Personal tools

Uganda, Nyagak III

Structuring a complex public-private partnership to deliver clean hydro power

Nyagak III

Context

Uganda has an electrification rate of 18%, dropping to 8% in rural areas. Electricity in the populous West Nile region of north-west Uganda is supplied via an independent grid operated by the West Nile Rural Electrification Company (WENRECO), a utility with access to just 1.44MW of installed power generation capacity. As part of a wider drive to develop the country’s renewable energy sector, the Government of Uganda has highlighted hydro power as a major pillar of its Second National Development Plan.  WENRECO has already invested in a 3.5MW hydro plant to diversify away from diesel and is keen to expand its hydro portfolio to keep pace with growing demand for power in the region.

Project

The International Finance Corporation (IFC) was approached by the Uganda Electricity Generation Company Ltd (UEGCL) to act as the lead transaction advisor for the development of Nyagak III, a 5.5MW run-of-river hydro plant on the Nyagak River. DevCo provided $580,000 to undertake a comprehensive package of technical, financial, legal, social and environmental due diligence, working with the IFC to recommend an optimal structure for a complex public-private partnership to deliver the project.

Following a competitive tendering process, Hydromax Ltd was awarded a 20 year concession to design, engineer, finance, build, operate and maintain the Nyagak III plant.  Power will be sold to the Uganda Electricity Transmission Company Ltd (UETCL), for a competitive tariff of US$0.055/kWh, under a 20 year power purchase agreement signed with Hydromax. Ugandan legislation dictates that UETCL be the sole off-taker for power projects and thus a complementary energy sales agreement was developed with WENRECO.   As a well-regarded public body, UETCL’s involvement has enhanced the viability of the project.

Impact

Nyagak III will offer a clean, affordable alternative to diesel power generation, cutting costs for consumers and reducing Uganda’s CO² equivalent emissions by 11,000 metric tonnes per annum. By adding 5.5MW of additional power to the region’s grid, it is anticipated that Nyagak III will provide improved access to power for two million people and will enable WENRECO to connect an additional 15,000 people to modern electricity.  Access to electricity will reduce dependence on unsustainable biomass and kerosene for cooking and lighting and will promote economic development in the region.

The involvement of DevCo and the IFC in the project has contributed to the capacity building of UETCL and WENRECO, which will enable them to successfully develop the region’s renewable energy potential in future.