Nairobi — Bujagali Energy Ltd, the special purpose company co-owned by the Industrial Promotion Services (K) Ltd, the government of Uganda and Sithe Global Power - an affiliate of the Blackstone Group - has closed financing of a $682 million debt facility for the 250-Megawatt Bujagali hydroelectric station located on the River Nile.

The achievement of financial closure signifies that the project is now fully funded.

BEL, in which IPS, Jubilee Investment Company Ltd (a subsidiary of Jubilee Holdings Ltd) and AKFED hold 50.25 per cent voting interest, was appointed the developer for the project following international competitive bidding won by IPS in 2005.

Bujagali's lenders comprise the IFC, a member of the World Bank Group, the African Development Bank, the European Investment Bank, DEG & Germany's Development Bank, Proparco and the Development Bank of France and the Netherlands Development Finance Company.

Barclays/Absa Capital and Standard Chartered Bank will provide commercial debt finance under IDA Partial Risk Guarantee while MIGA will provide insurance guarantee cover to Sithe Global equity.

The project equity of $191 million includes $20 million Uganda government interest in lieu of assets, such as land and intellectual property, which had been previously developed.

In order to keep electricity tariffs low, the government equity will however earn dividends only after full repayment of debt.

The total financing (debt and equity) committed for the project also provides for $90 million in contingency and debt service reserve.

This is turn triggered three important events, namely - injection of $171 million equity by IPS and Sithe; refund of the $75 million bridging loan earlier advanced to BEL by the Uganda Electricity Transmission Company/ government; and issuance of full notice to proceed to the contractor - Salini. The full notice to proceed will enable Salini to escalate the ongoing works to cover the full scope of construction activities.

Uganda is currently faced by a massive power deficit which has led to widespread loadshedding.

The recent decline in GDP, factory closures and job losses have been attributed to the load-shedding. To mitigate the impact of the load-shedding, the government has installed emergency diesel fired thermal generation, which has led to significant increases in electricity tariffs, despite massive subsidies.