Panel ofExperts PPA Power Purchase Agreement PRG Partial Risk Guarantee PSDO Power Sector Development Operation PSFM Power Sector Financial Model RAP Resettlement Action Plan RCDAP Resettlement and Community Development Action Plan REA Rural Electrification Agency SEA Social and Environmental Assessment SMP Sustainable Management Plan SSEA Strategic/Sectoral Social and Environmental Assessment SEAP Social and Environmental Action Plan, equivalent to EMP SWAP Sector Wide Approach UETCL Uganda Electricity Transmission Company, Limited. UJAS Uganda Joint Assistance Strategy UMEME Uganda electricity distribution company vcc Village Consultation Committee
LIST OF OPERATIONAL POLICIES/BANK PROCEDURES (oP/BP) AND OPERATIONALDIRECTIVES (OD)
OP 1.00 Poverty Reduction OP/BP 4.01 Environmental Assessment OP/BP 4.02 Environmental Action Plans OP/BP 4.04 Natural Habitats OP/BP 4.10 Indigenous Peoples OP/BP 4.1 1 Physical Cultural Resources OD 4.30 / OP/BP 4.12 Involuntary Resettlement OP/BP 4.37 Safety ofDams OP/BP 7.50 Project on International Waterways OP 10.04 Economic Evaluation ofInvestment Operations World Bank Policy on Disclosure of Information
V EXECUTIVE SUMMARY
1. Background. On March 7, 2007, the Inspection Panel registered a Request for Inspection, IPN Request RQ07/1 (hereafter referred to as “the Request”), concerning the then proposed Uganda Private Power Generation (Bujagali) Project (“Bujagali Project”, or “the Project”), for which the International Development Association (IDA) is providing a Partial Risk Guarantee. The Request for Inspection was submitted by the Ugandan National Association of Professional Environmentalists (NAPE) and other local organizations and individuals (hereafter referred to as the “Requesters”).
2. The Executive Directors and the President of IDA were notified by the Panel ofreceipt ofthe Request. The Management responded to the claims of eligibility in the Request on April 5,2007. The Project was approved by the Board ofExecutive Directors on April 26,2007.
3. On August 29, 2008, the Panel issued its report outlining the findings of its investigation. The Panel reviewed the claims raised by the Requesters, and found areas ofboth compliance and non-compliance. A response by Management to the Panel’s findings is provided in Sections I-VI, and Annex 1 below.
4. Importance of the Energy Sector. Energy is a crucial input to Uganda’s development, and hydropower is an important option for meeting the country’s power needs. With less than 10 percent of the population connected to electricity, a long-term investment program is required in the energy sector to realize the country’s development aspirations. The energy program, developed by the Government ofUganda (GoU) in partnership with the World Bank Group (WBG) and other donors, includes regional interconnections, large-, medium-, and small-scale generation, new transmission lines, and extension of the power distribution network. It embraces conventional and renewable energy technologies, and supports extension of the main grid, development of independent grid networks, and deployment of dispersed options such as solar photovoltaics.
5. The Bujagali Project. The Bujagali hydropower station is a key part of this program. The Project includes the construction of a 250MW run-of-river hydropower station on the Nile River eight kilometers downstream from the existing Nalubaale/Kiira power station. A transmission line, financed by the African Development Bank (AfDB) and the Japan International Cooperation Agency (JICA), is also under construction to evacuate the power to the main grid in Kampala. This is the second effort to develop the Bujagali hydropower station, following an unsuccessful effort that ended in 2003 due to financial difficulties experienced by the sponsor. The current Project is the largest private sector investment in East Ahca, and will provide stable baseload power which is needed to grow the economy and expand access to electricity.
6. In view of the Project’s history and its crucial importance to Uganda, Management at the outset has established enhanced due diligence for both Project preparation and supervision. This includes assignment of experienced staff with the necessary range of expertise, as well as recruitment of highly qualified consultants for specific tasks such as the financial analysis, economic analysis, hydrology review, etc.
vi 7. Next Steps. As discussed in Section V below, Management will follow up on specific stakeholder commitments through implementation of a proposed Action Plan, including establishment of a project monitoring committee, implementation of a management plan for cultural resources, and disclosure of the reports prepared by the Independent Panel of Social and Environmental Experts. Table 3 presents key elements of the supervision program, covering, for example, the socio-economic survey, annual updates of the Community Development Action Plan, and afforestation activities. Management plans to report to the Board on the progress of its proposed Action Plan a year from now.
vii
I. INTRODUCTION
1. On March 7, 2007, the Inspection Panel registered a Request for Inspection, IPN Request RQ07/1 (hereafter referred to as “the Request”), concerning the then proposed Uganda Private Power Generation (Bujagali) Project (“Bujagali Project”, or “the Project”), for which the International Development Association (IDA) is providing a Partial Risk Guarantee. The Request for Inspection was submitted by the Ugandan National Association of Professional Environmentalists (NAPE) and other local organizations and individuals (hereafter referred to as the “Requesters”).
2. The Executive Directors and the President of IDA were notified by the Panel of receipt of the Request. The Management responded to the claims in the Request on April 5,2007. The Project was approved by the Board ofExecutive Directors on April 26,2007.
3. On August 29, 2008, the Panel issued its report outlining the findings of the investigation. This report responds to the findings of the Panel. Section I1provides background and the status of the Project; Section I11 summarizes the findings of the Panel; Section lV addresses special issues emerging from the Panel’s investigation report; Section V includes Management’s Action Plan; and Section VI contains the conclusion. The Panel’s findings, along with Management’s responses, are described in detail in Annex 1.
11. BACKGROUND AND STATUS OF THE PROJECT
4. Context. Over the last four years, Uganda has suffered serious power shortages arising from a combination of: (i)delays in developing additional generation capacity, in particular the World Bank Group supported private sector Bujagali hydropower plant, which initially was to have been operational by end 2005,’ but is currently expected to be in service in 2011; (ii)a three year drought in the region (November 2003-October 2006), which has, in turn, reduced the generation output of the existing hydropower plants (Le., Nalubaale and Kiira); (iii)the high level of technical losses in the distribution system; (iv) annual demand growth of about 8 percent which has placed additional pressure on the power system; and (v) increasing prices of petroleum products in the world market, which added upward pressure on already high tariffs on the public grid as well as on the cost ofpower generation from alternative thermal sources. The Private Power Generation (Bujagali) Project is aimed at providing the capacity needed to overcome the supply constraints in a least-cost and environmentally and socially sustainable manner.
5. Addressing the electricity crisis has been a major pre-occupation of the GoU over the past four years. Less than 10 percent of the population has access to power, most of which (70 percent) is distributed to the three largest cities of Kampala, Entebbe, and Jinja, where industrial activity has begun to develop. At its height in 2006, load shedding2 resulted in an estimated 22 percent of demand from current customers going unserved. The increased load
1 The initial Bujagali Hydropower Project, approved by IFC and IDA on December 18, 2001, failed to materialize (see paragraph 21). * A procedure in which parts of an electric power system are disconnected in an attempt to prevent failure ofthe entire system due to overloading. Uganda - Private Power Generation (Bujagali) shedding threatened the already small, but steadily growing, manufacturing sector and had other indirect effects on economic activity, such as agriculture and local commerce.
6. On a human level, the cost has been substantial not only because of losses in livelihood and incomes, but also lost opportunities to establish and sustain local enterprises and institutions. Delays in realizing the Private Power Generation (Bujagali) Project have had other consequences for the Ugandan population at large, including the diversion of Government budgetary resources from health and education to partially subsidize the high cost of fuel imports for electricity purchased from emergency thermal power plants and higher electricity tariffs. The situation has been compounded by the growing unmet demand, the regional drought and the reduced generation at Nalubaale and Kiira noted above. The 250MW Bujagali hydropower plant is located downstream of Nalubaale and Kiira, and it would reuse the upstream water releases that pass through that water regulating structure at the mouth of the Nile. Had this Project come on stream in 2005 as originally envisaged, it would have averted the hardship to people and the economy caused by power outages and reduced growth and productivity; by providing adequate generation to meet Uganda’s power requirements. It would also have avoided the current political/economic imperative to minimize load shedding by over-abstracting water for power generation. Instead, it would have allowed an accelerated recovery of the level of Lake Victoria.
7. Power Crisis Impacts on Uganda’s Poverty Eradication Action Plan (PEAP). Uganda’s development objectives are articulated in the 2004 PEAP, the third version of its poverty eradication action plan. The 2004 PEAP restates Uganda’s ambitions of eradicating mass poverty and of becoming a middle income country in the next twenty years. It promotes a shift of policy focus from recovery to sustainable growth and structural transformation. The PEAP presents specific policies and measures to achieve its objectives, grouped under five pillars: (i)economic management; (ii)enhanced competitiveness, production and incomes; (iii) security, conflict resolution, and disaster management; (iv) governance; and (v) human resources development. The most direct impact of the power crisis was on pillar (i),economic management, and pillar (ii),enhancing competiveness, production and incomes. Commencing in 2006/2007, the GoU embarked on a combination of short-term emergency measures to ease load shedding through thermal generation and longer-term programs to raise generation capacity, both ofwhich required increased budgetary resources. This included a partial subsidy for imported fuel to reduce the cost of power generation both for the public grid and for private sector firms using generators. Largely as a result of these measures, the energy sector’s share of the budget increased from 1.9 percent in 2005/2006 to 9.2 percent in 2006/2007. With this reallocation, shares of key social service delivery sectors such as education and health declined from 3 1 percent to 25 percent ofthe budget over this period.
8. Uganda Joint Assistance Strategy (UJAS). The World Bank’s assistance to Uganda is set out in a Joint Assistance Strategy(UJAS) which was approved by IDA’S Board of Executive Directors in January 2006 as the country assistance strategy. The strategy now guides the activities of eleven other development partner^,^ as well as the Bank. The UJAS supports the GoU’s efforts to achieve its Poverty Eradication Action Plan (PEAP) targets, and, ultimately, the Millennium Development Goals. It promotes increased collaboration and
3 Initially formulated by 7 partners, the UJAS now has 12 signatories: DFID (UK); African Development Bank; Austria; Belgium; Denmark; EC; Germany; Ireland; The Netherlands; Norway; Sweden; World Bank.
2 Management Report and Recommendation harmonization among development partners and with the Government, as well as a stronger focus on results and outcomes. As part of the UJAS harmonization agenda, development partners have worked in a coordinated manner to address the power crisis by supporting investments in power generation facilities to increase reliability and lower the cost of electricity, which is a major cost of doing business.
9. Power Crisis Impacts on Economic Growth and Structural Transformation. Although economic growth and Uganda’s external position have remained robust since 2005/2006, the ongoing electricity crisis has constrained growth and structural transformation of the economy. Following the onset of the power crisis, growth in manufacturing decelerated and exports remained driven by commodities. Over the past five years, growth has been driven by the service sector, which accounts for 60 percent of the average GDP growth of 8.3 percent per year. In the energy dependent sectors, businesses shifted production hours to avoid power outages, and many resorted to high-cost backup thermal generators4 at the height of the power crisis, all of which affected their investments. Manufacturing, high-value agriculture like flowers, and processing industries, like fish, have been most affected by power cuts, and have reported reduced profits. The manufacturing sector, albeit with a small contribution to total GDP growth (i.e., less than 1 percentage point), was growing at 9.5 percent in 2004/2005, but decelerated to 4.5 percent by 2006/2007.
10. Another macroeconomic consequence of the current power crisis is its impact on domestic price levels, exacerbated by the increasing price of petroleum products in the international markets and bad weather. This has kept inflation above target for three consecutive years. Oil imports were more costly not only because of rising international prices but also due to the high volume of diesel fuel needed to sustain thermal power plants. If the first effort to develop Bujagali had been commissioned on schedule in 2005, Uganda could have avoided about US$6 million a month that it is currently spending on thermal power generation. The economic cost of unserved energy in 2006 was estimated at about US$0.394/kWhY when oil was US$68 per barrel.’ Oil prices continued to increase over 2007/2008, surpassing US$lOO per barrel, introducing an additional element of risk to a country that still relies heavily on diesel-powered electricity generation.
11. Power Sector Strategy. The power sector strategy of the GoU has been to: (i)maintain the legal, regulatory and structural sector reforms that are in place; (ii)leverage the role of private sector investment, management and operations in the sector’s development; (iii) provide adequate, reliable and least-cost power generation, including potential imports through regional transmission interconnections, with the goal to meet urban and industrial demand and increase access; and (iv) scale up rural access to underpin broad based development.
12. Since 1999, the GoU has implemented a comprehensive power sector reform program and enacted a new Electricity Act; established an independent Electricity Regulatory Authority (ERA); and unbundled the State-owned Uganda Electricity Board into separate entities
The cost ofrunning a generator was estimated to be 2 to 6 times as high as that of obtaining power from the public grid. 5 Source: “Bujagali I1- Economic and Financial Evaluation Study” (hereafter called the Economic Study), Power Planning Associates Ltd., February 2007. The cost ofunserved energy is estimated based on the cost ofself- generation using diesel generators (for commercial and industrial customers) and consumer “willingness to pay” for residential customers. It is noted that as ofNovember 2008, oil prices are again in this range.
3 Uganda - Private Power Generation (Bujagali) responsible for generation, transmission and distribution. The GoU has promoted the efficient operation of the power sector by increasing the role of the private sector in concessions for generation and distribution facilities. The GoU has taken a broad view of potentially viable energy sources for power production, and is currently exploring/exploiting both conventional (e.g., hydro, petroleum, regional imports, etc.), and newhenewable options (e.g., solar, biomass, geothermal, etc.). New power projects are subject to due diligence including engineering, financial, social, and environmental assessments. The number of urban and rural households with direct access to electricity has grown6 and the GoU is addressing the need to provide adequate, reliable and least-cost power generation capacity to meet demand and pursuing regional power interconnections with the countries of the East African Community (EAC).
13. Notwithstanding Uganda’s bold reforms, the power sector has been challenged by power shortages, as stated above. The increased cost of shifting from a primarily hydro-based system in 2005, to a situation in which 35 percent of generation is being supplied through expensive thermal plants in 2008, has been met through a combination of higher tariffs and subsidies. Once commissioned, the Bujagali Project will provide longer-term, lower cost power supply, mitigating the present crisis, and will be followed by new investments to ensure generation capacity remains ahead of demand. In addition to the short-term solution of expensive thermal generation through rapidly installed small capacity plants, the Government is pursuing more economical permanent thermal capacity to complement its hydropower facilities, as well as off-grid and grid connected rural electrification schemes.
14. In addition to the Bujagali Project, the Bank is currently supporting other aspects of the energy sector. This includes the Energy for Rural Transformation (ERT) Program, which is a three-phase Adaptable Program Loan (APL) aimed at assisting the GoU to reach its target of 400,000 new connections by 2010. ERT Iwill close in February 2009, having successfully supported the institutional creation of a private sector led, commercially-oriented access expansion program, including grid extension and independent grid networks, as well as solar photovoltaic and other renewable energy sources. ERT I1 will focus on the scale-up of investments, based on the foundation built in ERT I,and will be closely coordinated with the Sector Investment Plan being prepared under the Power Sector Development Operation (PSDO). The PSDO supports the GoU’s objective of reducing short-term power shortages and financial imbalances, and facilitating orderly longer-term expansion of electricity service. The PSDO included a US$80 million Development Policy Loan (DPL) component disbursed in 2006/2007 to partially offset the cost of thermal power generation. It also supports a 50MW short-term power station that is supplying power until Bujagali is fully commissioned in 201 1. This operation also includes support for energy conservation, as well as capacity-building in the sector, such as support for the creation of an energy Sector Wide Approach (SWAP). The Privatization and Utility Sector Reform Project includes a Partial Risk Guarantee (PRG) supporting UMEME, which is the private sector operator of Uganda’s interconnected distribution network. The Uganda energy sector also benefits from regional Bank-supported
The number ofnew annual connections has averaged about 21,000 since the concessioning ofpower distribution facilities in March 2005.
4 Management Report and Recommendation programs, including the Nile Basin Initiati~e,~Lighting Africa,’ and proposed regional transmission interconnection investments in support of the EAC Power Pool.
15. Private Power Generation (Bujagali) Project Objectives. The Project’s main objective is to provide least-cost power generation capacity that is expected to eliminate power shortages in 201 1 when the plant is commi~sioned.~The Project would represent an increase of 250MW of generation capacity on the national grid. In addition to mobilizing private investment and commercial bank lending, World Bank Group involvement in the Project is: (i)enhancing investor confidence in the sector (including sponsors, commercial lenders and development finance institutions); and (ii)leveraging critical access to long-term financing, leading to more affordable tariffs for the proposed Project. The World Bank Group also provided Project structuring guidance, based on international experience, to enhance Project bankability.
16. Project Description. The Private Power Generation (Bujagali) Project is a 250MW run- of-river hydropower plant with an adequate reservoir for daily storage, an intake powerhouse complex, and an earth filled dam 30 meters high, together with spillway and other associated works. The Project site is located on the Nile River, approximately 8 kilometers north of the existing Nalubaale and Kiira power plants.” The powerhouse is being constructed to house 5x50 MW Kaplan turbines. The small reservoir will have an estimated surface area of 388 hectares, extending back to the tailrace areas of the Nalubaale and Kiira dam complex. The Project requires 238 hectares of land take for the Project facilities, ofwhich 80 hectares are for new inundated areas adjacent to the Nile River. The land take includes 113 hectares for temporary and ancillary facilities, including temporary haul roads, coffer dams, storage and quarries. To support the Project, about 100 kilometers of transmission lines, construction of a substation at Kawanda, and extension of the Mutundwe substation, are being financed under a separate Interconnection Project supported by the African Development Bank (AfDB) and Japan International Cooperation Agency (JICA).
17. The improved efficiency of water use with the commissioning of the Bujagali hydropower project (HPP) will greatly expand the available generating capacity, such that, in combination with other hydro and thermal power plants, Uganda will be able to meet its electricity demand in line with water releases consistent with the Agreed Curve, the operating rule for water discharges through the regulating dam structure of Nalubaale and Kiira.” The Bujagali HPP will sell electricity to the Uganda Electricity Transmission Company Ltd. (UETCL) under a 30-year Power Purchase Agreement (PPA), signed on December 13, 2005. Project construction commenced on June 26, 2007 under a Limited Notice to Proceed, prior to full financial closure. This was facilitated by a bridge loan provided by the GoU. Financial
’ The Nile Basin Initiative is a collaborative effort by the 10 countries that share the Nile to jointly develop this shared resource to fight poverty, catalyze development, and promote regional peace and stability. Lighting Africa is a World Bank Group initiative aimed at providing up to 250 millionpeople in Sub-Saharan Africa with access to non-fossil fuel based, low cost, safe and reliable lighting products with associated basic energy services by the year 2030. Additional investments will be required to ensure that future load shedding is avoided. loSee Map 1 provided after the Annexes. ” The Agreed Curve functions as an operating rule for water discharges through the Nalubaale and Kiira dam complex, in which the volume of water released remains consistent with what would have occurred under natural conditions, thereby ensuring no change in downstream discharge (water releases are a hnction ofthe lake level at any given time).
5 Uganda - Private Power Generation (Bujagali) closure of the Project occurred on December 21, 2007 at which point the Project sponsor, Bujagali Energy Limited (BEL), injected US$190 million of equity into the Project.” The World Bank Group support consists of: an IDA PRG of US$ 115 million, International Finance Corporation (IFC) ‘A’ and ‘Cy Loans of US$130 million, and a political risk Guarantee from the Multilateral Investment Guarantee Agency (MIGA) of US$115 million.
18. As of September 2008, construction of the Bujagali hydropower station is proceeding well, with progress slightly ahead of schedule. Cofferdams on the eastern side of Dumbbell Island are complete, and excavation for the civil works is well underway. BEL also has commenced implementation of the Community Development Action Plan (CDAP) as described below. The contract for the transmission line has been signed, and the contractor, Jyoti Structures (India), is mobilizing.
19. Previous Bujagali and Other Energy Projects and the Inspection Panel (2001/2002). On August 7, 2001, the Inspection Panel registered for inspection IPN Request RQ01/3 concerning the SDR 86.9 million (US$125 million) Third Power Project (Power 111) financed by IDA, the SDR 24 million (US$33 million) Supplemental Credit for Power 111, the SDR 48 million (US$62 million) Fourth Power Project (Power IV), and the proposed Bujagali Hydropower Project for which IDA was providing a US$115 million PRG. The Request was submitted by NAPE, the same group that has submitted the current Request, as well as another group, Uganda Save Bujagali Crusade, and other local institutions and individuals.
20. At that time, the Requesters stated that the failures and omissions of IDA in the design, appraisal, and implementation of the above-referenced projects materially affected the rights and interests of the Requesters and were likely to jeopardize their future social, cultural, and environmental security. More specifically, the Requesters stated that the Owen Falls Dam Exten~ion’~and the construction of the proposed Bujagali HPP had resulted, or could have resulted, in social, economic and environmental harm to the local population. The Requesters also stated that they had been harmed or were likely to be harmed as a result of failure to undertake an Environmental Assessment (EA) of the Owen Falls Extension; the lack of a cumulative environmental assessment related to the dams already built, under construction and in the final stages of design; inadequate involuntary resettlement (including compensation arrangements); inadequate consultation, participation and disclosure of information; and insufficient economic and technical analysis, including lack of alternative economic analysis, especially in the case ofthe Owen Falls Extension.
2 1. The Inspection Panel recommended to the Board in October 200 1 that it investigate the Request and the Board authorized the investigation. The Panel’s findings were sent to the Board on May 23, 2002. Key findings focused on the Bujagali Project and concerned: disclosure of information about the Project; preparation of a Sectoral Environmental Assessment; an assessment of the cumulative impacts of constructing multiple dams on the Nile River in Uganda; use and adequacy of an environmental offset (at Kalagala Falls);
l2A portion of these funds were used to repay Government’s Bridge Loan. l3The Owen Falls Dam, financed by the United Kingdom and constructed in the 1950s, is now called Nalubaale, and the Owen Falls Extension is now called Kiira. IDA financed emergency repairs to the Nalubaale dam in the early 1980s and the construction of Kiira in 1991. The 2001 Power IV Project provided financing for Units 14 and 15 at the Kiira powerhouse.
6 Management Report and Recommendation economic evaluation (including demand forecast and institutional, tariff and affordability risks); examination of power generation alternatives; issues surrounding the PPA (e.g., transmission, strategic risks, and affordability); social compliance (e.g., use of socio-economic surveys, community development action plans, compensation); and management of cultural property.
22. In its June 1, 2002 document entitled “Management Report and Recommendation in Response to the Inspection Panel Investigation report (Uganda - Third Power Project, Fourth Power Project and Buj agali Hydropower Project),” Management recommended a ten-point action plan, which was endorsed by the Board of Executive Directors on June 17, 2002. Table 1 below includes the ten points noted in Management’s Action Plan; this list explains how the various issues raised by the Inspection Panel have been addressed in the context of the current Buj agali Project .
23. One of the key programs in the 2002 Management Action Plan was to “continue supervision to ensure that required Resettlement Action Plan (RAP) actions are met.” This continuity in RAP follow up was especially critical between the time AES Corporation, a United States power company, left the first Bujagali project in 2003 and BEL commenced preparation of the second Bujagali Project, starting in 2006. Based on the Bank’s advice, the UETCL retained the Bujagali Implementation Unit (BIU), a group from the previous AES project, located in Jinja near the Project site, which effectively maintained close liaison with the project affected persons (PAPS) and implemented “quick fix and quick impact” programs. In 2006, BEL hired some of the BlU staff to update and expand the livelihood support and CDAP.
Table 1. First BI igali Project Inspection Panel Management Action Plan -- Update Inspection Panel Status Findings POWER IV PROJECT 1 .Disclosure of Full and comprehensive discussions of the Power Ill and Power IV Projects Information: and their relationship to the reconfigured Bujagali HPP have been undertaken Environment: (Power Ill in connection with the design of the new Project. The Government has been and IV Projects) actively involved with the EAC in discussions surrounding Lake Victoria, as well as current and future hydropower generation prospects. Moreover, stakeholder consultations concerning the Private Power Generation (Bujagali) Project have encompassed such topics as hydrology, reduced hydropower capacity from the existing Ugandan hydropower plants, the leasing of emergency thermal power generation, as well as other generation expansion projects, including geothermal, bagasse based cogeneration, and other hydro and thermal options. BUJAGALI PROJECT 2. Sectoral EA In order to address the Panel’s concerns, Management agreed to undertake an inclusive, participatory and riparian-owned Strategic/Sectoral Social and Environmental Assessment (SSEA) under the strategic planning for the Nile Equatorial Lakes Subsidiary Action Program within the Nile Basin Initiative (NBI). The SSEA evaluates power generation options and associated transmission interconnectionsto meet the following multiple objectives: trans- boundary, economic and political cooperation: sub-regional integration: poverty reduction; dispute resolution: environmental sustainability: energy substitutions to reduce depletion of forestry resources; and sharing of mutual benefits in the context of multi-ouroose oroiects. The outcome of the orocess
14 The first point ofManagement’s Action Planrefers to disclosure issues related to the Power 111 and IV Projects.
7 Uganda - Private Power Generation (Bujagall)
Inspection Panel Status
features a power strategy that describes the power options, including their economic and engineering feasibility as well as environmental and social impacts, to facilitate informed and transparent decision-making in the selection of power investments by the Nile Basin riparian countries. The work commenced in October 2003 and the final SSEA report was disclosed in the Infoshop on February 23, 2007. The World Bank’s Bujagali website includes a link to the NBI website where the report can be found. The NBI has made considerable progress in bringing the Nile riparian countries together to identify potential power investments as well as investments in water resources management, agriculture, fisheries, and water hyacinth control. This initiative recognizes the need for early and upstream consideration of environmental and social impacts and public involvement in a program of collaborative action to promote cooperative management of the Nile River Basin. This includes the participatory SSEA discussed above. The SSEA analyzes and ranks potential future power options, based upon multiple criteria, including: assessment of direct, indirecffinduced and cumulative impacts of multiple activities; additional costs and benefits through multi- purpose use of storage reservoirs; risk of rainfall variability; and sharing of benefits at the local and regional level. Previous studies undertaken in order to make the decision in December 2001 to proceed with the Bujagali project served as part of the information base for the SSEA. Cumulative impacts of the currently proposed Bujagali Project are also addressed as part of the Project‘s Social and Environmental Assessment (SEA), disclosed in the InfoShop and in-country in December 2006. The GoU has signed an Indemnity Agreement (IA) for the current Bujagali Project. The GoU continues to honor its agreement to set aside the Kalagala Falls site exclusively to protect its natural habitat and environmental and spiritual values and to develop tourism, and not develop the site for power generation. For more information, see Item 8 of Annex 1. 5. Load Forecast Three load forecasts were prepared for the current Project, taking into account Scenarios actual data over the past several years and the comments made by the first Bujagali Inspection Panel with regard to ensuring an adequate range between the high and low load forecasts (see the Economic Study). By 201 1, the base case generation requirement for the domestic market would be 2,208 GWh, with a spread around the base case of about 14 percent above (high case) and 18 percent below (low case). By 2015, the base case demand would be 2,959 GWh, with a spread around the base case of about 24 percent above (high case) and 30 percent below (low case). 6. Institutional, Tariff These risks have been reassessed for the current Project.” In particular, it and Affordability was estimated that despite higher tariff levels, electricity expenditures will be Risks 5-6 percent of total household expenditures in 201 1, which is within the affordable range. The concessioning of Uganda’s distribution facilities to a private operator, and a strong track record of the ERA are helping to mitigate what had hitherto been perceived as public sector institutional, efficiency and performance risks (see the Economic Studv). 7. Examination of Power The Economic Study reviews all power generation options, including Generation alternative hydropower, oil-based thermal power, small-scale renewable Alternatives energy, and geothermal potential. Since other sources of funding for geothermal exploration and drilling have not been forthcoming, at the request of the GoU, IDA included additional studies and shallow drilling under the ongoing Power IV Project. These studies assessed geothermal prospects at several sites in Western Uganda. A key conclusion of the Economic Study is that, based on available analytical data, geothermal potential in Uganda for commercial development is about 40 MW, far less than the previously estimated potential of 450 MW (see the Economic Study). 8. Social Compliance Management proposed in 2002 the following activities: (i) supervision of
15 The Economic Study was prepared by Power Planning Associates, Ltd, United Kingdom.
8 Management Report and Recommendation
Inspection Panel Findings Status (RAP-Socio- focused surveys during the construction phase; (ii) redesign of CDAP based economic Survey) on survey results; (iii) after financial close, resolution of crop payment issues (with PAPS, Witness NGO, local land commission); and (iv) monitoring of compensation problems. A new socio-economic survey was launched in 2007 (at start of construction phase); CDAP redesign is ongoing (based on updated survey results in 2006 and 2008, and a needs assessment): less than one percent of compensation contracts are pending; and 89 percent of land titles were resolved in 2007-2008. The Assessment of Past Resettlement Activities and Action Plan (APRAP)’‘ is being implemented by BEL, including some follow up consultations with spiritual leaders. BEL sponsored an inter- denominational service and produced a Code of Practice for handling cultural and spiritual aspects during construction. Eleven IDA supervision missions (2003-2008) have been closely monitoring APRAP implementation. 9. Social Compliance Management committed in 2002 to “continue supervision to ensure that (CDAP) required RAP actions are met and that the best practice objectives of the CDAP are achieved.” Through field missions in 2003-2005, Management monitored the impacts of the BIU team’s consultations and field visits, in particular, the livelihood restoration projects in the nine project affected communities, including the Naminya Resettlement Site. In addition to implementation of the livelihood restoration components in the APRAP, BEL increased its budget for the CDAP by 18 percent, to US$3.81 million for a five- year period following the start of construction. These actions cover household electricity connections; health care facilities; new construction and repairs of schools; skills training and workshops to expand employment opportunities; piped in water supply, water boreholes, upgrading of water supply and sanitation; fisheries; education; small-scale business and tourism; training on money management and financial services; and special programs for vulnerable groups. 10. Compensation for In 2002, the SEA for the first Bujagali project discussed in detail the potential Tourism impacts on tourism and recreational activities, as well as mitigation measures. As part of the separate Tourism Impact Study that was undertaken by BEL in 2006, key affected tourism related businesses were consulted through individual interviews. Subsequent discussions were held from 2006 to 2008 with tourism operators and employees and BEL regarding mitigationkompensation measures. Memoranda of Understanding are being negotiated between BEL and tourism operators to collaborate in restoring tourism activities that may have been affected by the Project. These tourism activities are being done in coordination with the Jinja Tourism Development Association. Cultural groups, including traditional healers, have agreed to participate in the creation of cultural centers and cultural exhibits. White water rafting companies will invest in the area, including small tourism operators (e.g., three wheel boda boda” and kayak renters, food vendors, small hotels, arts and crafts makers, and shops).
24. The World Bank and IFC’s Board of Directors approved the Bujagali project developed by AES on December 18,2001. AES’s weakened financial position as the result of a downturn in the United States market eventually led to AES’ withdrawal from the previous project and to a termination by the GoU in September 2003. The GoU then initiated a transparent bidding process in adherence with the Government’s procurement guidelines, to seek a new project sponsor to develop the Bujagali Project in September 2003, with private sector participation and World Bank Group support. The feasibility of implementing the Bujagali HPP based on
l6Because there was no project sponsor after AES left in 2003 and until BEL took over in 2006, some aspects of the RCDAP that AES had initiated in 2000 had not yet been completed when the second Bujagali project was approved by the Board in 2007. In 2006, BEL undertook the APRAP as a continuation of the RCDAP process. 17 Bicycle taxi.
9 Uganda - Private Power Generation (Bujagali) the new schedule was revalidated through an update of the least-cost investment plan for the sector. There have been extensive national and regional analyses of the Project’s environmental, social, and economic impact, and a detailed examination of generation alternatives, accompanied by numerous public consultations and disclosure of Project documents.
