Are small dams better than huge dams in costs , feasiblity, environmentally and flexbility Bwanika Museveni, World Bank energy disagreement worries investors By Teresa Nannozi Oct 22, 2004
http://monitor.co.ug/business/biz10221.php KAMPALA - Investors are worried that the public disagreement between President Yoweri Museveni and Energy Minister Syda Bbumba over how to build the Bujagali and Karuma dams makes the projects too risky. "We are very confused by the public discussion between the president and the minister," said Sverre Nygaard, Senior Vice President of the Norwegian power company SN Power. UNTAPPED: Karuma Falls where the hydro-power plant is planned. Below is Ms Bbumba (File photo) "Government and the World Bank need to be more determined and decisive about what they want to do with the projects. For the moment it is unclear." This lack of clarity, Nygaard said, makes investors worry that government may change its policy about the dams once they have invested their money. "The political risk is very high, and it's something private investors are worried about," said Nygaard. "No one seems to know what to do." Nygaard was in Kampala earlier this month to negotiate for licenses to build small dams in Western Uganda. He told The Monitor that hydropower projects are particularly risky because a lot of money is invested in them. And unlike, say, factories from which machinery can be uninstalled and moved to a different location or country; equipment like turbines is made specific to each dam and location and cannot be moved and re-installed in another dam. Therefore, investors need the assurance that policies are clear, and will not change as soon as they have invested their money. The president and energy minister have recently disagreed about how to build the Bujagali and Karuma hydro-power dams. A recent presidential directive that both dams be built at the same time has apparently been ignored because Bbumba insists that Bujagali will be built first. The World Bank, relied upon to fund the project seems to like the minister's view saying Bujagali is "the least cost and best option". The Bank refused to comment about the effect the argument might have on the effort to attract investors to Bujagali. Nygaard says that last year, government attempted to persuade SN Power, one of Europe's leading power companies, to replace AES Nile Power in the Bujagali dam, but they turned down the offer because they found the project too controversial. "The history of that project is tricky. A lot of money is at stake, and there is something wrong with its basics," he said. He was referring to allegations of corruption and current claims that the water of River Nile cannot support its planned 250 MW. On the other hand, Nygaard said that SN Power would be interested in the Karuma project, if government would showed commitment. "If Karuma would have the same support from the World Bank and government as Bujagali, we would look into it," he said. Karuma enjoys three key advantages over Bujagali: It can be developed in stages, which lowers the risk of building over market capacity; it's environmentally less hostile, especially since it's not located near a water-based tourist site; and it's managed to stay clear of controversy. Investors have now turned to small hydro dams, which they consider less risky - among them SN Power and Siemens. Nygaard said the risk is lower for small hydro dams because they cost much less money and time, and the competition between project sites is much lower since different developers can build them in different locations at the same time. Next month, SN Power expects to be licensed to build four small hydro dams at $60 million to serve mostly rural communities in Western Uganda. They include a five MW dam at Waki in Masindi, 11 MW dam at Bugoye in Kasese, a 7.5 MW dam at Nengo Bridge in Rukungiri, and a 25 MW dam at Muzizi in Kabarole. In 2007, the first two of these dams are expected to generate 15 MW of power. Last week Siemens officials met Energy ministry officials and said they too were interested in developing small hydro stations. "We are interested in working with small independent producers to develop small hydro dams in different parts of the country," said Dr Joseph Adongo Ocier, the Siemens Manager for Uganda and Kenya. Ocier said smaller stations are easier to manage and finance, because they cost less (average $10 million). Siemens does not intend to own dams. Instead it will design the dams and manufacture and install equipment. The Private Sector Foundation gave $62,000 to small power projects, demonstrating the increased interest they have acquired with the increased demand for power, and the failure of big dams to supply it. --------------------------------- ALL-NEW Yahoo! Messenger - all new features - even more fun! 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