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