The World Bank has approved a $120m loan to Uganda to improve and expand the country’s electricity grid and connect more customers to it, a senior bank official said. The loan, which will be provided via the bank’s International Development Association, has an interest rate of 0.75 percent, a maturity period of 40 years and a grace period of 10 years, the Washington-based lender said.

Mr. Steven Shalita, World Bank Uganda's Senior Communications Specialist told the press that the loan would fund a five-year project to benefit existing grid customers afflicted by the power cuts.

The project would involve the construction of a 137 km transmission line and substations, providing technical assistance and relocation of people moved to make way for the power line. About 6,500 new customers in southwestern Uganda will be connected, Mr. Shalita said.

According to the sector regulator, Electricity Regulatory Authority (ERA), Uganda will be generating an estimated 747 megawatts (MW) by the end of 2011 from last year's 576 MW.

The Minister for energy told parliament recently that, more water would be released through the country's main hydropower dam, the Owen Falls, to generate an additional 40MW. The extra hydropower is expected to plug the deficit created after the government decommissioned one thermal power plant at Jinja in Eastern Uganda.

Meanwhile, Minister Irene Muloni has announced that Independent power producers will resume emergency power generation in Uganda following an agreement with the government over unpaid generation fees, energy and minerals.

About two diesel-fired thermal plants resumed operations recently, after the government assured the owners of payment of at least 300 billion Uganda shillings or $118 million in arrears. Independent power producers in the country include London-listed Aggreko PLC (AGK.LN), Ugandan power producer Electro-Maxx and Norway-based Jacobsen Elektro.