The World Bank (WB) has agreed to extend to Uganda a US$360 million loan to build a controversial 250MW hydropower station on the River Nile, according to a Bank statement issued in Kampala on Friday.

The statement said the project, which has been opposed by environmentalists, would help close the country’s energy gap, which the Bank said “seriously constrains social and economic development”.

"Uganda's workforce is expected to double over the next 15 years, making the creation of jobs through expanded industry, tourism and commercial services critical," Judy O'Connor, the Bank’s country director for Uganda, said.

"These sectors are energy intensive and will therefore rely on a consistent, affordable and expanding power supply,” she noted. “Bujagali [hydropower station] is an important step towards realising the needed level and quality of supply.”

The project at Bujagali ran into trouble after environmentalists expressed concern that the dam would drown the natural falls, and urged the government to preserve the falls by opting for less harmful and cheaper energy alternatives.

They also said the falls and rapids were a significant tourism attraction and water rafting site, as well as a site of spiritual significance to the local population.

Counting the cost
The dam’s cost has been revised upwards - from $550 million to almost $800 million. On completion it is hoped the current capacity of 380MW will be increased, allowing exports to Kenya, Rwanda and Tanzania to be boosted.

If construction started immediately, the dam could be operational in 2011, re-using water flowing from two existing upstream facilities to generate electricity.

“The additional electricity will increase the supply to the national power grid at the lowest cost compared to other power generation expansion options under Uganda's energy sector strategy,” the Energy Ministry said, referring to thermal electricity.

Out of the total estimated project cost of $799 million, the Bank’s $360 million support is comprised of $130 million in loans to the private project company Bujagali Energy Ltd (BEL), $115 million from the International Development Association for the project's commercial lenders; and an investment guarantee of up to $115 million from the Multilateral Investment Guarantee Agency.