Rwanda’s Kibuye Power 1, a company generating electricity from methane gas on Lake Kivu, is under liquidation after failing to pay its debts.

The liquidation seeks to pave the way for a new investor to take over the plant, and increase its generation capacity to 100MW to meet the projected demand.

While details of how much the creditors demand from Kibuye Power 1 (KP1), a company that pioneered extraction of methane gas for electricity generation by developing its own technology, are scanty, the liquidation follows last year’s ruling by which the Rwanda Commercial High Court dissolved Kibuye Power 1 Company after the Rwandan government through the Registrar General filed for insolvency.

“I do not have the list of creditors here. It is in the Kibuye Power 1 plant office,” Anita Mugeni, the liquidator appointed by the Commercial High Court to take over the power plant and oversee its liquidation process told The EastAfrican.

Ms Mugeni has, through advertisements in the press, invited interested buyers to submit their expression of interest for the purchase of the gas extraction platform and other assets of the company under liquidation.

“It is the gas extraction platform and other assets of the company under liquidation,” Ms Mugeni said, adding that the money raised from the liquidation will be used to pay creditors.

Rwanda is seeking to increase the current installed capacity estimated at 185MW to 563MW by 2017.

The Kibuye Power 1 was built and designed as a pilot project to demonstrate the production of electricity using gas extraction technology. It was designed for a capacity of 5MW.

Court battle

However, Dane Associates which had 70 per cent shares in the KP1 project is still currently involved in a legal battle with the government.

Dane Associates has since dragged the Rwandan government to the International Court of Commerce Arbitration accusing it of breaching the contractual obligation in the project.

Under the contract the two parties entered, they agreed that when a dispute arises, they will seek arbitration at the International Court of Commerce Arbitration.

The head of the legal department in the Ministry of Justice, Theophille Mbonera, said the case will come up for hearing this month.

But he explained that the decision of the Rwanda courts to wind up KP1 is still binding and the decision of the international court will have little bearing on the matter.

The bad blood between the Rwanda government and Dane Associates came to the fore in 2005 when the latter allegedly failed to account for $3 million in pre-project costs of the Kibuye Power 1 project.

This coupled with delayed execution of the project even after the two parties had entered a concession and power purchase agreements lead to unending court battles.

Analysts believe the ongoing court cases have impacted negatively on the company’s business plans and specifically the exploitation of methane to produce electricity resulting in the country investing in expensive sources of power.

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.

Rwanda has prioritised methane-gas to electricity-generation partly because it is cheaper, cleaner and the technology to exploit the resource is now readily available in the country.

READ: Methane power to double Rwanda energy output

The second power plant KivuWatt, has already added 25MW onto the national grid before embarking on the remaining 75MW to make it 100MW.

Symbion Power Lake Kivu Ltd, an American company, also signed a contract to generate 55MW.

READ: Rwanda adds 25MW from KivuWatt, Symbion signs methane deal

Symbion is the second independent power producer to invest in the methane-to-power plant after KivuWatt signed a concession.