Uganda will nearly double its power generation capacity over the next three years, helped by reforms that have fuelled a rush of investment by independent power producers and development groups, a top official said on Tuesday.
The east African country has grown by about five percent a year over the last decade, underpinned by huge investment in the retail, banking, telecoms and hospitality sectors.
Ugandan officials say they want to boost electricity supply rapidly to power an industrialisation drive. In recent years they have cut subsidies for consumers and introduced a tariff adjustment mechanism.
“All those have worked together to improve the regulatory and policy environment and this is attractive (to investors),” Benon Mutambi, chief executive officer of the state-run Electricity Regulatory Authority (ERA), told Reuters.
Mutambi said Uganda plans to export power within the region once the projects in the pipeline have come online.
He said eight projects under construction, both privately and publicly-funded, would expand Uganda’s generation capacity to at least 1500 megawatts (MW) over the next three years from 850 MW now.
The plants include Karuma and Isimba on River Nile, which are partly funded with loans from China’s export import (Exim) bank and are estimated to cost more than $2 billion.
The remaining six plants, which have a combined investment of about $500 million, are mostly small renewable energy plants developed by independent producers with funding from development bodies such as Germany’s KfW and Britain’s DFID.
In January 2012, the Ugandan government abolished electricity subsidies for consumers, saying the cost was unsustainable. In the same year, regulators introduced a mechanism to allow quarterly reviews of end-user power tariffs based on changes in inflation, exchange rates and fuel prices.
In October this year, ERA allowed Umeme Ltd, the sole power distributor, to raise tariffs 17 percent for the fourth quarter after the local currency fell against the dollar.
“We did it at the time when the country was in the election fever,” Mutambi said, refering to next February’s presidential elections. “Not many countries would … increase electricity prices at this time.”
Mutambi said being able to take unpopular measures to keep the power sector attractive had sent out “positive signals to the … investor community that yes, you have a country that is committed to ensure a conducive investment climate”.