Dispute delays Rwanda power project by 3 years

Saturday March 21 2015

The KivuWatt working platform at Lake Kivu. The

The KivuWatt working platform at Lake Kivu. The project will extract methane gas from the lake for power generation. PHOTO | FILE 

By KABONA ESIARA

Rwanda’s multimillion dollar methane gas project has been delayed by disputes between a private investor — KivuWatt Ltd, a subsidiary of ContourGlobal, a New York-based international power company which owns the project — and Kenyan sub-contractor Civicon Engineering.

Rwanda is seeking to tap at least 100MW from the project to bridge its energy deficit. The country’s current installed capacity is estimated at 165MW; the government aims to increase this to 563MW by 2017.

The pilot phase of the project, which was supposed to generate at least 25MW of power, has been delayed by almost three years since the government awarded exclusive rights to Contour Global in 2009.

On May 31, 2010, Civicon was awarded a contract by KivuWatt to build a barge and install a methane extraction facility on Lake Kivu in Rwanda.

In 2012, KivuWatt terminated the contract, allegedly on the grounds that the works were substandard and would endanger lives and equipment at the power plant in Kibuye.

The EastAfrican has learnt that Civicon Engineering is seeking at least $70 million in damages for termination of the contract. The termination followed an independent audit by American engineers, which found that Civicon had not conformed with the agreed engineering standards.

Lawsuit

In 2013, Civicon filed a suit at the high court of Kenya in Mombasa seeking an injunction restraining KivuWatt from continuing to demand the payment of a performance guarantee of $1.2 million from Citi Bank NA.

It also sought to restrain KivuWatt from interfering with any equipment, plant, machinery or any other asset in its possession.

The equipment for extracting methane gas, valued at $1 million, was impounded at the port of Mombasa following a court order. It has been lying there for almost three years.

“We have been moving from Malindi court to Mombasa. From the Magistrates’ Court to the High Court, and currently we are in the Court of Appeal,” said Emmanuel Wenani, the logistics and transport manager of KivuWatt.

At a stakeholders meeting in Kigali, organised by the Kenya Ports Authority, Mr Wenani said the lengthy court case in Kenya could undermine the benefits of regional integration for small countries like Rwanda.

The EastAfrican has learnt that KivuWatt has imported a new separator, currently being assembled at the plant in Kibuye, following pressure from the Rwandan government to deliver the project.

The parts were flown to Uganda and transported by road to Kibuye to avoid the risk of the equipment being impounded again.

Following the breakdown of the talks between the stakeholders in the project in 2010, the case was referred to the International Chamber of Commerce for arbitration at the International Court of Arbitration in Paris.

By processing methane gas at Lake Kivu, Rwanda seeks to diversify its energy sources to address the current shortage of power and reduce its power tariffs which are the highest in the region at $0.24 per kwh. Kenyans pay $0.15 per kwh, Ugandans $0.17, and Tanzanians $0.05.

Trapped gas

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.

Located in Karongi district, Western Province, the KivuWatt project is expected to produce a total of 100MW upon completion.

The project will represent the first large scale use of the gas, and the gas extraction will greatly mitigate the environmental hazards associated with a natural release of the lake gases in addition to providing an environmentally friendly and sustainable source of power generation.

Symbion Power is also developing a 50 MW independent power production project using methane gas from Lake Kivu. Under the agreement with the government of Rwanda, Symbion will build, own and operate the station.