Energy utility grapples with unfinished substation works

Mukungwa hydropower plant where a power station has been upgraded. Courtesy.

The construction works for five substations that were meant to boost power distribution in the country were suspended after the contractor failed to respect the contract owing to bankruptcy.

Early this month, Rwanda Energy Group (REG) through Energy Development Corporation Ltd (EDCL) announced it had terminated the contract with Isolux Ingeniera SA, after the former failed to meet the contractual obligations.

Isolux Ingeniera SA is a subsidiary of Grupo Isolux Corsán, which is registered in Spain, and apparently filed for bankruptcy in July 2017.

The Government in 2013 contracted the company to construct all the substations at $33 million (approximately Rwf29bn) but later realised that the company was facing bankruptcy.

According to an email sent to The New Times by EDCL, the five substations include Gisenyi substation with the capacity of 220/30kV 31.5MVA, Bwishyura substation with 220/110kV 93.8MVA, and Shango substation with the capacity of 220/30kV 31.5MVA.

Others are Kibuye substation that would have the capacity of 110/30kV 45MVA, while Birembo substation would have the capacity of 110/15kV 20MVA.

“The next step is to close the contract by a Project Settlement Agreement by which any pending and agreed amount will be paid to either party (REG and Isolux),” reads the email in part.

A public notice published by the utility company earlier this month called upon creditors to the company to urgently contact the representative of Isolux Ingenieria in Kigali within a month to settle the claims.

“The negotiations are at their final stage towards the signature,” it adds

Officials explained that the tender was done following deep analysis among the bidders.

The firm had won the tender through normal procedures and there were three bidders who participated in final stage of the bidding process, according to EDCL.

According to Donath Harerimana, the Director of Generation and Transmission Development Unit at EDCL, the contractor had already started on the project and the level of implementation was at almost 50 per cent.

“After the Project Settlement Agreement, we will look for a new contractor who will continue with the construction of the substations,” he said.

Officials from the utility company hope the construction would resume after six months from the Project Settlement Signature.

While they are not aware of the total debt of Isolux towards creditors, it has requested anyone, especially local creditors, to urgently check with Isolux before contract is closed.

“This was to make sure that no one will come later telling us that he or she worked for Isolux and was not aware of the contract closing,” officials said.

Legally, this avoids claims towards the litigant after the contract is closed.

Available information indicate that in July last year, the Board of Directors of Isolux Corsán, the parent company of the firm, resolved to file for bankruptcy proceedings for the seven companies of the group.

The seven affected companies under the group are: Isolux Corsán Group, Corsán-Corviam Construcción, Isolux Ingeniería, GIC Concesiones, Isolux Corsán Servicios, Isolux Corsán Inmobiliaria, and Isolux Energy Investments.

These companies have a combined of 1,992 workers, of which 1,108 are based in Spain, including 160 expatriates, and 888 in other countries.

The country has committed to achieve 100 per cent access to electricity by 2024 and is currently working on upgrading existing substations to optimise the distribution of the available energy, as well as continue scaling up generation.

The current electricity distribution stands at 48.6 per cent of the population, according to figures from REG.

Efforts to get a comment from Jose Miguel, the Managing Director of Isolux, were futile as messages to his known telephone number went unanswered.

Miguel is believed to be out of the country currently with no one officially in charge.