The International Finance Corporation (IFC) and Multi Investment Guarantee Agency (MIGA) have approved a new plan to refinance more than US$400m of loans to Bujagali Energy Limited and provide up to US$423m in guarantees in support of the Bujagali hydropower project to help reduce electricity costs in Uganda, where only one in five people have access to electricity.
Bujagali, a run-of-river hydropower project on the Victoria Nile, contributes 45 percent of the country’s annual electricity generation. It also provides clean, reliable base-load energy, and its commissioning in 2012 significantly reduced Uganda’s reliance on the costlier thermal power generation.
The refinancing package approved days ago will extend the tenure of senior and subordinated loans originally provided in 2007 by IFC, the African Development Bank (AfDB), the European Investment Bank (EIB), the Netherlands Development Finance Company (FMO), France’s Agence Francaise de Developpement (AFD) and Proparco, Germany’s DEG and KfW, and four commercial banks (ABSA, BNP Paribas, Nedbank and Standard Chartered Bank).
This extension in tenure will reduce Bujagali Energy Limited’s annual debt-servicing payments and make it possible for the company to reduce the cost of electricity produced by the hydropower plant over the next five years.
In addition, MIGA will provide political risk guarantees of up 20 years for equity investors in Bujagali Energy Limited, helping to shore up investor support and long-term engagement with the project.
An existing partial risk guarantee from the International Development Association (IDA) for two of the project’s commercial lenders remains in place.
The World Bank Group has been a long-term partner in the Ugandan power sector. Through IDA, it continues to engage with the government to support efforts to upgrade the country’s transmission and distribution networks and expand on-grid and off-grid access to electricity, providing connections for homes, schools, and health clinics. IFC is already an investor in Umeme—Uganda’s main distribution company—both as lender and shareholder.
Bujagali’s commissioning in 2012 allowed the government to deactivate more than 100 megawatts of diesel power plants and made it possible to nearly eliminate government subsidies to the electricity sector.
Since 2005, the share of Uganda’s population with access to electricity has increased from 9 percent to 22 percent, with the total number of customers having grown from 292,000 to more than 1.1 million over the same period.
More than 90 percent of Uganda’s electricity is now generated from renewable sources, making the Ugandan power grid one of the cleanest in the world.
