Bujagali refinancing lowers tariffs by $1.69 cents — minister

The junior energy minister says last month’s financial closure for debt refinancing of the Bujagali hydropower dam resulted in the reduction of end-user tariffs by 1.69 US cents (Shs62.89), from 9.61 US cents per kilowatt-hour to 7.91 US cents per kWh.

The tariff will continue to reduce until 2032, Simon D’Ujanga told Parliament on Thursday.

Mr D’Ujanga said the impact of the refinancing implementation has resulted in the reduction of electricity tariffs for extra-large industrial manufacturers by 15%: from an average tariff of 10.1 US cents per kWh to 8.3 US cents per kWh and 5.0 US cents during the off-peak period.

Related: Weak shilling drives rise in energy prices, but not for extra-large industries

“ln order for our industries to be more competitive, it is prudent to allocate all the benefits arising from the debt refinancing of Bujagali to the extra-large industrial customer category to ensure that our manufacturers are competitive,” Mr D’Ujanga said.

“The third quarter tariffs increased by about 1.7% weighted average due to the depreciation of the Uganda Shilling against the dollar by 3.50%, the reduction of exports of electricity to Kenya by UETCL by over 50%, and an increase in international petroleum prices by 220%,” Mr D’Ujanga said.

The minister was presenting a statement to Parliament on last week’s announcement of an increase in electricity tariffs by the Electricity Regulatory Authority. The regulator announced an increase in tariffs for domestic, commercial, medium and large industrial consumers by an average of 82 US cents during this quarter.

The ERA attributed the upward changes to the depreciation of the Uganda Shilling against the US dollar and the rise in the price of crude oil by 22% per barrel.

Parliament last July approved a waiver of corporate income tax for Bujagali Energy Limited, which owns and operates the 250 MW hydropower project, for 2017/18-2022/23. The tax waiver brought down the tariff for energy from the dam from an average of 13.83 US cents per kWh to an average of 10.62 US cents per kWh.

Mr D’Ujanga said the tax waiver benefits were applied across the board —for domestic, commercial, medium and large industrial consumers—which helped to reduce the end user tariff by an average of l8.3%.

Mr D’Ujanga also revealed that the average monthly capacity payments to Bujagali Energy Limited have also since reduced from $13m (Shs48bn) to $10.5m (Shs38.8bn).