25. The preparation of the second Bujagali Project built on both the previous project as well as the recommendations of the Management Action Plan in response to the first Inspection Panel investigation. Where appropriate, Management has proceeded in the same direction on areas found compliant in the first investigation. For example, under the current Project, the treatment of Bujagali Falls’ cultural and spiritual value to local people builds on the compliant work previously undertaken. While the second Buj agali Project incorporates critical lessons learned from the first Project, the second Request for Inspection reiterates not only ongoing concerns about the dam’s economic, environmental, and social impact, but also a broader debate about development in Uganda. Bujagali is the largest private investment in Uganda and among the largest in the power sector in Sub-Saharan Africa, with potential long-term benefits for future private sector investment as well as economic development in the country. It may also serve to establish a standard that can be replicated by other countries and investors in the region.
111. FINDINGS OF THE PANEL
26. The Panel made the following findings regarding Bank compliance with its policies and procedures in relation to the issues raised by the Requesters. Responses to the findings are contained in Annex 1 in the form of a matrix that lists each of the Panel’s findings and observations along with Management’s comments and clarifications. Section IV provides additional information and context for the issues raised by the Panel.
OPlBP 4.01 -Environmental Assessment &I Bank Policy on Disclosure - The Project has appropriately been classified as category “A, the category for projects with the most serious level of impacts. This complies with OP 4.01. - The Panel acknowledges that the necessary studies have been conducted and disclosed, albeit separately, considered by Management and referred to specifically in the PAD. - Management acted consistently with OP 4.01 and OP 4.04 as these relate to assessment of likely consequences of the Project on the fish stocks in the Upper Victoria Nile and Lake IN Victoria. COMPLIANCE - The Panel’s hydrology expert has concluded that hydrologic data sets used in the Project design constitute a reliable data series and that its variability over time is a natural condition, which can be observed in other hydrologic series elsewhere in the world, when the hydrologic series is long enough. The Panel finds that this provides an appropriate baseline for analysis of environmental and economic issues, in compliance with OP 4.01. - The possible effect of climate change on hydropower projects on the Victoria Nile has been seriously considered in the SSEA. This is in compliance with OP 4.01. - The fact that the Environmental Management Plan is not an integral part of the SEA that has been disclosed is a deficiency. This is not in compliance with OP 4.01. - As the Project is contentious and involves environmental concerns, appointment of the environmental panel of international experts is warranted and the lack of such a panel is not NOTIN in compliance with OP 4.01. COMPLIANCE - Failure to disclose the SSEA or its relevant parts as an integral part of the Project’s documentation is not consistent with OP 4.01. - Analyses [in the SSEA] are not sufficiently backed by evidence and include opinions rather than careful fact-based examinations of additive effects of impacts from present and
10 Management Report and Recommendation
foreseeable projects. The Panel finds that neither the SSEA nor the SEA has addressed cumulative effects of existing and planned projects in a meaningful way. This is not in compliance with OP 4.01. - The failure to consider mitigation measures, which would reduce social and environmental impacts of the transmission line, does not comply with OP 4.01 and OP 4.12. - The SEA analysis did not comply with OP 4.01 in defining the area of influence of the Project because Project impacts on the changing levels of Lake Victoria were not assessed. The Panel notes the importance of making the structure for governance of water releases from Lake Victoria clear and transparent to all stakeholders. - Management did not ensure that cultural and spiritual matters were properly considered when comparing the Bujagali and Karuma alternatives, as required by OP 4.01. - The Panel is concerned that analysis unduly narrowed consideration of alternatives on the basis of a-priori judgments rather than exploring all technically feasible options-including those that would not involve flooding Bujagali Falls and thus have lower social and environmental costs-and laying them out in a systematic way along with their economic, social and environmental benefits and costs, so that judgments on optimal alternatives could be made with full understanding of trade-offs involved. This is not consistent with OP 4.01’s provisions that feasible alternatives should be explored systematically to meet the basic Project objectives, and may have led to inadequate consideration of alternatives that met Project objectives while avoiding social and environmental costs associated with flooding
Buiaaali__,-u- Falls.- - OPlBP 4.04 - Critical Natural Habitats Management acted consistently with OP 4.01 and OP 4.04 as these relate to assessment of IN - likely consequences of the Project on the fish stocks in the Upper Victoria Nile and Lake COMPLIANCE Victoria. - There is evidence that an offset has been created, to meet OP 4.04, but there is no evidence of the offset site being subject to appropriate conservation and mitigation measures in conformity with sound social and environmental standards. The Project is thus not in compliance with OP 4.04. - The Kalagala offset may not achieve the purpose for which it was set aside, and this is not consistent with the provisions of OP 4.04. - The Panel notes with concern that the proposed Environmental Mitigation and Monitoring Plan is silent on the need for monitoring of enhancement and offset plantings. Monitoring of replacement plantings has not been included in the terms of reference of the witness NGO appointed to monitor Project compliance with IDA conditionalities. This is not consistent with NOTIN OP 4.04. COMPLIANCE - The Bujagali Falls area may be regarded as a critical natural habitat for purposes of OP 4.04 The Project record does not provide sufficient discussion as to why the area was not considered a critical natural habitat. Nor do Project documents explain the Bank’s “opinion” that the Project would not involve significant conversion or degradation of a critical natural habitat. Considering the known spiritual importance of the Project area, without such an explanation, one could also arrive at an opposite conclusion, Le., that the inundation may be regarded as resulting in the significant conversion of a critical natural habitat which would be in violation of OP 4.04. Omitting the reasons behind an opinion of not declaring the Falls a critical natural habitat is not consistent with the objectives of OP/BP 4.04. There is an overriding need for the Bank to address these issues in a coherent and well-founded manner to ensure compliance with Bank policies.
COMPLIANCE
- Management failed adequately to consider or implement alternatives to avoid Project-related impacts on Busoga spirituality and culture.. .The Project also failed adequately to consult witt Busoga spiritual clan leaders associated with one or more high status Spirits about significant cultural patrimony of Bujagali Falls. Misidentifying Bujagali Falls as a local cultural NOTIN resource, misaligning its consultation strategy, and failing to prepare a new Cultural Property COMPLIANCE Management Plan compounded errors and muddled mitigation. Management unnecessarily and inappropriately took sides in a spiritual controversy of a religion in which millions of Ugandans believe. The Panel finds this action by Management to be non-compliant with OP 4.11. - Management assumed that what it called the “Bujagali spirits” were restricted to the Project
11 Uganda - Private Power Generation (Bujagali)
construction and flooding area, in contravention to the BP 4.1 1 requirement that it work with and assist the Borrower to identify the spatial and temporal boundaries of the cultural resources affected by the Project. This did not comply with avoidance and mitigation requirements of OP/BP 4.1 1. - The culturally and spiritually affected people were not adequately identified as required by Bank policy. - Management failed to prepare a Cultural Properties Management Plan, assuming that the work of the previous Sponsor was sufficient to meet OP/BP 4.1 1 guidelines. Management is in non-compliance with OP 4.1 1, by misjudging the size, location, and scale as well as the nature and magnitude of the cultural and spiritual significance of Bujagali Falls. - Management did not consult with key stakeholders throughout Project cycle and is, therefore, in non-compliance with OP 4.1 1. Mitigation measures were not adequate because the scope of the impact and the consultation process were incomplete.
- The APRAP conclusion related to the necessity of issuing land titles to people resettled COMPLIANCE under the prior project is consistent with OP 4.12. - The Panel finds that the failure to consider mitigation measures, which would reduce social and environmental impacts of the transmission line, does not comply with OP 4.01 and OP 4.12. - The Panel found no formal monitoring or evaluation report supporting the assertion that involuntary resettlement was “largely completed,” the reason stated for forgoing full RAP preparation, as required by OP 4.12. The hydropower APRAP failed to assess and update the previous 2001 RAP and provide additional new information as required to complete the RAP requirements to current standards. This does not comply with OP/BP 4.12. - The Panel notes that the survey conducted by BEL cannot be considered a census of economic or social conditions as defined in OP 4.12. In this sense, Management‘s claim that the Project took the first Panel’s report findings into account in preparation of the current Project is not accurate because significant weaknesses in the process of gathering baseline data information were similarly identified in the 2002 Panel Investigation Report. The approach to consultations with people who had moved and had been compensated is not NOTIN consistent with the Involuntary Resettlement policy. COMPLIANCE - Overall, the Panel finds the Project in non-compliance with the mandate of the Bank policy on Involuntary Resettlement to improve or at least to restore, in real terms, the livelihoods and standards of living of people displaced by the Project. - Management did not assess and include in the APRAP a methodology for restitution of unintended socio-economic costs incurred by displaced persons resulting from Project stoppage/delay. This is not consistent with OP 4.12. - The Project failed to provide adequately for loss of livelihood associated with loss of fishing and agriculture, in non compliance with OP 4.12. - The Panel notes that the absence of focus on livelihood risks to the vulnerable is evident in that none of the proposed assistance measures addresses vulnerable tenanWsharecroppers or children. Additionally, proposed assistance measures do not address the question of sustainability beyond limited Project support. The Project [is] out of compliance with the vulnerable peoples provisions of OP 4.12. - With limited funding, broad criteria for eligibility, and lack of specificity, the CDAP programs do not assure compliance with OP 4.12.
- The Panel finds Management has complied with the procedures set forth in OP 4.37. COMPLIANCE OPlBP 10.04 - Economic Analysis of investment Operations - Management does not appear to have ensured that the Economic Study drew on the much more thorough analysis in the SSEA. The Panel finds that this is not compliant with OP 10.04. - The Panel is aware of the limitation of known technology in evaluating climate change scenarios and that the analysis of climate change is an evolving science, where gaps remain NOTIN Indeed, this situation makes all the more troubling the (Project Appraisal Document) PAD’S COMPLIANCE categorical assertion, without any reference to risk and uncertainty, that there will be no adverse effect on water release due to climate change during Project life. This failure to express climate change as a risk factor is not consistent with OP 10.04. - The Panel notes that information in the Economic Study and PAD relating to knowledge about and potential of smaller scale and/or distributed generation alternatives did not clearly
12 Management Report and Recommendation
- In order to comply with the requirements of OP 10.04, the PAD should have qualified its statement about the projected drop in tariffs to take into account the impact of engineering, procurement, and construction (EPC) and transmission cost increases. - The limited presentation and discussion of the [external] costs in the Economic Study did not succeed in demonstrating full compliance with OP 10.04. In the Panel’s view, to meet all requirements of OP 10.04, the Economic Study should have examined, in more detail, the
-The reauirement to su~~ortneeded caDacitv buildina, which is important in the implementation of social and environmental aspects,‘has not been comp6ed with in this Project.
IV. SPECIAL ISSUES
INTRODUCTION AND SUMMARY
27. The Special Issues section addresses several key themes in the Panel’s investigation report. This Introduction provides a summary of the Special Issues, which are fbrther developed in the following pages. In addition to its findings of compliance, the Panel has noted several issues among many others raised by the Requesters. First, on the issue of over- abstraction ofwater from Lake Victoria, Management notes that the water flows arriving at the Bujagali HPP will continue to be completely controlled by discharges from the mouth of the Nile River at the NalubaaleKiira hydropower dam complex, eight kilometers upstream from the Bujagali dam site.18 Management acknowledges that pressure to override the Agreed Curve1gcould still occur if Uganda experiences acute shortages of electricity supply. However, had the first Bujagali Project been commissioned in 2005, over-abstraction and the decline in lake levels would have ceased, leaving the lake at its then current level of about 1,135.50 meters AMSL.20While the additionally generated hydropower would primarily have replaced thermal power and reduced load shedding, it would also have allowed a reduction of releases, with a commensurate accelerated recovery of lake levels. One of the objectives of the run-of- river Bujagali HPP is to increase electricity production by re-using upstream water releases, thus optimizing water flows through the cascade of dams.
28. Management is working to assist Uganda’s efforts to return to the Agreed Curve by supporting both hydropower and other power generation investments. Also, through the proposed Lake Victoria Environmental Management Project I1 (LVEMP II),the Bank is supporting regional efforts by the EAC to address the myriad issues facing Lake Victoria, including water use for small-scale irrigation, power generation, domestic and industrial water supply, point and non-point pollution control, fisheries management, watershed management, etc. With respect to climate change and its impact on Lake Victoria, Management notes that suitable assessments were carried out in both the SEA and the SSEA, although cross-
l8See Map 1. ’’ The rating curve that correlates the flow of the Nile at the source with Lake Victoria to the water level in the Lake. See footnote 11 above and paragraph 32 below. 2o Above Mean Sea Level.
13 Uganda - Private Power Generation (Bujagali) referencing between the two assessments could have been stronger. Further, the risk of low water flow to the power station is covered in the Economic Study and specifically identified in the Project Appraisal Document (PAD) as a Project risk.21The agreements concerning the Kalagala Environmental Offset are detailed in the IA that the GoU has signed with the Bank. The cross default provisions allow, in the extreme, for suspension of the entire portfolio and provide a strong recourse should this be needed.22
29. Second, the Project addressed cultural and spiritual issues in light of OP 4.1 1, which addresses physical cultural resources, as well as OP 4.04, which addresses critical natural habitats. The first Bujagali Inspection Panel Report in 2002 found Management compliant in its treatment of cultural and spiritual values associated with Bujagali Falls, and found Management’s response at that time to have been substantial in ensuring that these values are built into the first Bujagali project. Management notes that culturally acceptable appeasement ceremonies took place, including more than 60 consultations with traditional spiritual leaders, local government officials, affected villagers, and experts from academic and research institutions, during the period 1998 to 2002. Cultural values were also included as one of the criteria for site selection of Bujagali (SSEA, Appendix J, 1998). At present, BEL continues to follow through, as required, with implementation of the Cultural Property Management Plan (CPMP), which was included in the 2002 Resettlement and Community Development Action Plan (RCDAP). In addition, the EPC contractor developed a separate CPMP in 2007, prior to the start of construction, which included a Code of Practice for “chance finds” procedures. The Ministry of Energy and Minerals Development (MEMD), in coordination with Local Councils (LC1 and LC3) and BEL, is updating the 2001 CPMP, focusing on building capacity for addressing cultural and spiritual aspects, and ensuring that feedback from spiritual leaders continues to be taken into account in the design of appropriate mitigation measures, as needed (e.g., appeasement and reconciliation ceremonies).
30. Third, resettlement, compensation, and livelihood restoration at the generation site were essentially completed during the first Bujagali project, and the current Project builds on the work started by AES. At the Bank’s urging, the GoU retained the BIU, which provided continuity during the gap period. In fact, less than 5 percent of PAPS had issues regarding compensation and land titling, and these are now being resolved by GoU district officials. Work on enhancing the socio-economic baseline (established in the 2006 APRAP) began in January 2007 and is being updated.
31. Fourth, a comprehensive environmental and social analysis was undertaken for the Project. This includes a robust cumulative impacts assessment that takes account of other potential Nile-based initiatives up to Lake Albert. A complementary assessment was undertaken in the SSEA, from a regional viewpoint (including several countries in the Nile Basin). In both cases, Bujagali’s run-of-river design was found to have a low impact. Similarly,
21 See PAD, page 24. 22 Specifically, in Section 4.01, the Indemnity Agreement provides that in the event of default, “. . .the Association shall be entitled, in addition to any other rights and remedies it may have, to suspend or cancel in whole or in part Uganda’s right to make withdrawals under any development credit agreement or financing agreement between the Association and Uganda or under any loan or guarantee between the Bank and Uganda, or to declare the outstanding principal and interest of any such credit or loan due and payable immediately.”
14 Management Report and Recommendation from both a project and a cumulative perspective, the selected transmission line routing was judged to have a low impact on terrestrial ecology.
32. Lastly, the economic and financial analyses were thorough and complete. The use of a “Constant Release” approach for analytical assessment of water usage was shown by the consultant to have no appreciable impact on the analysis results. Hence, the incorporation of a more complex Agreed Curve release module would not have materially changed the conclusions ofthe economic model. Treatment ofrealistic baseload generation alternatives was appropriate, as was the decision not to consider the then-unproven oil discovery. The actual EPC cost variations, while outside the range anticipated in the Economic Study, were well within the Project’s “least-cost” range. In spite of several concerns raised by the Panel, the Project’s financial analysis was not found out of compliance, and Management is convinced that the FAD’s presentation ofthe financial analysis was conducted in a thorough, professional manner by a highly qualified international consultant and accurately conveys the methodology and results of the analysis. Management also notes some misinterpretations in the Panel’s analysis and report which appear to have led to its conclusions about the financial analysis. Similarly, with regard to the PPA, the Panel’s assertion of a high risk allocation to the GoU ignores the counter factual case of public sector implementation, in which all risk would have been borne by GoU. The Panel’s comparison with the first Bujagali PPA also does not reflect the fact that the current Bujagali Project was competitively bid, compared to the single-source award of the first Bujagali project. Hence, the current Project is reflective of current market conditions, which have changed greatly in the years between the two projects.
LAKEVICTORIA, CLIMATE CHANGE, AND THE KALAGALA OFFSET
33. Regulating Water Flows from Lake Victoria. Among the primary concerns of the Requesters is the impact of the Bujagali dam on water outflows from Lake Victoria. Water flow arriving at the Bujagali Hydropower Facility has been and will continue to be completely controlled by discharges from the mouth of the Nile River at the NalubaaleKiira hydropower dam complex, upstream of the Bujagali dam site. Hence, the operators of the Bujagali facility will have no control on releases from Lake Victoria. Since 1954 (when the Nalubaale dam was completed), water flow from Lake Victoria into the Victoria Nile has been regulated in order to mimic the natural outflows from the Lake using what has become known as the Agreed Curve, a rating curve that correlates the flow of the Nile at the outlet of Lake Victoria to the water level in the Lake.
34. The pattern of water flows of the Victoria Nile is of major importance to the planning and operation of the Bujagali HPP, and one hundred and six years of existing hydrology data for Lake Victoria were reviewed. Due to unusually heavy rains, lake levels rose between 1961 and 1964 outside the range of the water levels contemplated for the Agreed Curve. In the period 1900-1960, the Net Basin S~ppl$~(NBS) of water to the Lake Victoria Basin fluctuated between annual average values of -500 and 2000 cubic meters per second (m3/s). However, for three consecutive years (1961 -1 963 inclusive), heavy rainfall in the basin caused the NBS to exceed 2,200 m3/s, resulting in an increase in both the water level in Lake Victoria and the annual average outflow. Since that period, the hydrology of the Lake Victoria Basin
23 Net Basin Supply equals the net inflows (from rivers and lake rainfall) minus outflows (from lake evaporation, power production, and other uses).
15 Uganda - Private Power Generation (Bujagali) and the natural outflow at the Nalubaale and Kiira dams have been studied extensively (e.g., Acres, 1991; Sutcliffe and Parks, 1999; Tate et al, 2004; WREM International, 2005).
35. Historic outflows from Lake Victoria reflect the historic patterns in NBS. The average outflow from Lake Victoria during the period 1900-1960 was approximately 660 m3/s, while the average outflow in the period 1961-1990 was approximately 1,200 m3/s. For most of the 1990s the outflow leveled at approximately 1,000 m3/s, but in 1997-1998, it rose significantly, due to severe rains from October to December 1997 (El Niiio). It should be noted that Lake Victoria’s levels have been as low as 1,133.15 m (1923) and as high as 1,136.25 m (1964). At present, the Lake’s level hovers around 1,134 m.
36. Electricity Shortages and Over-Abstraction from Lake Victoria. Up until 2004, Uganda’s power generation was 99 percent from one source - the dam complex at Nalubaale and Kiira. Increased economic activity and electrification has caused domestic peak power demand to grow from about 250MW in 2001 to about 390MW in 2008.24 Due to a number of factors, including inadequate investment in new capacity, the magnitude of load shedding began to affect economic development in 2004. At the same time, a regional drought (2004- 2006) began to affect Lake Victoria’s water levels. In order to minimize load shedding and support economic growth, over-abstraction of water for power generation was allowed in the period 2003-2005. By February 2006, GoU acted to reduce power output from Nalubaale/Kiira from its 265MW peak capacity in 2004 to 130MW in 2006 and 150 MW in 2007, in an effort to return to the Agreed Curve. The typical daily load curve shows that peak demand is currently about 360 to 390MW, compared to peak generating capacity, which until recently stood at about 200MW. Overall, the level of load shedding in recent years has been about 175 to 190MW during peak hours, 70 to 90MW during shoulder hours, and 60 to 120MW during off-peak hours. Significant power rationing has been a daily occurrence since 2005, affecting the daily lives of all consumers. Very recent commissioning of additional thermal capacity has reduced load shedding to about 50MW at peak.
37. To address the short-term load shedding, the GoU implemented a costly emergency thermal generation program in 2005 using high-speed reciprocating engines fuelled with diesel oil to generate up to 150MW of power, with plans to operate until 2010 when more economic, renewable and clean power becomes available from the Bujagali HPP. In parallel, in consultation with the EAC and Lake Victoria riparians, the GoU agreed to gradually return to the Agreed Curve. As of July 2008, abstraction was still above the Agreed Curve, but much closer than July 2007. These emergency actions and stepped up measures to bring permanent thermal, co-generation and mini-hydropower projects on line, along with the Buj agali Project, are expected to help meet the steady increase in electricity demand in step with the strengthening and expansion ofthe economy.
38. As noted above, in recent years Lake Victoria has experienced dramatic fluctuations in its water level due to a combination offactors, including regional drought, abstraction ofwater, as well as releases of water from Lake Victoria via the NalubaaleKiira hydropower complex. The increase in electricity demand, the lack of sufficient generation capacity and the deleterious impact of the significant power shortages sustained by the economy, led to GoU pressure to release water from Lake Victoria in excess of the Agreed Curve. The WREM
24 Actual demand can be difficult to assess in a load shedding context.
16 Management Report and Recommendation
International studg’ indicated that in 2004-2006, releases ofwater from Nalubaale and Kiira in excess of the Agreed Curve accounted for approximately half of the reduction in water levels in Lake Victoria, the drought accounting for the other half. Independent modeling assessed the impact of over-abstraction on the decline of lake levels at 62 cm on January 1, 2007. In total, the Nalubaaleffiira facility includes 15 separate hydropower turbines, with a combined capacity of 380 MW.26These turbines are being operated in parallel, although not all at the same time. The operating regime of the NalubaaleKiira hydropower dam complex was designed to be consistent with the Agreed Curve.
39. Bujagali’s Relationship to Lake Victoria Water Levels.27 Water levels in Lake Victoria will continue to be determined by rainfall, evaporation, inflow from upstream rivers, and the releases at the NalubaaleKiira dam complex. Since the Bujagali HPP is downstream, it will reuse the water coming from the upstream complex. Specifically, the water passing through Nalubaale and Kiira and subsequently through Buj agali will produce more than twice the amount of energy that Nalubaale and Kiira would produce alone, and this is expected to lead to a more efficient use of water for power generation in line with the Agreed Curve. To quote from the WREM (2004) report: “If Bujagali were on line, the release required to meet the power targets would be less than that according to the Agreed Curve, reducing annual lake drawdown to about 0.17 meters without load shedding; Thus, during droughts, Bujagali would enhance lake management as well as power production.” A 2006 study by dam expert Peter Mason goes further, stating that: “Unless another major rainfall event occurs, such as the one which occurred in the 1960s, it is inevitable that the power availability of the Jinja power stations (Nalubaale and Kiira) will revert back to long-term output of around 150MW. The only solution would appear to be another station further downstream, which can make use of the same water again, such as that currently planned at Bujagali.”
40. Water use for power generation is but one of several complex and intertwined aspects of Lake Victoria preservation, which includes water usage, pollution control, fisheries management, watershed management, transportation, tourism, etc. The GoU’s power development strategy recognizes that timely, least-cost power generation investments help Uganda to meet electricity demand and diversify its sources of supply, thereby avoiding the emergency situation that led to over-abstraction for power generation-the first step of which is to finalize the Bujagali Project. Other investments such as permanent thermal plants, continued development of mini-hydro facilities, cogeneration, and additional downstream hydropower stations on the Nile are underway to support this objective, and will provide an economic and financial incentive for the GoU to operate the power system in line with economic dispatch principles and the Agreed Curve. The GoU recognizes that while the Bujagali HPP will address most of the power shortages by the time it is commissioned, the Nalubaale/Kiira dam complex needs to be run in accordance with the agreed operating regime, while after commissioning at least one 50 MW thermal unit will also remain in operation.
4 1. Addressing Lake Victoria Resource Management. Lake Victoria is an important natural resource and source of economic activity for many inhabitants of its riparian countries
25 Water Resources and Energy Management (WREM) International is the engineering firm that prepared the Lake Victoria Water Management Study. 26 Nalubaale has 10 units totaling 180MW; Kiira has 5 units totaling 200 MW. 27 For a discussion of Climate Change, please refer to paragraph 46 below.
17 Uganda - Private Power Generation (Bujagali)
(Burundi, Democratic Republic of Congo, Egypt, Kenya, Rwanda, Sudan, Tanzania, Uganda). The LVEMP I1 Project is supporting the Lake Victoria riparians to: (i)implement their joint commitment to harmonize policies, legislation, and standards for shared natural resources and environmental management in the Lake Victoria Basin; (ii)further strengthen the capacity of regional, national, local, and community-level institutions responsible for lake basin management, developed under LVEMP I; (iii)update information on ecosystem health, especially on the water and fishery resources, which underpins resource management decisions; (iv) refine analytical tools for ecosystem monitoring developed under LVEMP I;(v) implement infrastructure projects on pollution control and prevention, and safety of lake navigation, based on the existing feasibility studies; (vi) scale up successful community-driven pilot interventions to control point and non-point sources of pollution; and (vii) mobilize new communities and build their capacity to prepare Community-Driven Development natural resources management and income generating subprojects. Under the terms of the Bank- supported Power Sector Development Operation, Uganda has committed to provide monthly reports to the EAC on abstraction from the lake.28 This is consistent with Uganda’s obligations under the Protocol for Sustainable Development of Lake Victoria Basin,29 ratified by Kenya, Tanzania and Uganda in 2003.
42. Alternatives to Bujagali, including Thermal Power. The alternatives to developing Bujagali are to do nothing, or to develop an alternative source or sources ofpower with similar characteristics (e.g., baseload capability, available within a similar time frame). The “do nothing” alternative would mean that the up to 250MW to be provided by Bujagali would be supplied by extending indefinitely the operation of the expensive hgh-speed emergency thermals, and by increased load shedding. This would have a significant long-term effect on the economy and the people of Uganda, and it would continue to place pressure on the Government to choose between load shedding and over-abstraction of water from Lake Victoria for power generation.
43. In the immediate term, the only feasible alternative for large scale hydropower generation in Uganda is thermal power. However, thermal power is not only more costly than hydro due to the price of imported fuel, it also has negative environmental effects including air pollution, noise, potential for spills, and greenhouse gas emissions (COz). Details on the alternative to large scale hydropower generation technologies, including wind, solar, geothermal, and thermal, are analyzed in the SEA report, sections from the summary of which are attached in Annex 2.
44. The technical reports (e.g., SEA, Economic Study, etc.) demonstrate why Bujagali is the preferred next large hydropower project on the Victoria Nile, and why the proposed configuration at the site is the preferred design for the facility. In particular, the Economic Study assessed all realistic options for providing baseload power to Uganda within the Project timeframe. This included hydropower (from large scale to mini-hydro), oil-based thermal, geothermal, and biomass. Some of these smaller scale alternatives are indeed retained in the least-cost expansion plan for power generation in Uganda as identified in the Economic Study. The least-cost expansion plan includes all of these options and clearly shows that Bujagali is the next in-line baseload power station for Uganda.
28 Management is following up with GoU to ensure compliance with this commitment. 29 This protocol was ratified by Kenya, Tanzania and Uganda in 2003, and entered into force in 2004.
18 Management Report and Recommendation
45. It bears noting that Uganda is at a very early stage of electrification, with less than 10 percent of the population connected. Therefore, off-grid options are important for populations unlikely to receive grid power in the near future. With donor and World Bank support, Uganda is pursuing both grid based power (e.g., Bujagali) and off-grid solutions (since 2001, through the Bank-supported Energy for Rural Transformation Program). While off-grid solar PV systems are being used where they are most effective (small, isolated loads) solar PV is not considered a baseload option since it is non-dispatchable and only available during daylight hours. Moreover, to produce the same daily electricity as Bujagali (under low hydrology) would require a solar PV array of about 625MW (roughly 8 square kilometers), making it one the largest PV systems anywhere in the world, costing over US$3 billion, or about 27 percent of GDP3' and more than 240 percent of GoU's annual capital expenditures for 2007/2008, and producing electricity at a levelized cost of about US$0.30/kWh - not a reasonable alternative to Bujagali. With respect to concentrating solar thermal electric options, Management notes that the climatic conditions in Uganda are not suitable for this technology; hence, it was not considered as an alternative.
46. The Impact of Climate Change on Lake Victoria. A detailed review of Lake Victoria hydrology was conducted for the Project. This encompassed an assessment of the risks, including risks posed by climate change, on Lake Victoria water levels and flows in the Victoria Nile. These risks have been thoroughly analyzed. Significantly contrasting values of Net Basin Inflows have been observed between the periods 1900 to 1960 and 1961 to 2000, and the somewhat lower inflow situation observed since 1999. The approach to hydrological risk analysis has been to adopt two separate hydrological flow release scenarios corresponding to a low hydrology scenario and a high hydrology scenario. The high hydrology scenario is based on the period 1961 to 2000 and the low hydrology scenario on the period 1900 to 1960. For the immediate future the likelihood of the low hydrology occurring has been assessed as substantially higher than the high hydrology.
47. The Economic Study concluded that the whole period of record from 1900 should be used to determine the future dependable flow for power generation at hydropower stations on the Victoria Nile. Sensitivity studies indicate that the Project's Economic Internal Rate of Return is robust against all key risk factors, including hydrology.
48. Accounting for Significant Risk Factors. Management is convinced that the Economic Analysis appropriately accounted for significant risk factors to the Project, including those of climate change risks. The Economic Analysis relied on published analyses of climate change impacts on the Nile River hydrology by Tate, Sutcliffe et a1 (Appendix B4 of Economic Study). This approach concluded that no significant reduction in hydrological flow is expected as a result of climate change during the life of the Project and was independently reviewed by hydrologist Professor Juan Valdes ofthe University of Arizona, who also did not find evidence of downside risk of climate change on Nile river hydrology, During this period, the SSEA was also under preparation, and the Project team noted that its conclusion agreed with the Tate, Sutcliffe study. Both indicated that, taking into account the uncertainties associated with any prediction, climate change is likely to increase the availability of water and runoff in the Lake Victoria Basin. Climate change would therefore potentially bring upside benefits rather than downside risks to the economics of the Project. Given all the available evidence, there was no
30 At the official exchange rate.
19 Uganda - Private Power Generation (Bujagali) basis for identifying climate change as a significant risk factor for the Project. Nonetheless, the adequacy ofwater flows on the Nile River was specifically addressed in Section E of the PAD on Critical Risks and Possible Controversial Aspects.
49. Kalagala Offset. World Bank OP 4.04 on Natural Habitats requires an offset in case a project will convert a substantial part of a natural habitat and after studies have indicated that no feasible alternatives exist. For this reason the World Bank Group has agreed with the GoU in the LA, dated July 18, 2007, on the Kalagala Offset (see Annex 3 for the IA).
50. Management acknowledges the Panel’s finding that an offset has been created to meet the requirements of OP 4.04. The LA for the Kalagala Offset also provides for the preparation and implementation of a Sustainable Management Plan (SMP) acceptable to IDA. This plan is currently under preparation by the National Forestry Authority (NFA) with the consulting assistance of the International Union for the Conservation of Nature (IUCN). It is being prepared in a consultative manner to ensure stakeholder concerns are adequately taken into account. In the meantime, under BEL’SSEA, enhancement planting is now ongoing in the Nile River Corridor from NalubaaleKiira dam complex to downstream of the Kalagala Falls, with tens of thousands of seedlings planted to date (up to 400 hectares, of which 79 have been completed, and another 125 hectares to be reforested by the end of 2008). NFA is carrying out enhancement planting, involving communities in joint forest management and establishing demonstration forest plots in order to recover degraded forest areas from the communities in the Mabira Central Forest Reserve. Additional plantings to reforest currently cleared areas of the forest reserves will be covered under the SMP.
