Rwanda seeks $5bn to fund key energy projects

Rwanda is seeking for funding worth $5 billion to fund key energy projects for the next seven years as it moves to address its current energy deficit.

The energy projects, including hydropower, geothermal and methane gas were unveiled to more than 150 investors from across the world on Wednesday in its capital Kigali during its first energy investor conference.

The country has an estimated potential of 83 MegaWatts (MW) to be exploited, with further sites with a potential of 22MW with feasibility studies to develop these projects planned with the support of the World Bank.

Rwanda’s installed capacity (off /on grid) is currently estimated at 100MW with only 11 per cent of Rwanda’s estimated 11 million population connected to the grid.

Expensive and limited energy — electricity costs $0.22 per kWh compared with $0.08-$0.10 in the rest of the region — raises the cost of doing business in Rwanda, according to the World Bank.

However, the government targets to have at least 1,000MW on-stream by 2017, with 50 per cent of its population having access to electricity, up from the current 11 per cent.

“We have a financing need of about $5 billion for the next 7 years. We want more committed investors with funds ready. We want more private investment because the government cannot finance these projects. We are trying to improve our regulatory framework and institutions to create a conducive atmosphere for investors,” Yussuf Uwamahoro, the Deputy Director General in charge of Energy at Rwanda’s Energy, Water and Sanitation Authority (EWASA) told The East African on the sidelines of the investment conference.

Key investment opportunities include developing 20 mini and small hydropower projects totalling 9MW as 4 “bundles” with an expected investment of $20-30 million.

It also includes developing medium hydropower (12-17MW) with an expected investment of $80 million and two regional hydropower projects –Ruzizi III (145MW) with an expected investment capital of $450 million and 90MW Rusumo falls that needs $300 million.

Of the installed generation capacity, hydropower accounts for about 59 per cent, thermal generation, primarily hired diesel and heavy oil fuel based generation units for 40 per cent and methane gas for about 1 per cent.

However, according to its strategic plan (2011-2017), government is targeting to tap its indigenous energy resources and from shared energy resources with its neighbouring countries to increase hydropower generation to about 333MW, develop geothermal power plants with a capacity of 310MW while methane gas power projects are expected to deliver 300MW to the national grid.

“It’s extremely important that the policy and institutional environment becomes what it needs to be - the tariffs have to be at cost recovery levels to make it attractive for private investment. Rwanda has enormous demand for energy but it will not be possible to develop the sector without the right regulatory environment.” said Johannes Zutt, World Bank Country Director for East Africa.

Mr Zutt added that though Rwanda has made tremendous progress in improving its business environment, its energy deficit remains a major constraint to private investment.

To attract private investment the government is offering incentives including providing land for power projects or compensate private developers for land acquisition and reforming its regulatory framework.

According to EWASA, domestic demand is expected to account for 60 per cent of peak demand; cross border mining projects are expected to account for 20 per cent while sub-regional electricity markets for the remaining 20 per cent.