A proposed hydropower project in Uganda which is backed by the World Bank has been criticised by the Bank's own inspectors because the environmental impact assessment was inadequate and because economic factors could make the electricity from the scheme too costly.
The Bujagali dam is a $550 million development to be built by the US company AES. The World Bank had proposed to provide $250 million in political risk insurance for the project through its Multilateral Investment Guarantee Agency.
A confidential report leaked to the Financial Times claimed that bank staff had not made a sufficiently thorough assessment of the viability of the project and its likely environmental impact. Although it praised the technical competence of the bank's proposal it questioned whether possible alternatives had been considered sufficiently thoroughly.
The report also said that projections for the cost of electricity from the plant did not take into account either the frailty of the Ugandan distribution system or the possibility of currency depreciation. A confidential power purchase agreement has been signed by AES and the Ugandan government but this has not been made public. The inspectors considered it vital that the agreement should be published to allow an informed discussion of the project to take place.
Campaigners opposed to the scheme have claimed that the report supports their view that the project is flawed. However the World Bank will not respond until after a meeting of the bank's board to discuss the scheme has taken place
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