Proposed Bujagali Dam & Power Station
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Document of The World Bank, International Finance Corporation, and Multilateral Investment Guarantee Agency Public Disclosure Authorized Report No: 3 842 1-UG PROJECT APPRAISAL DOCUMENT ON A PROPOSED INTERNATIONAL DEVELOPMENT ASSOCIATION PARTIAL RISK GUARANTEE IN THE AMOUNT OF UP TO US$ll5 MILLION FOR A SYNDICATED COMMERCIAL BANK LOAN Public Disclosure Authorized AND ON A PROPOSED INTERNATIONAL FINANCE CORPORATION FINANCING CONSISTING OF: AN “A” LOAN IN THE AMOUNT OF UP TO US$lOO MIILION AND A “Cy’ LOAN IN THE AMOUNT OF UP TO US$30 MILLION AND ON A PROPOSED MIGA GUARANTEE IN THE AMOUNT OF UP TO US$115 MILLION FOR SPONSOR’S EQUITY Public Disclosure Authorized TO BUJAGALI ENERGY LIMITED FOR THE PRIVATE POWER GENERATION (BUJAGALI) PROJECT IN THE REPUBLIC OF UGANDA APRIL 2,2007 Africa Region Energy Team, World Bank; Infrastructure Department, IFC; and Infrastructure Sector Team, MIGA This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective (March 19,2007) Currency Unit = Uganda Shilling (USh) USh1,759 = US$1 FISCAL YEAR Government - July 1 - June 30 Bujagali Energy Limited - January 1 - December 3 1 UETCL, UEDCL, UEGCL UMEME - January 1 - December 3 1 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet 1 cubic meter (m3) = 35.31 cubic feet 1 gigawatt hour (GWh) = 1 million kilowatt hours 1 hectare (ha) = 10,000 m20r 2.471 1 acres 1 kilometer (km) = 0.62 miles 1 kilowatt hour (kWh) = 1,000 watts hour 1 megawatt (MW) = 1,000 kilowatts ABBREVIATIONS AND ACRONYMS ADB African Development Bank ADO Automotive Diesel Oil AESNP AES Nile Power AFD Agence Franqaise de DCveloppement AKFED Aga Khan Fund for Economic Development AMSL Above Mean Sea Level BEL Bujagali Energy Limited BP Bank Procedures B IU Bujagali Implementation Unit COZ Carbon Dioxide CDAP Community Development Action Plan DEG Deutsche Investitions- und EntwicklungsgesellschaftmbH DFIs Development Finance Institutions DOTS Development Outcome Tracking System DSCR Debt Service Coverage Ratio EIB European Investment Bank EIRR Economic Internal Rate ofReturn * EPC Engineering-Procurement-Construction ERA Electricity Regulatory Authority FMO Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden GDP Gross Domestic Product HFO Heavy Fuel Oil IA Implementation Agreement ICSID International Center for Settlement of Investment Disputes IDA International Development Association IDC Interest During Construction IFC International Finance Corporation IPP Independent Power Producers IPS(K) Industrial Promotion Services (Kenya) Ltd. KfW Kreditanstalt fUr Wiederaufbau MEMD Ministry of Energy and Mineral Development MIGA Multilateral Investment Guarantee Agency NAFIRRI National Fisheries Resources Research Institute NEMA National Environmental Management Agency NGO Non-Governmental Organization FOR OFFICIAL USE ONLY O&M Operation and Maintenance OP Operational Policy PAPS Project Affected Populations PCDP Public Consultation Disclosure Plan PEAP Poverty Eradication Action Plan PPA Power Purchase Agreement PRG Partial Risk Guarantee Proparco Promotion et Participation pour la Coopkration Economique PS Performance Standard RAP Resettlement Action Plan RCDAP Resettlement and Community Development Action Plan REA Rural Electrification Agency SEA Social and Environmental Assessment SEAP Social and Environmental Action Plan Sida Swedish International Development Agency SSEA Strategic/Sectoral Social and Environmental Assessment UEB Uganda Electricity Board UEDCL Uganda Electricity Distribution Company Limited UEGCL Uganda Electricity Generation Company Limited UETCL Uganda Electricity Transmission Company Limited UJAS Uganda Joint Assistance Strategy VAT Value Added Tax WTP Willingness To Pay WPH World Power Holdings I World Bank (IDA): I I Acting Vice President: I Hartwig Schafer I Country Director: Judy O’Connor Country Manager: Grace Yabrudy I Sector Manager: I S. vijay Iyer I Task Team Leader: Malcolm Cosgrove-Davies IFC: Vice President, Industries: 1 Declan Duff I Regional Vice President: I Edward A. Nassim I Industry Director: Francisco Tourreilles Regional Director: Thierrv Tanoh I Industry Manager: I Darius Lilaoonwala I Regional Manager: Jean Philippe Prosper Investment Officers: Adil Marghub, Belen Castuera, Romani Curtis I MIGA: I I Executive Vice President: 1 Yukiko Omura I Acting Director, Operations Department: Philippe Valahu Director, Economics and Policy: Frank J. Lysy Task Team Leader: Jason Z. Lu This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Uganda: Private Power Generation (Bujagali) Project CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ................................................................ 1 A . Country and Sector Issues ................................................................................................ 1 B. Rationale for World Bank Group Involvement ................................................................ 8 C . Higher Level Objectives to which the Project Contributes .............................................. 8 D. Additionality of World Bank Group Involvement ............................................................ 9 I1. PROJECT DESCRIPTION............................................................................................... 9 A . Bank Group Instruments ................................................................................................. 10 B. Project Development Objective and Key Indicators ....................................................... 14 C . Project Components ........................................................................................................ 15 D. Lessons Learned and Reflected in the Project Design.................................................... 17 E. Alternatives Considered and Reasons for Rejection ....................................................... 18 I11. IMPLEMENTATION .................................................................................................... 19 A . Partnership Arrangements .............................................................................................. 19 B. Institutional and Implementation Arrangements ............................................................ 19 C . Monitoring and Evaluation of OutcomesResults ........................................................... 22 D. Sustainability .................................................................................................................. 22 E. Critical Risks and Possible Controversial Aspects ......................................................... 22 F. LoadCreditlGuarantee Conditions and Covenants ......................................................... 25 IV. APPRAISAL SUMMARY .............................................................................................. 25 A . Economic Analysis ......................................................................................................... 25 B. Financial Analysis of Bujagali Energy Limited (BEL) .................................................. 29 C . Financial Analysis of the Ugandan Power Sector .......................................................... -31 D. Technical ......................................................................................................................... 36 E. Fiduciary ......................................................................................................................... 40 F. Social .................................. ............................................................................................ 40 G. Environment (Environmental.. Category: A) ................................................................... 43 H. Safeguard Policies .......................................................................................................... 47 I. Policy Exceptions and Readiness ..................................................................................... 47 Annex 1: Country and Sector Background......................................................................... 48 Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies ...........58 Annex 3: Results Framework and Monitoring................................................................... 59 Annex 4: Detailed Project Description ................................................................................ 61 Annex 5: Project Costs and Financing Plan........................................................................ 67 Annex 6: Implementation Arrangements............................................................................ 69 Annex 7: Bujagali Energy Ltd: Technical and Financial Capabilities of Sponsors ........72 Annex 8: Procurement and Governance ............................................................................. 74 Annex 9: Economic Analysis ................................................................................................ 78 Annex 10: Lake Victoria Hydrology .................................................................................... 96 Annex 11: Bujagali Energy Limited Financial Projections ............................................. 100 Annex 12: Financial Performance ofthe Uganda Power Sector ....................................