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Uganda's government will stop buying expensive power from two thermal plants owned by London-listed Aggreko PLC (AGK.LN), in a bid to reduce its electricity subsidy burden, Minister of Energy and Minerals Irene Muloni said Friday.
The government will terminate its contract with the Kiira and Mutundwe plants--which have a combined capacity of 100 megawatts--by November, when the first unit of the 250 MW Bujagali Hydropower Project is commissioned.
Power from the Bujagali project will be cheaper and eliminate the need for expensive thermal power, Muloni said.
The Bujagali project is jointly owned by Sithe Global Power LLC and the Aga Khan Fund for Economic Development.
Aggreko officials couldn't comment immediately.
Uganda has been grappling with acute power outages over the past two weeks, after two thermal plants were shut down due to unpaid arrears of around 300 billion Ugandan shillings, or $118 million.
The country spends at least $300 million every year on subsidizing thermal power plants, which supply most of the power generated to primary processing industries handling coffee, cotton, cocoa, tea, fish and horticulture products.
Uganda, which contracted thermal generators in 2006 to supplement hydropower, is expected to retain some heavy oil-fired plants that will be using crude oil produced in the Lake Albertine rift basin during an extended well testing program expected to commence before the end of the year.
UK-based Tullow Oil PLC (TLW.LN) is expected to conduct the program in three blocks in the Lake Albertine rift, where at least 1 billion barrels of oil have been discovered.
Uganda is expected to start commercial oil production by 2014.
-By Nicholas Bariyo, contributing to Dow Jones Newswires; 256-75-2624615 firstname.lastname@example.org