Kelley Drye Advises Rwandan Government In Negotiating Major Foreign Investment Agreements

Tuesday, March 31, 2009 - 01:00

Kelley Drye & Warren LLP partner, Stephen W. Stein, working through the International Senior Lawyers Project and in collaboration with fellow volunteers from Hogan & Hartson LLP, has been assisting the Ministry of Infrastructure of the Government of Rwanda over the last three-and-a-half years in developing projects to increase the power generation capacity of the country. This is necessary for the development of local industry and the economy as a whole, as well as providing the population with access to reliable and affordable electricity.

On March 2, 2009, the Rwandan government signed a Gas Concession Agreement and a Power Purchase Agreement, as well as related agreements, with an affiliate of Contour Global, an American company that specializes in energy investments, to build, own and operate a gas production facility and a natural gas-fired power generation plant with a total of 100 MW of installed capacity.

The electricity generated by the plant will be sold to the Rwandan electric distribution company, Electrogaz. The agreements have terms of 25 years. The first phase consists of 25 MW, which will come on-stream in 2010. The second phase will bring an additional 75 MW online by the end of 2012. Phase one will cost about US $100 million, and the entire project will cost approximately US $325 million. This is the first independent power project developed in Rwanda. Mr. Stein and his colleagues drafted and negotiated the agreements on behalf of the government. In addition to providing advice to the Ministry of Infrastructure and Electrogaz, they also worked with the Ministries of Finance and of Justice.

The unique source of fuel for the power plant is methane gas that is trapped in the bottom layers of Lake Kivu, a deep water lake on the western border of Rwanda. Extracting the gas not only provides an environmentally friendly and sustainable source of power generation, but also greatly mitigates the environmental hazards and risks associated with an uncontrolled natural release of the lake gases.

Rwanda currently has an available peak capacity of about 60 MW. Thus the project will result in a substantial increase in the country's electrical generation capacity and will allow the country to increase the number of Rwandans with access to electricity from 6 percent to 16 percent.