On October 8th of 2012, Blackstone commissioned the Bujagali Hydroelectric Power Station in Uganda at an event attended by the President of Uganda, Yoweri Museveni, The Aga Khan, leaders from neighboring countries and the citizens of Uganda. The occasion marked the culmination of a project that began more than two decades ago.
The project was conceived of in 1994, when the Government of Uganda recognized its growing need for additional electricity and initiated a plan to build a hydroelectric power station on the Nile River, 8 km downstream from Lake Victoria. The project attracted much international attention and AES, a major developer of greenfield power projects, invested over seven years and $70 million to advance the project. Despite high hopes, the “Bujagali” project, fraught with delays and itself running into a cash crunch, was ultimately abandoned in 2003. In 2005, Blackstone, together with portfolio company Sithe Global Power, formed a unique partnership that brought together the public and private sectors to revive the project.
Blackstone, through Sithe Global, served as the lead investor, committing $116 million of equity to the approximately $900 million project. The investment was accompanied by $20 million in capital from the Government of Uganda and $63 million from Industrial Promotion Services, the investment arm of the Aga Khan Fund for Economic Development. Financing was provided by the World Bank, the African Development Bank, the European Investment Bank and others.
In addition to providing a reliable source of clean, affordable power for Uganda, construction of the 250MW hydroelectric power station generated 3,000 jobs over a five year period. The additional power generation from Bujagali will play a major role in spurring economic growth regionally, and help to eliminate load shedding (or rolling blackouts) by nearly doubling the country’s effective generation capacity. Uganda has historically had one of the lowest rates of electrification in the world, forcing it to rely on expensive, carbon dioxide intensive, diesel generators. Between 2006 and 2011, the Government of Uganda spent roughly $900 million on thermal energy subsidies, at a cost of 30 cents per kilowatt hour to Ugandans. Bujagali is expected to lower these rates by two-thirds. Furthermore, power generated from Bujagali brings the total supply in Uganda to 600MW as contrasted with 2012 demand of almost 450MW, which is permitting electricity supply to surpass demand for the first time in five decades and paving the way for economic growth.
Today, Bujagali represents one of the largest privately-funded power sector investments ever made in Sub-Saharan Africa and will undoubtedly be a model for what this type of partnership can achieve. Bujagali not only delivers much needed power to Ugandans, but will drive economic growth to the entire region.