The Executive on Tuesday got Parliament’s approval to borrow $1.435 billion (Shs4.289 trillion) from the Export–Import (EXIM) Bank of China to finance the construction of Karuma Hydro Power Plant.
This clears the way for financial close between the government of Uganda and the bank draw–down.
EXIM bank will loan $789.3 million (Shs2.359 trillion) of the $1.435 billion at an interest rate of two per cent per annum.
This part of the loan should be repaid in 20 years, starting from when the plant will be commissioned.
The rest – $645.82 million (Shs1.930 trillion) – will attract an interest rate of four per cent per annum; and the amount must be repaid within 15 years.
The total cost of the 600–megawatt plant is $1, 688, 421, 979.29 (Shs5, 049, 777, 717, 196.775) going by today’s Bank of Uganda’s selling price for a United States Dollar.
Uganda contributed $253.26 million (Shs757, 006, 803, 000) to kick-start the project.
Parliament’s authorisation to borrow to finance the construction of Karuma HPP comes hot on the heels of its nod to borrow $482, 578,142.32 (Shs1, 442, 450, 196, 301.596) to finance the construction of Isimba Hydro Power Plant.
The loan for Isimba too is supposed to be repaid in fifteen years.
This raises concern about Uganda’s ability to repay the loan given that it will over the same period be repaying the $8 billion (Shs23.9 trillion) Standard Gauge Railway loan.
Once commissioned, the Karuma and Isimba power plants will forestall a return to load shedding in the medium term
The Government of Uganda will have to open an escrow account in a commercial bank in Uganda, a bank that will be acceptable to the EXIM bank.
Revenue generated from selling Karuma’s electricity will be deposited on the escrow account and the money used to repay the loan.