Financial institutions must invest more in the energy sector for Rwanda to realise its energy potential, experts have said.
This will not only increase the country’s power generation capacity but also lower the cost of power across the country.
The experts were speaking during the closing ceremony of the iPAD Rwanda infrastructure and investment forum in Kigali, on Tuesday.
According to the experts, banks, insurance and the country’s pension fund should play a leading role in financing the energy sector.
“The involvement of banks in financing the energy sector is critical given the fact that the sector is capital intensive and requires long term loans. The private sector is ready to invest in the sector for as long as banks are willing to cooperate,” Edourd Ndayisaba, the Energy Private Developers vice-chairman, said.
While the private sector is expected to invest more than $1.3billion into the sector, according to ministry of infrastructure, the bigger question is where the money will come from if banks don’t take the initiative.
According to a senior bank official who spoke to The New Times on condition of anonymity, most banks lack the kind of capital those investing in the energy sector are looking for.
“It’s not the question of financing the energy sector but whether, these banks actually have the long term capital, investors are looking for,” he said.
Embracing private equity
Paul Hinks, the Chief Executive Officer, Symbion power based in USA, said that, government should embrace private equities as a long term and more sustainable financial solution.
“It is also critical that stake holders including developers, contractors, and legal advisers work towards lowering the costs involved in power generation. They will also have to maximise the rate of return so as to attract this private equity,” Hinks, noted.
According to Hinks, there is need to match private equity demands with the final power tariffs to be able to create demand for electricity.
Most local investors have money which they can actually invest in small scale energy generating projects; it’s the question of sensitising them about the opportunities in the sector, Benjamin Gasamagera, chairman, Private sector federation Rwanda, told The New Times.
“When you look at our investors, most of them are into real estate projects, construction and manufacturing. These therefore mean that they have the potential to take on the energy sector,” Gasamagera noted.
Government is targeting to increase its power generation capacity from the current 155MW to 563MW by 2017.
Access to electricity is also projected to reach a record high of 70% by 2018 from the current 22%.
Government has also lined up numerous energy projects that are envisaged to commence soon which the private sector should invest in and help the country generate more power.