Rwandan peat-to-power project to generate 80 MW

A $350-million deal has been signed to finance an 80 MW peat-to-power project in Rwanda, which aims to increase access to electricity for the three-quarters of the country’s population that is currently off the grid.

The group of signatories includes Africa Finance Corporation (AFC), which is arranging senior debt facilities of $225-million, contributing $75-million in loans and providing an underwriting commitment of $35-million, as well as Finnfund, the Development Agency of Finland, which is the lead arranger for the junior debt and is providing $10-million of the mezzanine debt tranche.

Also contributing to the financing deal are the Eastern and Southern African Trade and Development Bank, the African Export-Import Bank, the Development Bank of Rwanda and the Export-Import Bank of India. The sponsors of the project are Hakan Mining and Electricity Generation, a Turkish power generation company, and Quantum Power, a multibillion-dollar international investment company.

The project will use Rwanda’s significant peat reserves, estimated at about 155-million tons, to improve the country’s installed generation capacity, which currently stands at 186 MW. This will, in turn, alleviate the need for Rwanda to rely on costly external imports of fuel to power its growth.

AFC CEO Andrew Alli commented that the local government made investment in power infrastructure a priority, with AFC intending to do all it can to help Rwanda work towards its goal of achieving 100% electricity access by its people. 

“Rwanda is one of Africa’s fastest growing economies. However, only 25% of the population currently has access to reliable electricity. If Rwanda could achieve gross domestic product growth rates of 6.9% in 2015 with such a low proportion of the country connected to the grid, think what could be achieved if access is improved. The construction of this peat-to-power plant is a significant step along the road to achieving that goal,” he said.

Rwanda currently imports expensive diesel and heavy fuel oil, with thermal plants contributing about 40% of its installed capacity. National electricity generation costs of over $0.20/kWh are, therefore, one of the most expensive in Africa.

By substituting peat for diesel in the power generation mix, the proposed project will reduce the country’s average cost of electricity generation by about 35% to 40%, and save millions of dollars a year in fuel import costs.