Karuma Dam Faces Challenges in Reaching Full Potential and Revenue Targets

The Karuma Hydropower Project (KHPP), which marked its substantial completion in June 2024, is experiencing significant operational and financial hurdles. While the plant has begun commercial operations and contributed to the national grid, its energy output has been consistently limited below its 600MW potential, with peak generation reaching only 540 MW in June.

Key issues hindering full capacity include the persistent challenge of weeds and debris accumulating on the intake trash racks. This inflow restricts generation and also causes clogging in the cooling-water system, affecting critical equipment. The slow deployment of the contractor’s designers to address these issues and finalize as-built drawings has further exacerbated the problem.

Adding to the difficulties, delays in the supply of mandatory spare parts by the contractor, Sinohydro Corporation Ltd, have impacted operations. Although the contractor indicated procurement had commenced, some essential parts have reportedly not yet been received. The government is now considering a significant proposal from Sinohydro to rectify ongoing glitches that compromise the dam’s safety and functionality.

Financially, KHPP is grappling with substantial revenue shortfalls. The Uganda Electricity Generation Co Ltd (UEGCL) reports discrepancies with the Uganda Electricity Transmission Co Ltd (UETCL), the energy off-taker, which has been making only partial payments. This has resulted in accumulated arrears to UEGCL, creating cash flow problems that affect the project’s debt-servicing obligations. The original loan repayment plan was based on revenue assumptions that current dispatch levels struggle to meet.

Furthermore, the expiry of the electromechanical/hydromechanical Defect Liability Period in June has brought some issues to a head, though rectification processes are underway. The project’s overall financial health is precarious, with outstanding loan obligations totaling approximately Shs4.1 trillion, and a significant cumulative debt-service cash flow shortfall since commercial operations began.

https://www.monitor.co.ug/uganda/news/national/why-karuma-dam-is-struggling-to-take-off-5576048