51. An important provision of the IA is the Government’s commitment to “set aside the Kalagala Falls Site exclusively to protect its natural habitat and environmental and spiritual values in conformity with sound social and environmental standards acceptable to the Association. Any tourism development at the Kalagala Falls Site will be carried out only in a manner acceptable to the Association and in accordance with the aforementioned standards. Uganda also agrees that it will not develop power generation that could adversely affect the ability to maintain the above-stated protection at the Kalagala Falls Site without the prior agreement of the Association.” In a recent exchange, the President of Uganda reaffirmed the commitment to maintain the Kalagala offset. The importance of Bujagali is so significant for the country that it is foregoing the 450MW capacity that can be obtained from Kalagala. In addition, the GoU agreed to conserve through the SMP and a budget mutually agreed by the Government and the Association both the Kalagala area and other areas nearby (IA Section 3.06(a)). The cross default provisions of the LA, which would in the extreme allow the Bank to suspend its lending program, including the existing portfolio in the case of a default, provide powerful recourse should this be req~ired.~’
CULTURAL AND SPIRITUAL ISSUES
52. In its Investigation Report of the first Bujagali Project, the Panel noted that “the (Project) sponsor has acted responsibly in consulting local people, religious specialists and leaders, and has acted in good faith in attempting to mitigate the cultural consequences of losing the Bujagali Falls” (paragraph 323, Investigation Report). In addressing cultural and
31 See Footnote 19 for additional detail.
20 Management Report and Recommendation spiritual issues for the second Bujagali Project, Management drew on the Panel’s findings and observations, including positive comments about the CPMP and the need for inclusive discussions with all religious leaders. Management believes that Project preparation has addressed cultural and spiritual issues in three ways. First, Management notes the distinction between physical and non-physical values of Buj agali Falls while also recognizing that they are linked to culture and spirits. In this regard, Management supported the Project’s consultative appeasement approach. Second, the Project consistently applied culturally acceptable “closure” practices, including “appeasing the spirits,” based on feedback from professional advice and extensive consultations. More than 60 consultations took place with spiritual leaders who represented wider cultural constituencies, local governments from both banks of the river, and project affected villages. Third, in 2001, the Project prepared a CPMP and BEL has continued to implement its provisions. In addition, prior to construction in 2007, the EPC contractor also prepared a separate CPMP to incorporate such issues as a Code of Practice for “chance finds.”32
53. Physical and Norz-Physical Values of Bujagali Falls. The Panel addresses physical and non-physical values in both OP 4.1 1 and OP 4.04. The definition of critical natural habitats in OP 4.04 refers to “sites identified on supplementary lists prepared by the Bank or an authoritative source determined by the Regional environment sector unit.” The definition goes on to say that “such sites may include areas recognized by traditional local communities (e.g., sacred groves) ...” The list in the definitions of critical natural habitats, drawn from sources such as IUCN, was meant to be illustrative and to highlight the fact that certain biological assets, because of their special associations to local communities, could be considered critical natural habitats. The policy definitions in OP 4.04 do not include non-biological assets, such as rocks and waterfalls. In this context, Management notes that the Budhagali spirit was said to inhabit the rapids at Bujagali Falls. Indeed, project preparation activities in 1998 carefully incorporated these aspects, and included them as one ofthe site selection criteria. Furthermore, Management considers that OP 4.04, if triggered, allows for significant conversion of natural habitats and provides guidance on mitigation and offsets. As a result, the first Bujagali project’s approach of appeasing the spirits from Bujagali Falls and other areas, based on professional advice from spiritual leaders and culture experts, was undertaken. A broad consultation process was used during the first and into the second Bujagali Project. These consultations included one on September 5, 1999 with the spiritual leader, Nabamba Budhagali, who, in turn, consulted with the spirits and reported that they would accept the Project, including the inundation, by completing appeasement ceremonies.
54. Management considers that the two policies address physical assets or resources that may be affected by a project and thus, if triggered, require that these be assessed for environmental impact in the EA process. Management expected that the areas of compliance noted by the first Inspection Panel report of May 2002 would be reviewed by the second Inspection Panel investigation team using the same methodology. However, there appears to be a divergence of opinions and some inconsistencies, which also reflect the diversity of views on these issues among local leaders and followers, as demonstrated in each ofthe Inspection Panel analyses pertaining to Busoga spirituality and culture. In fact, the first Inspection Panel investigation report, citing findings from professional studies, found no fault with the approach of appeasing the spirits.
32 “Chance finds” are unexpected discoveries encountered during the construction process.
21 Uganda - Private Power Generation (Bujagali)
55. With respect to the inclusion of cultural resources considerations (including those linked to natural habitats) in the identification of alternative project sites, Management learned from local experts that major segments of the Nile River with hydropower potential have spirits associated with them.33Thus, as noted in Appendix J of the SSEA, “impacts on historical and religious sites” was one of the site selection criteria. During the Third Stakeholder Consultation in 1999, the Project Steering Committee retained this criterion, and although it was not measured in quantitative terms, the analysis of alternatives took into consideration cultural and religious values. Following professional advice, Management also believes that the Project could not rank one site’s spiritual values above or below another’s, so all sites were considered to have similar spiritual values, as well as corresponding culturally appropriate solutions.34
56. While the Panel questions Management’s focus on appropriate “closure,” it should be noted that existing documentation puts the Panel’s claims in full perspective. Chief among these are documents that chronicle the events around the September 28, 2001 appeasement ceremony. First, an extensive consultative process preceded the appeasement. Four major consultations in 2001-0n June 25, July 6, July 13, and July 25-with recognized spiritual leaders and advisors (diviners) took place. AES insisted on working with these diviners, precisely because it understood that their spiritual leadership was essential to appeasing the spirit. Second, the appeasement ceremony was facilitated by the same local NGO that the Panel credits with the successful reconciliation of the spiritual attachments found in other natural sites (and resources) in the Project area (paragraph 582 of 2008 Panel investigation report). Lastly, the Project codified the appeasement ceremony in the form of a mutual agreement. On August 21, 2001, Nabamba Budhagali signed an Agreement for the Mitigation of Cultural Impacts and Appeasement of the Budhagali Spirit (“the Agreement” with AES). Among the key provisions of this 2001 Agreement were:
“For the avoidance of doubt, after providing the agreed facilitation for the appeasement ceremonies, the Company [AES] shall deem and Nabamba Budhagali hereby asserts that all requisite cultural ceremonies associated with the interest of Nabamba Budhagali within the Project Site have been satisfied, the spirits have been appeased, acquisition of the Project Site[,] construction of the Project[,] and inundation of the Culture site have been accepted by the spirits. “Nabamba Budhagali shall have no more claims for re-consulting or re-appeasing the Budhagali spirit.”
57. Closure Regarding the Budhagali Spirits. The various diviners consulted from 1998 to 2002 agreed that “closure” was possible as a result of three actions that AES undertook based on their advice. First, the Project provided four payments for carrying out an appeasement ceremony. While the Panel correctly states that the diviners did not accept a payment of one million Uganda Shillings at the end of the ceremony, this was the fifth and final payment for the ceremony, the previous four payments to carry out various rituals, totaling 12.25 million Uganda Shillings, having been accepted. Second, the Agreement was clear that the impact from the Project would include inundation of Bujagali Falls. It should be noted that the other
33 Richard Kayaga Gonza, Traditional Religion and Clans Among the Basoga, Jinja, Uganda: Cultural Research Centre, Volume I,2002. 34 Cultural Research Centre, Ritual Gestures in Busoga, Jinja: 2001.
22 Management Report and Recommendation religious practitioners who carried out ceremonies at about the same time signed similar agreements. The diviners clearly knew the Project impacts prior to the ceremony, even if, as the Panel asserts, the 75 followers were not as clear on this impact. Third, the documented evidence shows that one purpose ofthe earlier payments was to bring the 75 followers from all over Uganda, which raises questions about the Panel’s statements that the Project did not reach out to a much larger group ofBusoga religious stakeholders.
58. Management found that all participants in the appeasement ceremony believed it was successfbl, including the expert source cited by the Inspection Panel. Management also agrees with BEL’s observation and commitment: “Bujagali Falls is of spiritual significance to the Kingdom of Busoga as it is a place inhabited by spirits. Cultural ceremonies were conducted by the previous project sponsor to relocate the spirits, although recent meetings with Kingdom representatives indicate that additional activities may be required to address the spiritual significance of the area prior to flooding. The Kingdom has expressed support for the Project and BEL is committed to continuing and undergoing consultations with them to determine what needs to be done prior to the flooding of the Falls” (APRAP, Appendix H, p 4, 2006). Management has understood since the ceremony that this issue was and is related to the spiritual and political issue of who truly represents the Budhuguli spirit, as well as questions about additional resources for performing further appeasement ceremonies. Thus, BEL supported a further ceremony on August 19, 2007, two days prior to the official groundbreaking ceremony for the Project, in which the Budhugali spirits, appeased in 2001, were perceived to have been placed in a “permanent home.”
59. In the future, the GoU, in coordination with BEL, will work with the various stakeholder groups to develop mitigation measures, including additional ceremonies, as necessary and based on experts’ advice, prior to the filling of the reservoir. These measures will be reviewed by cultural specialists, and more importantly, will be implemented in consultation with recognized local and spiritual leaders (see paragraph 57). Management will ensure that the GoU, in particular MEMD, and in coordination with BEL, will update the design of the mitigation measures, based on feedback from the affected persons themselves, including the local and spiritual leaders. Some of these mitigation measures are already included in BEL’s community development programs, such as establishing a cultural resource center; supporting a network of cultural and spiritual experts; and government sponsored kingdom-wide or nation-wide dialogues. Throughout the period of construction, Management will follow up with BEL to ensure cooperation on “chance finds” procedures, and cultural and spiritual matters between BEL and the GoU. Finally, with respect to individual shrines and other physical cultural resources, Management wishes to point out that these were addressed under the original project, which the Panel acknowledges in the current investigation report (paragraph 582).
60. Consultative Approach to Cultural Property Management. The Panel’s assessment of partial compliance does not take into account the multi-layered and extensive consultations and follow up undertaken throughout preparation. Annex H of the HPP SEA lists the extensive consultations, including ceremonies, to specifically discuss cultural and spiritual issues. These consultations not only addressed archaeological aspects, but also identification and preservation of religious objects, shrines, gravesites, or buildings. For example, AES consulted, in 1999-2001: (i)specialists from the Department of Sociology and Institute of
23 Uganda - Private Power Generation (Bujagali)
Language at Makerere University (Uganda), who submitted a special report on cultural and spiritual significance of Buj agali Falls; (ii)members of the Traditional Healers and Herbalists Association, Malindi Wakisi Branch; and (iii)villagers and various local spiritual leaders (e.g., Ssenkulu-Mandwa, the diviner; Akuba Ensaasi, gourd rattle player; healers such as Asandagga, Ayambulula, Agaba eddagala, Alumika, Anoga eddagala, Anoga era, Asekula eddagala; Mukongozzi, the medium; Ayunga, the bone setter; diviners such as the Abamayembe; and Abalogo, a traditional doctor).
61. Consultation feedback and expert advice are incorporated into the Project’s two completed CPMPs. The first CPMP was prepared by Ugandan cultural experts (Synergy), who also completed several consultations with spiritual leaders and villagers. Management will follow up with GoU (MEMD and other government agencies), in coordination with BEL, to ensure that measures are added to address any additional institutional capacity building needs beyond those already committed within the CPMP; and to implement a monitoring program to ensure that mitigation measures and procedures are fully effective. In addition to OP 4.1 1, several lenders follow the IFC’s Performance Standard 8, which specifically requires that the cultural resources management provisions be incorporated into the overall Social and Environmental Action Plan (SEAP) for the Project. The second CPMP was prepared by the contractor, Salini Costmttori, in 2007, as part of the SEAP, and specifically refers to the “chance finds” procedures during the construction phase.
INVOLUNTARYRESETTLEMENT
62. Resettlement Activities Between the First and Second Bujagali Projects. Management notes that the bulk of resettlement activities for the Bujagali HPP were completed by end 2001 (except for the Kawanda substation; also, no resettlement activities were undertaken for the transmission line right ofway at that time).35However, some aspects of the 2001 RCDAP had not been thoroughly completed when the Bujagali Project was approved by the Board in 2007. The APRAP was carried out by BEL in 2006 as a continuation of the resettlement, compensation, and livelihood restoration process. What remained to be finalized, as identified in the APRAP, were: (i)resolution of 24 pending contracts (out of 4,565 contracts, or less than one percent) related to land, crop, and other payments; (ii)issuance of 11 land titles (out of lOl), which were still being processed by the District Land Registry; and (iii)implementation of some of the elements of the livelihood support programs under the CDAP. The first Inspection Panel findings in 2002 noted that, except for some cases of crop valuation and payments, “the RCDAP was generally in compliance with OD 4.30 on Involuntary Resettlement” (paragraph 260, p. 80).36
63. Even prior to withdrawal of AES in 2003, Management and the GoU focused on ensuring that appropriate institutional arrangements remained in place for continuing support to PAPS, and that these were followed up during various field visits by Bank staff between 2001 and 2006. UETCL retained the BIU in Jinja near the dam site, which provided continuity
35 The transmission line RAP was updated, reviewed, and found acceptable by IDA, and is being implemented under the separate AfDBiJICA funded Interconnection Project. 36 In the associated InterconnectionProject, which is funded by AfDB and JICA, there are 2,148 project affected households along the 100 kilometer transmission line corridor and right of way. The BIU estimates that ofthese, 209 households will be physically displaced. More than 55 percent of compensation contracts have been negotiated and signed.
24 Management Report and Recommendation between the two projects and remained in contact with PAPs. Management continuously assessed the work of the BIU during the interim period and found it to have performed adequate short-term activities using “quick fix and quick impact” approaches. Management observed that the BlU was able to: effectively resolve most of the compensation and land titling gnevances; monitor service-oriented activities in the Project area (e.g., water wells); implement small-scale community development programs; secure the right of way for the hydropower facility and transmission line; and maintain an informative relationship with PAPs through monthly village consultations. In addition, the BIU was able to: establish local ownership of the community water wells through agreements with District Water Authorities for maintenance of the village water borehole pumps; complete several training sessions in business development and agriculture for women; and upgrade some secondary and tertiary roads. While these did not constitute the intended livelihood support programs outlined in the 2002 RCDAP, they nonetheless represented reasonable best efforts by the GoUAJETCL to ensure continuity in assisting PAPs until the Project restarted in 2006.
64. Implementing Resettlement and Compensation. Management supports BEL’S view that, although incomplete, the core elements of the resettlement and compensation components of the RCDAP as it relates to the dam site were completed prior to the time AES left the Project in 2003. First, AES finalized the cadastral and land survey, indicating a land take of 238 hectares comprised of 80 hectares (33 percent of total land take) to be inundated; 45 hectares for construction of facilities; and 113 hectares to be used during the construction period (but later reverted to agricultural and forestry uses). These are in the villages of Kikubamutwe, Namizi, and Malir~di.~~Second, the process of identifying PAPs was extensive. The RCDAP identified 1,288 households (8,700 PAPs) that would be directly affected by the Project. Of these, 101 households (714 persons) were physically displaced and, except for 16 households who moved to another part of their land, the remaining 85 households were moved to another location. The 1, 1 87 non-physically displaced households were compensated for lost land, crops, trees, and other assets.
65. Third, the Naminya Resettlement Site was completed and located within 5 to 7 kilometers of the Project site, with good road and vehicular access. The replacement houses were adequately built with functional latrines; rain water harvesting systems; and other amenities like a drilled well with Orbit handpump, sub-county level 3 health center, and progress in establishing a nursery or primary school. Each resettler household was given one acre of land and land title, including an agricultural plot. The remaining 51 households were given resettlement assistance and relocated on their own. Fourth, cash compensation payments were 99 percent completed (4,539 out of 4,565 contracts). The valuation method was based on market value, plus an “uplift,” reflecting full replacement cost. Compensation covered land, permanent houses, non-permanent houses, other structures (gravesites, granaries, latrines), perennial crops, annual crops, moving costs, and communal assets (foot paths, access to the river, and communal gardens). Fifth, some livelihood support programs were undertaken, including training on money management; farm practices and cultivation methods; garden agriculture; and animal husbandry. In addition, based on the RCDAP, BEL has been able to implement the following: (i)public consultation and disclosure plan; (ii)labor force management plan; and (iii)the CPMP.
37 A small land take for quarrying is in the village of Buloba.
25 Uganda - Private Power Generation (Bujagali)
66. Enhancing the Socio-Economic Baseline. Prior to the Request, Management already had identified deficiencies in the socio-economic baseline. Management concurs with the Panel’s observation that the APRAP could have obtained better updated socio-economic information on PAPs. In fact, actions have been taken to comply more strictly with OP 4.12. Specifically, in early 2007,38 Management set in motion with BEL two proactive steps to enhance the socio-economic baseline. The first is through an updated socio-economic survey and needs assessment that will be completed by BEL in March 2009. The findings from this survey and needs assessment supplement the existing 2006 socio-economic databases3’ Management agrees with BEL that the relatively small sample size in the 2006 survey will need to be expanded, and after completion of the updated survey in 2009, BEL will use this series-data for measuring income and livelihood outcome indicators.
67. The second corrective measure is strengthening the existing socio-economic monitoring system. BEL currently prepares a quarterly Social and Environmental Monitoring report which contains a separate section on impacts of livelihood restoration and community development programs on PAPs. Based on updated 2009 socio-economic survey results, BEL will be able to monitor: (i)“before-and-after” (2004-2006) changes in income and livelihood indicators of original PAPs who were surveyed as part of the APRAP; and (ii)future impacts from a larger sample of PAPs and indirectly affected people. In this regard, MIGA’s technical assistance, which was provided in March 2008, will fund development of the database of household survey information. It will also provide capacity building for monitoring and evaluation of impacts of livelihood restoration (through records of what was done, where, how many people were involved, what materials were provided, etc.). MIGA will also support BEL in establishing a mechanism for compiling feedback from PAPs.
68. Resolving Minimal Compensation Gaps. As of 2006, less than 2 percent of payment contracts were unresolved. In fact, the APRAP found payments, at a rate of US$1,235 per hectare, to be higher than the 2002 national average. The total cost of compensation was US$9.6 million or 82 percent of the total budget. It represented an average cost of almost US$9,600 per household, which was equivalent in 2002 to four years of a household’s yearly income, and among fishing households, which had much lower income levels, it was equivalent to twelve years of income. In addition to the need to urgently resolve the compensation claims, the large infusion of cash did cause some problems. For example, around one-third ofhouseholds spent their cash on non-livelihood related expenses. Learning from this experience, BEL contracted a business oriented NGO to provide training to PAPs on money management and development of small enterprises.
69. Completing Land Titling. Management acknowledges the Panel’s agreement with the APRAP assessment of issuing land titles as consistent with OP 4.12. As noted in the 2006 APRAP, initially there was confusion among PAPs about resettlement plots and replacement lands purchased as part of the land-for-land exchange and cash compensation for lost crops, trees, and other assets. Despite these problems, currently only 5 percent of land titles remain
~_____
38 Prior to receipt of the Request. 39 In fact, this socio-economic information gap was already discussed with BIU and GoU. It was decided in 2003 that a new survey would be launched once a new sponsor was identified. However, a new socio-economic survey did not take place until 2006, under the APRAP, and by this time, BEL had difficulty locating the original resettlers.
26 Management Report and Recommendation unresolved and Management notes that this was due to delays by the District Land Registry in issuing land titles. While BEL continues to work on this issue, it has minimal control over the timetable for resolving the land titling disputes.
70. Expanding Livelihood Support. Management notes the Panel’s concerns about the effects on PAPs of delays in providing extensive livelihood support due to delays in realizing the Project, but these have already been addressed by the Project in three ways. First, agricultural livelihood support was started during the interim period from 2003 to 2005. Resettlers were provided with selected crops, tree seedlings, and backyard animals. Starting in 2006, the program was expanded to include agricultural extension support and was accelerated at a scale of three times the original coverage, including the provision of high value crops and assistance in marketing them. As of July 2008, more than 84 percent of PAPs had participated in the program. Second, under the APRAP, BEL contracted a local NGO, Team Business College, to provide training workshops on business opportunities. These workshops covered: use of village banks; group savings among fishermen’s associations; and group financing (e.g., capitalization of small fishing boats, gear, and other materials). Lastly, BEL’S business resource centers on the east and west banks of the Project area will support small businesses for agricultural enhancement; fisheries improvement; and micro credits. To support these businesses, two agricultural and fish markets will be constructed by BEL.
71. More than one half (57 percent) of project affected households relied on agricultural income sources in 2006, compared to the baseline in 2001 (46 percent), so BEL continues to emphasize agricultural extension and construction of a market near the affected villages. The average annual household income from agriculture increased from US$2,300 in 2001 (see the APRAP, page 58) to an estimated US$4,200 in 2007 (Socio-Economic Survey, BEL Quarterly Report, July 2008). However, because the households surveyed in 2007 are not the same as those who responded in 2001, the results are not conclusive, although they do indicate positive income change.
72. Addressing the Needs of Vulnerable Groups. Management shares the Panel’s concern about providing sustainable support to vulnerable groups. In June 2008, BEL completed a census of vulnerable people in the eight affected villages and Naminya, and found a total of 230 households, or 1,357 individuals, classified as vulnerable. BEL already identified specific programs for vulnerable people in the APRAP. First, BEL provided additional support to them beyond what they have received from compensation payments (APW,page 32). Priorities were given to villages with larger percentages of vulnerable people (Namizi, 25 percent; Kyabinva, 15 percent; Ivunamba, 12 percent; and Bujagali, 11 percent). Second, BEL set up “village consultation committees” composed of local government (LC 1) officials, elders or religious authorities, NGOs, and representatives from the GoU social services units. The committees have proposed activities for vulnerable households, such as counseling on matters like family, health, money management, and livelihoods adapted to their conditions. Some committees have proposed regular food support and health monitoring. BEL has also focused on orphans, especially in resolving compensation problems that arose when payments were given to their custodians.
73, Enhancing Community Development and Benefit Sharing. Management notes the Panel’s concerns about the CDAP, and observes that BEL has already addressed these concerns in six ways. The first is the increase in the CDAP budget from US$2.084 million in
27 Uganda - Private Power Generation (Bujagali)
2001 to US$3.817 million in 2006. Coverage beyond PAPs includes four villages on the west bank (Mukono District) - Naminya, Buloba, Malindi, Kikubamutwe; and four on the east bank (Jinja District) - Bujagali, Ivunambe, Kyabinva, and Namizi. The second is sustainability of CDAP sub-projects by involving local authorities to ensure long-term operation and maintenance arrangements, including partnerships with local NGOs. The third aspect is the focus on employment opportunities. A minimum of 10 percent of the unskilled workforce in the construction site will be recruited from local villages. More jobs are expected when tourism businesses expand, including work in small-scale tourism development.
74. Fourth, BEL continues to construct new roads and access trails and upgrade existing social services and facilities. For example, BEL rehabilitated the access road from the Naminya Resettlement Site to make the area more accessible. BEL’S support for schools and health centers covers: (i)rehabilitation of facilities, new construction or upgrades; (ii) provision of equipment or materials; and (iii)provision of incentives for operating and maintaining the facilities. Rehabilitation in five schools started in 2007-2008 (2 on the west bank and 3 on the east bank). In the Naminya site, BEL allotted one house for a resident teacher as an incentive to ensuring that the school had a qualified teacher to run the primary school. The Budondo Level 2 Health Center on the east bank was rehabilitated and another Level 2 Health Center will be constructed on the west bank. Health professionals are being provided by their respective district health agencies. Next year, BEL will construct more access trails and two community resource centers on each side of the river. These centers will provide library services; classroom training facilities; financial information and services; resettlement information and services (as part of the continuing disclosure plan); services to vulnerable people; health information; and communications access (fax, phone, internet/email, and photocopying).
75. Fifth, BEL will provide electricity connections to approximately 900 households through connections to the local electricity grid by 2012. BEL will supervise construction of low-voltage lines and subsidize connection costs for PAP households willing to pay the electricity tariffs, using supplemental financing of US$345,000 from the Agence Francaise de Developpement. The electricity connections will cover the nine affected villages, including Naminya. Once the system is installed, the electricity distribution company, UMEME, will take ownership and be in charge of the operation and maintenance of the grid, metering, and billing of customers. This makes the program sustainable over the long term. BEL will sensitize the communities about the electricity grid and the meaning of the tariff, and explain that although the connection charge is subsidized, households will still be expected to pay a minimal usage fee per month. By the end of next year, it is estimated that at least 870 private connections in PAP households will be completed; the remaining 30 households, due to their location, may take a few more months to complete. BEL is coordinating this work with the Rural Electrification Agency (REA) and utilizing a New External Distribution Agreement, which REA has developed with UMEME.
76. Sixth, community development will address the PAPs’ priority for secure water supply. From 2002 to 2006, AES and BEL provided 17 water boreholes with Orbit pumps and water tanks. By 2011, 50 percent of PAP households will benefit from private water connections. As part of the supplemental funding covering electricity and water, BEL has an agreement with the National Water and Sewer Company’s (NWSC) local water agency. The NWSC plans to
28 Management Report and Recommendation construct standpoints (water kiosks) to be managed by small-scale providers who will sell water using 20 liter jerrycans at a low unit cost of US$0.03. Long-term operation and maintenance of these water kiosks will be the responsibility of NWSC. The kiosks will be provided to communities on the condition that: (i)the community pays for the cost of water, including operation and maintenance (with the initial capital costs being subsidized); (ii)the community organizes itself to maintain and operate the pump; and (iii)women are involved in managing the facilities, including collection of water charges. BEL will assist in training local communities in maintenance, including purchase of spare parts and repair skills. The existing agreements with District Water Authorities for operation and maintenance of the water pumps in Naminya and the other eight affected villages will be updated to reflect the above conditions. In addition, BEL added the villages ofKikubamutwe, Malindi and Buloba since the Project is expected to block their access to the river during the construction period. BEL will install an additional 16 water boreholes equipped with handpumps and piped-in water supply at an affordable domestic water tariff in these villages.
77. Supporting Tourism Related Activities. Local authorities and BEL have agreed to implement tourism development activities. On the community level, these include specific support to cultural groups, such as traditional healers, who are participating in the creation of cultural centers which will provide a venue for cultural exhibits and performances. On the enterprise level, white-water rafting companies have submitted proposals to BEL and the National Environmental Management Agency (NEMA) indicating their planned tourism activities after the dam is constructed. Memoranda of Understanding are being finalized between BEL and tourism operators, Hoteliers and tour operators in the Project area have also agreed to collaborate to revive the local tourism association, Jinj a Tourism Development Association. In the future, several programs supported by BEL are planned for smaller tourism operators (for example three-wheelers, boda boda, and kayak renters, food vendors, small hotels, arts and craft makers, shops). These programs, supported by BEL, include access to micro credits, training in business management, and development of alternative tourism activities and sites, in addition to infrastructure and facilities. The infrastructure will include: construction of a “Bujagali Visitor DadInterpretation Center,” to be completed by around 2010; a museum and cultural center (in coordination with the NFA and other operators); a main tourism site with picnic area, car park and visitor center, a campsite and an upscale hotel facility; a community museum and cultural heritage center with residences (bandas) to be constructed on a chosen site in the Project area (including a showcase garden with traditional and medicinal plants, a picnic, camping and relaxation area, an area for meetings and retreats, a landing site for fishermen to display their catches, and display and sale of traditional arts and crafts); and a Bujagali Picnic Site situated close to Jinja. All of these initiatives are covered in BEL’S Tourism Strategy, which includes cost estimates for financing the above mentioned activities. Implementation of the strategy will be carried out in cooperation with local communities, tourism organizations such as the Uganda Tourism Board, Uganda Tourist Association, and the Ministry of Tourism, Trade and Industry.
ENVIRONMENTALISSUES
78, Comprehensive Environmental and Social Analyses. Environmental and social analyses and programs for the Bujagali HPP and the Interconnection Project are founded on the information and guidance accumulated during the extended development period of the Project.
29 Uganda - Private Power Generation (Bujagali)
Consistent with the Bank’s policies and the recommendation of the previous Panel report, the Bank supported preparation of the SSEA to address the broader power development issues in the Nile Equatorial Lakes Region, and BEL conducted Proj ect-specific SEAs. Practical considerations have led to some relevant analyses being included in both the sectoral SSEA and the Project-specific SEAs, among these, assessments of cumulative impacts and alternatives. Management agrees with the Panel’s concerns that the presentation ofissues could have been strengthened by more clearly showing the inter-relationships and entire suite of documents that constitute the studies. That said, Management considers the overall analysis to be substantive and comprehensive.
79. Adequate Analysis of Cumulative Impacts. BEL responded to the Bank’s OP 4.01 requirements by expanding the assessment of cumulative impacts which would normally be conducted for a private sector project beyond the Project area, to encompass the 320 kilometer reach ofthe Victoria Nile River between Lake Victoria and Lake Albert. The analysis took into account other initiatives such as the Kalagala Offset and the other foreseeable hydropower project, Karuma, also on the Victoria Nile but physically separated from Bujagali by Lake Kyoga. Lake Kyoga’s location 110 kilometers below Bujagali was found to limit any downstream cumulative effects from Nalubaale and Kiira and Buj agali. Thus, Management believes that its analysis addressed cumulative impacts in a meaningful way, while acknowledging that inclusion of additional detail and cross-referencing to analyses elsewhere in the SEA would have strengthened the presentation.
80. The general configuration of the Bujagali Project and the interconnecting transmission lines to Kampala have been known for many years, and many governmental and individual planning decisions have been made on that basis. While recognizing this reality in its planning of the Project, BEL nonetheless conducted a thorough review of technical needs and current conditions in the Project area of influence. Changes in local land use and electricity load requirements dictated minor changes to the transmission line route in the Kampala area from the one selected by the previous sponsor in 2001. Based on the updated analysis undertaken, expansion ofthe existing power line wayleave4’ through the buffer zone ofthe Mabira Central Forest Reserve remained the best option.
81. The Panel has expressed concern that the Interconnection Project SEA does not adequately address the cumulative effects of the transmission lines, and that the cumulative loss of forest habitat from the Project’s transmission line has not been determined. Because of security reasons for the country’s power supply and constraints on the construction of the new Transmission Line, UETCL does not allow overlapping wayleaves. However, in order to minimize impacts on protected forest areas the wayleave for the new Transmission Line was reduced from 40 to 35 meters (total wayleave width including wayleave width of existing transmission line will be 65 meters). In its use of locally available expertise, BEL engaged researchers at Makerere University in Kampala to examine the new transmission line alignment in the context ofan expansion ofthe existing wayleave in the Mabira Central Forest Reserve. These researchers concluded that the forest loss is not expected to result in major impacts on terrestrial ecology, and that improved management of Mabira could actually compensate for the loss. Based on this advice, UETCL has offset the impact through payments
40 The wayleave is the 40 meter wide corridor in whch the new Transmission Line will be constructed, while the right of way is the 5 meter wide strip used for maintenance and in which no economic activities are allowed.
30 Management Report and Recommendation
- covering both ground rent and incremental costs - to the NFA to support its programs as part of the broader management plan for Mabira. In addition, the World Bank Group is currently working with the NFA in its development of a SMP for the Reserve that is expected to result in a net improvement in the extent and quality of forest within the Mabira Central Forest Reserve.
82. Environmental Management Plans. Timing considerations related to the selection of EPC contractors restricted the level of detail regarding Environmental Management Plans (EMPs) that could be presented in the SEAs. Under a private sector EPC arrangement, responsibility for environmental and social management during construction is primarily the responsibility of the EPC contractors, with oversight by the Project owner. The SEAs included framework programs and details of management, mitigation, and monitoring actions to the extent that they were known at the time (December 2006). Detailed EMPs have since been prepared, and have been reviewed and accepted by the Bank. The approach taken fulfills the intent ofthe Bank’s OP 4.01.
83. In addition, BEL’S management team includes professional Ugandan specialists who were key participants in SEA preparation to oversee and monitor the EPC contractors’ implementation of the EMPs. BEL has also maintained the Project’s long-term relationship with the Ugandan National Fisheries Resources Research Institute to conduct the regular monitoring of water quality, aquatic ecology, fisheries and public health included in the EMP. This continuity ofkey in-country experts is expected to extend into Project operation.
