What you need to know:
- This is the fourth time the project’s commissioning has been pushed ahead, and it is understood that Chinese contractor Sinohydro Corporation will table a schedule of additional costs.
By the time the $1.7b Karuma Hydro Power Project on River Nile is fully commissioned, it would have been under construction for a decade.
Government has yet again pushed completion of the 600MW dam by 12 months to June 2023.
This is the fourth time the project’s commissioning has been pushed ahead, and it is understood that Chinese contractor Sinohydro Corporation will table a schedule of additional costs.
The postponements have seen the contractor stay on the job four years longer than the contract period, for a project that was initially expected to be completed in 60 months – and later revised to 72 months – from start of construction in December 2013.
At the heart of the postponements are non-conformities of the electrical-mechanical systems, which remain contentious between Sinohydro and government.
Mr Hou Fuqiang, the Sinohydro’s Karuma project manager, says the non-conformities that the contractor accepts responsibility will be completed by June 2023, but other contentious defects that it considers to be outside the contract, will attract costs for government.
This and the extended completion schedule, Uganda Electricity Generation Company Limited (UEGCL) admits will ratchet up additional costs, but argues that it is too early to state which party will bear these extension period overheads, until Sinohydro formally tables its demand note.
“The issue of costs of postponement is a contractual matter and at present subject to review by relevant parties to make a determination based on the justification or substantiation presented by the contractor,” says Enock Kusasira, the UEGCL head of communication and corporate affairs.
Projects that take longer have greater cost overruns, and bigger projects often take longer, a 2013 study by energy economists and scholars from Oxford University titled “Should we build larger dams? The actual costs of hydropower mega projects development” noted.
The study says large dams suffer average cost overruns of 96 percent, with the degree tending to increase with the size of the projects.
It also revealed that implementation of such projects suffers an average delay of 44 percent, which does not include the lengthy lead time required to prepare projects, warning that planners of large dams such as Karuma should increase cost estimates by 99 percent, schedules by 66 percent to achieve 80 percent within the planned budgets.
The project failed the first expected commissioning of 2019 because at the time, a number of defects had been identified, which, if not addressed, could adversely affect the safety, reliability and durability of the plant.
Government says the project schedule that informed the revised completion dates had been prepared in December 2019, but when Covid-19 struck, it adversely affected progress due to national and international restrictions.
The Karuma Hydro Power Project is 85 percent funded by Exim Bank of China and 15 percent by government with a significant portion of inputs imported from China.
Therefore, disruptions to movement resulting from Covid-19 caused delays as the contractor paused installation of any equipment because some of them were not in supply.
In March, the contractor instituted changes in the project’s management team, which has significantly improved project performance particularly in pending rectification works.
Critical pending works
Whereas government says the project progress is currently at 99 percent, the 1 percent of outstanding works, which includes fixing defects, remains a headache.
Still pending are rectification works to address non-conformances identified in the electro and hydro mechanical installations, such as generator cleaning, corrosion protection of mechanical equipment and fibre optic cable installation, among others.
“The strategy was to fully rectify all defects that impact the safe operation and reliability of the plant,” says Albert Byaruhanga, the Karuma project manager.
Also pending is completion of land acquisition for the Karuma-Lira 132kV transmission line and the Karuma dam reservoir inundation area.
Completion of the dry commissioning tests for equipment and inspection and testing of balance of plant systems, which is ongoing at the project site, is also still pending.
Balance of plant systems include fire detection and suppression systems, emergency and black start diesel generators, ventilation and air conditioning, plant monitoring and control systems , backup power, drainage and dewatering systems and aspects of plant operation health and safety.
Thereafter, the contractor is expected to conclude and submit pending designs for review and approval by the owner’s engineer – government.
With the pending works and completion of transmission lines to evacuate power from Karuma, the project will be commissioned unit-by-unit.
During the presentation of the 2022/23 budget last month, Finance Minister Matia Kasaija provided Shs1.573 trillion ($420.1 million) to complete pending works, including feasibility studies for cross border transmission lines to enable sale of Karuma power to South Sudan.
According to the revised project implementation schedule, commissioning of the first of six units will be in October while the others will follow.
The project includes the run of the river Karuma hydropower plant located about 110km downstream of Lake Kyoga, in Kiryandongo District, mid-north of Uganda, but also three high voltage transmission lines to evacuate electricity, which have also suffered delays.
The low collections
In January 2020 while the plant completion status stood at 97 per cent, the UEGCL chief executive officer Eng Harrison Mutikanga assured government that the project would be commissioned in November 2020 without fail.
But months later in October, while the November commissioning timeline approached, a disagreement between UEGCL and the project contractor Sinohydro broke out over the unfixed defects.
While Sinohydro claimed the plant was ready for tests, UEGCL conditioned that it would only be done once particular defects are fixed, accusing the contractor of doing shoddy work.
While clearing the contractor of both structural and technical defects ahead of the project commissioning in April this year, Dr Eng Mutikanga observed that the biggest challenge they faced with the contractor earlier on was cabling non-conformances.