UGANDA: QUESTIONABLE WORLD BANK TENER DECISION AFFECTS US

UNCLAS SECTION 01 OF 02 KAPALA 000518

SIPDIS

STATE FOR EB/IFD/ODF
TREASURY FOR S DIRECTOR, WORLD BANK

SIPDIS

SENSITIVE

EO. 12958: N/A
TAGS: ECON EFIN ENRG ETRD PGOV UG
SUBJECT: UGANDA: QUESTIONABLE WORLD BANK TENER DECISION AFFECTS US
FIRM

REF: 06 KAMPALA 102

KAMPALA 03260518 001.12 OF 002



1. (SBU) SUMMARY. The Government of Uganda GOU) conducted a
tender for 50 megawatts of theral generators to help alleviate the
current gap n power brought on by diminished hydroelectric powr.
and moved to consider the bid ranked second. After reviewing tender
bids, including additionalsupporting documents, it was determined
by the Wrld Bank (WB) that Mantrac/Unatrac, the local
representative for U.S. firm Caterpillar (CAT),lacked adequate
prior experience operating thermal generator power projects. The
GOU tender review committee has stated it is satisfied
Mantrac/Unatrac possesses the requisite prior experience. END
SUMMARY


2. (SBU) According to senior Minister of Energy officials, and a
representative from the tender review board conducted by Electricity
Transmission Company Ltd (UETCL),the Mantrac/Unatrac bid was the
top-rated proposal and the lowest priced per kilowatt hour.
Minister of Energy, Daudi Migereko, told Emboff that the GOU bid
rankings were submitted to the WB in Washington D.C. Bank officials
subsequently wanted clarification on Unatrac/Mantrac's prior
experience on thermal generator projects to determine if prior
experience was lease/BOO, supply and installation, or delivery only.



3. (SBU) The Bank directed UECTL to pose these questions to
Unatrac/Mantrac. UETCL sent the questions to Mantrac in Kampala on
September 28, 2006 and Mantrac responded on September 29. The UETCL
tender board was satisfied with Unatrac/Mantrac's response and
determined it had adequate experience. Uganda's office of the
Solicitor General, which performs legal review on these tenders,
also reviewed the WB's questions and Unatrac/Mantrac's responses.
The Solicitor General office agreed with the Ugandan tender review
board that Mantrac demonstrated adequate prior experience with
thermal generators. It forwarded these conclusions to Bank
officials in Washington D.C.


4. (SBU) The review by the WB in Washington D.C. lasted from
September 2006 to March 2007, despite the emergency nature of the
project to help alleviate the ongoing energy crisis. World Bank
headquarters told the GOU tender review board that it was not
satisfied that Unatrac/Mantrac had demonstrated it had adequate
prior experience. The WB would not approve a "no objection" letter
that would allow the project to be awarded to Unatrac/Mantrac.


5. (SBU) On March 15, Energy Minister Migereko said to Emboff that
the tender review board recognized that this bid for Caterpillar
equipment was backed by a major U.S. firm. Ugandan officials were
certain that the appropriate prior experience existed, and the GOU
review board expected that the WB review would concur with their
assessment after receiving the supporting documents from
Unatrac/Mantrac.


6. (SBU) The GOU is concerned that selecting another proposal would
result in higher per kilowatt rates and therefore cost the people of
Uganda higher prices for power. The Unatrac/Mantrac bid was three
cents per kilowatt hour lower than Aggrekko's. The increased prices
could create domestic political problems in Uganda because
electricity tariffs have been raised multiple times since the
beginning of the energy crisis and the Ugandan public is very
sensitive to contracting irregularities. The Ugandan public and
business community have frequently vented their frustration over the
high cost of energy in Uganda, which is discouraging investors. A
few firms in Uganda have had to close during the past year because
of increased energy costs.


7. (SBU) In early March, the Bank informed the tender board that it
could proceed with preliminary discussions with Aggrekko, the second
ranked bid submission. Aggrekko currently operates 50 megawatts of
thermal generators in Kampala. The Norwegian firm Jacobsen was the
third bidder. Officials in the Ministry of Energy responded that
this move would result in higher energy costs for Ugandans and
created a monopoly if Aggrekko was awarded the contract. The Bank
told the GOU that monopoly concerns were not included in the
original bid tender and could not be a factor for consideration.


8. (SBU) COMMENT: This tender has been a long process for Uganda,
which hoped to have the 50 megawatts of power awarded before the end
of 2006. Uganda still suffers power load shedding and although the
Ministry of Energy has been proactive in identify alternative
sources of power, the country desperately needs the gap filler
solution provided by thermal generators. It is unclear why the WB
review found that Unatrac/Mantrac lacked the prior experience to
operate a 50 megawatt thermal generator project, but it does not
appear to be a lack of support by the tender review board in Uganda.


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