ECONOMICAND FINANCIALANALYSIS
84. Thorough and Complete Economic Analysis. Management believes that a thorough and comprehensive Economic Analysis was carried out for this Project in accordance with OP 10.04 and OP 4.01. Annex 1 deals with questions regarding small and medium scale project alternatives, and climate change risk under Items 12 and 13.
85. Constant Release Analytical Approach and the Agreed Curve Implementation. The Panel has opined that there is a discrepancy between the PAD and the Economic Study with regard to the water release rule to be applied at the Nalubaalemiira dam complex: whereas the former relies on the Agreed Curve for its analysis, the latter uses a “Constant Release” analytical approach, which the Panel contends could have material implications for the Lake Victoria levels and for the Project’s economic viability. With regard to the Lake levels, the analysis determined that both the “Constant Release” and Agreed Curve methodologies come to analogous conclusions. As shown in the diagram below, lake levels are similar when using the “Constant Release” approach for analysis of the Project under the most likely scenario (low hydrology, which is also the base case for the Project). Neither is the Project’s long run average energy generation changed significantly. It is only under the high hydrology scenario that a significant difference emerges between the two release rules, and this is only beyond 20 years of Project operation (see page 48 of the Economic Therefore, the Economic Study has adopted the “Constant Release” as an analytical tool that simplifies long-term projections of the Project’s energy output. The PAD and the Economic Study are consistent in using the two hydrology scenarios developed for the purpose of the Economic Study.
41 Note that 1900- 1960 is the reference period for the low hydrology scenario, whereas 196 1-2000 is the reference period for the high hydrology scenario, in accordance with the findings of the Economic Study.
31 Uganda - Private Power Generation (Bujagali)
Management reiterates that the “Constant Release” is used only as a simplifying analytical tool and neither the Government nor the Bank has advocated the use of “Constant Release” instead ofthe Agreed Curve regime.
Figure 1. Lake Victoria Level in the Case of Low Release - Low Hydrology Scenario (Reference Period 60 years from 1900 to 1959)
I
Source: Economic Study, page 48.
86. Climate Change Risk. The Panel acknowledges that the SSEA has thoroughly assessed climate change risk in hydropower projects on the Victoria Nile, but states that the SSEA has not been properly disclosed as a Project document. However, this overlooks the Management Action Plan response to the Panel investigation of the first Bujagali project, wherein it was explicitly indicated that the SSEA would be a freestanding document, addressing the entire sub-region, not just Bujagali. The SSEA was made public in April 2007; it is referred to in the PAD and there is a link on the Bank’s Bujagali website to the Nile Basin website where the SSEA can be found. (www.worldbank.ordbuiagali).
87. Treatment of an Unproven Oil Resource Discovey. The Panel states that while the oil resource discovery was at a very early and unproven stage at the time when the Economic Study final report was completed (February 2007), the existence and potential of this resource should have been reviewed in the discussion of alternative supply options. Management notes that at the time of the Economic Study, the GoU had not yet disclosed the extent of the oil discovery. Management considers that it would have been inappropriate to compare an unproven domestic oil resource to proven hydropower and other energy resources. Oil-based thermal generation candidates were included in the analysis; but it was assumed that the associated oil products would be imported. In the PAD, the Project team noted that the probability of some domestic oil production in Uganda had increased (see page 86, footnote 5 of the PAD). However, the key point from an economic perspective is not the source of the fuel, but its price. The comprehensive economic risk analysis conducted in the Economic Study indirectly addresses the risk of substitution of imported fuel with domestically produced and refined fuel oil, under the low oil price scenario.
32 Management Report and Recommendation
88. Impact on Low Income Households. The Panel states that it did not find evidence in the Economic Study or the PAD of any estimates of the economic impact of the Project on low-income households. Management considers that the impact of the Project, both direct and indirect, on low-income households is covered implicitly in the Project documents. Less than 10 percent of Uganda’s households currently have access to electricity and these consumers tend to be the better off. Through willingness to pay analysis, the Economic Study shows that households that are currently not connected to the main power grid usually pay more for substitutes such as batteries or petrol generators. Therefore, by providing incremental power generation, the Project will enable more households to be connected to the grid, spreading the benefits of electricity access down the social pyramid. Furthermore, over 60 percent of electricity sales are destined to commercial and industrial users. By meeting their needs for electricity, the Project will help to create jobs and stimulate economic activity, which ultimately benefits low-income households. Management wishes to highlight that the objective of this Project is “to add least-cost power generation capacity that will eliminate power shortages.” The Government is pursuing other projects specifically aimed at expanding both off-grid and grid-based rural access to electricity to commercially viable consumers (the Energy for Rural Transformation Program). Similarly, UMEME has intensified its efforts to connect commercially viable consumers, though this program has been hindered by the lack of adequate and reliable ele~tricity.~~
89. Financial Analysis. Management has taken note that the Inspection Panel report has not raised any issues of non-compliance with OP 10.04 concerning the PAD’S Financial Analysis, though it has expressed opinions to which Management would like to respond.
90. The Panel Investigation Report in paragraph 385 suggests that two statements made in the PAD’S Power Sector Financial Analysis Section43 “appear(s) misleading and seriously at odds with the projected revenue stream of the Bujagali project. ’’ Management believes that the financial analysis undertaken for this Project has been conducted in a manner consistent with OP 10.04. Management considers that the Panel’s analysis contained in paragraphs 387-389 of the Investigation Report is inaccurate, and thus leads to incorrect conclusions. The reasons for Management’s views are discussed below.
91. In paragraph 112 on page 34 of the PAD, the financial analysis and projections carried out for the Ugandan power sector state that, “Electricity tariffs would be fully cost reflective by [2011] and subsidies would be removed, except for duty exemptions on generation fuel and transmission investments,” based on the Base Case assumptions and as documented in the PAD. With regard to the overall direct support by the GoU to the sector, the PAD (paragraph 115 on page 36) demonstrates that in the Base Case, “the power sector will be a drain on the Treasury until the Project is commissioned, but a net contributor thereafter.” These statements are based on calculations performed by the Power Sector Financial Model (PSFM), which simulates the financial situation and prospects of the Ugandan power sector during 2007-2016.
42 Management continues to assess poverty and social impacts in the energy sector by financing the Ministry of Finance, Planning and Economic Development and Uganda Bureau of Statistics survey of 1,500 businesses and 17,500 households. The objectives of these surveys are to analyze the implications of the energy crisis on Ugandan businesses and poor households. The survey results will be submitted to Parliament in March 2009 as part of a planned discussion of energy policies and programs. 43 PAD, page 34, paragraph 112 and page 36, paragraph 115.
33 Uganda - Private Power Generation (Bujagali)
The PSFM takes into account all current and future revenue requirements of the entire power sector, including the revenue requirements for the Buj agali hydropower plant and the Interconnection Project (transmission line) at the time of Project appraisal. Consistent with least-cost power planning principles, the calculation of total annual sector revenue requirements also includes all sector costs arising from other transmission and distribution investments that are needed to ensure that power can be evacuated efficiently and effectively throughout the grid, as well as assumptions on the future levels of annual losses and collections. Furthermore, the PSFM has calculated several sensitivities, including one scenario which assumes lower improvement levels of the future collection rates and levels of technical and non-technical losses. Those sensitivities and their impact on the projected end-consumer tariff path have been described in the PAD (Section F ofAnnex 12).
92. Bujagali Financial Model. The annual revenue requirements for the specific Buj agali hydropower plant were calculated in a separate second financial model (the “Buj agali Financial Model”). This model assesses the investment costs and financing needs that arise from the Project’s structure and is based on the Project’s contractual agreements. The Base Case revenue requirements for the Bujagali HPP have been presented in the PAD in the form of lump sum annual figures (PAD Annex 11, paragraph 10) and in the form of an average annual nominal price per kWh (“Nominal Targ” see PAD, Section IV.B, Table 5), to provide the reader with a cost comparison analysis. This Nominal Tariff should neither be confused with the Bulk Supply Tariff that UETCL will charge the distribution company for sale ofpower, nor with the sector’s overall end-consumer retail tariff. The Bujagali Financial Model also calculated the overall discounted 30 year average price that is based on the individual annual Nominal Tariffs for the Bujagali Project to provide a standardized cost benchmark for the Project. This discounted average figure is the “Levelized Tariff’ which is also documented in the PAD, page 30, Table 5.
93. Based on the different revenue requirement input parameters, the PSFM in the Base Case simulates a financing plan for all those revenues. One part of the revenue requirements would be financed by direct and indirect subsidies committed by the GoU to the power sector. The remaining balance is to be financed by end consumers through the electricity retail tariffs. The required level of annual average end consumer retail tariffs was derived from that analysis and led to a projected tariff path as documented in PAD Figures 3 and 12.2.
94. Financial Foundation of the Electricity Sector. On the basis of those annual average electricity tariffs and with the direct subsidies committed by GoU until the Bujagali HPP is commissioned, the electricity sector would be financially whole under the assumptions of the Base Case as simulated for the period 2007-2016. These calculations and their outcomes are the foundation upon which the conclusions presented in PAD paragraphs 112 and 115 are based, and Management believes that the calculations performed in both financial models are correct and the conclusions are accurate. In March 2007, the region undertook an independent “Quality Enhancement Review”44 of the Project, including the financial analysis, which concluded that the analysis was robust.
44 Management placed extraordinary emphasis on this project’s Quality Enhancement Review. An external consultant was retained to chair a nine member Review Panel, under Terms ofReference prepared by the Task Team and approved by Management. Panel members were drawn from throughout the Bank, based on their
34 Management Report and Recommendation
95. Calculation of the Base Case. Management considers that the Investigation Report applies an incorrect calculation to verify whether, in its opinion, the Project would be financially sustainable in the Base Case. This is discussed below.
96. In paragraph 388 of the Panel’s Investigation Report, the Inspection Panel states that the “PAD also shows that in a high hydrology scenario, Bujagali’s lifetime (30 years) capacity charges could be recovered through a levelized bulk supply tariff.’’ Management wishes to clarify that nowhere in the PAD has it been suggested that the estimated hydropower electricity tariff in levelized terms would be sufficient to recover Bujagali’s lifetime nominal revenue requirements, nor does the PAD suggest that “a levelized tariff will be set” (as stated in paragraph 389 of the Panel’s Investigation Report) over the lifetime of the PPA. As described in PAD Annex 6, paragraph 7, “the monthly payments for available capacity on the basis of a capacity payment, [will] be calculated in accordance with the terms of the Power Purchase Agreement (PPA).” In that same paragraph the PAD also makes it clear that “the PPA does not include specific amounts for the capacity charge since this will be based on certain variables which can only be determined upon the commissioning of the Project (e.g., allowed Project costs), while others will need to be established on a monthly basis (e.g., availability).”
97. Thus the Inspection Panel’s analysis assumption that a “tariff will be set” (paragraph 389 ofthe Panel’s Investigation Report) for the lifetime ofthe PPA is incorrect, because only a capacity payment formula has been established for the lifetime of the PPA which “clearly defines the costs which will be passed through to the tariff” (PAD Annex 6, paragraph 7). Also, the Nominal Tariffrequired in any given year is not necessarily the same as the Levelized Tariff estimated for the life of the Project as shown in the PAD, Figure 2 and Table 5 (page 30). Specifically, the Nominal Tariff is higher than the Levelized Tariff in the early years of the Project while debt is being repaid and decreases to less than the Levelized Tariff in the later years.
98. Despite the detailed explanations in the PAD, including a description of the contractual agreements pertaining to the PPA, the Inspection Panel’s Report sought to calculate the “annual payments [...Iwhich UETCL would need to recover through the Bulk Supply Tariff’ (Panel’s Investigation Report, paragraph 387) by multiplying the estimated annual GWh output of the plant with the Levelized Tarif$ Based on this incorrect assumption, the discounted average revenue figures were netted with the annual nominal Revenue Requirements documented in PAD Annex 11, paragraph 10-and the mathematical outcome leads to an erroneous conclusion ofrevenue shortfalls in several early years ofthe Project.
99. On the basis of the above explanations, Management believes that the financial models of the Bujagali Project and of the integrated power sector and their outcomes described in the PAD, Section IV as well as Annexes 11 and 12 are accurate and appropriate.
POWERPURCHASE AGREEMENT
100. The Inspection Panel has commented on the risk allocation under the PPA and its potential impact on the Project’s ability to achieve the broad objective of sustainable recognized expertise and experience. The Panel chair coordinated the Panel’s work to ensure complete coverage at the Review Meeting, chaired by the Africa SDN Sector Director, as well as preparation of a summary report.
35 Uganda - Private Power Generation (Bujagali) development and poverty reduction sought in Bank policies. Management would like to respond to these concerns which it believes are unfounded.
101. The Inspection Panel in paragraph 420 of the Investigation Report summarizes its opinions, raising the following concerns: (i)high allocation of risk to UETCL, the power purchaser, and eventually the GoU, which increases the possibility that the Project may or may not achieve the broad objective of sustainable development; (ii)increased possibility of a call on the IDA guarantee; and (iii)any additional resources spent by GoU on the development and operation of the Project possibly leading to decreased resources being available for social and other development priorities.
102. Private vs. Public Sector Project. Management believes that the Panel’s criticism, described in paragraphs 397 to 420, does not consider that the counterfactual to undertaking the Project in the private sector would be to undertake the Project in the public sector. This would imply full financing from the GoU, thereby diverting a significant order ofmagnitude of financial and human resources from other sectors (e.g., social sectors) that are unable to attract private sector resources, and yet are key to sustainable development. More importantly, a public sector project would have fully transferred all the Project risks @e., development, financing, con~truction~~and operation) to the GoU.
103. Risk Allocation Framework. The GoU has used an overall risk allocation framework consistent with international practice for private project financing, which allows it to transfer key project risks to the private sector, following the principle that the risk should be borne by the entity best able to manage it. Therefore, the general principles followed in the structuring of the Project were: (i)all key contracts and services were competitively bid, and paid at the prices received through the competitive bidding process; (ii)any changes in the Competitively bid prices would need GoU concurrence and were a part of the lenders’ oversight; future changes (if any) would result in a penalty borne by the Project company; (iii)key areas of expenditure that were not competitively bid, such as the Project development costs incurred by the sponsors, were capped at the outset for tariff purposes; and (iv) under the agreed PPA and EPC contract, financial penalties are to be levied to ensure optimal performance. These are consistent with current international market practices for projects ofthis nature.
104. EPC Costs. In comparing the “cost basis” and risk allocation in paragraphs 400 and 405, the Panel seems to have overlooked some distinct differences between the first and second Bujagali projects. While AES was given a sole sourced contract and was not required to procure the EPC through a competitive bidding process, the process initiated by GoU in 2005 was a two stage competitive process. In the first stage, the developer was selected competitively on the basis of the amounts bid for key cost elements such as: (i)a cap on the Project company’s development costs allowed in the Project tariff; (ii)the return on the equity component of the Project tariff, which could not be changed thereafter; and (iii)the annual operation and maintenance costs for the life of the Project. In the second stage, the selected developer conducted a competitive bidding process for the selection of the EPC contractor. In
45 While private sector limited recourse projects have generally been constructed on schedule, historically, public projects, especially hydropower projects, have generally had substantial cost and time overruns (World Bank Technical Paper No. 325 (Energy Series) - Estimating Construction Costs and Schedules, Experience with Power Generation Projects in Developing Countries, August 1996).
36 Management Report and Recommendation this respect, it should be noted that the EPC costs represent approximately 65 percent of the total Project costs, Also, the equity remuneration component, a key component of the tariff in addition to the cost of debt, was competitively bid. Therefore, the competitive bidding process addressed key cost parameters of the Project. It is also important to note that the selection of the EPC contractor was carried out according to EIB guidelines and under its oversight. Hence, unlike in the case ofAES, there was no need for a cap as these costs were established through a transparent bidding process.
105. Paragraph 402 of the Panel’s Investigation Report states that “BEL has considerable scope to shape the base costs and in some cases the increases too, to deliver a higher capacity charge.” The paragraph also alludes to the pass through of EPC cost increases. Per the requirements of the PPA, the EPC cost was firmed up at financial closure and includes full adjustments for changes in costs that are outside the control of BEL or the EPC contractor. These are: (i)increases or decreases in costs due to changes in groundhbsurface conditions; (ii)costs resulting from ‘force majeure’ events; and (iii)costs on account of modifications to plant and civil works specifications (which are primarily provided by the GoU). In case of any other increases in EPC costs, 70 percent of such increases would be passed through in the tariff and the remaining 30 percent would have to be absorbed by BEL. This provides adequate incentive for BEL to ensure that such changes to the EPC costs are minimal since the contractor would get the full benefit of such an increase while BEL would have to absorb 30 percent of the costs against its equity return. Schedule D of the PPA (pages D-6 and D-7), defines the categories of costs which are treated as full pass through items for tariff purposes. These are primarily costs that are not defined upfront (e.g., the costs related to financing, licenses, etc.) or non-EPC costs beyond BEL’Scontrol.
106. Paragraphs 406 through 415 of the Panel’s Investigation Report refer to a variety of risks and their consequences. These are discussed below.
107. Capital Cost Escalation. The capital cost for the purposes of the tariff is calculated based on parameters defined in the PPA. The intent of the Panel’s comments is not clear. The impact of the capacity charge on the sector revenues has been thoroughly assessed and discussed under the financial analysis section of the PAD.
108. Currency Depreciation. It is normal in private sector projects for the price of power produced at the power station to be denominated in hard currency. Unless there are long-term hedging arrangements available in the country, which allow projects of this nature to obtain long-term financing (e.g., 15 to 20 years, as in this case) in local currency terms or a sufficiently deep local financial market that can provide these maturities, this risk has to be passed to the off-taker through the tariff. This is because neither the Project companies (which are generally special purpose vehicles), nor the contractor or lenders are in a position to manage or absorb such a risk. Availability of long-term financing for projects of this nature (Le., projects with a long gestation) is key in order to allow for the long-term recovery of Project costs and an affordable and sustainable tariff. Furthermore, if the GoU were building this Project as a public sector operation, it would bear all the foreign exchange risks of the Project.
109. Low Demand Growth and Affordability. The aspects of demand growth, sector financials as well as affordability have been presented in detail in the PAD (Sections IV.B,
37 Uganda - Private Power Generation (Bujagali)
IV.C, Annexes 9, 11 and 12). As explained in the section of this report dealing with economic and financial analysis, Management believes that these analyses are consistent with the requirements of OP 10.04.
110. Construction Delays. The Panel’s statement in paragraph 413 of the Investigation Report warrants reconsideration as under the contractual arrangements, Project cost increases only on account of construction delays would not be passed through the PPA. While the Project company would be protected should there be construction delays caused by the actions of the GoU or its entities, delays caused for any other reasons would result in penalties being paid by BEL to UETCL (which, in some cases, BEL may be able to recover from the contractor through the EPC contract). Therefore, a delay in itself (without a corresponding change in the scope of work of the EPC) does not necessarily translate into additional Project costs for tariff purposes. However, if a delay were to occur due to a BEL-approved change order in EPC, then such EPC costs would only be partially passed through in the tariff, as described above. Also, if such increased costs were, for example, due to a change in groundsubsurface conditions, such costs would be fully passed through in the tariff.
11 1. Plant Operation. The PPA defines the level of availability at 95 percent in the first year of operation and 96 percent from the second year ofoperation onwards. The PPA in section 5.4 spells out the methodology for adjusting the payment in case of any shortfalls in plant availability.
V. MANAGEMENT’S ACTION PLAN IN RESPONSE TO THE FINDINGS
112. In light of the foregoing, Management has prepared an Action Plan (Table 2) to address key past and ongoing problems, in particular with respect to institutional capacity, social and cultural aspects, and environmental mitigation measures of the Project. A World Bank mission discussed the broad features ofthe Action Plan with the Requesters on October 3 and 24,2008. The Requesters welcomed the establishment of the Project Monitoring Committee as well as the GoU’s commitment on the CPMP, while at the same time reiterating the full extent of their original Request for Inspection. Representatives of the Naminya Resettlement Areas also participated in the consultations on October 24th. In general, these representatives expressed strong appreciation to BEL, and confidence that BEL will satisfactorily and consultatively address outstanding issues. For example, with respect to the impacts of blasting and associated mitigation measures, BEL has commissioned a study that was publicly discussed on October 26, 2008 prior to its finalization and submission to NEMA. The Requesters raised the following main points at the meeting: the environmental impacts ofBujagali, notably its effects on aquatic life and the fishing industry; possible costs to Ugandans if electricity output from Bujagali is below projections; and the ethical dimensions ofBujagali as a development model.
113. With respect to fisheries, BEL noted that there has been considerable study of fish populations in the upper reaches of the Nile that will be affected by the project, and that major impacts are not expected. Nevertheless, BEL will continue monitoring of impacts on the aquatic ecosystem, fisheries, and public health in the Project area. BEL also described the support being provided to the fishing industry, including the supply of a boat, nets, and other equipment. With respect to the unit cost (i.e., cost per kWh) of Bujagali power under low hydrology, it is acknowledged that the unit cost will vary with the hydrology. However, it is
38 Management Report and Recommendation reasonable to expect that over the life of the hydropower station, hydrology patterns will continue as in the past 100 years or, if climate predictions prove accurate, that water flows will increase. Therefore, extended low hydrology/high unit cost periods are unlikely. In the event such an extended event does occur, the Project legal agreements include provisions for the GoU to buy out BEL. On the question of ethics, it was noted that virtually all development investments invoke ethical and moral choices. Uganda’s dynamic democratic system provides an appropriate forum for debate and decision making incorporating the ethical and moral dimensions of the issues. In the case of Bujagali, the GoU has decided to proceed with development.
ISSUES ACTION
Management will follow up on NEMAS commitment to establish a Institutional Capacity Project Monitoring Committee; and will follow up on strengthening of capacities of BEL’s Environment and Social Unit (ongoing).46
Vulnerable Groups (OP Management will follow up on BEL’s programs, with timetable and 4.12) targeted activities, to address needs of vulnerable groups (ongoing).
Management will follow up on GoU commitments to ensure that the required capacities and resources are in place for the Government Physical Cultural Resources (coordinated by MEMD, and including Local Councils) to update the and Cultural Property CPMP (which was part of the 2002 RCDAP) by June 2009; and BEL Management Plan (OP 4.1 1) will incorporate into this update the EPC contractor’s Code of Practice (which is covered in the 2007 CPMP developed by the contractor) for “chance finds” procedures.
Independent Panel of BEL will review the Environment and Social Independent Panel of Experts (OP 4.01 and OP Experts (PoE) reports and disclose them by end-2008. 13.05)
114. Supervision. Management notes that an intense supervision regime has been established for this Project, including semi-annual Lenders’ Supervision Missions (March and October) in which all Project lenders may participate. At least two more Uganda energy missions are conducted annually during which Bujagali issues are addressed as required. Management has also fielded additional targeted missions on an as-needed basis to address specific issues as they arise. Moreover, the Kampala country office is staffed with both a social specialist and an environmental specialist, whose work programs include Buj agali. Management notes that in most instances, the concerns raised by the Requesters and Panel are areas in which Management, GoU, and BEL have already invested analysis, resources, and actions to address these issues. As a result, the response to these concerns commenced prior to the Request and, where appropriate, have been embedded in ongoing Project supervision. Therefore, in addition to the actions listed above in Table 2, Management wishes to ensure that
46 See Item 3 of the Matrix in Annex 1.
39 Uganda - Private Power Generation (Bujagali)
the full record also shows key actions that are already part of ongoing supervision. These key actions are in Table 3 below.
Table 3. Ongoing Actions and Supervision ISSUES I ACTION General Management will follow up on coordination arrangements of the MEMD Project Inter-Agency Coordination Committee; and NFA’s Institutional Capacity implementation capacity for the SMP for the Kalagala Offset and Mabira Central Forest Reserve. Social Impact Assessment and Mitigation Measures
0 Management will ensure that findings from the socio-economic survey (which will be completed by March 2009) are integrated into the CDAP by BEL in its design of sub-project activities; and reported in Remedial Steps for Updating BEL’s Quarterly Environment and Social Monitoring. and Completion of Baseline 0 BEL will enhance its database of household survey data and capacity Socio-economic Information building for monitoring and evaluating impacts of livelihood restoration (OP 4.12) and community development (ongoing); and through technical assistance (from MIGA) to BEL, will improve the socio-economic database.
~~ ~ Management will follow up with BEL on yearly updated needs Sharing of Project Benefits assessments that are used to adjust CDAP activities, responding to (OP 4.12) PAP priorities (ongoing). Environmental Assessment and Mitigation Measures Management will monitor progress of BEL’s ongoing afforestation activities (79 hectares completed; additional 125 hectares by end- 2008; 196 hectares by end-2009) as part of the EMP jointly Environment Management implemented by BEL, District Environmental Officer, District Forest Plan and Kalagala Offset Officer, and LC1 (ongoing). (OP 4.01) Management will follow up on completion by NFA of the SMP for the Kalagala Offset, which includes the Mabira Central Forest Reserve, by June 2009, including tourism development program (ongoing).
Cumulative Impacts; Climate Management will follow up on GoU’s commitment to disclose the Lake Change and Hydrology Victoria hydrological (water releases) information and make it available Risks; Potential Impacts on to the EAC (ongoing). Lake Victoria; Alternative Project Configurations (OP4.01)
VI. CONCLUSION
115. Management believes that the Bank is making every effort to apply its policies and procedures and to pursue its mission statement in the context of the Project. Management notes the Panel’s findings and is committed to fulfilling the Management Action Plan described above and to supervise and monitor the implementation of environmental and social policies
40 Management Report and Recommendation and procedures. Management believes that the proposed Action Plan addresses the Panel’s concerns. Management plans to report to the Board on the progress of its proposed Action Plan a year from now.
41 Uganda - Private Power Generation (Bujagali)
ANNEX 1 FINDINGS, COMMENTS AND ACTIONS
No IssuelFinding Para CommenffAction nos. ENVIRONMENTAL ISSUES - 1, Adeauacv.- of the Social and 119- Comment: Management acknowledges the Panel’s finding of compliance Environmental Assessments 123 with OP 4.01 regarding the environmental screening of the Project as Project has appropriately been Category A. classified as category “A, the category for projects with the most serious level of impacts. This - complies with OP 4.01. - 2. Environmental Mananement Plan 124- Comment: Management notes that detailed EMPs are not included in the The fact that the Environmental 125 SEAS; however, this is consistent with the approach taken in private sector Management Plan is not an integral projects and with the timing of key planning elements. In large private part of the SEA that has been sector infrastructure projects, the SEA report contains a comprehensive disclosed is a deficiency. This is not framework EMP. A detailed EMP can only be prepared when the EPC in compliance with OP 4.0 I. contractors, who have the main responsibility for environmental management, have been selected and the contract signed (in December 2007 for BEL).
At the time of SEA preparation, in December 2006, BEL, the Project sponsor, had not yet selected the EPC contractor for the hydropower project, nor had UETCL selected the contractor for the transmission line component. The December 2006 SEA included comprehensive framework EMPs, called Social and Environmental Action Plans (SEAPs) in this case; the details of management, mitigation, and monitoring actions were to be subsequently reviewed and updated by the EPC contractors and subject to review. The SEAPs also included estimated budgets for planned implementation and capacity building measures. Once the EPC contractors were engaged contractually, they worked in parallel with BEL to develop detailed SEAPs. These were reviewed and found acceptable by World Bank Group staff and NEMA.
Management believes that the approach taken -framework EMPs in the EA document, followed by detailed EMPs once contractors were selected -fulfills the intent of OP 4.01 and is consistent with global best practice. - - Action: No action is planned beyond ongoing supervision. 3. Institutional Capacity 126 Comment: Management has assessed and adequately accounted for The requirement to support needed NEMA’S capacity building needs through another Bank-supported capacity building, which is important operation. BEL and UETCL have recruited qualified staff to ensure they in the implementation of social and have satisfactory social and environmental capacity. These actions meet environmental aspects, has not been the capacity building needs identified at the concept stage of the Project. complied with in this Project. A stand-alone Partial-Risk Guarantee will normally not provide financing for environmental and social management capacity building. However, since 1994, the World Bank has provided financial support through the Environmental Management and Capacity Building Project to NEMA for capacity building in environmental legislationlregulations and in environmental and social management. This program continues to perform satisfactorily, and the Board has recently approved Additional Financing to deepen its positive impact. While a stand-alone technical assistance project had been anticipated in 2002, given the ongoing technical and operational support to NEMA, further strengthening of the agency in the context of the Bujagali Project was not required. Capacity building for the MEMD and other energy sector stakeholders is also being financed through Bank-supported operations such as the Power Sector Development Operation and the Energy for Rural Transformation Program. Moreover, through the Nile Basin Initiative, Uganda and its riparian - partners are receiving considerable support for capacity building, for
42 Management Report and Recommendation
IssuelFinding -Para Go mme nt/Actio n -nos. example through the Shared Vision Program, the Nile Transboundary Environment Action Project and the Confidence Building and Stakeholder Involvement Project.
BEL has hired a highly qualified Ugandan environmental and social manager, who is supported by one professional environmental manager, one social manager and 10 field environmentallsocial staff. UETCL also has a professional environmental and social management team of I2staff in the office and 16 staff in the field. The EPC contractor has its own environmental manager. Management considers the complement of specialists to be adequate.
Action: Management will follow up on NEMA’S commitment to establish a Project Monitoring Committee, and follow up on strengthening the capacity of BEL and BIU’s Environmental and Social unit. In the course of normal supervision, Management will follow up on coordination arrangements of - the MEMD Project Inter-Agency Coordination Committee. Independent Panel of Experts 127 Comment: An Environment and Social Independent Panel of Experts was As Project is contentious and established in 2006 for the current Project. It follows a similar panel that involves environmental concerns, served for the first Bujagali project. This satisfies the requirements of OP appointment of environmental panel 4.01. of international experts is warranted and the lack of such panel is not in For the first Bujagali project, a three-member independent Environmental compliance with OP 4.01. and Social Panel of Experts was convened by AESNP in November 1997 and its first report was submitted in February 1998. This panel reviewed the EIA, and submitted its fifth and last report on February 26, 1999.
For the second Bujagali Project, BEL set up a two-member Independent Panel of Experts (PoE) in 2006 (prior to submission of the Request) composed of an environmental and a social specialist. The Terms of Reference for the Panel of Experts was disclosed as part (Appendix G.4) of the SEA (December 2006). There was a delay in the appointment of the PoE by the World Bank Group.
The PoE completed its first visit to the Project site immediately after the SEA was submitted, in January 2007 and has provided timely and welcome reviews, inputs and advice to the Project team. It is expected to provide advice on and oversight of the implementation of the SEA and conduct “public and agency consultation activities and make recommendations on how the Bujagali project should proceed;” in addition, it will “review environmental and social issues related to the transmission and hydropower generation components of the Project.”
Action: BEL will review the PoE’s reports and disclose them by the end of - 2008. Disclosure of Project 128- Comment: Management acknowledges that the SSEA was not disclosed Documentation 135 as an integral part of the Project‘s documentation. The circumstances of Panel acknowledges that the the first Bujagali project (which was not completed) led to “reports from one necessary studies have been projecffprogram being used to fulfill the requirements of another project” as conducted and disclosed, albeit the Panel notes in paragraph 135 of its current Investigation Report. While independently, and considered by this situation may not have been anticipated by the drafters of OP 4.01, Management and referred to who envisioned a single borrower with responsibility for all EA documents, specifically in PAD. However, failure Management agrees with the Panel’s view (also in paragraph 135) that “in to disclose SSEA or its relevant the interests of efficiency, an EA may, in principle, refer to and/or parts as an integral part of Project’s incorporate, as appropriate, other relevant studies.” documentation is not consistent with OP 4.01. Management also agrees with the Panel that presentation of the Project to stakeholders (e.g., in the Executive Summary of the SEA) could have been strengthened in ways such as those suggested by the Panel (“clear - statement and graphic showing the inter-relationships and entire suite of
43 Uganda - Private Power Generation (Bujagali)
7 -No IssuelFinding Para Comment/Action -nos. documents that constitute the studies making up the SEA). However, the approach taken in the Project documentation is consistent with the requirements of OP 4.01.
