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dam-l Uganda's Bujagali Falls dam/LS
Looks like the recent bad news about this dam may not "hold water".
>From the newspaper The Uganda Confidential.
No. 364 12-18 November, 1999
ucl@infocom.co.ug
As another elephant is born - AES Nile Power: Darkness at noon?
A pyrrhic victory is a victory which was not worth winning because the
winner has lost so much in winning . Such was the victory for a
parliamentary resolution passed November 8. 1999 for government to
guarantee UEB's payment obligations under a power purchase
agreement with AES. The resolution, which was quite unnecessary, lacks
legal validity and is inneffectrial in AES financial closure as
banks will not accept it as a legal instrument of guarantee.
The Save Bujagali Crusade and the world-wide environmentalist fraternity
can take heart that the treasured falls may yet survive as the
struggle continues.
Government and parliament can only do such things as are authorised by
the constitution and/or statute. The empowerment of parliament
in respect of government guarantees for money paid into or out of the
consolidated fund requires a full reproduction of article 159 of the
constitution so that all and sundry, including American investors and
banks, can make their own interpretations:
159. (1) Subject to the provisions of this constitution, government may
borrow from any source.
(2) Government shall not borrow, guarantee, or raise a loan on behalf of
itself or any other public institution, authority or person except as
authorised by or under an Act of Parliament.
(3) An act of parliament made under clause (2) of this article shall provide_
(a) that the terms and conditions of the loan shall be laid before
parliament and shall not come into operation unless they have been
approved by a resolution of parliament; and
(b) that any moneys received in respect of that loan shall be paid into
the consolidated fund and form part of that fund or into some other
public fund which is existing or is created for the purpose of the loan.
(4) The President shall, at such times as Parliament may determine,
cause to be presented to parliament such information concerning any
loan as is necessary to show_
(a) the extent of the total indebtedness by way of principal and
accumulated interest;
(b) the provision made for servicing or repayment of the loan; and
(c) the utilisation and performance of the loan.
(5) Parliament may, by resolution, authorise the government to enter
into an agreement for the giving of a loan or a grant out of any public
fund or public account.
(6) An agreement entered into under clause (5) of this article shall be
laid before parliament and shall not come into operation unless it has
been approved by Parliament by resolution.
(7) For the purposes of this article, the expression "loan" includes any
money lent or given to or by the government on condition of return
or repayment and any other form of borrowing or lending in respect of which _
(a) moneys from the Consolidated Fund or any other public fund may be
used for payment or repayment; or
(b) moneys from any fund by whatever name called, established for the
purposes of payment or repayment whether in whole or in part
and whether directly or indirectly, may be used for payment or repayment.
(8) Parliament may by law exempt any categories of loans from the
provisions of clauses (2) and (3) of this article, subject to such
conditions as parliament may prescribe.
160 (1) The public debt of Uganda shall be charged on the consolidated
fund and other public funds of Uganda.
(2) For the purposes of this article, the public debt includes the
interest on that debt, sinking fund payments in respect of that debt and
the
costs, charges and expenses incidental to the management of that debt.
Therefore the government guarantee of the payment obligations of UEB is
not authorised under the existing statutes i.e the external loans
act, the loans (guarantee) act, the loans act, 1965, and authorisation
to guarantee loan ordinance, 1982. It is also not known whether a
power purchase agreement would fall within the ambit of the expression
"loan" as defined in section 7 of article 159.
When parliament stayed the resolution pending the enactment of the
electricity act it gave government the opportunity to legislate therein
the authorisation of government guarantees for power agreements and to
define payments under the guarantee as "loans" to UEB. The
energy ministry seems to have bungled that opportunity.
When the banks query the legality of the guarantee the energy minister
may be compelled to come back to parliament and present the
motion in the manner proposed by Hon Absolom Ongam and Hon Dick Nyai. In
any case the banks will request for the attorney general's
opinion, so it might as well have been placed before the house and
devoted together with the PPA and the electricity act.
Of what value then is the so much hyped resolution that caused so much
exhilaration, ulutation and hugging outside parliament? The value
of the AES parliamentary resolution has value in political exhortation
that the caucus is supporting government programmes and in the
angling for minister achievement award for succeeding in lobbying
parliament for the president's project where others have failed.
While on the subject of success, what became of parliamentary etiquette?
Is there no members decorum after the debate of such a
controversial motion? The whole country knew the efforts expended on
getting parliamentary approval. The president had admonished
parliament more than twice; he had met the national resources committee;
the resolution was discussed by the movement caucus twice and
the president met with the chairmen of the parliamentary committee twice
in the same week. On the day the motion was approved the
Kween MP, Chebet Maikut invoked the Kangaroo closure to stop the debate.
