“EIB must withhold funding Bujagali dam until major problems are addressed”

Following a highly critical assessment from a World Bank body on the impacts of the USD 799 million Bujagali dam in Uganda, the campaign coalition Counter Balance has called on the European Investment Bank (EIB), a joint funder of the controversial project with the World Bank, to withhold any further disbursement of its USD 130 million loan for the project until an independent investigation of the impacts of the dam are undertaken.

After a 17-month investigation into the Bujagali dam, the World Bank’s Inspection Panel – the multi-lateral lender’s internal complaints mechanism – warned this month that the benefits of the project now being built by private companies on the River Nile have been overstated and its risks understated. [1]According to the Inspection Panel, the dam’s hydrological risks, such as diminishing electricity output due to climate change, the potential for the dam to harm Lake Victoria and the cumulative effects of multiple dams on the Nile, have not been properly addressed by the World Bank. Nor did the Bank adequately consider alternatives to the project.

Regine Richter, from the German environmental and human rights organisation urgewald and member of Counter Balance: Challenging the European Investment Bank, said: “Most of the risks identified by the Inspection Panel fall on Uganda, one of the world’s poorest countries, rather than the project developers. Project costs have risen dramatically since the deal was sealed, and the Panel expressed clear concerns about this costly dam’s impact on tariffs in a nation where only a small percentage of the population can afford electricity. The Panel is right to question how the Bujagali dam can possibly fulfil the World Bank’s objective to reduce poverty through sustainable development.”

The project is being developed by a consortium that include the US-based Sithe Global Power and Italian construction company Salini, among others. Groups monitoring the project say the deal must be reworked to take some of the risk from Uganda.

Frank Muramuzi, Executive Director of the National Association of Professional Environmentalists, the Ugandan group who filed the initial claim with the Inspection Panel, said: “The World Bank’s Inspection Panel has reported that this dam could cost Uganda more than it’s worth. The power purchase agreement between our government and the project developer will drain the national treasury and take away important resources for other social and economic services, making citizens poorer than they already are.” [2]

Members of the World Bank Board have said they expect a clear action plan to solve the project’s many problems.

“We expect action from the EIB too,” said Desislava Stoyanova, coordinator of Counter Balance. “The EIB has agreed to a USD 130 million loan for the Bujagali dam project, pledging that it would follow the recommendations of the Inspection Panel. The EIB should undertake the actions proposed by the Inspection Panel, but launching an independent investigation of the project impacts, massive as they are, would be a lot wiser.”

For more information, contact:

Desislava Stoyanova
Counter Balance
Tel: + 32 2 542 01 85
Mobile: +32 487 617 482
Email: desislavaATbankwatch.org

Regine Richter
Tel: + 49 30 44339169
Mobile: 49 170 2930725
Email: regineATurgewald.de

Notes for editors:

1. The Inspection Panel report, the World Bank Management’s response and NGO recommendations are available here.

2. The National Association of Professional Environmentalists is calling for a more balanced allocation of risk; a high-quality plan for addressing economic, environmental, and resettlement problems; and an open and transparent process for protecting Lake Victoria from excessive outflows. The project developer should also be required to take out climate-risk insurance.

3. EIB commitments to the Bujagali project are available at the bank’s website.

The EIB often co-finances large infrastructure projects with other international public lenders, and shifts the responsibility for addressing adverse environmental and social impacts caused by such projects onto other public financiers. This has been the case recently with the controversial Chad-Cameroon oil pipeline where the EIB followed the World Bank in providing project finance for the largest pipeline on the African continent, and now after the withdrawal of the World Bank is left with serious reputational risk on account of its inaction.

More information about the Bujagali dam is available here.

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