Management completed a freestanding SSEA of Power Development Options in conformance with the Action Plan found in the Management Report in response to the Inspection Panel investigation of the first Bujagali project (2002). This study is regional in scope and extends well beyond Bujagali, and thus was disclosed under the NBI, consistent with Management‘s undertakings as explained in the 2002 Action Plan. References to the SSEA have been included in key Bujagali documents as well as on the Bujagali website. Hence, the documents were properly cross-referenced and publicly available, with ample time for public review and comment.
Having taken the findings and recommendations of the first Inspection Panel report into account, Management launched the SSEA prior to finalization of the preparation of the new Project. The SSEA offers an overview analysis of major regional power development options and regional transmission interconnections in the Nile Equatorial Lakes Region in Eastern Africa. It also provides a solid foundation for planning the development of the region’s power sectors until 2020.
The Bujagali Project is only one of the many options considered in the SSEA. Since the SSEA is a planning tool and linked to all planned power projects in the region, it would not be logical to consider the SSEA only as an integral part of the Bujagali safeguard documents suite. However, reference to the SSEA has been made in the Bujagali safeguards documents and in the Integrated Safeguard Data Sheet.
It is worth noting that World Bank Group staff met with the Requesters in Uganda in March 2007, shortly before the Request was submitted to the Inspection Panel, and specifically described the suite of sectoral and Project documents and where each of their key concerns was addressed.
- - Action: No action is planned. 6. Cumulative Impacts of Bujagali 136- Comment: Manaaement first wishes to clarifv that the Karuma project is and Existing and Future Hydro 143, north of Lake KyGa, upstream from the border of Murchison Falls-National Projects 146- Park, and not located between Lake Victoria and Lake Kyoga. Cumulative Impacts of 147 Transmission Lines The cumulative impact assessment undertaken for the Project is found in Analyses in SSEA do not provide the SEA. The SSEA also provided a parallel cumulative impact systematic examination of potential assessment in fulfillment of Management’s commitment under the first consequences of the Nalubaale and Panel investigation of Bujagali. Management believes that in both cases, Kiira facilities, the Bujagali Project, suitable qualitative and quantitative methodology was applied to take and the planned Karuma project all account of potentially significant cumulative impacts of past and potential being situated on the Victoria Nile future projects on the Nile River in Uganda. between Lake Victoria and Lake Kyoga. Panel finds that analyses are In carrying out the cumulative effects assessment, the SEA consultants not sufficiently backed by evidence examined all previous reports including that of ESG International (ESG and include opinions rather than 2000). To ensure that the methodology was not highly quantitative or careful fact-based examinations of statistical in nature, and that it was easy to convey to a variety of additive effects of impacts from stakeholders, the SEA adapted the “Limits of Acceptable Change” present and foreseeable projects. approach to cumulative effects assessment, which requires a clear Panel finds that neither SSEA nor definition of spatial and temporal boundaries. It also requires selection of SEA have addressed cumulative key criteria that reflect people’s social, economic, and environmental effects of existing and planned priorities for the study area. orojects in meaningful way. This is uot in compliance with OP 4.01. For this Project, the study area was the existing development in the Panel finds that the failure to - Victoria Nile Basin in Uganda, with a 20-year planning horizon, including
44 Management Report and Recommendation
IssuelFinding -Para CommentlAction -nos. consider mitigation measures, which existing hydropower facilities. The projects assessed were Nalubaale would reduce social and (Owen Falls), Kiira (Owen Falls Extension), Bujagali, and Karuma, and the environmental impacts of the study accounted for the benefits that Bujagali would bring to an operating transmission line, does not comply regime that would efficiently manage and use water flows for power with OP 4.01 and OP 4.12. production in line with the Agreed Curve. A Kalagala scheme was not included as the Kalagala Offset agreed by the GoU to offset the residual impacts of the Bujagali Project precludes such development there.
Overall, the significant and positive cumulative effects of Bujagali have been determined to include: Developmental benefits at the local, regional and national levels, including economic benefits associated with the Project’s construction (short-term) as well as with its operation (medium and long-term), covered in the Labour Force Management Plan that was disclosed in November 2007, which anticipated local job creation for 1,000-2,000 local workers, including skills training, completed in February 2008. With the dam’s operation (medium- to long-term), additional job growth could result from associated tourism benefits estimated in the SEA to increase from a baseline of 4,500 visitors per year in 2006 to 6,000 visitors per year after the Project (SEAP, December 2006), as well as a subsequent increase in small businesses and job creation from tourism and service industries. Increased supply of electricity, including poverty alleviation benefits to the extent that new electricity services are accessible to the poor; specifically, the increased supply will facilitate implementation of GoU’s program to add 400,000 new customers by 2010. Compensation to people economically affected or physically relocated by the Project; and Employment and small business opportunities for Ugandans in the short, medium and long-term.
Project cumulative impacts of a negative nature include: Relocation of people with compensation to accommodate the Project‘s construction, facilities and operations;’ Aesthetic impacts from the presence of another dam with the potential for enhanced tourism; Some disruption of the natural flow regime over an -8-kilometer stretch of the Nile downstream of and as a result of Nalubaale and Kiira, with associated impacts: o on aquatic organisms and communities (also potentially positive if productivity of reservoir increased); o and on river users (fishers) - also potentially positive if increased productivity in reservoir is reflected in fishers’ catches; and Losses of wildlife populations and habitats, as well as agricultural lands, due to inundation of terrestrial habitats. (See Annex 2, SEA Summary from the SEA.)
It is unknown, based on currently available data and information, whether cumulative effects on health and educational services or on culturallspiritual sites might be identified. It seems unlikely that there are cumulative effects on white-water rafting, as these activities are not believed to have been commercially available at the time of Kiira’s approval. The cumulative effects of transmission system infrastructure associated with the Bujagali Project are addressed in the companion SEA.
In accordance with the Management Action Plan commitment on cumulative impacts under the first Bujagali project, the SSEA has been completed, including a Cumulative Impacts Assessment. This analysis was
’ See paragraphs 72-86.
45 Uganda - Private Power Generation (Bujagali)
IssuelFinding -Para CommentlAction nos. undertaken on a basin or sub-region basis depending on the groupings of options which would potentially lead to cumulative impacts. For example, cumulative hydropower impacts are viewed from a basin perspective, while thermal options are clustered on an “airshed” basis. The exercise proved to be challenging due to the highly variable nature of the data available on the options under consideration. For some projects, social and environmental assessments had been prepared. For others, very little information was available. The analysis of cumulative impacts in the SSEA provides basic qualitative information on cumulative impact issues to be accounted for in the analysis of the power development portfolios under study. With respect to the Victoria Nile Basin, including the Bujagali and Karuma options, the SSEA2 identified the following potential environmental impacts:
Virtually no change in flow regime as only the Rusumo Falls option would cause small localized changes in flow regime, which would be absorbed by Lake Victoria; all other options are run-of-river; Possible slight reduction in sediment and nutrient flow would lead to improved water quality: Virtually no change in evaporation/ evapotranspiration rates; and Some localized loss of habitat.
With regard to socio-economic impacts, it was noted that ”some socio- economic impacts of hydropower options (such as waterborne diseases or economic spin-offs during construction) are generally quite local and do not really generate cumulative effects with other activities elsewhere in the target area. On the other hand, a geographical concentration of multiple options might affect the regional socio-economic dynamic and therefore will generate some impacts that may accumulate in time and space” (SSEA Section 14.7.2).
With respect to the Victoria Nile Basin, “the only significant negative cumulative socio-economic impact in this region (including Karuma and Bujagali options) will be on aesthetics and tourism concerns. In contrast, it should be taken into account that a more reliable supply of energy will improve infrastructure and services, an essential factor to attract tourism and promote economic growth. Even though the region is highly densely populated, it is not expected that the resettlement that will take place for Bujagali will deteriorate socio-economic conditions in the region. In the entire region, it is the only project with involuntary resettlement and thus the impact will not cumulate with other options proposed” (SSEA Section 14.7.2.3).
Management believes that the cumulative effects assessment was carried out within a strategic social and environmental framework for existing and future hydropower development in the Victoria Nile Basin, and thus with an eye to facilitating decision-making on the timing and selection of the next project for development.
Action: No action is planned beyond ongoing supervision. Environmental Impacts on 148- Comment: Management acknowledges the Panel’s finding of compliance Fisheries and Aquatic Systems 159 with OP 4.01 andOP 4.04 as these relate to the assessment of likely Based on its review of relevant consequences of the Project on fish stocks in the Upper Victoria Nile and research studies, Panel observes Lake Victoria. that the status of fish species -
Rusumo falls is located on the Kagera River upstream of its outflow into Lake Victoria. A feasibility study is under preparation for an -80MW hydropower station. The project is being prepared through a collaborative effort of Burundi, Rwanda and Tanzania.
46 Management Report and Recommendation
IssuelFinding -Para CommentIAction -nos. nhabiting both Lake Victoria and ktion: No action is planned beyond ongoing supervision. Victoria Nile is disputed and that mgoing research is desirable. However, significant effort has been devoted to study these fish in the reaches of the Victoria Nile that will be affected by the Bujagali Hydropower Project. Panel finds that Management acted consistently with OP 4.01 and OP 4.04 as these relate to assessment 3f likely consequences of Project on
Fish stocks in the Utmer9s Victoria Nile and Lake Victoria. - Kalagala Offset Agreement 160- Comment: Management acknowledges the Panel’s finding that an offset Panel finds that there is evidence 172 has been created to meet the requirements of OP 4.04. Management that an offset has been created, to Further notes that the GoU has signed an IA (IA), as part of the Partial Risk meet OP 4.04, but there is no Guarantee arrangements, including provision to create and implement an evidence of the offset site being SMP acceptable to IDA. This plan is currently under preparation. subject to appropriate conservation Moreover, under BEL‘S SEA, enhancement planting is now ongoing, with and mitigation measures in tens of thousands of seedlings planted to date (up to 400 hectares; of conformity with sound social and which 79 hectares completed; additional 125 hectares by end-2008; environmental standards. Project is remainder in 2009). thus not in compliance with OP 4.04. Panel finds that the Kalagala offset An important provision of the IA is the Government‘s commitment to “set may not achieve the purpose for aside the Kalagala Falls Site exclusively to protect its natural habitat and which it was set aside, and this is environmental and spiritual values in conformity with sound social and not consistent with the provisions of environmental standards acceptable to the Association. Any tourism OP 4.04. Panel notes with concern development at the Kalagala Falls Site will be carried out only in a manner that proposed Environmental acceptable to the Association and in accordance with the aforementioned Mitigation and Monitoring Plan is standards. Uganda also agrees that it will not develop power generation silent on the need for monitoring of that could adversely affect the ability to maintain the above-stated enhancement and offset plantings. protection at the Kalagala Falls Site without the prior agreement of the Monitoring of replacement plantings Association.” In addition, the GoU agreed to conserve through a SMP and has not been included in the terms budget mutually agreed by the Government and the Association both the of reference of the witness NGO Kalagala area and other areas nearby” (IA Section 3.06(a)). appointed to monitor Project compliance with IDA conditionalities. Management notes the concerns of the Panel with regard to agreements This is not consistent with OP 4.04. being considered “permanent.” As with other Agreements signed with IDA, the IA is subject to cross-default conditions which in the extreme would allow the Bank to suspend the Bank’s entire program and ongoing portfolio of projects in an event of default. The IA therefore provides a powerful remedy.
With respect to enhancement planting, Management notes that the Panel visited the site prior to financial closure. In conformance with the SEA, BEL will implement afforestation activities within the area covered by the SMP. The afforestation activity within the area covered by the SMP is part of a larger afforestation program undertaken by BEL to cover up to 400 hectares, of which 79 hectares have been completed and an additional 125 hectares are expected to be completed by end-2008. This activity complements the SMP currently under preparation by the NFA, with the assistance of IUCN. This Plan includes Mabira Central Forest Reserve, the Kalagala Forest Reserve and the Nile Bank Central Forest Reserve. The preparation and implementation of the SMP is participatory and includes the local communities. Additional reforestation activities beyond those by BEL and NFA will be part of the SMP in order to offset the lost trees in the reservoir area and re-establish forest in currently cleared forest reserve areas.
47 Uganda - Private Power Generation (Bujagali)
IssuelFinding -Para CommentlAction -nos. The SMP will also assess the capacity of NFA and other organizations involved in implementing and managing the SMP and capacity building will be included as appropriate. BEL will continue to be a partner in the implementation of the SMP in accordance with its SEA. Implementation of the SMP will be monitored by BEL, NFA and the World Bank. OP 4.04 does not require that a witness NGO monitor the replanting of trees; this is the responsibility of NFA, the District Forest Officer, the District Environmental Officer and LCI.
Action: In the course of ongoing supervision, Management will monitor progress of BEL’S ongoing afforestation activities as part of the EMP jointly implemented by BEL, District Environmental Officer, District Forest Officer, and LCI. Management will also follow up on completion by the NFA of the SMP for the Kalagala Offset, which includes the Mabira Central Forest Reserve, by June 2009, including tourism development program. Such follow up will include an assessment of NFA’s implementation capacity for the SMP. If the SMP is not completed by the agreed deadline, Management reserves the right to take action similar to that set out in the - IA. Safety of Dams 173- Comment: Management acknowledges the Panel’s finding of compliance Panel finds that Management has 179 with OP 4.37 regarding the safety of dams. complied with the procedures set forth in OP 4.37. - Action: No action is planned. OLOGICAL AND CLIMATE CHANGE -3ISKI Appropriateness of Hydrological 187- Comment: Management acknowledges the Panel’s finding of compliance Data Series used in Project 195 with OP 4.01 regarding the appropriateness of hydrological data series Design used in the Project. Panel’s hydrology expert has concluded that hydrologic data sets Action: No action is planned. used in Project design constitute a reliable data series and its variability over time is a natural condition, which can be observed in other hydrologic series of different parts of the world, when hydrologic series is long enough. Panel finds that this provides an appropriate baseline for analysis of environmental and economic issues, in compliance with OP 4.01. - Potential Impact of the Project on 221- Comment: Management notes that as a run-of-river facility downstream of Lake Victoria 230 Nalubaale and Kiira, Bujagali will have no control over releases from Lake Panel notes importance of assessing Victoria. Nonetheless, the SEA reviewed the cumulative impacts of the changes in operating regimes and Project in the Victoria Nile Basin, and thus the area of influence of this extending area of influence of the Project was correctly identified as including the Nalubaale/Kiira dam Project to Lake Victoria. Panel finds structure. Moreover, Management acknowledges the critical importance of that SEA analysis did not comply sustainable management of Lake Victoria (including water usage (e.g., with OP 4.01 in defining the area of energy, water supply, etc.), fisheries management, pollution control, influence of the Project because tourism, transport, and many other interrelated issues), and is supporting Project impacts on the changing collaborative efforts by the EAC in the context of the LVEMP. levels of Lake Victoria were not assessed. Panel notes the Management believes it has adequately described the current hydro importance of making the structure operating regime, the Government‘s efforts to return to the Agreed Curve for governance of water releases operating regime, and the benefits that the Bujagali Project will bring from Lake Victoria clear and through more efficient use of water for hydropower generation. The Project transparent to all stakeholders. does not create an incremental draw on Lake Victoria: it reuses the water released for the operation of the NalubaalelKiira dam complex. With the joint operation of the existing hydropower facilities and the proposed Project, the same energy output generated by Nalubaale and Kiira in 2007 would only require 45 percent of the current water release from Lake
48 Management Report and Recommendation
No IssuelFinding Para- CommentlAction - -nos. Victoria (see PAD, paragraph 123). Furthermore, the GoU is taking a number of measures to diversify power supply, including procuring permanent thermal generation capacity, adopting demand side management measures, as well as accelerating mini-hydro and co- generation prospects in the short term, and geothermal prospects in the long term (see PAD, page 24).
Management also believes that it has properly assessed the area of influence of the Project on Lake Victoria. This includes an assessment of the hydrology of the Victoria Nile and hydrological risks (PAD, paragraphs 118-131 and Annex IO), along with the potential effects of climate change on the long-term viability of the Bujagali Project (PAD, paragraph 160 and Annex 15, paragraphs 100-102).
Management acknowledges that there are two opposing views of the Project‘s potential impact on Lake Victoria. Project opponents contend that as demand continues to rise, it could add to pressure for over-abstraction of Lake Victoria, since Uganda will be increasingly reliant on Nile-based hydropower. As Management has explained above, the Bujagali dam itself will not result in greater abstraction from Lake Victoria. By more efficiently using the water for both hydropower facilities through a joint operating regime of water flows, such pressure will be lessened. Furthermore, ongoing planned investments in new generation, including thermal power, along with regional interconnections, will allow the GoU to stay ahead of demand and thus reduce reliance on the Nile for power generation.
On balance, Management believes that with ongoing support from the GoU, private sector, and donors, investment plans can be realized, which will support maintenance of water releases on the Nile that are consistent with the Agreed Curve. In particular, the GoU, Bank and other donors are establishing a Sector Wide Approach to support the investment plan and stay ahead of demand growth. In addition, should demand growth be lower than expected, as the Panel suggests (see paragraph 254 of the Panel’s Investigation Report), the pressure would be reduced. Moreover, over- abstraction would be less of an issue if climate predictions prove correct, and the water inflows to Lake Victoria are higher than today.
Nevertheless, Management stresses the importance of supporting sustainable use of Lake Victoria, including water use, biodiversity, fisheries, water quality, watershed management, tourism, transportation, and other issues. This complex web of issues cannot be resolved on the basis of a single hydropower project. For this reason, the Bank is supporting the LVEMP II, one objective of which is to strengthen regional and national institutions for coordination of sustainable management of the transboundary Lake Victoria Basin resources, including establishing suitable and inclusive governance structures for water usage. To accomplish this, the Project will establish and/or strengthen regional and national institutions that regulate, monitor and enforce sustainable utilization of natural resources and environmental standards. Mechanisms for resolving disputes over natural resources management and environmental impacts will also be developed.
Action: In the course of normal supervision, Management will follow up on GoU’s commitment to disclose the Lake Victoria hydrological (water releases) information and make it available to the EAC. The LVEMP II under preparation will also address a broad range of environmental issues - affecting Lake Victoria. 12. Climate Change Risks 231- Comment: Management acknowledges the Panel’s finding of compliance Panel finds that the possible effect of 246 regarding the consideration in the SSEA of the possible effect of climate climate change on hydropower change on hydropower projects on the Victoria Nile. Management agrees - projects on the Victoria Nile has - that the PAD’S language might have been more appropriately moderated;
49 Uganda - Private Power Generation (Bujagali)
IssuelFinding -Para CommentlAction nos. been seriously considered in the however, the Economic Analysis correctly accounted for significant risk SSEA. This is in compliance with Of factors to the Project in accordance with OP 4.01. 4.01. Management does not appear to have ensured that Economic Given all the available evidence, there was no basis for identifying climate Study drew on the much more change as a significant risk factor for the Project and no evidence has thorough analysis in SSEA. Panel emerged since then that would alter that assessment. Nonetheless, the finds that this is not compliant with adequacy of water flows on the Nile River was specifically addressed in OP 10.04. Section E of the PAD on Critical Risks and Possible Controversial Aspects. Panel is aware of the limitation of The Economic Study relied on published analysis of climate change impact known technology in evaluating on Nile River hydrology by Tate, Sutcliffe, et al. (Appendix B4 of Economic climate change scenarios and that Study). This approach concluded that no significant reduction in the analysis of climate change is an hydrological flow is expected as a result of climate change during the life of evolving science, where gaps the Project. A further assessment was carried out by an independent and remain. Indeed, this situation makes renowned international hydrologist, Prof. Juan Valdes of the University of all the more troubling the PAD'S Arizona, who also did not find evidence of downside risk of climate change categorical assertion, without any on Nile River hydrology, although he did state that caution should be used reference to risk and uncertainty, when applying results of the climate change models to make operational that there will be no adverse effect decisions. During this period, the SSEA was also under preparation, and on water release due to climate the Project team noted that its conclusion indicated that, taking into change during Project life. account the uncertainties associated with any prediction, climate change is This failure to express climate likely to increase the availability of water and runoff in the Lake Victoria change as a risk factor is not Basin. Climate change would therefore likely bring upside benefits rather consistent with Of 10.04. Panel than downside risks to the economics of the Project. notes the importance of continued attention and analysis to the effect of Action: See Action under Item 11 above. climate change on flows and hydropower aeneration on the Victoria Nile.- - OMlC AND ENVIRONMENTAL ANA1 -'SIS c ALTERNATIVES Small and Medium Scale 282- Comment: The Economic Study assessed all realistic options for providing AI tern at ives 290 baseload power to Uganda within the Project timeframe. This included Panel notes that information in hydropower (from large scale to mini-hydro), oil-based thermal, Economic Study and PAD relating to geothermal, and biomass. The least-cost expansion plan includes all of knowledge about and potential of these options and clearly shows that Bujagali is the next in-line baseload smaller scale and/or distributed power station for Uganda. The analysis of alternatives in the Economic generation alternatives did not Study conforms with OP 10.04. clearly establish that available studies and data had been identified The Economic Study assessed existing data and collected its own and evaluated to decide whether information about the cost of small-scale off-grid generation in Uganda. Further consideration was required. This analysis, which was used for calculating consumers' willingness to Panel finds that Economic Study and pay and cost of unserved energy, includes seven studies and surveys PAD did not demonstrate full listed in Appendix El and shows that none of these options (including compliance with Of 10.04 solar power) is competitive with the Bujagali Project. requirement to evaluate alternatives. Based on the information available during Project evaluation, the Economic Study and PAD took into consideration the technological options that are suitable in Uganda for grid-based generation including: hydropower (conventional and small-scale - down to 3MW), geothermal, biomass and oil-based thermal options. Some of these smaller scale alternatives are indeed retained in the least-cost expansion plan for power generation in Uganda as identified in the Economic Study. There are no available studies sufficient to assess realistic prospects for grid-connected wind-power in Uganda. Moreover, there are few if any places in Uganda known for sustained, high winds throughout the year. Hence wind power is currently not viewed as a near-term realistic option for grid-connected generation and was not considered in the Economic Study.
It bears noting that Uganda is at a very early stage of electrification, with less than 10 percent of the population connected. Therefore, off-grid options are important for populations unlikely to receive grid power in the
50 Management Report and Recommendation
IssuelFinding -Para CommentlAction nos. near future. With donor and World Bank support, Uganda is pursuing both grid-based power (e.g., Bujagali) and off-grid solutions (since 2001, through the Bank-supported Energy for Rural Transformation Program). While off-grid solar PV systems are being used where they are most effective (small, isolated loads) solar PV is not considered a baseload option since it is non-dispatchable and only available during daylight hours. Moreover, to produce the same daily electricity as Bujagali (under low hydrology) would require a solar PV array of about 625MW (roughly 8 square kilometers), making it one the largest PV systems an here in the world, costing over US$3 billion, or about 27 percent of GDPY and more than 240 percent of GoU’s annual capital expenditures for 2007/2008, and producing electricity at a levelized cost of about US$0.30/kWh - not a reasonable alternative to Bujagali. With respect to concentrating solar thermal electric options, Management notes that the climatic conditions in Uganda are not suitable for this technology; hence, it was not considered as an alternative. As solar power generation technology matures and becomes commercially viable, Uganda could certainly explore adding such capacity to its overall energy portfolio.
The Bujagali Project is conceived to meet the needs of the main electricity grid in Uganda and the Economic Study fulfilled its key objective for identifying the least-cost technology for doing so.
Action: No further action is required. Tariffs and Affordability 328- Comment: Both the Economic Study and the PAD used the latest Project Panel finds that, in order to comply with 330 cost information available at the time they were being finalized. the requirements of OP 10.04, the Negotiations continued beyond that point and the EPC cost was not fixed PAD should have qualified its in US$ until BEL issued the notice to proceed, following financial close in statement about the projected drop in December 2007. Management acknowledges that the Project team could tariffs to take into account the impact of have explained better this uncertainty regarding ultimate Project cost in the EPC and transmission cost increases. PAD. However, at the time, Management anticipated financial close shortly after Board approval in April 2007. As pointed out by the Panel, the Project’s least-cost status is robust to such cost variations, as the Project cost would have to increase by 49 percent while the Karuma dam remained unchanged before the Bujagali Project ceased to be the least- cost option. Under risk analysis, the Economic Study did cover the case where the Project had a higher cost by 10 percent compared to the base case (as it turned out this was the right order of magnitude in terms of Project cost at financial close, although the attributed probability of such ar outcome at 20 percent appears with hindsight to have been low). It was demonstrated that Project economics remain robust under such a high cost scenario. End user tariff projections are covered extensively in Annex 12 of the PAD - Financial Performance of the Uganda Power Sector, including downside and upside risk. Variations in Project cost could have been added as an additional downside risk, while recognizing that other risk factors, such as oil prices, which were included, may well turn out to have a larger impact on end-user tariffs.
Action: No further action required. Externalities 344- Comment: The pollutants noted by the Panel are normally associated with Panel finds that the limited 349 thermal power projects; to the extent that the Bujagali Project reduces the presentation and discussion of the need for thermal generation, the avoided environmental cost of such [external] costs in Economic Study emissions would in fact improve the economic viability of the Project. did not succeed in demonstrating full Management considers that, given that the Project’s economic viability wa5 compliance with OP 10.04. In the already well demonstrated, this additional analysis would not have Panel’s view, to meet all materially changed the conclusions. requirements of OP 10.04, Economic Study should have - Action: No further action required.
3 At the official exchange rate.
51 Uganda - Private Power Generation (Bujagali)
IssuelFinding -Para Comment/Action -nos. examined, in more detail, the potential of changes in damage from other pollutants than COZ, even if it might have proved difficult to value them. - Hydropower Location Alternatives 359- Comment: The Project took into account the cultural and spiritual values within Uganda 365 associated with Bujagali Falls and treated these as part of the assessment Panel finds that Management did not of Project location and anticipated impacts, as noted in Appendix J of the ensure that cultural and spiritual SSEA. During the Third Stakeholder Consultation in 1999, the Project matters were properly considered Steering Committee retained the criterion “impacts on historical and when comparing the Bujagali and religious sites.” Although this was not measured in quantitative terms, the Karuma alternatives, as required by analysis of alternatives took into consideration the traditional practices and OP 4.01. This is especially relevant the value attached to “unseen, free moving, spiritual forces associated with in light of the significant cultural and ancestors (personal spirit forces) or with nature (impersonal spirit forces)” spiritual importance of Bujagali Falls (RCDAP, pages 95-96). This was evident in the appeasement ceremony, to the Busoga people. Lack of facilitated by AES, and which took place in August 1998, with the spiritual proper consideration of cultural and leader, Nabamba Bujagali, who found the Project to be “culturally spiritual matters in this comparison acceptable.” On this basis, and following advice from several academic had important consequences, in that and local cultural experts, as well as feedback from more than 60 it appears to have led to the consultations with spiritual leaders, local officials, and other PAPS, the conclusion that there was little Project proceeded with the selection of Bujagali, with the knowledge that difference between the Bujagali and the cultural and spiritual aspects were sufficiently taken into account in its Karuma sites and that therefore site selection. economic and financial aspects of the options should become the Action: No further action is required. determining factor in selecting the preferred option. - Alternative Project Configurations 366- Comment: The SEA describes the alternative configurations considered at Bujagali 370 for the Project. These included options which might have preserved the Panel notes that a range of Bujagali Falls. However, these were rejected on technical, environmental, alternatives have been considered in and social grounds. The selected alternative includes an environmental these studies. Panel is concerned, offset (Kalagala). This conforms with the requirements of OP 4.01. however, that analysis unduly narrowed consideration of Section 4.4, page 184 of the main SEA Report for the hydropower plant alternatives on the basis of a-priori (December 2006) provides the details of the configurations studied. The judgments rather than exploring all Inception Report (WS Atkins, 1998) and scope of work for the EIA included technically feasible options, a requirement that alternative options at, and around, the Bujagali site also including those that would not be investigated. The objective of the study was to “compare and evaluate involve flooding Bujagali Falls and options that have been developed for Bujagali, in order to provide the thus have lower social and rationale for the selection of the preferred scheme. The key considerations environmental costs, and laying in the comparison are the potential power output of the different schemes, them out in a systematic way along their financial costs and their relative environmental and socio-economic with their economic, social and implication^."^ A review of this report was undertaken in connection with environmental benefits and costs, so the Economic Analysis of the new Project. that judgments on optimal alternatives could be made with full Five configurations for the dam had previously been considered by the understanding of trade-offs involved. engineering firm Acres in 1990 in connection with the feasibility of This is not consistent with OP 4.01’s expanding the Owen Falls power station at: Kyabirwa Falls: Bujagali Falls provisions that feasible alternatives (the “BI Configuration”); Buyala Falls (two alignments); and Busowoko should be explored systematically to Falls. These configurations were re-examined and costed during the meet basic Project objectives, and Economic Analysis performed for the new Project. In addition, two further may have led to inadequate configurations were identified, one a diversion canal at Bujagali to avoid consideration of alternatives that met the inundation of Bujagali Falls (the “B2” configuration); and the other at Project objectives while avoiding Busowoko Falls with a lower full supply level, again to preserve the falls social and environmental costs and the river downstream to Dumbbell Island. associated with flooding Bujagali
4 The assessment was undertaken by WS Atkins, in association with engineering consultants Knight Piesold, and was completed in June 1998. The report was included in Volume 2 of the EIS submitted to NEMA (WS Atluns, 1999).
52 Management Report and Recommendation
IssuelFinding -Para Comment/Action -nos. Falls. As the above summary indicates, these configuration studies included alternatives to preserve Bujagali Falls. The diversion canal and lower supply levels that were considered were rejected on technical (lower power output, increased construction time) and on environmental, social and economic grounds.
Management considers that the present configuration with the Kalagala Offset provides a more environmentally sound development option for the Victoria Nile. Instead of two additional dams on a short stretch of the river, only one additional dam (Bujagali dam) will be built, which allows for alternative environmentally sound development on that stretch of the Victoria Nile.
On culturallspiritual issues, please see Item 23 below. - Action: No action is planned beyond ongoing supervision. \L ISSUES-- INVOLUNTARY RESET -.EMEI Assessment and Action Plan 447- Comment: The second Bujagali Project built as appropriate on the work Panel found no formal monitoring or 454 undertaken for the first Bujagali project. In the case of resettlement, under evaluation report supporting the its RCDAP, AES had already concluded the cadastral survey: paid 99.4 assertion that involuntary percent of the contracts related to land, crop, and other payments; resettlement was “largely completed 84 percent of the land titling; constructed the Naminya completed,” the reason stated for Resettlement Site; physically relocated all 101 households which required forgoing full RAP preparation, as displacement: implemented major elements of livelihood support: and required by OP 4.12. Panel finds other actions. Management considers that these actions by AES show that that the hydropower APRAP failed to resettlement and compensation at the dam site were largely completed for assess and update the previous the Project. Management finds that BEL‘s preparation of an APRAP was 2001 RAP and provide additional an appropriate means of evaluating past actions and remaining new information as required to requirements, consistent with OP 4.12. In fact, the first Inspection Panel complete the RAP requirements to findings in 2002 noted that, except for some cases of crop valuation and current standards. This does not payments, “the RCDAP was generally in compliance with OD 4.30 on comply with OPBP 4.12. This led to Involuntary Resettlement” (see the Panel’s investigation report for the first Action Plans that did not meet the Bujagali project, paragraph 260, page 80). policy objectives and requirements. Management supports BEL’s view that, although some aspects of the RCDAP required follow up, the bulk of the resettlement and compensation components of the RCDAP was completed by the time AES left the Project in 2003. First, AES finalized the cadastral and land survey, indicating a fairly substantial land take of 238 hectares. Second, the process of identification of PAPs was extensive - 1,288 households (8,700 PAPs) directly affected by the Project; of these, 101 households (714 persons) were physically displaced and, except for 16 households who moved to another part of their land, the remaining 85 households were moved to another location: and 1,I 87 non-physically displaced households compensated for lost land, crops, trees, and other assets. Third, the Naminya Resettlement Site was completed, with replacement houses adequately built. Fourth, cash compensation payments were 99 percent completed (except for 26 out of 4,565 contracts). The valuation method was based on market value plus an “uplift,” reflecting full replacement cost. Fifth, some livelihood support programs were completed, including training on money management; farm practices and cultivation methods: garden agriculture; and animal husbandry. In addition, based on the RCDAP, BEL was able to complete the following: (i) public consultation and disclosure plan; (ii) labor force management plan; and (iii) the CPMP. - Action: No action is planned beyond ongoing supervision. Baseline Socio-Economic Data 455- Comment: A socio-economic baseline was completed by AES in 2001, Panel notes that the survey 465 and updated by BEL in 2006. However, in January 2007, prior to the conducted by BEL cannot be submission of the Request for Inspection, Management found deficiencies considered a census of economic or - in the baseline and initiated corrective action. Management has agreed
53 Uganda - Private Power Generation (Bujagali)
IssuelFinding -Para CommentlAction -nos. social conditions as defined in OP with BEL on a plan for an OP 4.12-compliant baseline to be completed by 4.12. In this sense, Management‘s March 2009. claim that the Project took the first Panel’s report findings into account As a corrective measure, Management already set in motion with BEL, in in preparation of the current Project early 2007, proactive steps to enhance this baseline in two ways. The first is not accurate because significant is through an updated socio-economic survey and needs assessment that weaknesses in the process of will be completed by BEL in March 2009. The findings from the survey and gathering baseline data information needs assessment supplement the existing 2006 APRAP socio-economic were similarly identified in the 2002 database. The second is strengthening the existing socio-economic Panel Investigation Report. Panel monitoring system. BEL currently prepares a quarterly Social and also finds that the approach to Environmental Monitoring report which contains a separate section on consultations with people who had impacts of livelihood restoration and community development programs on moved and had been compensated PAPs. Based on the updated socio-economic survey results, BEL will be is not consistent with involuntary able to monitor “before-and-after” changes in income and livelihood resettlement policy. indicators for specific PAPs who were surveyed in 2001 and 2006; enhance the baseline data coverage to all PAPs and vulnerable households: and follow up changes in the income and poverty indicators through panel surveys (every two years).
