CAO Cases

Arne Hoel, The World Bank

Sub-Saharan Africa

Uganda / Bujagali Energy-07/Bujagali

Complainant
Local community members
Date Filed
February 03, 2015
Concerns
Inadequate compensation for assets
Case Status
Open - Compliance
 

Synopsis

Complaint

The Bujagali Energy project involves the development, construction, and maintenance of a run-of-the-river power plant with a capacity of up to 250 MW on the River Nile in Uganda. Bujagali Energy Limited also manages the construction of approximately 100 kilometers of 132 kV transmission line on behalf of the Uganda Electricity Transmission Company Ltd. to improve transfer of electricity from the plant.

 

Bujagali Energy Ltd. is owned by Industrial Promotion Services (Kenya) Ltd.—the industrial development arm of the Aga Khan Fund for Economic Development and SG Bujagali Holdings, Ltd., an affiliate of Sithe Global Power LLC (US). IFC and MIGA are supporting the $750 million project along with several other international financial institutions, including the International Development Association, African Development Bank and European Investment Bank.  IFC’s investment comprises $100 million in A and C loans, and MIGA issued a $115 million guarantee to World Power Holdings Luxembourg S.à.r.l., a subsidiary of Sithe Global Power, for its investment in the project.

 

In February 2015, four community members residing in the Bujagali affected area submitted a complaint to CAO on behalf of themselves and over 200 other community members. The complaint relates to inadequate compensation for crops damaged by project activities.

 

CAO Action

CAO found the complaint eligible for further assessment in February 2015 and due to the complicated nature and volume of individual complaints forming part of the group complaint, as well as other ongoing processes at the time, the parties agreed to an extension of the deadline to complete the assessment.  Consulting with the different parties, CAO understood that while the complainants expressed interest in pursuing a CAO dispute resolution process, BEL and UETCL felt dispute resolution was not appropriate at this time.   Given the voluntary nature of CAO’s dispute resolution processes and lack of consensus between the parties to pursue dispute resolution, in accordance with CAO’s Operational Guidelines, the case was referred to CAO’s compliance function for appraisal.  

 

A compliance appraisal was released in November 2016, and CAO concluded that an investigation was warranted in relation to this complaint. In the interest of time and given the extent of completion of the compliance investigation in relation to labor issues, the issues raised in the compliance appraisal for this complaint are being considered in a separate investigation from the ongoing investigation regarding the Bujagali 04 and 06 complaints.  Terms of Reference for this investigation were disclosed in November 2016 (updated in January 2017).

 

CAO released its compliance investigation report on January 16, 2018.

 

CAO finds that IFC and MIGA properly recognized the interconnection project as an associated facility of the hydropower project, requiring the application of the 2006 Sustainability Framework and committing through a direct agreement that UETCL work with IFC’s client to implement the project in accordance with IFC’s performance standards. 

 

CAO also finds that IFC did not have assurance that the Resettlement Action Plan (RAP) for the transmission line, a key step in any land acquisition process, met the requirements of Performance Standard 5. In this regard, firstly, CAO finds that IFC lacked assurance that the compensation framework provided in the RAP met IFC’s requirements for compensation at full replacement cost. Secondly, CAO finds that IFC lacked assurance that the final RAP compensation framework was disclosed or was subject to meaningful consultation with affected communities. Thirdly, CAO finds that IFC did not assure itself that the RAP addressed gaps in government capacity that would need to be bridged in order to support effective implementation at the level required by IFC’s standards. 

 

Weaknesses in the RAP manifested as challenges during project implementation. The project grievance mechanism as described in the RAP, however, was not equipped to deal with the types of complaints that were noted as soon as land acquisition began and persisted throughout the construction period. As a result, numerous complaints were referred to UETCL, the CGV and the recourse mechanisms of the project financiers. Despite indications that complaints regarding compensation were systemic in nature, IFC and the other financiers supported an ad hoc response to the grievances being raised rather than requiring a review of the adequacy of the compensation framework provided for by the RAP. To date, a required completion audit of the resettlement process has not been conducted. In these circumstances, CAO finds that IFC lacks assurance that compensation paid meets the full replacement cost requirement or that affected people have been appropriately compensated considering the delays in payment that have occurred. As a result, significant numbers of households whose land was acquired for the transmission line likely did not receive compensation at full replacement cost.

 

IFC provided a public response to the CAO investigation report.

 

All documents relating to this case are available under "View Documents" below.

 

Status

As per CAO's Operational Guidelines, this case will remain open as CAO monitors IFC's response to the findings.

 

Status as of January 16, 2018


Project information

Institution
IFC & MIGA
Project Name & Number
Bujagali Energy Ltd 24408 (IFC) & 6732 (MIGA)
Department
Infrastructure
Company
Bujagali Energy (IFC); World Power Holdings (MIGA)
Sector
Utilities
Region
Sub-Saharan Africa
Country
Uganda
Environmental Category
A (IFC)
Commitment
$100m A & C loans (IFC), $115m guarantee (MIGA)

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Transferred

Compliance

  • Under Appraisal: Completed
  • Under Audit: Completed
  • Monitoring: In Process