By Andrew Irumba
Officials of the Electricity Regulatory Authority (ERA) are involved in a bitter clash with Elemental Energy Uganda Limited over the license for the construction of a hydro power project on River Kaku, in Kisoro district.
SpyUganda has learnt that the standoff between the two entities started when Elemental Energy received a license in October 2017 to construct the 7MW Nyamabuye power dam on the river at USD27m.
However, in July 2019, ERA issued a license revocation notice to the company, contending that it “was unlikely to fulfill its obligations under the license”.
Thereafter ERA gave Elemental Energy 45 days to show cause why the license shouldn’t be revoked.
In the notice to Elemental Energy, ERA stated that: “The Authority at its 315th meeting held on 4th July 2019, assessed the licensee’s compliance and noted that the licensee had registered minimal progress towards the development of the project and was thus unlikely to fulfill its obligations under the license…the licensee is in breach of its license terms and conditions.”
In November last year, Elemental Energy missed a key date for financial close – where financial arrangements are completed – but it asked for an extension to complete negotiations with financiers.
But ERA has since rejected this.
Julius Wandera, the ERA spokesperson, said “The Company had shown lack of seriousness, which is unacceptable.”
However, Carol Kutesa, the head of business development at Elemental Energy said they had done whatever they were supposed to do, although the regulator was being unfair – and at worst having ‘sinister reasons’ to revoke their license.
She said “We successfully did the feasibility study and spent more time doing the hydrology gauges to ensure the river has enough water for the project, a requirement for all projects that request for money from the World Bank.”
But ERA insists that Elemental Energy was expected to reach a financial close in November last year which they didn’t do.
Financial close is the date on which the licensee has concluded financial arrangements and disbursements by the lenders.
Wandera said the company was just holding the license and failed to court investors to give it money and instead tried to sell the license, reason why it had to be revoked.
But Elemental Energy rejected this claim, saying they brought in investors DI Frontier as an equity investor and FMO from the Netherlands as a debt funder who were rejected by ERA. ERA also said the company had wrangles among the shareholders where one wrote to it, saying she hadn’t been consulted on the investors; they were bringing on board to buy shares in the company.
But Kutesa noted that they were not convinced why the regulator had rejected the funders.
She said the regulator has refused to respond to the financier’s inquiries about the ability of government to evacuate the power once the project has been completed.