Action: Management will ensure that findings from the socio-economic survey (which will be completed by March 2009) are: integrated into the CDAP by BEL in its design of sub-project activities: and reported in BEL’s Quarterly Environment and Social Monitoring. BEL will enhance its database of household survey data and capacity building for monitoring and evaluating impacts of livelihood restoration and community development, and through technical assistance (from MIGA) to BEL, - improve the socio-economic database. Livelihood Restoration 466- Comment: Management took proactive measures to mitigate the effects of Panel observes that effects of the 469, the gap period between the two projects, consistent with OP 4.12 original displacement and of the 470- requirements. The gap was addressed by the Project in three ways. First, ensuing delay have not been fully 473, during the interim period, resettlers were given agricultural livelihood reflected in the APRAP. Overall, 474- support, including crop and tree seedlings and backyard animals. In 2006, Panel finds Project in non- 476, this program was expanded to include agricultural extension and provision compliance with the mandate of 477- of high value crops and assistance in marketing them. As of July 2008, 84 Bank Policy on Involuntary 490, percent of PAPs participated in this ongoing program. Second, under the Resettlement to improve or at least 51 3- APRAP, BEL contracted a local NGO, Team Business College, to provide to restore, in real terms, the 516, training workshops on business opportunities. These workshops covered: livelihoods and standards of living of 517- use of village banks; group savings among fishermen’s associations; and people displaced by the Project. 521 group financing (e.g., capitalization of small fishing boats, gear, and other materials). Lastly, BEL’s business resource centers on the east and west Method to Assess Livelihood banks of the Project will support small businesses for agricultural Restoration and Address Project enhancement; fisheries improvement; and micro credits. To support these Delay businesses, two agricultural and fish markets will be constructed by BEL. In Panel’s view the methodology used to assess livelihood restoration Management notes that the Panel visited the Project affected villages in the context of Project, while during the “gap period.” Management had already undertaken proactive suggestive of issues, cannot measures with BEL to mitigate the effects of this gap period between the substitute for an economic analysis two projects with the previous AES BIU and with BEL, consistent with of livelihood risks and restoration. OP4.12 requirements. For example, UETCL retained the BIU in Jinja near Panel also finds that Management the Project site, thus ensuring continuity between the two projects and did not assess and include into the maintaining contact with PAPs. Management continuously assessed the APRAP a methodology for restitution work of the BIU during the interim period and found it to have performed of unintended socio-economic costs adequate short-term activities using “quick fix and quick impact” incurred by displaced persons approaches. Management observed that the BIU was able to: resolve mos resulting from project of the compensation and land titling grievances: monitor service-oriented stoppageldelay. This is not activities in the Project area (e.g., water wells): implement small-scale consistent with OP 4.12. community development programs: secure the right of way for the Real or perceived unfulfilled hydropower facility and transmission line; and maintain an informative promises in the prior Bujagali relationship with PAPs through monthly village consultations. In addition, Project - the BIU was able to: establish local ownership of the community water
54 Management Report and Recommendation
IssuelFinding Para- CommenffAction 5 Panel notes that lack of clear wells through agreements with District Water Authorities for maintenance communication with affected people of the village water borehole pumps; complete several training sessions in to address concerns of displaced business development and agriculture for women: and upgrade some persons with regards to the secondary and tertiary roads. While these did not constitute the intended commitments made by AESNP, risks livelihood support programs outlined in the 2002 RCDAP, they leaving the project with contentious, nonetheless represented reasonable best efforts by the GoUlUETCL to unresolved issues. ensure continuity in assisting PAPs until the Project restarted in 2006.
Specific Livelihood Risks: Fishing The APRAP completed eight focus group discussions in the Naminya and Agriculture Resettlement Site, host communities, Kukubamutwe (West Bank) and Panel finds that Project failed to Namizi West (East Bank) to inform PAPs on livelihood restoration provide adequately for loss of programs. Producer groups were organized for agriculture and fisheries, livelihood associated with loss of and through the monthly meetings of these groups, BEL held consultations fishing and agriculture, in non and needs assessment discussions, which were the focus of meetings in compliance with OP 4.12. 2006 to 2007. Two Village Consultation Committees (VCC) were formed in each district in March 2007 to facilitate information exchange. BEL reported in its APRAP Update of October 15, 2007 that the Community Liaison Officer documented 165 meetings of the VCC. Transcripts of these meetings indicate that PAPs were not only informed about the livelihood programs but also participated in the design of its components. - Action: No action is planned beyond ongoing supervision. Land Titles 495- Comment: Management acknowledges the Panel’s finding that the Panel finds that APRAP conclusion 498 APRAP’s assessment of issuing land titles is consistent with OP 4.12. As related to the necessity of issuing noted in the APRAP, there was confusion among PAPs about resettlement land titles to people resettled under plots and replacement lands (land-for-land exchange) purchased by AES prior project is consistent with OP as part of the in-kind compensation for lost land. But despite these 4.12. Panel notes however that there problems, currently only 5 percent of land titles remain unresolved: BEL is seems to be no agreed timetable for working to complete the land titling process. Management has raised with issuance of these titles. GoU counterparts the importance of resolving land titles in a timely and effective manner. - Action: There are no additional actions required. Vulnerable Peoples 499- Comment: The APRAP alreadv Drovides sDecific Droarams for the Panel notes that the absence of 503 vulnerable, including additionaicompensation payments and organization focus on livelihood risks to the of ”village consultation committees” to ensure sustainable support. BEL vulnerable is evident in that none of completed a recount of vulnerable people (230 households) and provided the proposed assistance measures additional support to them beyond what they have received from addresses vulnerable compensation payments (see APRAP, page 32). BEL’s coordination with tenantskharecroppers or children. village committees constitutes a more sustainable institutional set up. Eact Additionally, proposed assistance committee is comprised of local government (LCI ) elected officials, elders measures do not address the or religious authorities, NGOs, and representatives from the GoU social question of sustainability beyond services units. A special group prepares the proposed activities for the limited Project support. Panel finds vulnerable people, especially orphans and women’s groups. Project out of compliance with vulnerable peoples provisions of OP Action: Management will follow up on BEL’s programs, with timetable and 4.12. - targeted activities, to address needs of vulnerable groups. Sharing in Project Benefits and 522- Comment: Prior to the Request for Inspection, BEL increased the CDAP Community Development 532 budget by 83 percent, which provides sufficient funds for this important Panel finds that with limited funding, activity. In addition, BEL is seeking to involve local authorities, utilities, and broad criteria for eligibility and lack service providers to enhance the sustainability of their interventions. Also, of specificity, CDAP programs do no! BEL has committed to hire at least 10 percent of the unskilled workforce assure compliance with OP 4.12. from local villages. Finally donor co-financing will expand electricity and water supplies to the area.
Action: In the course of ongoing supervision, Management will follow up with BEL on yearly updated needs assessments that are used to adjust - CDAP activities, responding to PAP priorities. Indigenous Peoples 533- Comment: Management acknowledges the Panel’s conclusion. Panel did not find any evidence that 535
55 Uganda - Private Power Generation (Bujagali)
-No IssuelFinding Para CommentlAction nos. Management violated provisions of Action: No action required. Bank policy on Indigenous Peoples, - with regard to the Basoga people. -CUL JRAL AND SPIRITUAL VALUES - 25. Physical Cultural Resources 566- Comment: Management considers that the Project was prepared in light of Panel finds that Management failed 597 Bank policies on physical cultural resources (OP 4.1 1) and natural habitats adequately to consider or implement (OP 4.04). Management notes that, in fact, it has addressed cultural and alternatives to avoid project-related spiritual issues in three ways. First, Management notes the distinction impacts on Busoga spirituality and between physical and non-physical values of Bujagali Falls while also culture. Most of those who believe in recognizing that they are linked to culture and spirits. Second, the Project the significance of the Bujagali Falls consistently applied culturally acceptable practices, such as appeasement spiritual site do not live in the ceremonies, based on sound professional advice and feedback from immediate vicinity of the Project. extensive consultations. Lastly, in 2002, the Project prepared a CPMP Project also failed adequately to and, in 2007, the EPC prepared a second CPMP (focused on “chance consult with Busoga spiritual clan finds” procedures. BEL has made arrangements for its update and leaders associated with one or more implementation, starting with the construction phase. high status Spirits about significant cultural patrimony of Bujagali Falls. The various diviners consulted from 1998 to 2002 agreed that “closure” Misidentifying Bujagali Falls as a was possible as a result of three actions that AES undertook based on local cultural resource, misaligning their advice. First, the Project provided four payments for carrying out an its consultation strategy, and failing appeasement ceremony. While the Panel correctly states that the diviners to prepare a new Cultural Property did not accept a payment of one million Uganda Shillings at the end of the Management Plan compounded ceremony, this was the fifth and final payment for the ceremony, the errors and muddled mitigation. previous four payments to carry out various rituals, totaling 12.25 million Resultant problems included loss of Uganda Shillings, having been accepted. Second, the Agreement was objectivity of the Sponsor, clear that the impact from the Project would include inundation of Bujagali impatience, assignment of pecuniary Falls. It should be noted that the other religious practitioners who carried motives to stakeholders, cost out ceremonies at about the same time signed similar agreements. The cutting, culturally inappropriate diviners clearly knew the Project impacts prior to the ceremony, even if, as mitigation efforts, and most the Panel claims, the 75 followers were not as clear on this impact. If there importantly, a misunderstanding that was confusion, AES may not have clarified the situation because it was its the Bujagali Project is ensconced in understanding that informing the other 75 followers was the responsibility a long-term relationship with its new of the diviners. Third, the documented evidence shows that one purpose of neighbors and their spirit world. the earlier payments was to bring the 75 followers from all over Uganda, Management unnecessarily and which raises questions about the Panel’s claims that the Project did not inappropriately took sides in a reach out to a much larger group of Busoga religious stakeholders. spiritual controversy of a religion in which millions of Ugandans believe. With respect to the inclusion of cultural resources considerations (including The Panel finds this action by those linked to natural habitats) in the identification of alternative project Management to be non-compliant sites, Management learned from local experts that major segments of the with the OP 4. I I. Nile River with hydropower potential have spirits associated with them. The Panel finds that Management Following professional advice, Management also believes that the Project assumed that what they called the could not rank one site’s spiritual values above or below another’s, so all “Bujagali spirits” were restricted to sites were considered to have almost similar spiritual values, as well as the Project construction and flooding corresponding culturally appropriate solutions. area, in contravention to the BP 4.1 1 requirement that they work with and The Project completed multi-layered and extensive consultations and assist the Borrower to identify the follow up throughout preparation. As noted by the first Inspection Panel spatial and temporal boundaries of Report (2002): “The sponsor has acted responsibly in consulting local the cultural resources affected by people, religious specialists and leaders, and acted in good faith in the project. This did not comply with attempting to mitigate the cultural consequences of losing the Bujagali svoidance and mitigation Falls (page, 97, 2002).” Annex H of the SEA shows the extensive requirements of OP/BP 4.1 I. consultations, including ceremonies, and a national meeting in Kampala, to Panel finds that the culturally and specifically discuss cultural and spiritual issues. These consultations not spiritually affected people were not only addressed archaeological aspects, but also identification and sdequately identified as required by preservation of religious objects, shrines, gravesites, and buildings. Bank policy. - - Action: See Item 25 below. 26. Critical Natural Habitats 598- Comment: The list in the definitions of critical natural habitats in OP 4.04, - finds that the Bujagali Falls -607 drawn from sources such as IUCN, was meant to be illustrative and to
56 Management Report and Recommendation
IssuelFinding -Para CommentlAction -nos. area may be regarded as a critical highlight the fact that certain biological assets, because of their special natural habitat for purposes of OP associations to local communities, could be considered critical natural 4.04. habitats. The policy definitions in OP 4.04 do not include non-biological The Panel finds that the Project assets, such as rocks and waterfalls. In this context, Management notes record does not provide sufficient that the Budhagali spirit was said to inhabit the rapids at Bujagali Falls. discussion as to why the area was Indeed, project preparation activities in 1998 carefully incorporated these not considered a critical natural aspects, and included them as one of the site selection criteria. habitat. Nor do Project documents Furthermore, Management considers that OP 4.04, if triggered, allows for explain the Bank‘s “opinion“ that the significant conversion of natural habitats and provides guidance on Project would not involve significant mitigation and offsets. As a result, the first Bujagali project’s approach of conversion or degradation of a appeasing the spirits from Bujagali Falls and other areas, based on sound critical natural habitat. Considering professional advice from spiritual leaders and culture experts, was the known spiritual importance of the undertaken. The Project took the approach of appeasing the spirits from Project area, without such an Bujagali Falls and other areas, based on professional advice received, anc explanation, one could also arrive at following feedback from more than 60 consultations during the first and an opposite conclusion, i.e. that the into the second Bujagali Project. These consultations included an inundation may be regarded as appeasement ceremony on September 5, 1999, with the spiritual leader, resulting in the significant conversion Nabamba Budhagali, who reported that the spirit would accept the Project, of a critical natural habitat which including the inundation, by completing this appeasement ceremony. would be in violation of OP 4.04. The Panel finds that omitting the reasons Action: No action required. behind an opinion of not declaring the Falls a critical natural habitat is rlot consistent with the objectives of OPBP 4.04. The Panel finds that !here is an overriding need for the Bank to address these issues in a :oherent and well-founded manner ’0 ensure compliance with Bank 2olicies. hltural Property Management sas- Comment AES completed a CPMP, which was part of the RCDAP. The >Ian 613 CPMP was prepared by Ugandan cultural experts, based on more than 60 Jane1 finds that Management failed :onsultations with spiritual leaders, local officials, and villagers. The o prepare a Cultural Properties ’roject has met the basic requirementsfor a CPMP, including mitigation Management Plan, assuming that neasures, managing “chance finds,” and a monitoring system. As noted, vork of previous Sponsor was iossible enhancement of the 2002 CPMP would be strengthening iufficient to meet OPBP 4.1 1 government institutional capacity with respect to cultural resources. In iuidelines. Panel finds that Iddition: (i) the Code of Practice as part of the EPC contractor’s 2007 vlanagement is in non-compliance 2PMP will monitor “chance finds” during construction; (ii) GoU will sponsor vith OP 4.11, by misjudging the neetings and ceremonies, in coordination with local spiritual leaders, to kize, location, scale as well as the jeterrnine location of other physical sites, presewation of artifacts, etc., of iature and magnitude of cultural and :ultural and historical importance; and (iii) any additional appeasement ,piritualsignificance of Bujagali tnd reconciliation rituals will be held, based on recommendations of yak. Panel finds that Management culture specialists and local spiritual leaders, and feedback from local lid not consult with key stakeholders consultations. iroughout Project cycle and is, ierefore, in non-compliance with Action: Management will follow up on GoU commitments to ensure that )P 4.11. Panel finds that mitigation the required capacities and resources are in place for the Government ieasures were not adeauate (coordinated by MEMD, and including local councils) to do an update of because the scope of the impact and the CPMP (which was part of the 2002 RCDAP) by June 2009; and BEL the consultation process were will incorporate into this update the EPC contractor’s Code of Practice (which is covered in the 2007 CPMP developed by the contractor) for “chance finds.”
57
ANNEX 2 SEA SUMMARY - EXCERPTS
@ BURNSiDE
Bujagali Energy limited
Bujagali Hydropower Project Social and Environmental Assessment Report Executive Summary
Prepared by
R.J. Burnside International Limited 292 Speedvale Avenue West, Unit 7 Guelph ON NlH 1C4 Canada
tn association with
Dillon Consulting limited, Canada Ecological Writings #1, Inc., Canada Enviro and Industrial Consult (U) Ltd., Uganda Frederic Giovannetti, Consultant, France Tonkin & Taylor International Ltd., New Zealand
December, 2006
File No: I-A 10045
The material in this report reflects boat judpsment in light 01 the inlormation available at the time of prepriation. Any use which a third party malm of this report, or my reliance on or decisions mide based on il, are the responsibilities of such third parties. R.J. Burnridr Iotorclational Limited @ceeptsno rirponribilily for damrper, if any. suffered by any third party as a rtruil 01 decisions made or actions bmdon this report.
R.J. Burnside International limited I-A 10045
Bujrgali Energy limited ES4 Bujagali Hydropower Project Social and Environmental Assessment .Executive Summary December. 2006
Table of Contents ... Glossary ...... 111 Foreword ...... v 1. 0 Introduction ...... 1 1.1 Project Overview and History ...... 1 1.2 SEA Process and Report ...... 13 2.0 Regulatory Requirements ...... 15 3.0 Existing Social and Environmental Conditions ...... 17 3.1 Project Setting ...... 17 3.2 Biophysical Conditions ...... 17 3.3 Socio-economic and Cultural Conditions ...... 19 3.4 Recent Activities in the Project Area ...... 20 4.0 Praject Need and Alternatives ...... 23 4.1 Meed and Rationale for the Project ...... 23 4.2 Alternative Power Generation Technologies ...... 23 4.3 Alternative Hydropower Development Sites ...... 24 4.4 Evaluation of Alternative Hydropower Configurations ...... 25 5.0 Project Description ...... 27 8.0 Public Consultation and Disclosure ...... 29 6.1 Consultation Program ...... 29 6.2 Grievance Management Mechanisms ...... 37 6.3 Disclosure Program ...... 37 7.0 Impact Identification and Management ...... 39 7.1 Compliance Screening ...... 39 7.2 Project Benefits and Community Development ...... 39 7.2.1 Project Benefits...... 1...... 39 7.2.2 Community Development Program ...... 40 7.3 Key Project Issues and Net Effects Analysis ...... 41 7.4 Cumulative Effects ...... 46 8.0 Social and Environmental Action Plan ...... 49 8.1 Environmental Management ...... 49 8.2 Relationship of the SEAP to Other Project Plans ...... 50 8.3 Implementation of the Social and Environmental Action Plan ...... 50 8.3.1 BEL'S Commitments and Resourcing ...... 50 8.3.2 EPC Contractor's Commitments and Resourcing ...... 50 8.3.3 Reporting Lines and Decision-Making...... 53 8.3.4 Social and Environmental Auditing and Reporting ...... 53 8.3.5 Social and Environmental Oversight ...... 53 8.3.6 Change Nlanagement ...... 54 8.4 Responsibilities and Costs for Environmental Mitigation Measures ...... 54 8.5 Responsibilities for Environmental Monitoring Measures ...... 56 8.6 Institutional Strengthening...... 56
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Tables
Table ES.1: Consultation Activity Summary ...... 29 Table ES.2: Summary of Key Issues. and Responses ...... 30 Table ES.3: Summary of Project Effects. and Impact Mitigation and Effects Monitoring Activities ...... 42 Table ES-4: Responsibilities. Timing and Budgets for Social and Environmental Actions ...... 55
Figures
Figure ES-1 Location of the Bujagali Project ...... 3 Figure ES.2 General Project Layout ...... 5 Figure ES-3 Schematic of Bujagali Hydro Dam and Transmission Facilities ...... 7 Figure ES-4 Permanent and Temporary Land Takes. 1 of 2 ...... 9 Figure ES-4 Permanent and Temporary Land Takes. 2 of 2 ...... 11 Figure ES-5 Public Consultation and Disclosure Activities ...... 35 Figure ES-6 SEAP Component Plans ...... 51
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3.0 Existing Socisl and Environmental Conditions
3.1 Project Setting
The Bujagali HPP is located on the Victoria Nile in south-eastern Uganda. The Victoria Nile is the start ofthe longest branch of the Nile, known as the White Nile The source of the Nile is Lake Victoria, Africa's largest water body and the second largest lake on Earth.
The Lake lies within an elevated plateau in the western part ofAfrica's Great Rift Valley, and straddles the equator. The location of the HPP itself is about 1,100 m above sea level and a few degrees north of the equator.
The discharge of Lake Victoria was dammed in 1954 by construction of the Owen Falls (now Nalubaale) hydro dam. In 2000, a second discharge point from the Lake was created by the construction of a second dam and power plant next to the Nalubaale dam. The Second dam and power plant, originally known as the Owen Falls Extension but later renamed Kiira, went into service in 2000. Page 2 ofFigure ES-4 shows the side-by-side layout of'the two facilities.
The reach of the Victoria Nile that flows between NalubaaleMira and the Bujagali HPP site is located within a deeply incised, steeply sloped valley, and drops in a series of rapids. In recent years, rapids within this reach, as well as those downstream of the dam site, have been used for white water rafting, and several companies have been established that offer rafting tours to mostly foreign tourists. The river is also used for small scale fisheries and as a source ofwater for local villagers, and its many islands and rapids hold significant cultural/religious values for local persons and communities.
Jinja town, located on the east side of the river near Nalubaale is the closest large community. The city developed starting in the 1950's when power for industry became available from the Owen Falls project, and is now the second largest city in Uganda. Kampala, the largest city in the country, is located about 70 km to the west of Jinja.
The majority ofthe study area for the Bujagali hydropower facility is rural, with estate and small-scale or subsistence agriculture being the predominant land uses. Agricultural activity is primarily a labour-intensive, intercropping system with both cash and subsistence crops following the seasonal changes.
3.2 Biophysical Conditions
Within the project area, the Victoria Nile varies in width from 200 to 600 myand drops over 20 m in a series of rapids between the Nalubaale power station and
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Dumbbell Island. The area has moderate potential earthquake risk for hydropower development thus requiring the project be designed to withstand the Maximum Design Earthquake (MDE) and Operating Basis Earthquake levels.
Since 1954, water flow in the mainstem Victoria Nile has been controlled by the Nalubaale and (since 2000) Kiira power stations. Water flows from the dams have been designed to match the natural outflows from the lake that existed prior to the dams’ construction according to the “Agreed Curve.” BEL also adopted the Agreed Curve for its design and implementation of the Bujagali Hydropower facility. (This same approach was adopted previously by AESNP.)
Water quality in the river is believed to be acceptable for drinking, and good for aquatic life. There has been little change in water quality values from 2000 to 2006, other than slight increases in nutrients. The quality ofborehole groundwater in the area meets World Health Organisation ( 1993) guidelines.
The northern region of Lake Victoria has an equatorial type of climate. Two rainy seasons can be distinguished from March-May and October-November. Most of Uganda receives between 1,000 and 1,500 mm precipitation, Mean daily temperature varies between 22°C in July and 24OC in February, The mean minimum varies from 17OC in April, with mean maximum varying from 26°C in June to 35OC in February (Bitarakwate et al., 1967). The local meteorology is characterised by a very high frequency of southerly winds. Prevailing southerly winds occur for over 30 percent of the year. Winds from the west-northwest to the east are very infrequent,
The Victoria Ni1e”supports a diversity of aquatic life including plants, phyto and zooplankton, micro and macro-invertebrates, and fish. Key aquatic species to consider from a human-health perspective as vectors of tropical diseases include snails transmitting schistosomiasis; river blindness (Onchocerciasis) transmitting Simulium damnosum flies; sleeping sickness (trypanosomiasis) transmitting Tsetse flies; and, female mosquitoes belonging to the genus Anopheles, which transmit malaria.
The Victoria Nile originally had a very rich assemblage of fish dominated by riverine species. Significant changes to the environment include the physical barrier to fish movement between the Victoria Nile and Like Victoria introduced by the Nalubaale dam, and the introduction of Nile perch and Nile tilapia. Viable populations ofmany fish species continue to exist in the Victoria Nile despite the construction of the Nalubaale dam over 50 years ago. Nine keystone species from a fisheries and conservation perspective, have been identified in the upper Victoria Nile, the majority ofwhich are classified as able to inhabit both lake and river habitats. This is likely due to the variety of micro-habitats offered in this section ofthe river - from deep, slow-flowing backwaters and ‘pond’ areas with silty sediments through to rapids with rocky substrates.
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The lands within and surrounding the project area are intensively settled and cultivated. The vegetation generally forms an agro-ecosystem with bananas, coffee, maize and vanilla as the main crops. The remnant natural vegetation is characterised as moist semi-deciduous forests. The 2006 vegetation survey identified 298 species in total. Of those identified M, excelsa (Mvule) ‘is categorised as “Low Risk/ Near Threatened” in reports published by the International Union for the Conservation of Nature. Other restricted range species include Ficus cordata and Ficus ottonifolia that have been recorded in only one floral region out of the four that occur in Uganda.
Most of the project area including the islands contains little native vegetation due to intensive agricultural activities. The main crops grown in the area are coffee, maize, sorghum, cassava, sweet potatoes, cabbages, yams, sugar cane and vanilla. Fruits include bananas, mangoes, jackfruit, avocados and pineapples. Eucalyptus is planted for building poles and firewood in Naminya, Malindi and Namizi. The weeds in agricultural areas, some ofwhich are used for medicinal purposes, include woody and non-woody plants
The banks and islands of the Nile in the upstream part of the study area (Bujagali Falls and upstream) are within the Jinja Wildlife Sanctuary which includes the entire Municipality of Jinja as well as the Victoria Nile between Lake Victoria and Bujagali Falls. While the Sanctuary was established in 1953, development along the river has ’ not been restricted and there is no management plan or management activities associated with the Sanctuary. Proposals for activities which may result in the destruction ofhabitat within a wildlife sanctuary must incorporate suitable mitigation measures, and this principal has been adopted for the HPP.
Kimaka Central Forest Reserve (CFR) is the only protected forest in close vicinity of the project area.
3.3 Socio-economic and Cultural Conditions
There is widespread poverty in Uganda, and the country is consistently ranked one of the poorest nations in the world. Approximately 85 percent ofthe population in Uganda reside in rural areas and depend mainly on agriculture for their livelihood. Literacy rates are low.
Agricultural activity is primarily a labour-intensive, intercropping system with both cash and subsistence crops following the seasonal changes. The main cash crops are coffee and sugar cane, coupled with more recent cropping of vanilla. Subsistence food crops include bananas, cassava, sweet potatoes, maize, beans, millet, and yams.
The City of Kampala is Uganda’s political and commercial centre. The Town of Jinja, Uganda’s second largest urban centre, serves as the administrative centre for Jinja
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District and is the District’s prime economic hub, housing industries such as textiles, beer, plastics, food processing, and flour milling.
Within the project area, there are several ethnic groups, mostly of Bantu origins. Busoga is the Kingdom the Basoga people, one of the largest of the five traditional kingdoms in present-day Uganda. The World Bank Group does not consider either group in the area of the project to be indigenous according to the definitions in its safeguard policy and performance standard on that topic.
Historically, the Basoga inhabited the areas ofsouthern Uganda east of the Nile. Buganda is the Kingdom of the Baganda people, who historically inhabited the areas west ofthe Nile. This is still largely the case, although Basogans and Bangandans live on both banks of the river, today. Although the Busoga and Buganda languages vary, they are similar to one another and mutually understandable. Many people still practice traditional religions, .although they are often practised in concert with Christianity and Islam. Several people have amasabo (roughly translated as shrines) on their properties where they can pay respect to their ancestors and commune with spirits.
Between Nalubaale and Dumbbell Island, there are groups of islands, some ofwhich have become intensively farmed during the last few years. The rapids have been used to develop a tourist destination for white water rafting since the late 1990’~~and the islands and rapids have significant cultural/religious value for local people. They also are reported to have been used for grave sites by local people.
Malaria and respiratory infections account for about half of all outpatient diagnoses in , Uganda. The prevalence ofHIVIAIDS is high, with HIV/AIDS-related illness accounting for over 30 percent ofall hospital admissions, and increasing. In an effort to address the spread ofHIV/AIDS, widespread public education campaigns have been established and condoms are readily available.
3.4 Recent Activities in the Project Area
The early stages of development, and subsequent abandonment, of the Bujagali Project by AESNP had effects on the local social baseline conditions that persist. Prior to its departure, AESNP aggressively pursued its resettlement programme which included the physical relocation ofpeople from lands to be used by the project on both banks ofthe river Nile. While certain ofthose lands are currently guarded and fenced (west bank) and monitored, others are still being used for short-term agricultural activities (east bank) on the understanding that they will no longer be available for such uses when the project is re-started.
Since AESNP’s departure in 2003, the Government of Uganda has maintained a presence in the project area through a small group of UETCL employees working as
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the Bujagali Implementatipn Unit (BIU). The BIU has maintained contact yith local people, monitored their issues and conceks, and done its best’in the face of very limited funding and resources to at least be aware of the local socio-economic conditions. In the absence of a private sector sponsor with the necessary permits and financing to pursue the project actively, the B1U’s activities on behalf of the GoU have helped maintain a certain presence and contact with local people while the project was re-bid and re-started.
As a result of the project hiatus, certain of AESNP’s commitments to regulators and the communities under its resettlement and community development plans were not completed. In recognition of these issues and their currency with affected stakeholders, BEL has undertaken to document the situation, and in selected instances began immediate action programmes to respond. Those BEL actions, as well as its commitments to its own resettlement and community development activities, are presented to the level of detail consistent with the present status of the project in the SEA documentation. The ongoing, increasingly detailed plans and activities will be documented on a regular basis in the project’s Social and Environmental Action Plan (SEAP). The revisions to the SEAP will be consulted upon with affected stakeholders and publicly disclosed as they are prepared on a regular basis.
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4.0 Project Need and Alternatives
Historical and ongoing analyses of the power supply options for Uganda confirm that the Bujagali HPP is needed, and that it is the preferred and least cost solution to addressing the long standing power shortages in Uganda. A summary of the need and rational for the HPP, and the extensive analyses of alternatives that has been completed as part of the design of the HPP, follow.
4.1 leed and Rationale for the Project
Uganda has suffered for many years from shortages of electricity and this situation has been exacerbated in recent times due to the drought in the region that has contributed to the lower level of Lake Victoria.
Throughout the 1990s the electricity demand was greater than generating capacity, and therefore load shedding was required to balance the system. In 2000 the increased capacity provided by the commissioning of the first two 40 MW units at Kiira power station relieved the load shedding. However, the drop in water levels in Lake Victoria due to the drought and to increased flows through the two dams has led to reductions in the availability of water for power generation, forcing more severe load shedding.
The demand for electricity has steadily increased in step with the strengthening and expansion of the economy, and it is possible that a shortage of capacity could occur even with the Bujagali project in service.
To address the short term load shedding the government is implementing a costly emergency thermal generation program using high-speed reciprocating engines fuelled with diesel oil to generate 100 MW of power. This power will be costly due to the need to import relatively expensive diesel fuel, and the high operating cost of high-speed units. Therefore, the high-speed units are only planned to operate until 20 10 when more economical, renewable and clean power becomes available from the Bujagali HPP.