So knowing such circumstances, why not ameliorate the excitement and say
"it was difficult to balance the concerns of cultural heritage
and great demands for electricity for the development of our country,
but those for electricity seem to have had the edge "or" it has been a
very exacting session, please find me in my office and I will brief you more.
Clearly, the hugging, embracing, exhilaration and declaration of victory
(victory over who) that went on outside parliament was
anachronistic and reminiscent of multiparty electoral successes or in
more recent times the scene resembled that of congratulations in a
murder charge acquittal outside a court house.
If it was "a victory and a great day for all the people of Uganda" why
not leave it for the people to spontaneously celebrate in the streets,
bars, night clubs and their homes? We saw them do it at the royal
wedding of the Kabala.
We should be mindful that 95 percent of Ugandans do not use electricity
and not because of loadshedding, but because they cannot and
will not afford it.
If The New Vision quoted him correctly, Mr Christian Wright of AES was
more accurate to limit the greatness of the day only for
"parliament and government." He would know better.
The Monitor leader of November 9, 1999 states among other things that:
"If UEB fails to pay the power produced by AES as stipulated in
the agreement, the PPA states that government will make good."
Anyone knowledgeable in the electricity industry, including UEB and AES,
know that UEB will default in the above payments. The
Uganda government, even under the guarantee, would not, being a HIPC
(High Indebted Poor Country), raise the payments from the
consolidated fund and litigation will issue. Since the parliamentary
resolution authorising the government guarantee has no constitutional
validity, AES will not succeed on it. They ought to have done due
diligence and are no doubt aware of the provisions of the Uganda
Constitution.
However they may wish to take the risk knowing they can always exert
political pressure, the precursor of extortionist foreign investment.
What AES has to contend with, however, is that a different future
government of Uganda can successfully repudiate the guarantee and
compel AES to sell its own power.
One can argue that since the PPA is not a loan, the government does not
need a parliamentary resolution to effect the guarantees. That may
well be so, but then why all the hullabaloo, the lobbying, the kangaroo
device, the embracing and victory celebration, the much ado about
nothing?
At the Uganda Confidential we would wish to caution those, including the
minister, who were ecstatic that parliament did a good job in
refining the PPA by negotiating better terms such as removing the
infamous hydrological risk guarantee, and reducing the tariff from 11
US cents to 3.9 US cents. How can you reduce your price by 65 percent
and still be in business? The saying goes, "don't count your
hens before the eggs hatch." We believe that what one contributor in
parliament was saying was that these AES concessions are
inconsequential to the capacity payments upon which the PPA is based so
that even after refining the "shoddy work" of the energy
ministry negotiators the price remains the same.!
The view which we at the Uganda Confidential have brought forth would
not have been necessary had Hon Ongom's proposal to lay
before the house the final documents, including the attorney general's
opinion, been adopted and a debate allowed. The onus is now on
those responsible to produce them. In that way we will have made our
contribution on this debate about the demise of Bujagali falls which
has aroused world-wide interest. The government development programmes
will succeed only if Uganda becomes a truly law-based
market economy. An economy that is also compassionate to the poor and
their cultural heritage.
In the new millennium when every house is lighted and heated by solar
panels and cooking is on newly discovered natural gas under lake
Kioga, should your child ask you who flooded the famous and picturesque
Bujagali falls, you should be among those who can proudly
answer: "Son, I voted for the preservation of Bujagali, but
unfortunately those were the days of personal rather than best merit."
The AES people are laughing all their way to what they call financial
closure with donors. They must do some homework.
In the 1999 International Finance Corporation (IFC) annual report, it is
reported that in Cote D'Ivoire, the 288 MW Acito Power plant cost
only $223 million. This project is new (awarded in 1997 and operation
started March 1999). In Uganda on the other hand, a mere 200
MW at Bujagali which is in the pipeline is estimated to cost $430
million. This works out to be $2,150,000 per KW in Uganda, while the
one in Cote D'Ivoire works out to be only $774,305 per KW. If we are to
get value for money, the $430 million should be able to
construct a 550 MW power dam and not a mere 200 MW.
Payments which UEB is to pay to AES (CHART, DOES NOT WORK IN EMAIL)
The maximum capacity payment has been determined assuming the deferral
of a portion of the company return on equity during the first
twelve years after the commercial operations date, and the subsequent
recovery of such amounts over the remaining term of this
agreement, at a compounded rate of 13 percent per annum. The parties
agree to adjust the deferral mechanism contained in section 5.5 to
reflect the foregoing assumption.
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Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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