The Monitor (Kampala)
May 2, 2005
By Charles Mwanguhya Mpagi & Angelo Izama
Kampala
The Minister of Energy and Mineral Development, Ms Syda Bumba, and Mr Teddy Ssezi Cheeye are locked in a bitter row over the hiring of Aggreko International Power Projects to develop a 50 megawatts (MW) thermal electricity generating plant in Kampala.
Cheeye, the Director for Economic Monitoring at the Internal Security Organisation (ISO), says the $167.8 million (about Shs300 billion) project is inflated by over $9 million (about Shs16 billion).
But Bumba dismissed the claims saying they lacked thorough research. Cheeye wrote to President Yoweri Museveni on April 9 saying, "The Ministry of Energy has wrongly preferred to enter into a contract of hiring generators to produce the 50MW power at an astronomical figure of $167 million covering only three years."
Aggreko started assembling the thermal generators early April. When complete the project is expected to reduce on day load shedding.
The New Vision on April 15 quoted the Managing Director of Uganda Electricity Transmission Company limited (UETCL) Mr Eriasi Kiyemba as saying, the project is "...Government's strategic intervention...to enable small industries and commercial enterprises to operate in the daytime as it will greatly reduce the daytime shortfall of power. Domestic consumers will have fewer days of load shedding."
But Cheeye claims his investigations have uncovered corruption in the thermal equipment procurement process.
Cheeye first raised the red flag on the contract in February saying the government stands to lose $9.3 million (about 162b) on the Thermal contract with Aggreko because the Ministry of Energy opted to hire the thermal generation equipment instead of outright purchase, which would save the country some money.
His letters were copied to President Museveni and the Minister for General Duties Prof Mondo Kagonyera.
In a strongly worded letter, Bumba said the Cabinet approved the thermal project. She said Cabinet considered options for hiring generators and direct purchase and the former was chosen because it would save time.
Bumba also accused Cheeye of fronting for one of the bidders. She refers to a telephone conversation she had with Cheeye on February 1, four days before the ISO director first wrote to the President about the matter.
"By the time you called, the evaluation team had not yet taken the results of the evaluation exercise to the Ministry's contracts committee to make a decision on the bidding process. The tone of your conversation was a clear signal that you were fronting for one of the companies," she wrote on February 11.
She did not mention the company Cheeye was reportedly fronting for.
Four companies bid for the project; they included Ms Aggreko International Projects Ltd of the United Arab Emirates [the eventual contract winners], Ms Cummins Power Generation Ltd, Uganda, Ms Mantrack Uganda Limited and Ms Jacobsen Electro AS of Norway. Aggreko won the tender in March and started installing the equipment at Lugogo Sub-station in April.
"It is advisable that in future you should carry out adequate investigations before disseminating unresearched information taking up serious people's valuable time responding to it," Bumba's February 11 letter read. "It is also advisable that you as a government officer acquaint yourself with the [proper] channels of communication as laid down in the standing orders. I am therefore coping this letter to the Minister for Security who should have been the appropriate party to communicate your concerns to me."
Cheeye blames the energy crisis in the country on the Ministry, saying it had a history of bungling projects and contracts.
In a subsequent letter on April 6 written in response to Bumba's, Cheeye said, "One of the major signs of dubious contracts, which end up becoming a total haemorrhage of the national financial resources, is the inbuilt element of 'inconclusiveness'. The 50 mega watt Thermal Project is a typical case of a contract, which is inconclusive, and would therefore expose the government to a total financial haemorrhage."
On February 9, Cheeye had written a letter warning against the awarding of the contract to Aggreko, which advice Bumba ignored.
Cheeye said his investigation had revealed that the contract at $872, 941 per month for three years, would make the government to lose at least $9.3 million at the end of the three years.
Quoting Prof Aswath Damodaran, a top corporate finance professor in the US, Cheeye said, "A postulate of sound investing is that an investor does not pay more for an asset than it is worth," he said of the power deal.
"What this means is that the government can still pay less for the same investment. For example under the contract which your ministry is keen to sign, the government will lose $9.3 million (the difference with the lowest and equally reliable bidder, and the highest which you have for strange reasons accepted)."
Cheeye's letter had questioned the ministry on at least five other incidents in which the government has lost money due to "extravagancy and waste" on the part of the Ministry of Energy officials.
He says this has compounded Uganda's power crisis.
The country suffers a shortfall of at least 120MW of power and demand is growing at an average of 80MW per annum but supply has not increased since the failure of the Bujagali project, which was expected to produce 250MW.
"A deal like this based on inflated costs is certainly corrupt. The cancer of corruption will lead to further complications," Cheeye said.
He said: "I can assure you, this sort of project will become even more complicated and may not even serve the purpose. My suggestion is that you should be prudent and award the contract on the basis of what is the actual value for what government wants to achieve."
But Bumba said, "While I agree with you that as a principle, an investor should not pay more for an asset than its worth, it is possible that in this case you have rushed to make your judgment without understanding the circumstances on the ground."
Bumba declined to comment on her exchange with Cheeye when contacted on Friday. She said she considered it classified.
Cheeye confirmed writing the letters. He told The Monitor on Wednesday that he believed the project to be suspect.
"It is my sincere advice that if Your Excellency, The President, want to see this thermo project take off immediately, you should transfer this project to the Ministry of Finance, Planning and Economic Development. I have no faith in the Ministry of Energy officials, as recent history shows," he wrote.
__________________________________________________
Do You Yahoo!?
Tired of spam? Yahoo! Mail has the best spam protection around
http://mail.yahoo.com
_______________________________________________ Ugandanet mailing list Ugandanet@kym.net http://kym.net/mailman/listinfo/ugandanet % UGANDANET is generously hosted by INFOCOM http://www.infocom.co.ug/