Even so, the Bujagali HPP will not address the full shortfall of energy, thus the GoU is pursuing additional generation from medium-speed reciprocating engines fueled with heavy fuel oil (100 MW), cogeneration at sugar works (15 MW), and mini hydro (41 MW).
4.2 Alternative Power Generation Technologies
The alternatives to developing Bujagali are to do nothing, or to develop an alternative source or sources of power. The do nothing alternative would mean that the up to 250 MWto be provided by Bujagali would be supplied by extending indefinitely the operation of the expensive high-speed emergency thermals, and by increased load
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shedding. This would have a long term significant effect on the economy and the people ofUganda.
Given the large, and growing, gap between electricity supply and demand in Uganda, a number ofelectricity generation alternatives studies over various planning horizons has been completed and options examined and prioritised for the country. The generation alternatives for the next 20 years in Uganda include:
Wind-generated electricity; Geothermal electricity; Solar-generated electricity; Small scale hydroelectric development; Co-generation facilities; Biomass-generated electricity; Thermal power plants; Large scale hydroelectric development; and, Demand management measures which reduce the need for the above-noted types of projects and bring more efficiency to the national system.
The general conclusions from the evaluation of these generation alternatives is that large- scale hydroelectric development remains the most economical way forward for the country in the short-medium term. The Victoria Nile is the primary'hydrological resource available in Uganda to meet the growing electricity demand in the country.
An ongoing study by Power Planning Associates is reassessing the various alternative power generation technologies currently available to Uganda. Preliminary unpublished results from that study which is expected to be published in Q1 2007, confirms that large- scale hydroelectric development provides the least cost option for the country in the short-medium tern.
4.3 Alternative Hydropower Development Sites
Six potential hydropower sites along the Victoria Nile have been examined in some detail by a number of studies in recent decades. One of those sites (at Kalagala Falls downstream of Bujagali) is no longer an option as the Government ofUganda has committed to the preservation of the falls and its environs as an 'offset' for social and environmental impacts incurred with the development of the Bujagali project. Overall, two projects - Bujagali and Karuma - emerge as the preferred hydropower options for Uganda based on a range of criteria and a variety of comparative methodologies.
The above-mentioned report in preparation by Power Planning Associates for the World Bank Group is an Economic and Financial Evaluation Study to determine the viability of the Bujagali HPP, including a comparison with the Karuma project. The
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preliminary results from that study indicate that Bujagali is the least cost option compared to Karuma by a significant margin.
Another recent report prepared as part of the Nile Basin Initiative examined the “Strategic/Sectoral, Social and Environmental Assessment of Power Development Options in The Nile Equatorial Lakes Region” (SSEA). One objective of the study was better definition of the actions that must, in the advancement and approval of new generation and transmission projects, be taken to improve electricity supply, in terms ofreliability of supply, cost, environmental and social acceptability, and regional integration.
The SSEA report states that, of all the electricity supply options studies and evaluated across the ten countries that are within the Nile Equatorial Lakes Region, Bujagali was one of three projects that “should be implemented as soon as possible,” as Uganda is suffering from serious poweroutages. It identified Bujagali as a project that could be installed in the short to mid-term, at low cost and with acceptable environmental and social impacts.
4.4 Evaluation of Alternative Hydropower Configurations
Alternative project configurations at, and around, the Bujagali HPP site have also been investigated. The objective was to compare and evaluate possible options to provide the rationale for selection of the preferred design approach. Key considerations in the comparison are the potential power output ofthe different options, their financial costs and their relative environmental and socio-economic implicati ons .
An initial 1998/1999 assessment considered five configurations for the dam. In addition, two further configurations were identified, one a diversion canal at Bujagali to avoid the inundation ofBujagali Falls and the other a dam and reservoir configuration at Busowoko Falls with a lowei full supply level, again to preserve the falls and the river downstream to Dumbbell Island.
Further reviews ofalternative configurations at Bujagali were carried out in 1999/2000 and again in 2005/2006. They included two additional options at Busowoko Falls and further consideration of the differences in environmental impact between the two options at Dumbbell Island. The review concluded that the now- preferred option at Dumbbell Island is more favourable not only on technical and economic grounds, but also from an environmental and social perspective. These analyses re-confirm the hydropower facility configuration that BEL is now seeking approval for.
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7.0 Impact Identification and Management
This SEA adopts a project life cycle assessment format. It focuses on the development of specific management initiatives for all phases ofthe project to ensure that: i)the people closest to the project receive the projected benefits; ii)potentially negative environmental and socio-economic impacts are minimised; and iii)potentially negative health and safety impacts are kept to a minimum. To optimise the life cycle assessment, linkages between potential impacts (i.e., key environmental issues), mitigation measures (Le. management actions), net effects (i.e. residual effects), and monitoring programmes (i.e. management decision tools) are explicitly made.
This section summarizes:
Compliance screening of the project against Government ofUganda Legislation, International Treaties and Conventions Ratified by Uganda, and project applicable safeguard policies, performance standards and guidelines; e Identification and analysis ofcommunity benefits and economic and developmental benefits; and, 0 Identification and analysis ofkey project issues, and net effects analysis.
7.1 Compliance Screening
A screening exercise, the details of which are presented in the SEA Report, confirms that the project complies with:
0 GoU-statutes and regulations; 0 Relevant international environmental treaties and conventions; and, 0 Project applicable standards as determined from the concordance analysis of the social and environmental policies, performance standards and guidelines applicable to the project.
7.2 Project Benefits and Community Development
7.2.1 Project Benefits
The HPP will generate a number of economic and developmental benefits at both the macro-economic level and the local level, and is expected to make a major contribution towards the GoU goal of poverty eradication. The key macro-ecgnomic benefits that are expected include:
Reducing electricity rationing and the associated costs of alternative self- . generation; 0 Create conditions to attract direct foreign investment to Uganda;
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Increase productivity and lower costs for government, education, health, business and industry; 0 Facilitate rural electrification; and, 0 Minimise cost of electricity for consumers.
Overall, it has been estimated in some reports that every month that the Bujagali project is delayed costs the economy approximately 10 to 15 million dollars. The project is also expected to help reduce noise and air emissions generated by the numerous small generators that are used to provide electricity during blackout periods.
Local economic benefits from the project are those which accrue to employees and the wider community over and above the benefits accruing from alternative income- generating activities. These include:
0 Direct employment of Ugandans during construction (600 to 1, 100 persons) and operation (50 persons) ofthe project; 0 Induced employment (an estimated 9,000 to 16,500 jobs during construction Ad 250 during operations) and increased trade in service industries, particularly during the dam construction period; and, 0 Benefits from indirect employment and trade, in industries and commercial activities, which become established as a result ofthe greater availability of electricity.
7.2.2 Community Development Program
BEL has developed a Community Development Action Plan (CDAP) which sets out proposed actions that will benefit the wider communities in the project area, beyond those individuals and households who have been or will be directly affected, such as by loss of land, crops or other assets.
The area that will benefit from the CDAP consists mainly ofthe eight directly- affected villages: four on the West Bank (Mukono District): Naminya, Buloba, Malindi, Kikubamutwe; and, on four the East Bank (Jinja District): Bujagali, Ivunamba, Kyabirwa and Namizi.
The following criteria were considered when the CDAP was developed:
0 Programmes should be based on local conditions and the needs of directly affected communities, identified using culturally appropriate means of consultation; Programmes are to be sustainable; and, 0 Partnerships are to be established with credible local NGOs.
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The objectives ofthe CDAP are as follows:
To improve opportunities for higher incomes 05. living standards ofProject- Affected Persons and the affected area as a whole; To improve quality of life in the affected area; and, To provide a safety mechanism for vulnerable persons.
BEL proposes to support long-term sustainable development initiatives, rather than to generate them, The CDAP was developed, based on the following strategy:
Construction of the hydropower facility will provide direct sources ofemployment to directly-affected persons; Local communities should benefit from indirect employment opportunities; Water supply within the directly affected communities will be improved; Improved marketing offarm produce can improve farm incomes; New sources ofnon-agricultural income are needed for women and young people, given the current land scarcity; Financial services and training to directly-affected persons is required in order that sudden access to cash compensation is handled wisely; Better access to credit is critical for development of small-scale businesses; Recreational facilities are important for a good quality of life; and, A social safety mechanism is needed for those Project-Affected Persons who may 'have difficulties due to the displacement/compensation/resettlementprocess.
The key areas where benefits are expected include:
Health care facilities; Employment opportunities; Water supply; Electricity; Fisheries; Training and financial services; Education; Tourism; and, Community resources.
Key Project Issues and Net Effects Analysis
Table ES-3 highlights the key project issues, as well as the corresponding avoidance, protective and mitigative measures relevant to the construction and operational phases of this project.
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Tabla ES.3: Summary of Project Effects, and Impact Mitigation and Effects Monitoring Activities Project Issue Summary of Mitigation and Net Effacts Resettlement and Corrective actions will be undertaken to ensure those resettled by the Land previous project sponsor are no worse off as a result of the project. Land Compensation required for the construction and operation of the hydropower facility totals 238 ha. Landowners were either resettled or provided cash compensation for loss of land by the previous project sponsor. Eighty- five households were displaced. An assessment survey of the resettled villagers was undertaken by BEL as part of this SEA process to confirm whether any unresolved issues remained. BEL has initiated an , Assessment of Past Resettlement Activities and Action Plan (APRAP) to resolve these remaining issues. Immediate corrective activities being undertaken by BEL include: provision of new water supply hand pumps at 17 existing bore hole locations in the surrounding communities; improvements to education facilities in the 8 affected communities; and, improvements to the health facilities at the Naminya resettlement site. 3ffects on Land There will be permanent and temporary loss of agricultural land. Temporary land take areas will be reinstated to a condition that will makc it possible for the land to be used for agriculture, forestry or industry.
To minimise impacts to terrestrial habitat, BEL will: 0 Do enrichment planting to regenerate forest vegetation on island land not inundated but previously logged or cleared for agriculture, as well as land along the, mainland shore. 0 Plant native and medicinal tree species in areas of the riparian strip that are currently bare or planted with cash and/or subsistence crops, in order to control erosion and to provide (in the long term) roosting sites for birds and bats.
The portion of the quarry that will remain above water level, Le. form the new riverbank, will be profiled and planted such that it has a similar landscape to equivalent areas above the water line prior to construction, and blends in with the profile of undisturbed areas. ffects on The HPP is not expected to significantly alter or affect the hydrology of :ydrology Lake Victoria or the Victoria Nile. The quantity and timing of water released from Lake Victoria will continue to be controlled by the iperation of the Nalubaale and Kiira facilities. Because the reservoir for .he HPP is small it can only hold back a few hours of flow, and therefore t will essentially pass-through whatever flows are released by Nalubaale ind Kiira.
The only significant concern related to hydrology is concern for public safety from fluctuating water levels immediately downstream of the dam. Further analyses, and a stakeholder engagement program, are proposed to address those concerns through a management plan to be developed. Fluctuations further downstream are not expected to be problematic, and not expected to be significant in Lake Kyoga or beyond.
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Project Issue Summary of Mitigation and Net Effects Effects on Water The project is not expected to have any significant long term detrimental and Aquatic Life impacts on water quality or aquatic life,
During construction there will in an increase in suspended solids resulting from coffer dam and other construction activities. These effects will be minimised by avoiding disturbance of soils during the clearing activities. Site drainage systems will include sedimentation basins to trap sediments in runoff prior to release to the river.
[ndigenous aquatic grasses will be planted to control erosion that might occur as a result of the fluctuating water levels during the initial >peration period. In the long term the banks are expected to stabilize and io significant erosion is expected.
rrees and shrubs will be harvested prior to the reservoir being filled, to ninimise water quality effects associated with rotting vegetation, and to revent fouling of fishing gears.
t is expected that fish stocks will naturally increase in the reservoir ,ompared to the existing condition. For Nile tilapia habitat enhancement vi11 be carried out as part of the quarry and river bank restoration. ltocking is not expected to be needed.
'he abundance of "Haplochromines" fish are also expected to increase as result of the conversion of faster-flowing habitats to the slower-flowing abitats that are preferred by these species
ntrapment and entrainment of aquatic organisms is not expected to have significant effect on fish or other populations. Fish screens will be rstalled on the water intakes reduce the rate of entrainment by fish. ccess points will be provide to the river to ensure there is access to the ver by local persons for washing, fishing or other purposes during the mstruc t ion period . ir Quality and he project will not involve significant emissions of pollutants to air. reenhouse Oases lust will be generated during construction but is not expected to result in ,ny significant offsite impacts. Industry good practice will be used to imit dust, including grassing stockpiles to prevent wind raised dust, lsing wetting agents on roads, and using covering loads of friable . iaterials on trucks using public roads, Vehicles and motors will be egularly maintained to minimise exhaust emissions and black smoke.
lujagali will generate about 250 times less greenhouse gas emissions ompared to generating the same amount of electricity from burning of mil fuels. loise generated during construction is not expected to have any gnificant off-site nuisance effects. The main offsite noise will be short rm noise related to blasting during quarrying. A notification procedure ill be developed to ensure surrounding communities are informed about le procedures and timing of blasting.
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Summary of Mitigation and Net Effects An existing two-lane, paved, public highway provides access to the site. Traffic The existing roads are of sufficient capacity to accommodate project related traffic. A Traffic Management Plan (TMP) will address all aspects of project related traffic including speeding, maximum loads on trucks, abnormal loads; and, management of connection points between access roads and main public highways. Consultations are planned with community leaders to identify measure to ensure safety for pedestrians, including school children, that use the road as a walkway. !Environment The project will result in disturbance and loss of land that falls within thc Protection Areas Jinja Wildlife Sanctuary, Consultations wit the management authority foi the Sanctuary indicate that planned enhancement planting will offset the losses, The sponsor will assist in the further development of the Kalagala Falls and Nile Bank CFRs to help offset impacts on Bujagali Falls and Jinj a Wi Id1i fe Sanctuary. Tourism, White The project will result in flooding of Bujagali Falls and associated rapids Water Rafting and Consultations with WWR operators indicate that the operators are Aesthetics generally well-advanced in their preparations to re-orient their operations downstream and expand operations beyond rafting. To facility the move BEL will provide new raft launching facilities downstream of the dam, .he specific locations to be agreed upon with the operators. BEL is nvolved in ongoing consultations with the WWR operators as to how it :an further offset the impacts on their activities, and support the -elocationprocess.
3EL will construct a visitor's centre at the HPP and a cultural centre near 3ujagali Falls, and work with Jinja Tourism Development Association JITDA) on sustainable tourism activities for the new reservoir ecreational 1 y . Effects on Cultural )welling sites of spirits important to the local community are being Property ddressed through transfer and resettlement ceremonies. Ceremonies for he Bujagali Rapids have been carried out, although additional activities re being discussed with the Busoga Kingdom.
'he project will result in flooding of household graves and amasabo shrines). Where possible these have been relocated as part of the :settlement programme or through compensation payments. emembrance services to commemorate those buried in the area will be ~mpleted.A structure or monument may be erected, either at site of :membrance or elsewhere, in accordance with wishes expressed by local ammuni ties. Zommunity EL has developed public health related programs to combat spread of gealth, Safety 'and HIV/AIDS and other sexually transmitted diseases (STDs) and vector- iecurity borne diseases such as malaria amongst workers and the local Eommunities. An emergency program is being developed specifying ictions to be taken in the event of an outbreak of Ebola, or other highly nfection disease. Improvements to health care in local communities is Ieing addressed in the CDAP.
A.J. Burnside International Limited I.A 10045 Bujagali Energy Llmited ES-45 Bujapali Hydropower Project Social and Environmental Assessment - Executive Summary December, 2006
Project Issue Summary of Mitiflation and Net Effects Dam Safety - Risl An indeDendent Panel of Experts will be commissioned to review and Assessment ' advise BEL on matters re1at;ve to dam design and safety. The Bujagali Dam Safety Panel (BDSP) is expected to consist of three technical experts who will provide advice through final design, construction, initii filling, and start-up phases of the dam, The BDSP is also expected to examine the potential safety implications raised by NGOs regarding the upstream Nalubaale facility. Labour and The potential risks have been identified which have a regional prevalenc Working ' and which have arisen from analysis of similar projects include: Conditions 0 Worker health and safety; 0 Forced labour and freedom of association; 0 Payment of minimum wage; and, 0 HIV impact.
' BEL iscommitted to implgmenting various processes, business commitments and measures to address the various labour risks identified and additional issues required. in lender policies.
The contract and terms of reference to be agreed between BEL and the EPC contractor (which will employ the majority of construction workers] will specify labour and occupational health and safety commitments to br observed by the contractor and sub-contractors, as well as responsibilitiei for monitoring the implementation of these commitments, which will lie primarily with the EPC contractor. BEL is committed to establishing its own procedures and reviewing the EPC contractor's procedures, and assessing the performance of both parties on these issues, including ensuring that sub-contractors' contracts commit them to compliance with relevant labour and health and safety legislation and guidelines. issociated 4 separate SEA has been completed for the Bujagali Interconnection 'acilities Project (IP). That SEA addresses the following key issues: 0 Resettlement and Compensation for the projected affected persons; 0 Impacts on Central Forest Reserve Lands; 0 Impacts on Lubigi Swamp and other wetlands; 0 Impacts on public health, including HJV/ADIS and Electric and Magnetic Fields (EMFs); 0 Aesthetics; 0 Labour Force Management; 0 General construction related issues; and, 0 Cumulative effects
That SEA has been prepared in parallel with the SEA for the HPP, and in line the HPP SEA included extensive stakeholder consultations.
R.J. Burnside International limited I-A 10045 ES-46 Bujagali Energy limited Bujanali Hydropower Project Social and Environmental Assessment - Executive Summary December, 2008
Project Issue Summaq of Mitigation and Net Effects Other Constructioi A number of construction-related issues were identified that are common Related Issues to many large-scale construction projects, and for which potential effects are well-known and effective mitigation available. The issues identified are: 0 Public and Worker Health and Safety; 0 Management of Hazardous and Contaminating Material; 0 Management of Solid Waste; 0 Soils and Agriculture; 0 Air quality; and, 0 Archaeological Sites.
\ The EPC Contractor will be responsible for measures to mitigate and manage the potential effects related to construction activities. These measures will be specified in the Contractor’s plans, which will be incorporated into the SEAP, Ither Operations A number of operational-related issues were identified that are common {elated Issues to most large-scale hydro projects and for which the potential effects are well documented and effective management measures available. These issues identified are:
0 Public and worker health and safety; 0 Management of hazardous and contaminating material; and, 0 Management of solid waste.
3EL, as operator of the facility, will be responsible for the mplementation of measures to protect, mitigate, and manage the iotential effects related to the operation of the hydropower facility. Project specific plans and programmes to be developed by BEL for the operations phase will be incorporated into the SEAP.
7.4 Cumulative Effects
The potential cumulative effects of the Bujagali hydroelectric project have been evaluated in the context of other existing and proposed hydroelectric projects on the mainstem Victoria Nile in Uganda. The timeframe is on the order of 20 years, though conceptually, the timeframe extends to the end of the operational life of the projects under review, more on the order of 50 years, at least.
The projects assessed are Nalubaale (Owen Falls), Kiira (Owen Falls Extension), Bujagali, and Karuma. A Kalagala scheme is not included as the Kalagala offset agreed by the Government of Uganda to offset the residual impacts of the Bujagali project precludes such development there.
A.J. Burnside International limited I-A 10045 Bujsgrll Energy Limited ES.47 Bujagali Hydropower Project Social and Environmental Assessment - Executive Summary December, 2006
Overall, the significant and positive cumulative effects ofBujagali have been determined to include:
Developmental benefits at the local, regional and national levels, including Economic benefits associated both with: o the project’s construction (short term), and; o the operation of the project (medium and long term). Increased supply ofelectricity, including poverty alleviation benefits to the extent that the new electricity be accessible to those living with poverty; Compensation to people economically affected or physically relocated by the ’ project; and, 0 Employment and small business opportunities for Ugandans in the short, medium and long terms.
Project cumulative impacts of a negative nature are considered to be of minor significance. These include:
_------~ _------0 Relocation of people with compensation to accommodate the project’s construction, facilities and operations; a Aesthetic impacts from the presence ofanother dam with the potential for knock- on tourism impacts (potentially positive, as well, however); 0 * Some disruption of the natural flow regime over an -8-km stretch of the river Nile downstream of and as a result of Nalubaale and Kiira (see Section 7.5.3): o with associated impacts on aquatic organisms and communities (also potentially positive if productivity of reservoir increased);
o and river users (fishers) - also potentially positive if increased productivity in I reservoir is reflected in fishers’ catches, and; 0 Losses ofwildlife populations and habitats, as well as agricultural lands, due to inundation of terrestrial habitats.
It is unknown, based on currently available data and information, whether cumulative effects on health and educational services or on cultural/spiritual sites might be identified. It seems unlikely that there are cumulative effects on white water rafting, as these activities are not believed to have been commercially available at the time of Kiira’s approval. The cumulative effects oftransmission system infrastructure associated with the Bujagali hydroelectric project are addressed in the companion SEA.
R.J. Burnside International Limited LA 10045 ES.48 Bujagsli Ensrgy limited BujaQali Hydropower Project Social and Environmental Assessment - Executive Summary December, 2008
Other cumulative effects of the ‘Bujagali HPP could include:
Disruption of fish migrations in the river Nile in the vicinity ofthe project, given Nalubaale’s impacts on fish movements between Lake Victoria and the river Nile since 1954; Insignificant changes in the levels of Lake Kyoga and in flows downstream of it (Section 7.5.3); and, Reduced operational need to increase flows through Nalubaale and Kiira due to efficiencies from Bujagali HPP (a positive cumulative effect, should it occur).
With respect to cumulative effects with other non-hydroelectric projects in the Ugandan energy sector, there could be a reduced need to dispatch thermal and emergency sources ‘of electricity to the Ugandan grid and by individual consumers (generators) with cost savings, air emissions reductions, and likely human health . benefits (another positive effect). Another such effect could be some reduced demand for other fuels (including firewood) where access to electricity is available and cost- competitive.
There are no changes (including cumulative effects) antkipated in the ‘Agreed Curve’ hydrological regime for the river Nile.
BEL intends to consult with key stakeholders in Uganda and elsewhere, as appropriate, on the preliminary conclusions reached in the cumulative effects analysis and report on the results and any associated mitigation or monitoring implications, as appropriate, in the SEAP update documentation to be released on a regular basis.
In addition, the final version ofthe Strategic/Sectoral, Social and Environmental Assessment ofPower Development Options in the Nile Equatorial Lakes Region commissioned by the Nile Basin Initiative is expected to become available after the disclosure of this SEA report. The update of this cumulative effects analysis of preliminary conclusions will include any implications for this analysis from the final version ofthat report, as well as modifications resulting from consultations with key stakeholders.
R.J. Burntide International Limited LA 10045 Bujagali Energy limited ES-49 BUj8gdi Hydropower Project Social end Environmental Assessment - Executive Summery December, 2008
8.0 Social and Environmental Action Plan
The SEA provides a framework for the Social and Environmental Action Plan (SEAP) that will be developed for the project. At the time the SEA was written, certain detailed planning and design activities relevant fo the SEAP were still to be completed. Thus, the SEAP is described at the level of detail available at the time of writing. When the detailed activities are completed, they will be integrated within the framework of the SEAP and an update will be prepared and released by BEL. Currently, the SEAP framework addresses the following key components:
Swial and environmental management policies and systems; Mitigation plans, procedures, and programmes; 0 Monitoring activities; 0 Implementation schedules and cost estimates; and, 0 Plans for integrating the SEAP within the overall development plan for the proje6 t.
8.1 Environmental Management
BEL is the project sponsor and will have overall responsibility for design and building of the hydropower facility. BEL will own and operate the hydropower facility for a 30 year period, after which time ownership will be transferred to the GoU. BEL is in the process .of selecting a contracting consortium, which will construct the hydropower facility on an Engineer, Procure and Construct (EPC) basis.
As project sponsor, the ultimate responsibility for the project’s compliance with Ugandan and international lender legislation and guidelines for environmental and social performance will lie with BEL. However, day-to-day responsibility for implementing environmental and social mitigation, compensation and monitoring actions will in many cases be devolved to the EPC Contractor or to third parties.
The SEAP addresses both the construction and operational phases of the hydropower facility for a 30 year period, until UEGCL, or its successor, assumes ownership and responsibility of the hydropower facility.
BEL is committed to the creation and implementation of programmes to reduce the probability of occurrence of deleterious environmental incidents. Contingency plans will be developed for dealing with such adverse incidents, if they occur.
BEL will expect the same level of environmental performance from its agents, suppIiers, and sub-contractors and will stipulate this in any legally binding agreements it enters with these parties.
R.J. Burnside Internetionel Limited 1.A 10045 ES.50 Bujsgsli Energy limited Bujanali Hydropower Project Social and Environmental Assessment - Executive Summary December, 2006
8.2 Relationship of the SEAP to Other Project Plans
The SEAP is an umbrella plan that is comprised of several components that are to be integrated and implemented by BEL and the EPC Contractor with regard to the Bujagali Hydropower Facility. These components are shown in Figure ES-6.
While this SEA includes working versions of three of the Sponsor’s Action Plans (namely the PCDP, the APRAP and the CDAP), those which are the responsibility of the EPC Contractor, and those of the sponsor not included herein will be developed after the EPC Contractor has been appointed at the appropriate level of detail for that stage of project development. The overall objective is to have final versions ready as needed for their implementation, Consultations and disclosure of the various plans will occur throughout the process of their development and implementation.
8.3 Implementation of the Social and Environmental Action Plan
8.3.1 BEL’s Commitments and Resourcing ’
In order to discharge its commitments with respect to management of biophysical impacts of the project, BEL will designate a suitably qualified and. experienced Environmental Manager.
The Environmental Manager shall report directly to BEL’s ImplementationManager, and will be provided with sufficient support staff and facilities to allow all of BEL’s environmental commitments to be discharged appropriately. The Environmental Manager and his team will be members of the overall Implementation Team for the project,
8.3.2 EPC Contractor’s Commitments and Resourcing
The EPC Contractor will designate an appropriately experienced and qualified Site Environmental Officer (SEO), who will be responsible for implementation of the measures set out in the Contractor’s EMMP.
The Environmental Field Inspectors will be appointed during the mobilisation phase, and will be local staff with relevant environmentaVengineering experience, who are fluent in local languages. The number of field inspectors may be adjusted according to the environmental issues on-site.
The SEO will have overall responsibility for the activities of the Contractor’s Environmentaldepartment. On a day-to-day basis the emphasis of his work will be upon liaison with BEL’s Environmental Manager, and with relevant authorities, local residents and NGOs on environmental issues (Le. external liaison). The responsibility for day-to-day management of the field team will be devolved to the Environmental
R.J. Burnside International Limited I-A 10045 Social & Environmental Action Plan j (SEPp) Regulatory & Management Framework: LegislatiodPolicies, Environmental Review, Change Management I I I 1 i. c Sponsor's Action Plan I Contractor's Action Plan Traffic Management Plan (TMP) Public Consultation and Disclosure Plan (PCDP) Waste Management Plan (W)
Assessment of Past Resettlement - Labour Force Management Plan - Activities and Action Plan (APRAP) (LFW I I - Environmental Mitigation & Community Development Action Plan Monitoring Plan (EMMP) (CDAP) I Health & Safety Management Plan 4 Labour Force Management Plan 1 - (HSMP) (LFMP)
Environmental Mitigation & Pollutant Spill Contingency Plan - Monitoring Plan (EMMP) . (PSW I
Emergency Preparedness and Respons Hazardous Materials Management , Plan (EPRP) -I - ' Programme (HMMP)
Project Name: BUJAGALI HYDROPOWER Date: Decemher, 2008 1 lOMB*H-ESb Figure ES.6 PROJ~~CT 1 IPrepared for: SEAP COMPONENT PLANS BUJAGAU ENERGY LIMITED
Prepared by: BURNSiDE Eujagali Energy limited ES.53 Bujaflsli Hydropower Projact Social and Environmental Assessment - Executive Summary December, 2008
Field Co-ordinator. The field team will comprise Field Inspectors, supported by drivers and labourers. The Field Inspectors will maintain a permanent presence on- site, carrying out routine checks of operating procedures and environmental monitoring.
8.3.3 Reporting lines and Decision-Making
On a quarterly basis, the SEO will provide the Environmental Manager with a report containing monitoring results (and a summary of these), a synopsis of environmental issues encountered, and the efficacy of solutions to these issues. The Environmental Manager will use these as the basis for BEL’Squarterly environmental reports. BEL’S quarterly reports will also include commentary on the implementation and efficacy of environmental mitigation actions implemented by BEL.
The Environmental Manager will develop annual environmental reports suitable for submission to NEMA (as a requirement ofthe Ugandan Environmental Impact Assessment Regulations) and to other stakeholders as appropriate, This will provide an opportunity for NEMA and stakeholders to comment both on the impacts of the project itself and the efficacy of the SEAP. Where necessary, the SEAP will be updated.
.\ 8.3.4 Social and Environmental Auditing and Reporting
Auditing ofthe environmental compliance of the project will be carried out at two levels: internal and external.
BEL will carry out annual internal audits of its compliance with the requirements of the SEN, and any other environmental requirements, such as those imposed by NEMA and/or the international lenders. The responsibility for implementing these audits will lie with the Environmental Manager, who may elect to employ external consultants.
External audits of the EPC Contractor’s environmental compliance will be carried by BEL, and potentially by representatives ofNEMA and the international lenders.
8.3.5 Social and Environmental Oversight
The project will have ongoing accountability to, and will be monitored by, both the lenders and NEMA (the latter via the District Ehvironmental Officers for Jinja and Mukono). However, in order to ensure that issues are identified early, and resolved in an equitable fashion, BEL undertakes to support independent oversight of the project at several levels, as follows:
R.J. Burnride International limited LA 10045 ES-54 Bujagall Energy Limited Bujagali Hydropower Project Social and Environmental Assessment - Executive Summary December, 2008
Social and 8nvironrnentaf Panel of Experts It is a requirement of lender policies that the Project Sponsor engages a Social and Environmental Panel of Experts (PoE), to provide ongoing oversight of compliance with the relevant Safeguard Policies and Performance Standards. BEL is in the process of engaging the PoE for the Bujagali project.
Darn Safety Review Panel Under World Bank Group policies, BEL is required to assemble a Dam Safety Review Panel (DSRP) acceptable to the World Bank Group, At financial close, BEL will develop a Terms of Reference and assemble a 3-member DSRP, the main functions of which will be to review and advise BEL on dam safety matters and other critical aspects ofthe dam, its structures, catchment area, reservoir surroundings and downstream areas. BEL may request the panel to provide expert review of associated issues such as the safety of the power generation facilities, river diversions during construction, the implications on safety of the upstream dams - Nalubaale and Kiira, . and potential effects ofa failure at either ofthese facilities on the Bujagali Dam.
Environmental Monitoring Committee At the time of writing, an EU country was considering supporting an independent Environmental Monitoring Committee which would provide social and environmental oversight of the Bujagali HPP as part of its bilateral aid to Uganda. This Committee would support NEMA and would be independent of the sponsor group. Thus, the ' implementation of this Committee, if it eventuates, would be the responsibility of ' GoU.
8.3.6 Change Management -
During the implementation of the project, change may be required to address unforeseen or unexpected conditions or situations. A change management process will be applied to ensure environmental and social issues are addressed as part of any significant changes to project procedures, processes, design or activities. Both BEL and the EPC Contractor will be responsible for managing changes within their respective areas ofresponsibility.
8.4 Responsibilities and Costs for Environmental Mitigation Measures
Table ES-4 below outlines the overall package of environmental mitigation measures that will be implemented in relation to the Bujagali hydropower facility. The table also assigns general responsibilities for implementing each group ofmitigation measures. A detailed implementation schedule will be developed once the EPC Contractor is selected, and it will be submitted as an SEA update.
Consistent with the Bujagali Project's contracting strategy of integrating environmental protection and mitigation activities into the EPC Contractor's Scope of
A.J. Burnside Internationst Limited I-A 10045 Uujagell Energy Limited ES.55 BujaQaliHydropower Project Social and Environmental Assessment - Executive Summary December, 2006 .
