Government abandons plan to give Chinese firm Karuma hydropower project

Monday October 1 2012

Part of the Karamua Falls on River Nile where government plans to build a hydro electricity dam.

Part of the Karamua Falls on River Nile where government plans to build a hydro electricity dam. FILE PHOTO 

By Tabu Butagira

The government has abandoned its plot to secretly hand the Karuma dam contract to China International Water and Electric Corporation (CWE) as more details emerge of behind-the-scenes manoeuvres by Energy officials in favour of the company.

New information shows that Attorney General Peter Nyombi wrote to Energy Minister Irene Muloni in late August, indicating that his initial commitment to draft agreements with CWE for the $2b (Shs5 trillion) deal was based on “the mistaken belief that all the tendering procedures had been completed”.

The procurement process, now shrouded in controversy amid allegations of bribe-taking by bid evaluators, stalled last month. Nakawa High Court about a fortnight ago slapped an injunction - the second court order stopping the search process - following a petition this time by Vinci Construction Grands Project, Orascom Construction and Group Five International, one of the joint bidders.

Six bidders were evaluated in February, this year, and one of the best two would build the 600MW dam on River Nile at Karuma Falls. Results of the appraisal exercise, which reportedly put CWE and Perlite Construction Company in pole position to win the tender, was, however, not announced after Salini Spa, another bidder, filed for administrative review.

In his letter to Ms Muloni, the Attorney General said he acted on false information. “I regret the mistake,” Mr Nyombi noted while withdrawing his August 17 letter to CWE General Manager Daniel Wang to whom he had given the green light for the Chinese firm to take the contract.

The development comes to light on the backdrop of reports that Ms Muloni on August 17 secretly met the Chinese ambassador while her junior, Eng. Simon D’Ujanga, flew to China to meet CWE bosses, and in both meetings, the Ugandan officials pressed CWE to get a guarantor if it wanted the deal.
China Three Gorges Corporation board chairman subsequently wrote to Eng. D’Ujanga, offering that the Chinese government firm would guarantee CWE in the development of Karuma dam.

President Museveni had directed Ms Muloni to ensure that if CWE wins the tender, “the bigger Chinese government companies that were involved in building the big (22,500MW) Three Gorges Dam guarantee the successful bidding of Karuma (dam)”.

This, the President noted, was because he had obtained information “casting doubt” on CWE’s technical and financial capacity to, on its own, build Karuma dam.
Mr Museveni said he was told the figures given by CWE in its bid documents were at variance with the actual previous work it did on listed energy projects, raising questions about its ability. The Chinese firm, has, however, previously insisted that it has capacity to undertake the project and points to business rivalry as the cause of friction.

In an email reply to our enquiries, CWE’s lawyer Paul Wanyoto noted that the law and code of ethics bar his clients from making press statements regarding an ongoing procurement process. He dismissed reports that CWE has secretly sealed the Karuma deal with government.