A Rwandan energy firm has sealed a five-year contract worth $13 million to supply peat, xxxxxxx, to cement maker Cimerwa.

The deal with Peat Energy Company (PEC), inked on Thursday in Kigali, comes as a relief to Cimerwa that has been grappling with high power costs which translate to increased production expenses making Rwanda manufactured cement less competitive in pricing.

Currently, while a 50kg bag manufactured locally by Cimerwa on average costs $15, the same bag of imported cement from the region costs on average $13.

This is because Cimerwa has been relying on imported heavy oil fuel to dry cement during the manufacturing process which consumes 85 per cent of the total cost of producing a 50kg bag.

Cimerwa’s chief executive Ms Maria Busisiwe said the relatively lower energy costs arising from the use of peat will allow the factory to increase its production.

"We are spending 85 per cent on heavy fuel -it is very expensive. This is why we are supplementing it with peat energy," she said during the signing ceremony.

Cimerwa's other drawback is its use of outdated wet plant processing when neighbouring countries have switched to dry process plants, which use less energy.

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Market players say Hima, Bamburi and Tororo that supply cement on the Rwandan market are competitive after they reduced their production costs by almost 50 per cent by switching to dry processing.

However, Cimerwa is also in the process of switching to dry processing.

Pretoria Portland Cement (PPC), South Africa’s leading manufacturer, is the majority shareholder in Cimerwa after buying a 51 per cent stake worth $69.4 million in December 2012.

The minority shareholders include Rwanda Investment Group (RIG) with 11 per cent stake while the rest is owned by the government and an undisclosed individual shareholder.

Pierre Kalinganire, PEC chief executive said peat has proved to be a much cheaper alternative source of energy.

PEC plans to increase its production capacity from the current 13,000 tonnes of wet peat to 20,000 tonnes as demand increases.

“We have an installed capacity of 20,000 tonnes but during the piloting phase Cimerwa has been consuming 10,000 tonnes,” Mr Kalinganire said.

Cimerwa is increasing its cement production capacity from 100,000 tonnes— 600,000 tonnes annually by building a modern plant.

The factory is expected to be completed by September this year and commissioned in February 2015.

Rwandan government also signed an agreement with an Indian firm, Punj Lloyd Ltd, worth $371 million to invest in a 100MW peat power project.

Punj Lloyd is to construct, finance, maintain and operate a peat power plant in North Akanyaru located in Bugesera district in Eastern Province.