Work, the specifications for many of the activities were included in the bid package upon which the EPC Contractor is developing its base rates. Therefore, since many of the costs associated with environmental protection and mitigation activities are included in the EPC Contractor's base rates, it is not possible to present a detailed accounting of all the monies devoted to the project's construction phase environmental protection and mitigation activities. These costs are therefore described as 'Within EPC contract price' in the table.
Estimated Issue Actionh Timing Responsibility Cost (USD) BEL Staffing for SEAP Recruit SEAP - Months 1-3 Implementation 1,125,000 Implementation Implementation Team Financial Close Maria cr Social and Environmental BEL- ' Appoint S&E Panel of Prior to Financial Oversight Implementation 300,000 - Experts Close International Manager Lenders I BEL Prior to Financial implementation- Dam Safety Appoint DSRP 450,000 Close Manager Resettlement Year 1 after BEL Social - 497,000 Corrective Actions I Implement I Financial Close 1 Community Throughout BEL Social Implement CDAP - 3,8 17,000 Development Construction Phase Unit Included in salary BEL - Public Consultation/ Implement PCDP Throughout Community for SEAP Zommunity Liaison Construction Phase Liaison Manager implementation team
,abour Force Develop Sponsor's Months 1-3 aner kfanagcment I LFMP Financial Close Managers I 20,000 .abour Force Develop EPC Within EPC Months after EPC Contractor contract price danagement Contractor's LFMP appointment I I I I I I I BEL I Preconstruction (Environmental 32 1,000 Manager) litigation of BEL iophysical impacts Implement Sponsor's Construction Phase (Environmental 1,476,200 not construction- EMMP Manager) elated BEL Operations Phase (Environmental 361,880 . (first 2 years) Manager) litigation of iophysical impacts Implement Throughout EPC Contractor Within EPC construction- Contractor's EMMP Construction Phase (SEO) contract price
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Estimated Issue Actionfs Timing Responsibility Cost (USD) Institutional TED (funded (‘Iant and Environments' Assess need prior to Years 29 and 30 of BEL from Bujagali handover to concession. HPP operating Management within UEGCL. BEL’S UEGCL) budget)
8.5 Responsibilities for Environmental Monitoring Measures
The SEAP describes the overall package of environmental monitoring that will be carried out in relation to the Bujagali hydropower facility. The EMMP also assigns responsibilities for each monitoring activity, and proposes parties who are capable of cairying out the monitoring, on behalf of the responsible body.
It should be noted that, consistent with the strategy of integrating social and environmental protection and mitigation activities into the EPC Contractor’s Scope of Work, the specifications for many of the construction-related monitoring activities were included in the bid package upon which the EPC Contractor is developing its base rates. Therefore it is not possible to present a detailed accounting of all the monies devoted to the project’s environmental monitoring activities during the cwstruction phase.
8.6 Institutional Strengthening
Several governmental agencies at both the local and national levels will be responsible for ongoing monitoring’of construction and operational conditions and activities. In general, BEL will consult with the applicable agencies to establish the extent of each agency’s ‘in house’ capability for managing such activities, and identify any shortfalls.
Preliminary information about the institutional strengthening needs of the key government agencies involved, based on preliminary consultations during the SEA process, is provided in the SEA documentation.
R.J. Burnside International limited I-A 10045
ANNEX 3 INDEMNITY AGREEMENT
COIWORMED COPY
NUMBER B-0130-UG
INDEMNITY AGREEMENT
(Partial Risk Guarantee for the Private Power Generation (Bujagali) Project)
between
INTERNATIONAL DEVELOPMENT ASSOCIATION
and
REPUBLIC OF UGANDA
Dated July 18,2007 NUMBER B-0130-UG
INDEMNITY AGREEMENT
INDEMNITY AGREEMENT, dated July 18, 2007, between the REPUBLIC OF UGANDA (“Uganda”) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the “Association”).
(A) WHEREAS pursuant to a loan agreement dated on or about the date hereof (the “IDA Guaranteed Facility Agreement”), between Bujagali Energy Limited, a limited liability company organized under the laws of Uganda (the “Company”) and the financial institutions named therein as lenders (the “IDA Guaranteed Lenders”) and Absa Bank Limited as agent (the “Agent”) for the IDA Guaranteed Lenders, the IDA Guaranteed Lenders have agreed to make a loan to the Company of up to one hundred fifteen million United States Dollars (US$115,000,000) (the “Guaranteed Loan”) to support a portion of the financing of the Bujagali Project (the “Project”), as defined in the Implementation Agreement dated December 13, 2005 between the Government of Uganda (the “Government” or “GOU’) and the Company (as it may be amended and restated with the Association’s consent) (the “Implementation Agreement”).
(B) WHEREAS the Government has undertaken certain obligations (including payment obligations) to the Company with respect to the Project pursuant to the Implementation Agreement and the Government Guarantee, which guarantees certain of UETC’s payment obligations under the PPA and agrees to compensate the Company for certain losses arising from Political Force Majeure Events, GOU Events of Default and UETC Events of Default (as each of the foregoing terms is defined herein and/or in the Implementation Agreement);
(C) WHEREAS at the request and with the agreement of Uganda, on or about the date hereof, the Association and the Agent (on behalf of the IDA Guaranteed Lenders) entered into an agreement (the “IDA Guarantee Agreement”) pursuant to which the Association agreed to guarantee (the “IDA Guarantee”) to the IDA Guaranteed Lenders the payment of interest and the repayment of the principal amount of the Guaranteed Loan on the terms and conditions set forth in the IDA Guarantee Agreement, but only on condition that Uganda agrees to reimburse to the Association all amounts paid by the Association in relation to or arising from the IDA Guarantee Agreement and to undertake such other obligations to the Association as are set forth in this Indemnity Agreement; and
(D) WHEREAS, in consideration of the Association providing the IDA Guarantee pursuant to the IDA Guarantee Agreement, Uganda has undertaken the obligations to the Association set forth in this Indemnity Agreement,
NOW THEREFORE the parties hereto hereby agree as follows: 2
ARTICLE I
Incorporation of General Conditions and Modifications
Section 1.01. (a) The following provisions of the “General Conditions Applicable to Development Credit Agreements” of the Association, dated January 1, 1985 (as amended through May 1, 2004) (hereinafter the “General Conditions”), with the modifications set forth in paragraph (b) of this Section 1.01, constitute an integral part ofthis Indemnity Agreement:
Article I;
Sections 2.01(1), (2), (3) and (4) both as modified below, (7), (8) as modified below, (9), (10) and (12) both as modified below, and (14);
Sections 2.02 and 2.03;
Sections 3.04(c) and 3.05;
Sections 4.05 and 4.06;
Section 8.0 1;
Sections 9.01, 9.02 and 9.08;
Sections 10.01, 10.02 as modified below, and 10.03; and
Article XI.
(b) The General Conditions, unless the context otherwise requires, shall be modified as follows:
(0 the term “Borrower” wherever used in the General Conditions, means Uganda;
(ii) the term “development credit” or “Credit” wherever used in the General Conditions, means the amounts payable by Uganda under this Indemnity Agreement, save as used in Section 9.01 of the General Conditions where it shall mean the Project;
(iii) the term “Development Credit Agreement,” wherever used in the General Conditions, means this Indemnity Agreement;
(iv) the term “Effective Date,” wherever used in the General Conditions, means the date specified in Article V ofthis Indemnity Agreement;
(VI the term “Project,” wherever used in the General Conditions, means the Project as defined in the Preamble to this Indemnity Agreement; and 3
(vi) in Section 10.02 the phrase “the IDA Guarantee Agreement, the IDA Guaranteed Facility Agreement, the Transaction Documents or any other related document” is added immediately after the phrase “the Development Credit Agreement.”
Section 1.02. Unless the context otherwise requires,
(a) the several terms defined in the General Conditions and in the Preamble to this Indemnity Agreement have the respective meanings therein set forth;
(b) the following terms shall have their respective meanings set forth in the Implementation Agreement: “Change in Law,” “Company Action or Inaction,” “Company Event of Default,” “Force Majeure Event,” “GOU Action or Inaction,” “GOU Event of Default,” “Land Licence,” “Laws of Uganda,” “Lease Agreement,” “Liquidity Facility Agreement,” “Other Force Majeure Event,” “Political Force Majeure Event,” “Power Station EPC Contracts,” “UETC Action or Inaction,” “UETC Event of Default,” “UETC Line,” and “UETC Line EPC Contract.”
(c) the following additional terms shall have the following meanings:
(i) “Bank” means the International Bank for Reconstruction and Development;
(ii) “Demand” means a demand on the Association for payment under the IDA Guarantee Agreement, made by means ofa Demand Notice;
(iii) “Demand Notice” means a demand presented to the Association by the Agent in accordance with Article 6 of the IDA Guarantee Agreement;
(iv) “Dispute” means a “dispute” as that term is used in Article XVI of the Implementation Agreement;
(v) “Environmental Management Plans” or “EMPs” means the two Social and Environmental Assessment (“SEA”) reports in respect of the Project and the UETC Line being financed and constructed for the benefit of UETC (the “UETC Line Project”), both dated December 2006, adopted by the Company and approved by the Association; the EMPs also set out the actions, measures, monitoring arrangements and other activities to be undertaken by the Company, as well as UETC and the Government, during implementation ofthe Project and the UETC Line Project, to mitigate adverse environmental and social impacts, offset them, or reduce them to acceptable levels, as such plans may be amended from time to time with the prior agreement ofthe Association;
(vi) “GOU Direct Agreement” means the agreement among the Government, the Company and the intercreditor agent (or agents) representing the lenders (including the IDA Guaranteed Lenders) to the Project dated on or about the date hereof; 4
(vii) “Government Guarantee” means the agreement between the Government and the Company dated May 25,2007 providing for GOU’s guarantee to the Company of UETC’s payment obligations under the PPA;
(viii) “Guaranteed Obligation” means any obligation of the Government with respect to making a compensation payment or other payment upon termination of (or at any other time under) the Implementation Agreement or the Government Guarantee by reason of:
(a) any GOU Event ofDefault pursuant to Sections 15.2 (a), (b), (c), (d), (f), (g) or (h) of the Implementation Agreement;
(b) any UETC Event of Default pursuant to Sections 4.3(a), (b), (c) or (f) (but excluding any breach by UETC of the Liquidity Facility Agreement) ofthe PPA; or
(c) any Political Force Majeure Event pursuant to Sections 14.1(a)(i), (a)(ii), (a)@) or (a)(v) of the Implementation Agreement;
(ix) “IDA Agreements” means the IDA Guarantee Agreement, this Indemnity Agreement, and the IDA Project Agreement;
(x) “IDA Project Agreement” means the agreement dated on or about the date hereof between the Association and the Company;
(xi) “Kalagala Falls Site” means the area designated as such on the map attached hereto;
(xii) “Mabira Central Forest Reserve” means the area designated as such on the map attached hereto, including all use classifications set forth on such map as agreed with the Association;
(xiii) “O&M Contractor” means the onshore and offshore operators who are parties to the Operation and Maintenance Agreements;
(xiv) “Operation and Maintenance Agreements” means the offshore and onshore operations and maintenance services agreements between the Company and the O&M Contractor;
(xv) “PPA” means the Power Purchase Agreement between UETC and the Company dated December 13, 2005 (as it may be amended and restated with the Association’s consent), providing for the long-term off-take arrangements between UETC and the Company;
(xvi) “Prohibited Activities” means Corrupt Practices, Fraudulent Practices, Collusive Practices, Coercive Practices or Obstructive Practices in any way connected to the Project, as each ofthose terms is defined in Annex 1 hereof; 5
(xvii) “Public Sector Entity” means:
(a) the Government, the Parliament of Uganda, any governmental department or ministry, agency, body, instrumentality or public authority, whether national, state, regional or local (or any subdivision thereof), or any State Company or other entity subject to the overall control or direction as to matters of policy ofthe Government or which is otherwise controlled by the Government (including UETC);
(b) any court with jurisdiction over the Company or the Project or any part thereof; or
(c) any person having or asserting authority to issue a license, approval or consent required or necessary in connection with the Project, or otherwise having jurisdiction over any aspect of the Project;
(xviii) “Relevant Project Agreements” means the Government Guarantee, the Implementation Agreement, the PPA, the UETC Line EPC Contract, the Power Station EPC Contracts, the Liquidity Facility Agreement, the GOU Direct Agreement, the UETCL Direct Agreement, the Land Licence, the Lease Agreement, and the Operation and Maintenance Agreements;
(xix) “Resettlement Action Plans” means the plans titled “Assessment of Past Resettlement Activities and Action Plan” in respect of the Project and the “Resettlement and Community Development Action Plan” for the UETC Line, both dated and disclosed in December 2006 as part of the SEAS, for the Company’s as well as UETC’s and the Government’s implementation of the involuntary resettlement of displaced persons in conjunction with the development ofthe Project and the UETC Line Project;
(xx) “State Company” means a legal entity which is directly or indirectly controlled by the Government. For the purpose of this definition, the Government will be deemed to have control if it:
(a) holds an absolute majority of the votes in a shareholder meeting or equivalent corporate body; or
(b) holds more than fifty percent (50%) of the rights and interests which confer the power of management and control; or
(c) has the power to appoint a majority of the members of the governing body of such legal entity;
(xxi) “Transaction Documents” means the Relevant Project Agreements and the IDA Agreements; and 6
(xxii) “UETC” means Uganda Electricity Transmission Company Limited, a limited liability company held and controlled by the Government, and organized under the laws ofUganda;
(xxiii) “UETCL Direct Agreement” means the agreement among UETC, the Company and the agent (or agents) representing the lenders (including the IDA Guaranteed Lenders) to the Project dated on or about the date hereof;
(xxiv) “UETC Line EPC Contractor” means the contractor engaged by the Company or UETC to carry out the work under the UETC Line EPC Contract; and
“United States Dollars” or “US$” or “US Dollars” means the lawful currency of the United States of America.
ARTICLE I1
Indemnity by Uganda to the Association
Section 2.01. In consideration of the Association providing the IDA Guarantee on the terms and conditions set out in the IDA Guarantee Agreement, Uganda hereby irrevocably and unconditionally agrees:
(a) to reimburse the Association in US Dollars immediately upon written demand or as the Association may otherwise direct in writing for any amount paid by the Association under the IDA Guarantee Agreement together with interest thereon at the rate per annum determined by the Association and notified to Uganda (which rate shall not exceed the Bank’s prevailing lending rate for Fixed-Spread Loans denominated in US Dollars, as shown from time to time on the Bank’s external website) from the date such payment is made by the Association until such amount is paid in full;
(b) to indemnify the Association on demand in respect of all actions, proceedings, liabilities, claims, losses, damages, costs and expenses brought against, suffered or incurred by the Association which are reasonable and documented in relation to or arising out of the IDA Guarantee Agreement (except as otherwise provided in Section 10.03 (i)of the General Conditions);
(c) that (i)the Association is authorized to comply with any Demand Notice served on the Association pursuant to the IDA Guarantee Agreement and make any payments which are due or claimed from the Association under the IDA Guarantee (provided that the Association shall promptly notify Uganda of any such demand, but failure to give such notice shall in no way affect the Association’s obligation to make payment under the IDA Guarantee or Uganda’s obligation to reimburse or indemnify the Association pursuant to this Indemnity Agreement); and (ii)it shall not be incumbent on the Association to confirm whether or not any statements in such Demand Notice are in fact correct; and
(d) that any such Demand Notice shall, as between Uganda and the Association, be conclusive evidence that the demand is properly made and payment is due. Following the 7 notification to Uganda of the receipt by the Association of any Demand Notice, Uganda may investigate the validity of the statements in such Demand Notice and take such actions as Uganda may see fit against the Company, the Agent and the IDA Guaranteed Lenders in respect thereof, all without prejudice to the Association’s obligations under the IDA Guarantee Agreement to make a payment in respect of such Demand Notice and to Uganda’s obligations under this Indemnity Agreement in relation to its indemnity and payment obligations to the Association. The obligations of Uganda hereunder shall apply notwithstanding that Uganda, UETC or any Public Sector Entity disputes the validity of any such Demand Notice or the accuracy or correctness ofany documentation, fact or figures relied upon or stated therein.
Section 2.02. (a) The obligations of Uganda under this Indemnity Agreement are irrevocable, absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of Uganda’s obligations under the Implementation Agreement, the Government Guarantee, or any other Public Sector Entity’s obligations under other Transaction Documents, and shall not be discharged except by performance and then only to the extent of such performance. Such obligations shall not be subject to any prior notice to, demand upon or action against the Company, the Agent, the IDA Guaranteed Lenders or any other person, or any prior notice to or demand upon Uganda with regard to any failure by the Company or Uganda to pay any amount in respect of which a Demand Notice is served on the Association pursuant to the IDA Guarantee Agreement. Such obligations shall not be impaired by any of the following: (i) any extension of time, forbearance, concession or other indulgence given to the Association, the Company, the Agent, the IDA Guaranteed Lenders or any other person; (ii)any variation of the IDA Guaranteed Facility Agreement, or any Transaction Document or any other related agreement; (iii)any assertion of, or failure to assert, or delay in asserting, by any party to a Transaction Document, any right, power or remedy against Uganda, UETC, the Company or any other person, or in respect of any security created or purported to be created for the Guaranteed Loan (or any part thereof or interest thereon); or (iv) any other circumstances which would or might (but for this provision) constitute a release, discharge, defense or waiver for Uganda.
(b) The Association may at any time, without thereby discharging, impairing or otherwise affecting any rights, powers and remedies hereby created or conferred upon it by any IDA Agreement, the IDA Guaranteed Facility Agreement, or any other related agreement or by law: (i)offer or agree to or enter into any agreement for the extension or variation of the IDA Guarantee Agreement, the IDA Guaranteed Facility Agreement (other than, without Uganda’s consent, any such extension or variation that would materially increase the obligations of Uganda under this Indemnity Agreement), any Transaction Document or any other related agreement; and (ii)offer or give or agree to give any time or other indulgence to any person or entity other than Uganda from whom it may seek reimbursement (at law or otherwise) in respect of sums paid out or liabilities incurred by the Association under the IDA Guarantee Agreement.
(c) Any rights conferred on the Association by this Indemnity Agreement shall be in addition to, and not in substitution for or derogation of, any other right that the Association may have at any time to seek from Uganda, UETC, the Company or any other person or entity, reimbursement of or indemnification against payments made or liabilities arising from or in connection with the IDA Guarantee Agreement.
(d) The Association shall not be obliged before or after taking steps to enforce any rights conferred on it by this Indemnity Agreement or exercising any of the rights, powers and 8 remedies conferred upon the Association by the IDA Agreements, the IDA Guaranteed Facility Agreement or any other Transaction Document, or any other related agreement or by law: (i)to take action or obtain judgment or award in any court or tribunal of competent jurisdiction against any other person (including persons from whom it may seek reimbursement in respect of sums paid out or liabilities incurred pursuant to the IDA Guarantee Agreement); or (ii)to enforce or seek to enforce any other rights it may have against Uganda or its rights against or security given by any other person including, but not limited to, security provided by the IDA Guaranteed Lenders to the Association.
Section 2.03. Any payment required to be made by Uganda pursuant to the terms ofthis Indemnity Agreement shall be applied first, to pay all interest and other charges due to the Association and second, after such interest and other charges are paid, to pay all other amounts then due to the Association under this Indemnity Agreement.
ARTICLE I11
Project-Related Covenants
Section 3.01. Without limitation or restriction upon any of its other obligations under this Indemnity Agreement, Uganda hereby undertakes to the Association to punctually perform all of its obligations under the Transaction Documents and to cause UETC and each relevant Public Sector Entity to punctually perform all of its obligations under the relevant Transaction Documents to which it is a party or which are otherwise applicable to each ofthem respectively, to the extent the breach of or failure to perform any such obligation could lead to a Demand under the IDA Guarantee Agreement.
Section 3.02. Uganda shall not take, or permit UETC or any other Public Sector Entity to take, any action which would prevent or interfere with the performance by Uganda or any such Public Sector Entity of any of its material obligations under the Transaction Documents (or any other related agreement) to which it is a party, and Uganda shall notify and cause UETC and each such Public Sector Entity to notify the Association prior to agreeing to any material amendment, waiver, termination or other change to any Transaction Document to which Uganda, UETC or any Public Sector Entity is a party, and shall obtain the written consent ofthe Association (not to be unreasonably withheld) prior to agreeing to any such material amendment, waiver, termination or other change to such an agreement or undertaking which would or could in the opinion ofthe Association materially affect the rights or obligations of the Association under the IDA Agreements or any other Transaction Document (including any assignment, transfer, novation, abrogation, granting of security over or other disposition of any rights or obligations under such agreements).
Section 3.03. Uganda shall, and shall cause UETC and each other Public Sector Entity performing obligations under or related to the Transaction Documents or related agreements or undertakings, to promptly notify the Association of (a) the receipt or giving by Uganda, UETC or the Company (as the case may be) ofany notice, claim, demand, payment or recovery for or in respect of any Company Action or Inaction, Company Event of Default, Force Majeure Event, GOU Action or Inaction, GOU Event of Default, Other Force Majeure Event, Political Force Majeure Event or UETC Event of Default; and (b) the occurrence of any other event or 9 circumstance that would or could: (i)result in the breach or termination of any Transaction Document; or (ii)affect the Company’s, GOU’s, Uganda’s or UETC’s ability to perform its obligations or exercise its rights under the Transaction Documents.
Section 3.04. Uganda shall take all lawful actions within its power to remedy and cure any GOU Event of Default (including a Change in Law) or any other event referred to in Section 3.03 within Uganda’s, UETC’s or a Public Sector Entity’s control or responsibility, that would or could result in the breach or termination of any of the relevant Transaction Documents, or that could adversely affect the Government’s ability to perform its obligations or exercise its rights under the Implementation Agreement or the Government Guarantee or the ability of any of the Public Sector Entities to perform its obligations or exercise its rights under the relevant Transaction Documents.
Section 3.05. Uganda shall take all lawful action within its power so as not to create or permit to exist or occur, and shall ensure that neither UETC nor any other Public Sector Entity shall create or permit to exist or occur, any circumstance or Change in Law that would render obligations under a relevant Transaction Document illegal, invalid, unenforceable, ineffective or void in whole or part, and will not initiate or permit any Public Sector Entity to initiate a Dispute in violation of the Implementation Agreement. If such circumstance or Change in Law exists or occurs, or a Dispute is initiated, Uganda shall take all lawful actions within its power to remedy and cure, or to procure that UETC or the appropriate Public Sector Entity remedies and cures, the adverse effect on the Project of such circumstance, Change in Law or Dispute.
Section 3.06. Uganda shall:
(a) set aside the Kalagala Falls Site exclusively to protect its natural habitat and environmental and spiritual values in conformity with sound social and environmental standards acceptable to the Association. Any tourism development at the Kalagala Falls Site will be carried out only in a manner acceptable to the Association and in accordance with the aforementioned standards. Uganda also agrees that it will not develop power generation that could adversely affect the ability to maintain the above-stated protection at the Kalagala Falls Site without the prior agreement of the Association. In addition, GOU undertakes to conserve through a sustainable management program and budget mutually agreed by the Government and the Association (no later than expiration of the prevailing sustainable management program or such later date as the Association may agree), the present ecosystem of the Mabira Central Forest Reserve, as well as the Kalagala Central Forest Reserve and the Nile Bank Central Forest Reserve on the banks of Kalagala Falls (as such Reserves are included within the Kalagala Falls Site). Upon receiving the Association’s notice of a termination (or prospective termination) of the IDA Guarantee Agreement (whether by the Association’s payment thereunder or otherwise) which in turn may lead to a termination of the Project or this Agreement, Uganda will enter into discussions with the Association regarding an extension (and the terms of any extension) of the afore-mentioned setting aside of and undertakings in respect of the Kalagala Falls Site (including the Kalagala Central Forest Reserve and the Nile Bank Central Forest Reserve) and the Mabira Central Forest Reserve;
(b) carry out promptly or cause to be carried out promptly any action required to be performed by it or by any Public Sector Entity (including UETC) under the Environmental Management Plans and the Resettlement Action Plans; 10
(c) take all action that shall be necessary on its part or on the part of UETC or any other Public Sector Entity to enable the Company (i)to obtain any required approval or environmental or social authorization for the Company to perform its obligations under the Environmental Management Plans and the Resettlement Action Plans (so long as the Company has properly applied for such approval or authorization in accordance with the Laws of Uganda andor any applicable Transaction Document provision), and (ii)to perform all of its obligations under the IDA Agreements and the Transaction Documents;
(d) not take any action or cause or permit UETC or any other Public Sector Entity to take any action that would prevent or interfere with the performance by the Company of such obligations referred to in Section 3.06(b) above;
(e) deliver, or cause UETC to deliver, to the Association a copy ofits annual audited financial statements within six (6) months oftheir certification; and
(f) not take or permit to be taken any action that would prevent or interfere with the Company’s performance of its obligations under the IDA Agreements.
Section 3.07. Uganda affirms to the Association that no Prohibited Activities have been engaged in by any official or representative ofUganda or any Public Sector Entity with respect to the Project or the UETC Line Project and declares its commitment to enforce the laws ofUganda against Prohibited Activities during and with respect to the performance of any contract or activity related to the Project.
Section 3.08. Without prejudice to Sections 9.01 and 9.02 of the General Conditions, Uganda shall, upon request, promptly provide the Association all information necessary, in the reasonable opinion of the Association, for the Association’s review of Uganda’s performance of its covenants pursuant to Sections 3.06 and 3.07 above.
Section 3.09. Without limitation of its rights under this Indemnity Agreement, the Association will notify Uganda as soon as practical following any reduction in amount, suspension or revocation ofsuspension, or termination ofthe IDA Guarantee.
ARTICLE IV
Remedies of the Association
Section 4.01. In the event that: (i)Uganda fails to make any payment to or to indemnify the Association as required pursuant to Section 2.01 of this Indemnity Agreement; (ii)Uganda defaults in the performance of any of its obligations hereunder and such failure or default continues and remains uncured in the opinion ofthe Association for sixty (60) days or more after notice thereof shall have been given to Uganda by the Association; or (iii)any representation made by Uganda in or pursuant to this Indemnity Agreement, or any statement furnished in connection with this Indemnity Agreement and intended to be relied on by the Association in providing the IDA Guarantee, shall in the opinion of the Association have been incorrect in any material respect, the Association shall be entitled, in addition to any other rights and remedies it 11 may have, to suspend or cancel in whole or in part Uganda’s right to make withdrawals under any development credit agreement or financing agreement between the Association and Uganda or under any loan or guarantee between the Bank and Uganda, or to declare the outstanding principal and interest of any such credit or loan due and payable immediately.
ARTICLE V
Effective Date
Section 5.01. This Indemnity Agreement shall come into force and effect upon signature by the parties, but save as otherwise may be provided hereunder, shall have no force or effect following the Government’s satisfaction of all Guaranteed Obligations and the termination ofthe IDA Guarantee Agreement.
ARTICLE VI
Miscellaneous Provisions
Section 6.01. The Minister of Finance of Uganda is hereby designated as representative ofUganda for the purposes ofSection 11.03 of the General Conditions.
Section 6.02. The following addresses are specified for the purposes of Section 1 1.01 of the General Conditions:
For Uganda:
Minister of Finance, Planning and Economic Development P.O. Box 8147 Kampala Uganda
Facsimile: 1-256-414-230163 12
For the Association:
International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America
Cable address: Telex: Facsimile: INDEVAS 248423 (MCI) or 1-202-477-639 1 Washington, D.C. 64145 (MCI) 13
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Indemnity Agreement to be signed in their respective names in Washington, D.C. as of the day and year first above written.
REPUBLIC OF UGANDA
Is/ Charles Ssentongo By: Authorized Representative
Name (printed): Charles Ssentongo
Title: Charge D’Affairs, Embassy of Uganda
INTERNATIONAL DEVELOPMENT ASSOCIATION
Is1 Grace Yabrudy By: Authorized Representative
Name (printed): Grace Yabrudy
Title: Country Manager for Uganda ANNEX 1
ANTI-CORRUPTION GUIDELINES FOR WORLD BANK GUARANTEE TRANSACTIONS
The purpose of these Guidelines is to clarify the meaning of the terms “Corrupt Practices,” “Fraudulent Practices,” “Coercive Practices,” “Collusive Practices” and “Obstructive Practices” in the context of IFC, MIGA and World Bank Guarantee (Partial Risk Guarantee - PRG) operations.
1. CORRUPT PRACTICES
A “Corrupt Practice” is the offering, giving, receiving or soliciting, directly or indirectly, of anything ofvalue to influence improperly the actions ofanother party.
INTERPRETATION
A. Corrupt practices are understood as kickbacks and bribery. The conduct in question must involve the use of improper means (such as bribery) to violate or derogate a duty owed by the recipient in order for the payor to obtain an undue advantage or to avoid an obligation. Antitrust, securities and other violations of law that are not of this nature are excluded from the definition ofcorrupt practices.
B. It is acknowledged that foreign investment agreements, concessions and other types of contracts commonly require investors to make contributions for bona fide social development purposes or to provide funding for infrastructure unrelated to the project. Similarly, investors are often required or expected to make contributions to bona fide local charities. These practices are not viewed as Corrupt Practices for purposes of these definitions, so long as they are permitted under local law and fully disclosed in the payor’s books and records. Similarly, an investor will not be held liable for corrupt or fraudulent practices committed by entities that administer bona fide social development funds or charitable contributions.
C. In the context of conduct between private parties, the offering, giving, receiving or soliciting of corporate hospitality and gifts that are customary by internationally- accepted industry standards shall not constitute corrupt practices unless the action violates applicable law.
D. Payment by private sector persons of the reasonable travel and entertainment expenses of public officials that are consistent with existing practice under relevant law and international conventions will not be viewed as Corrupt Practices.
E. The World Bank Group does not condone facilitation payments. For the purposes of implementation, the interpretation of “Corrupt Practices” relating to facilitation 2
payments will take into account relevant law and international conventions pertaining to corruption.
2. FRAUDULENTPRACTICES
A “Fraudulent Practice” is any action or omission, including misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial benefit or to avoid an obligation.
INTERPRETATION
A. An action, omission, or misrepresentation will be regarded as made recklessly if it is made with reckless indifference as to whether it is true or false. Mere inaccuracy in such information, committed through simple negligence, is not enough to constitute a “Fraudulent Practice” for purposes ofWorld Bank Group sanctions or remedies.
B. Fraudulent Practices are intended to cover actions or omissions that are directed to or against a World Bank Group entity. It also covers Fraudulent Practices directed to or against a World Bank Group member country in connection with the award or implementation of a government contract or concession in a project financed by the World Bank Group. Frauds on other third parties are not condoned but are not specifically sanctioned in IFC, MIGA, or PRG operations. Similarly, other illegal behavior is not condoned, but will not be sanctioned as a Fraudulent Practice under World Bank Group operations.
3. COERCIVE PRACTICES
A “Coercive Practice” is impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party.
INTERPRETATION
A. Coercive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.
B. Coercive Practices are threatened or actual illegal actions such as personal injury or abduction, damage to property, or injury to legally recognizable interests, in order to obtain an undue advantage or to avoid an obligation. It is not intended to cover hard bargaining, the exercise oflegal or contractual remedies or litigation. 3
4. COLLUSIVEPRACTICES
A “Collusive Practice” is an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party.
INTERPRETATION
Collusive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.
5. OBSTRUCTIVEPRACTICES
An “Obstructive Practice” is (i)deliberately destroying, falsifying, altering or concealing evidence material to the investigation or making false statements to investigators, in order to materially impede a World Bank Group investigation into allegations of a Corrupt, Fraudulent, Coercive or Collusive Practice, and/or threatening, harassing or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation, or (ii)acts intended to materially impede the exercise of the World Bank Group entity’s access to contractually required information in connection with a World Bank Group investigation into allegations of a Corrupt, Fraudulent, Coercive or Collusive Practice.
INTERPRETATION
Any action legally or otherwise properly taken by a party to maintain or preserve its regulatory, legal or constitutional rights such as the attorney-client privilege, regardless of whether such action had the effect of impeding an investigation, does not constitute an Obstructive Practice.
GENERALINTERPRETATION
A person should not be liable for actions taken by unrelated third parties unless the first party participated in the prohibited act in question.
I Kalagala offset Area & Environs
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