Uganda has started construction of a $550m (�386m) dam on the river Nile, which it hopes will boost the country's electricity generation capacity.

Uganda's President Yoweri Museveni launched the construction of the Bujagali hydroelectric power project, which is 80 kilometres east of the country's capital Kampala.

The station, which is expected to start producing power in 2005, will be built by AES Nile Independent Power, the local affiliate of U.S. utility AES Corporation.

The World Bank, through its private lending arm, International Finance Corporation, and the International Development Agency, has issued $215m in direct loans and guaranties for the construction of the dam.

Eight years of delay

Construction of the Bujagali hydroelectric power project was supposed to have begun in 1994.

The project met with stiff opposition from those who argued it would displace many people and submerge the Bujagali Falls, a popular tourist attraction.

Construction was finally given the go-ahead by the government last December.

The new station is expected to generate 250 megawatts, and will be a welcome addition to the country's power generation capabilities.

At the moment the country produces 260 megawatts of power from its two power stations upstream from Bujagali, but this does not meet demand.

Uganda frequently suffers from power cuts, and according to a recent survey at least 90 working days are lost each year as a result.

President Yoweri Museveni apologised for the delay to the project at the ceremony to begin the dam's construction.