Chinese firm wants to build dam on Nile River

Uganda has received an application for a licence to build a hydroelectric power plant on the Nile River from a Chinese firm, documents seen by Reuters News Agency show.

The $1.4bn plant, if approved, will expand the East African country's power generation by 40 percent, a regulatory official who also confirmed the application, said.

The firm, POWERCHINA International Group Limited (PIGL), wants to develop the Ayago Hydroelectric Power Station, located on a section of the Nile between lakes Kyoga and Albert, according to its licence application.

"We have called for comments from the public on their proposed project," Julius Wandera, spokesman for the state-run power regulator, Electricity Regulatory Authority (ERA) told Reuters on Tuesday.

The ERA licences all power generators in the country and is also responsible for setting generation and end-user power tariffs.

The Ayago power plant will have a capacity of 840 megawatts (MW) and, when successfully developed, would be Uganda's largest power plant.

The Karuma hydroelectric dam, upstream of Ayago and due to be completed early this year by China's Synohydro Corporation, is currently Uganda's largest power project.

The ERA would also conduct its own due diligence on POWERCHINA International to ascertain whether it had the financial and technical capacity to execute the project, Wandera said.

"By April we should be communicating our final decision on their application to them," he said.

According to their application, the firm plans to raise funds for the project through a 25-75 percent mix of equity and debt.

The project could potentially ramp up Uganda's generation capacity by 40 percent to about 2,800MW according to calculations from data available from the energy ministry.

In recent years, Uganda has been wooing private-sector energy investors and taking loans from China and other sources to help boost power production to meet fast-growing demand.

To make the sector attractive to foreign investors, the government abolished subsidies for consumers and introduced a tariff-setting system that is benchmarked on movements in key parameters such as inflation, foreign exchange and oil prices.

Uganda is one of six countries that signed a 2010 Cooperative Framework Agreement (CFA) that allows upstream Nile basin countries to develop projects along the river without Egypt's consent as it was in a previous colonial-era agreement on the use of Nile waters.

Building dams on the Nile has proven controversial in recent years with Egypt, which almost entirely depends on the water from the river, seeing them as a national security threat.

Ethiopia is currently building a dam on its section of the Nile. The Grand Ethiopian Renaissance Dam is about 70 percent complete and promises to provide much-needed electricity to Ethiopia's 100 million people.

However, Egyptian officials are concerned that filling the reservoir behind the dam could significantly reduce the amount of Nile water available to Egypt.

The two countries are negotiating a way forward and are expected to strike a deal in the coming weeks.