Home Business & Tech Rwanda Signs $150 Million Energy Deal With U.S Firm

Rwanda Signs $150 Million Energy Deal With U.S Firm

by Magnus Mazimpaka
11:45 am
Rwanda Signs $150 Million Energy Deal With U.S Firm

Methane gas extraction rig on Lake Kivu

Roughly 450 days from now, Symbion Power Lake Kivu Ltd, an American energy corporation, will inject 14 Megawatt  of electricity into Rwanda’s main power grid.

By the 1080th day,  the firm will have commissioned 50 Megawatt, says Symbion Power CEO Paul Hinks.

Hinks made the announcement on Tuesday as the firm put a signature on a 25-year power purchase agreement (PPA) with Rwanda government for extraction of 50 Megawatt from methane gas in Lake Kivu.

“Unlocking Lake Kivu’s energy potential is a game changer for Rwanda,” Hinks said late Tuesday night.

“Our team is working hard to turn this resource into affordable, reliable power for Rwanda’s people.”

Once the firm presses the final button, the total contribution to the power grid will increase by 30%,  Infrastructure Minister, James Musoni said adding that the deal with Symbion Power will have a  massive impact on the country’s economy.

The project is a key part of Rwanda’s plan to increase generation capacity. Power generated from the lake resource will help boost the country’s electricity supply and lower the overall cost of electricity.

After ten months of back and forth negotiations, the two parties concluded at a 9.8 cents per unit, which is almost 50% lower than the current industrial price (18 cents) offered by other private power generators.

“This is an equitable deal,” said Francis Gatare, CEO of Rwanda Development Board, whose team was involved the negotiation of the $150 million deal.

In the deal, Symbion, which was awarded the tender in August 2014, will build, own and operate the 50 Megawatt power station by constructing gas extraction facilities to lift, separate, and process methane gas, which is dissolved in the deep waters of Lake Kivu.

After extraction, the gas will be delivered to an on-shore generating facility located at Cape of Busororo in Nyamyumba sector of Rubavu district, a few miles away from DRC.

Under the terms of the agreement, too, the parties, where Rwanda is represented by Rwanda Energy Group (REG) had agreed that Symbion should first conduct a feasibility study for the project and upon approval by REG, the parties would negotiate and execute the Power Purchase Agreement (PPA) and Concession Agreement (CA).

However, with the stressing need for power, the parties later agreed to start negotiations of the PPA and the CA prior to the approval of the feasibility study so that the agreements could be executed soon after the approval of the feasibility study.

The Ministry of Infrastructure quickly approved the feasibility study and agreed key terms for the PPA and CA with Symbion.

Although, RDB’s Gatare said the negotiation has happened so fast (ten months), a source at Symbion told KT Press that they wanted it to happen even faster. “The CEO (Hinks) kept calling and asking what was going wrong,” the source said.

KT Press learnt that RDB was concerned with many issues surrounding the extraction due to the risky nature and the financing of such a project.

Also, RDB was trying to strike a better deal, putting in the bad experiences from several previous deals where the government found itself under the armpit of the other parties.

“This was the most professional and experienced negotiating team I have come across in Africa,” said Hinks.

“They hit the sweetest spots, but it is a win-win deal, fairly speaking,” Jocelyn Wessling told KT Press after the signing. She said that now that the signing is done,  Symbion will begin implementation activities.

Hinks said that as Symbion waits for the financiers to approve the funds, “we will use our own money. We know Rwanda needs the power urgently.”

Rwanda wants to achieve 70% of the electricity access rate from the current 24% and aims at having an installed capacity of 563 Megawatt in 2018, from the current installed capacity of 161Megawatt.

Lake Kivu contains 300 km3 of dissolved carbon dioxide and 55 to 60 km3 of methane gas accumulated and trapped at significant depth in the lake.

There are likelihoods that, if this project is executed efficiently,  Rwanda might give Symbion more deals. “Obviously we will not look very far,” said RDB CEO.