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Economy - Development | Environment - Nature

Scandinavians pull out of Uganda's Bujagali project

afrol News, 6 June - The controversial Bujagali hydro-electric power plant on Uganda's Nile River has suffered another major setback. Two Scandinavian companies and their key funding are turning the back to the project after bribery allegation.

The once prestigious Ugandan billion-dollar project of building a dam at Bujagali long time ago developed into a scandal operation. It soon became clear that the project would strongly harm the environment, irresponsibly increase Uganda's debt burden and that electricity from Bujagali would be far too expensive for Ugandan consumers. A 1999 corruption affair only complicated things.

Also for the Norwegian construction company Veidekke, the Bujagali project - the largest contract it had ever signed - only has meant problems. It was discovered that Veidekke's English subsidiary, Nor-Icil, had given the Ugandan Minister of Energy a US$ 10,000 bribe in 1999, something that led the World Bank to stop the financing process one year ago.

Since that, the Bujagali project has not moved forward, except for corruption investigations in the US, UK, Uganda and Norway (which are still going on). The latest consequence of this has been the decision by Veidekke and its Swedish partner Skanska to pull out of Bujagali altogether.

Veidekke and Skanska were part of the three-member consortium, which an American company, AES Corporation, had contracted to do the civil works for Bujagali. The two Scandinavian companies also brought with them external financing from the UN Economic Commission for Africa (ECA), which will now be lost for the project.

The Veidekke leadership however denies that the many scandals surrounding the Bujagali project had made them pull out. The company blames the long standstill in the project and the lowered value of the US dollar, producing new economic conditions.

- Because things have taken so long, the conditions for the project have changes, Veidekke spokesman Kai Krüger Henriksen yesterday told NorWatch, a Norwegian group scrutinising national companies and their ethics abroad. "The contract with AES actually ceased one year ago, and meanwhile the dollar has fallen considerably and AES has decided to arrange a new international tender for the project," Mr Henriksen added.

The Veidekke spokesman, who doubts his company will participate in the new tender, denies the ongoing corruption investigations had influenced the decision to pull out of Bujagali. He however concludes projects in "the Third World are poorly predictable and include big risks." Veidekke is to have lost US$ 5 million in its Bujagali engagement so far.

NorWatch also says the Norwegian government's export subsidy, granted Veidekke for the Bujagali project, was due to be reconsidered. If other Norwegian companies were to try to participate in the upcoming tender, the government would be difficult to convince, given the many scandals surrounding Bujagali.

Meanwhile, Uganda's new Energy and Mineral Development Minister, Syda Bbumba, recently was informed about the Scandinavian pullouts during a trip to Washington DC, where he met World Bank and AES officials. He told the Ugandan daily 'New Vision' that replacements would be contracted through competitive bidding.

Asked of an opinion to why Veidekke and Skanska had pulled out, Ms Bbumba was unsure what to answer. "But I suspect Skanska was tired of waiting since they signed the contract in 2000," she told 'New Vision'. Unconfirmed reports however disclose Skanska had pulled out in part because "they hadn't been paid by AES in over a year."

The news of Veidekke and Skanska pulling out of Bujagali has been received well in a large number of organisations worldwide, condemning the project for environmental, economic or other ethic reasons. These now hope the project's financing will have to go through another round of approval, which will be complicated by the many negative consequences now known.

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