AS Jacobsen, the power firm, will build a 50 MW thermal plant at Namanve and will operate it for six years before handing it over to the Ugandan government, according to the agreements signed recently.
A power purchase agreement was also signed, allowing Jacobsen to sell power to the grid as an independent power producer.
The Electricity Regulatory Authority (ERA), the Energy Ministry of Uganda, Uganda Electricity Transmission Company and the World Bank selected Jacobsen because it offered the cheapest cost of operations.
"The capital (equipment) cost of the thermal plant is only about 15 percent of the entire cost. The real cost of the plant is in operation and that is why Jacobsen was considered," Birungi, ERA's communication official said.
Three power firms, including AS Jacobsen, Electromax and API, had bid for the project. Jacobsen won the bid, offering 289 million dollars as energy cost, 52 million dollars as capital cost which totaled to 341 million dollars as total cost of plant operation in six years.
The Namanve plant is one of the two thermal plants with total capacity of 100 MW that the Ugandan government decided earlier this year to build to ease the souring power shortage in the east African country.
Construction of the thermal plants, which are expected to function in January 2007, would mitigate load shedding before the Bujagali hydropower project, the biggest in the country, is completed.
The 250 MW Bujagali project is expected to kick off this year and start generation in 2010.
"Demand for power has continued to grow at 27 MW annually without substantial new generation capacity. In the short term, thermal generation in Namanve and Mutundwe will greatly reduce load, said Frank Sebbowa, CEO of the ERA.