The cabinet has approved the lease of Rukarara Small Hydro Power Project to a local firm Digitech Solutions as part of the government’s plan to involve the private sector in energy generation.
The company will run the plant located in Nyamagabe District, Southern Province, at a cost of US$23.5m.
The plant, which started operating at the beginning of this year, supplies 6 Mw of power to the national electricity grid.
According to the Minister of Finance, John Rwangombwa, the government made the decision to lease out the project as a way of involving the private sector in the strategic plan to generate 1,000Mw over the next seven years.
“The lease of Rukarara is a strategic decision. We have more power plants which we want to lease out because we believe the private businesses have an upper hand in maintaining projects like this and making them more profitable than the state.
“We thought that a private company would run the plant more efficiently than the government, but the most important thing is that Digitech is a local firm which has a long term vision to generate about 255Mw (of power) over the next seven years,” Rwangombwa said.
He added that the government does not have enough resources to produce the targeted 1,000Mw hence encouraging local and international private firms to invest in the energy sector.
Rwangombwa also mentioned that as a new company with a keen investment plan, government wanted to kick-start Digitech by leasing to it the plant as a starting point towards investing in the energy project. He said the company would generate and sell power to the government.
He further noted that the lease would ensure that the plant is well managed and efficiently run.
Among other things, Rwangombwa said that the government, through the Ministry of Infrastructure, is sourcing out for more investors in micro-hydro projects.
Speaking to The New Times, the Chief Executive of Digitech Solutions Andrew Nyamvumba said that the firm is finalising negotiations for a 40-year lease with a possibility of completely buying it out from the government in 15 years.
“We are still negotiating specific purchase terms, but our plan is to invest an initial US$ 9 million to upgrade the plant which among other things will include connecting it to the national grid.
“Then we will be paying the government a lease fee of US$1.66m annually for 40 years with an option of buying out the government after 15 years, much as we would wish to acquire it in less than 15 years,” Nyamvumba stated.
He added that the energy produced by Rukarara is distributed on medium voltage, supplying only the Southern Province. Nyamvumba said the firm would work with the Energy, Water and Sanitation Authority (EWSA) to connect the plant to the national grid.
Currently, the power generated from the plant is connected through a newly constructed eight kilometre single circuit 30 KV transmission line directly to an existing Medium Voltage line to the national network.
The plant, which boasts of three turbines, was under the management of Beijing Forever Technology Development Co. Ltd until July 2009 and was later handed to AECOM (formerly RSW International) from Canada from December 2009.
The project is one of the several micro-hydro projects started by the government to boost energy supply.
Others include Nyabarongo Hydro Electric Project which is currently under construction with a targeted output of 28 Mw.
It is expected to generate power by February 2013. Feasibility studies for Rusizi III HEP shared among Rwanda, DRC and Burundi, are complete. It is expected to be complete in 2016 with a capacity to produce 145 MW of power.
Rusumo expected to produce 61 MW, shared among Burundi, Tanzania and Rwanda, will be completed in 2015. A feasibility study has already been finalised.