Dott Services Limited, known for its long list of road works in Uganda, has today lodged another notice at the Electricity Regulatory Authority (ERA) of its intention to bid for a license to generate and sell electricity from the 48MW Muzizi hydropower project.
It is the second such notice from Dott Services in nine months, the first one having come in December 2023.
In its application, Dott says it “intends to undertake detailed feasibility studies and other activities leading to the development of the above-mentioned Power Project whose proposed installed capacity is 48 MW.
The generated power will be sold to the Uganda Electricity Transmission Company Limited (UETCL) and fed into the National Grid.”
Now, the Electricity Regulatory Authority (ERA) is calling on the public, especially those in the south western district of Kagadi where the project will be located, to make any comments on the project over the next 30 days.
This latest interest in the Muzizi hydropower project is another development in a nearly 15-year attempt by different parties to develop a project, which, in terms of capacity, would be the fifth largest power plant in Uganda.
On October 27, 2010, the Uganda Electricity Generation Company Limited (UEGCL), a government company, engaged a consultant, Fichtner GMBH & Co., to carry out a feasibility study for the Muzizi project at Euros 1.5 million. On top of this, UEGCL had also kicked off negotiations with foreign funders such as Germany’s KfW for money to fund the feasibility study.
At the time, there was a change of government in Egypt after the Arab Spring saw the overthrow of the 30-year Hosni Mubarak government. Egyptian companies went out in pursuit of opportunities across the continent. They targeted Uganda’s energy space, and quickly won favour with Hilary Onek, the energy minister at the time.
In March 2011, Onek, in total disregard of the developments in the industry, directed ERA to rubberstamp a request by United Engineering and Trading Company from Egypt to take up the Muzizi hydropower project.
ERA officials protested, saying the minister was flouting the process on how licenses to independent power producers are awarded. The Germans were shocked at the turn of events, and pulled the plug on whatever discussions they were holding with Ugandan government officials.
Calm was restored when, in May 2011, Onek was dropped from his ministerial position at the Energy docket. With him gone, the bid from the Egyptians collapsed.
A few months later, the Germans returned to the negotiation table. And in 2013, KfW offered UEGCL a UGX 5 billion grant for the Muzizi feasibility study and advisory services.
In February 2014, UEGCL appeared to have made a breakthrough.
The company submitted a request to ERA for a license to build the Muzizi hydropower project. UEGCL announced that a technical feasibility study had been completed, plus a couple of environmental reports had been handed to the National Environment Management Authority (NEMA), while discussions on how to compensate and resettle those living around the project site were ongoing.
KfW, on September 22, 2015, gave Uganda a grant of Euros 5.36 million for more pre-construction activities for the Muzizi project.
There was a time lapse in activities at the time as a heated electoral period from 2015-2016 ensued with President Yoweri Museveni fighting off a stiff challenge from opposition stalwart Kizza Besigye.
Investors tend to hold off any commitments during such periods. And so, investor interest in Muzizi waned.
With Museveni declared winner of the early 2016 elections, government managed to source credit for the Muzizi project later that year. On November 25, 2016, the government of Uganda signed a credit facility agreement of Euros 40 million with KfW.
Just over two weeks later, on December 9, 2016, another similar loan agreement of Euros 45 million was signed with France’s Agence Francaise De Development (AFD).
The money was to facilitate the process that would lead to the construction of the power project. The expected completion date for the construction of the project was scheduled for December 2023.
In 2017, UEGCL announced in their annual report that the Muzizi project had “advanced with the completion of the detailed designs, and prequalification of potential contractors. The project is at advanced stages of tendering for construction works.”
However, the project was facing a slow compensation process of the project affected persons. Plus, there was a delay in approving the cost of construction of the plant.
By 2018, the government had not made much progress on the Muzizi project, while the country was drawing closer to another heated political election cycle.
In March 2019, the 183MW Isimba hydropower plant, constructed by China’s CWE, was commissioned, adding more energy to the grid. Muzizi, at this point, was backburnered.
The emergence of the Covid-19 pandemic in 2020 further complicated matters as travel bans and other stringent lockdown measures were instituted. Muzizi, for all intent and purposes, was never going to take off.
The loans that Uganda’s government had signed with the Germans and French were not being absorbed. Left with limited choices, on February 22, 2022, the Uganda government sought to cancel the loan agreement it entered into with KfW.
KfW acknowledged receipt of the letter and agreed to cancel the loan. No money had been disbursed to government. However, government had to pay commitment and cancellation fees.
Dott Services, owned by the Indian-Ugandan family of Reddy, is attempting to succeed where government has failed. And it is likely ERA will not stand in the company’s way.
Dott Services Limited is known to enjoy enough political clout in Uganda, and the company comes with more than enough experience to get the job done. The company has put up power voltage lines in different parts of Uganda, and undertaken construction works in sensitive areas such as the Tilenga oil fields.
It is getting the money for the Muzizi project, which should hover around $150 million that should pose a major challenge for the company.
