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Refinancing of Uganda’s major power dam to cut electricity costs 

KAMPALA (Xinhua) -- Refinancing of Uganda’s major hydro power plant has got industrialists in the country optimistic that the power tariff rate, which has been driving the costs of production high, will fall.

A consortium of development finance institutions and commercial lenders on Tuesday announced the completion of the refinancing of more than 400 million U.S. dollar in loans to Bujagali Energy Limited (BEL).

The International Finance Corporation, a member of the World Bank Group, the African Development Bank, the Netherlands Development Finance Company and others say that the refinancing package will extend the tenure of the loan repayment period.

The extension of the loan tenure will reduce BEL’s annual debt servicing payments and make it possible to cut the cost of electricity produced by the plant over the next five years.

The 900 million U.S. dollar Bujagali plant is one of the largest power generation plants in Uganda, contributing 45 percent of the country’s annual electricity generation. Its commissioning in 2012 reduced the country’s reliance on costlier thermal power generation.

Simon D’ujanga, minister of state for energy, said in a recent statement the refinancing has already delivered a tariff reduction for extra-large industrial manufacturers, from 10.1 U.S. cents per kilowatt hour to 8.3 cents.

Gideon Badagawa, executive director of Private Sector Foundation, said the refinancing will ease pressure on the private sector, since the high tariff has been driving the cost of production high, making Ugandan products more expensive.

“All the other East African Community partner states have lower power tariffs compared to Uganda,” Badagawa said.

He said the move will also help ease pressure that comes with exchange rate hikes, because the more it rises, the more BEL spends to finance its debt.

“That burden is normally passed to the final consumer,” he said.

Daniel Birungi, executive director of Uganda Manufacturers’ Association, is optimistic that the tariff will drop further to 5 cents per kilowatt hour for manufactures, as was promised earlier by the country’s president, Yoweri Museveni.

“At the end of the day, what we need is an affordable tariff and uninterrupted supply of power so we can produce competitively,” Birungi said.

Bujagali’s commissioning in 2012 allowed the government to retire more than 100 megawatts of diesel power plants and made it possible to nearly eliminate government subsidies to the electricity sector.

Uganda’s current installed capacity is estimated at 930MW, according to government figures. It is estimated that 1,131MW will be required to meet the national electricity demand by 2020.

More than 90 percent of Uganda’s electricity is now generated from renewable sources.

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