When the Karuma Hydropower Project (KHPP) achieved its substantial completion in June 2024, the government issued the contractor, Sinohydro Corporation Ltd, a completion certificate to mark the start of commercial operations.
To date, the plant has generated a total gross energy output of 2,624,330 MWh and net energy output of 2,609,533 MWh, translating to approximately Shs478.2b in revenues.
Yet there is no shortage of deficits. Business Outlook has established that besides the plant failing to achieve its full potential of generating 600MW, it is also struggling to meet its revenue targets. This is due to increased revenue discrepancies between the Uganda Electricity Generation Co Ltd (UEGCL) and the Uganda Electricity Transmission Co Ltd (UETCL).
Since the commencement of commercial operations, Karuma’s peak energy dispatch is said to have progressively increased. It reached a maximum of 540 MW in June. While this performance demonstrates its increasing contribution to the national grid, the plant’s output continues to be constrained by the weed and debris challenge.
UEGCL says the slow deployment of the Engineering, Procurement, and Construction (EPC) Contractor’s designers to the site has not helped matters.
A speedy process would facilitate face-to-face discussions necessary to fast-track submission and approval of compliant final as-built drawings.
Another delay—this time in the supply of mandatory spare parts by the contractor—has added salt to the injury.
In May 2024, Sinohydro Corporation Ltd indicated that it had commenced the procurement of pending spare parts.
The UEGCL, however, says some of these spare parts have never been received to date. Despite this, the government has said it is considering a multi-billion proposal by Sinohydro Corporation Ltd to repair pending glitches that have continued to impede the dam’s safety and operations.
Mr Sidronius Okasaai, the State minister for Energy, told this publication that a committee had been set up to scrutinise and advise on the conceivability of the proposal seeking additional $40m (Shs148.5b) to fix the pending glitches.
“There have been changes in what’s happening in the river from the time the construction was done up to now. The challenge is more than what was the case at the time of the physical testing; that is why we (the Energy ministry) have put a team together to study what can be done to control it effectively,” Mr Okasaai disclosed.
It is thought that the plant is negatively impacted during the rainy season. The rain brings with it heavy weeds and debris inflow whose accumulation on the intake trash-rack screens results in increased screen losses and restrictions on generation.
To compound matters, some material also affects the cooling-water system, causing frequent clogging of filters serving critical plant equipment.
Consequently, questions have been raised as to why the plant was commissioned in 2024 without the log boom lines.
Dr Harrison Mutikanga, the UEGCL chief executive officer, admits to suffering “frequent trip-offs or outages because of the water weeds.” While the water weed management system was part of the project cost and the UEGCL, per Dr Mutikanga, “formally sought the contractor to act upon it”, no assurances have been made.
Blame game?
The KHPP is also bogged down by other issues. On May 22, the facility’s Defect Liability Period (DLP) of 24 months expired. Business Outlook has, however, established that Sinohydro Corporation Ltd is said to have pending obligations to fulfil before receiving the 2.5 percent retention money together with the Final Acceptance Certificate.
While the dam has paid Shs108b in interest since commissioning, the UEGCL says it remains riddled by revenue shortfalls. This is due to non-payments from the energy off-taker, UETCL.
“The main challenge is now repayment of the principal loan. To date, UEGCL has made one partial principal repayment of Shs35b. Under the agreed repayment schedule, UEGCL is required to make two principal repayments each year, with each instalment amounting to Shs141.3b,” the UEGCL said in a statement.
As at June 30, the adjusted cumulative debt-service cash flow shortfall since the commercial operations date is Shs525.5b. Elsewhere, the outstanding Karuma loan obligation is approximately Shs4.1 trillion.
The original loan repayment plan was developed on the assumption that KHPP would generate sufficient revenues, primarily through capacity charges, rather than relying on energy sales and actual power dispatch. Based on current financial projections, an average dispatch of about 300MW or higher would substantially strengthen UEGCL’s capacity to meet its annual principal repayment obligations.
If dispatch remains significantly below this level, revenues from energy sales may not be sufficient to cover the scheduled principal instalments, the UEGCL statement further says.
UEGCL sells the generated energy to UETCL under the applicable power purchase agreements. We, however, understand that UETCL has been consistently making partial payments against electricity invoices. This has resulted in accumulated arrears to UEGCL of more than $6m (about Shs22.2b) by April 2026 since commercial operations kicked off.
“The arrears create significant cash flow shortfalls which affect debt-servicing obligations associated with the project; the payment challenge is linked to wider cash flow pressures within UETCL,” the UEGCL statement further discloses, adding, “In particular, UETCL has encountered a payment dispute with a major electricity consumer in the data-centre segment, which has constrained the collections from electricity supplied.”
**Hurdles **
There are a range of hurdles the project is grappling with. Government documents show that the dam’s DLP is divided into two periods: two years for the electromechanical/hydromechanical works and five years for the civil works.
The documents further show that the Electro-Mechanical and Hydro-Mechanical Defects Liability Period (EM/HM DLP) expired on June 11. The Civil DLP is currently at 25 out of 60 months, and will run until June 11, 2029.
Sinohydro Corporation Ltd has recently rolled out its rectification process by mobilising additional engineers and equipment specialists/manufacturers’ representatives to support the works, including the procurement of the required materials and spare parts from China to facilitate timely completion of the outstanding works.
While commendable progress is said to have been made in the rectification of reported defects, some key outstanding issues continue to affect the reliable operation of the dam. We have established that the pending defects include the inefficiency of the cooling water system and blocked trash racks due to the challenges associated with debris/weed management.
“Reduced plant availability directly affects the amount of electricity generated and billed, resulting in lost revenue and potential implications for meeting the Project’s loan repayment obligations,” Sinohydro Corporation Ltd admitted in a statement.
Murky waters
The EPC Contractor has submitted an improved upstream debris/weed management proposal, covering both technical and financial aspects, which is currently under review.
The UEGCL is pursuing support from the Volta River Authority (VRA) of Ghana, drawing on its experience in weed management on the Volta River, the statement reads.
Last week, Mr Kou Zhibin, Sinohydro Corporation Ltd’s commercial manager, told lawmakers that fixing the log boom lines was beyond the contract’s prescription for fixing within the DLP.
He added that this is compounded by the fact that repeated studies revealed a more complex picture of the water weeds problems that his entity had not planned for at the project’s inception.
This was hardly the outlook in September 2024 when Karuma Hydropower Dam was commissioned by President Museveni in Kiryandongo District. The run-of-river hydropower dam, located on the Kyoga Nile River, about 270 km north of the capital, Kampala, features a run-of-river design that includes six vertical Francis turbines with a rated capacity of 100 MW each.
Other features include a concrete gravity dam with spillway gates, six intakes and headrace tunnels, an underground powerhouse complex, and two parallel 8 km-long tailrace tunnels, among others.
The completion of the KHPP and the beginning of commercial operation in June 2024 was meant to mark a significant leap for Uganda’s energy sector. Instead, questions are being asked about what went wrong.
