Officials from the ministries of finance and energy were in China this week to discuss the release of another batch of funds for the 600MW Karuma power plant.
According to a document issued by the Exim bank of China on June 10, and addressed to the ministry of Energy and Mineral Development, the bank agreed to cover Sinohydro Corporation, the contractors of Karuma dam, with an advanced payment.
Exim bank agreed "unconditionally and irrevocably to guarantee as primary obligator and not as surety merely... without whatsoever right of objection" to fund Sinohydro in its bid to build Karuma power plant.
Sinohydro has already committed funds for the ongoing construction works at the project site ahead of the release of funding by the government of Uganda. Last month, Li Ruogu, the chairman and president of Exim Bank of China, was in Uganda to meet president Museveni to confirm the details of the project funding.
Karuma's total cost of construction is estimated at $1.7bn, according to Sinohydro. That figure includes the cost needed to build a transmission line from Karuma to a location where the power will be integrated into the national power grid.
Last year, Finance Minister Maria Kiwanuka said 85 per cent of the funding would come from the Exim Bank of China while Uganda government would chip in with the remaining 15 per cent. The concession loan from China is to be repaid in the next five years.
Some MPs recently claimed that the Karuma project was in danger of failure as the contractor was demanding the government's 15 per cent contribution even before Exim bank had confirmed commitment to fund it.