Volume I: Investment Prospectus Rwanda Electricity Sector Access ...

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Government should be cautious about promising any tariff cuts as a result of thedevelopment of lower-cost generation sources. The Government intends to ensure that, atthe very least, customer payments cover the entire system operating costs.However, for the success of the access programme it will be important to make the initialconnection cost affordable to customers. New customers are currently charged close to thefull cost of connection, which can exceed US$500 and is not affordable to the vast majorityof Rwandan households. The financial projections in this Prospectus have been calculatedassuming that grid-based electricity consumers are asked to contribute 10 percent of the costof their connection—an average of US$100 per connection.Assuming that tariffs remain at current levels and a US$100 connection charge applies, thesector is projected to generate around US$75 million (42 billion RWF) in surplus cash flows(that is, after meeting operating costs). These surplus customer payments will be used tofund a small proportion of investments in new generation, transmission and the accessprogramme—offsetting funding requirements from the Government and developmentpartners. Figure 5.4 (below) presents projections of surplus cash flows to 2013, and adetailed breakdown of cash flows from operations is provided in the Technical Annex,Section 4.2.Figure 5.4: Projected Electricity Sector Net Operating Cash Flows (2009–2013)252222Sector Operating Cash Surplus (US$ million)20151055718-2009 2010 2011 2012 2013Projected surplus cash flows are projected to increase significantly when the planned 25MWmethane generation plant is commissioned in 2011. This will reduce operating costs bydisplacing higher-cost generation from heavy-fuel oil.Summary of funding needs and funding sourcesAn initial analysis has been prepared of how total sector funding needs over the next fouryears (2009–2013) will be met while adhering to the following two funding principles:• At a minimum, sector operating costs will be met through operating revenues54
• The capital costs of the access programme will be funded in the followingproportions: 10 percent from connection charges, 10 percent from the utility’sfinancial resources and the remaining 80 percent from Government transfers andgrants from development partners.Figure 5.5 (below) illustrates that the first principle is expected to be achieved in each quarterof the EDPRS period. The graph shows that operating costs are projected to decrease in2011 after a commercial scale methane gas plant is commissioned. At the same timeoperating cash flows increase as more power is available for sale. 33 Total system operatingcosts over the next four years are projected to be in the order of US$220 million, while cashflows from customer tariffs amount to over US$260 million.Figure 5.5: Forecast Sector Cash Flows (2009–2012) (RWF million)16,00014,000Operating Cash Flows (RWF million)12,00010,0008,0006,0004,0002,000Operating Cash FlowsOperating Expenses-Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012Figure 5.6 (below) shows the funding sources available to meet the capital costs of the accessprogramme:• Connection charges averaging US$100 per connection are required to provide10 percent of the programme costs directly from new customers. These chargescould be differentiated based on customers’ ability to pay. This could be achievedby reducing the connection charge over time, ensuring that customers that arewilling to pay relatively higher connection charges receive electricity connectionsfirst• Utility self-financing totalling 10 percent of programme costs will come fromoperating cash surpluses. This contribution needs to be provided throughoperating surpluses because Electrogaz is not in a position to borrow for capitalprojects33 The financial projections made in this Prospectus assume that a proportion of surplus power is exported. The surpluspower might alternatively be used for industrial or commercial developments within Rwanda.55
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Rwanda ElectricitySector AccessProg
Page 5 and 6:
Table of Contents1 Purpose of Prosp
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Figure 2.2: Comparative Data from A
Page 9 and 10:
Glossary of TermsAbbreviations and
Page 11 and 12:
Executive SummaryThe Government of
Page 13 and 14:
A series of important conclusions o
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There are three sources of funds fo
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1 Purpose of ProspectusThe Governme
Page 19 and 20: 2 Access Programme is a Critical Pa
Page 21 and 22: supply capacity is available as exp
Page 23 and 24: Table 2.2: EDPRS Targets for Expand
Page 25 and 26: important for the access programme,
Page 27 and 28: Central GovernmentThe Government’
Page 29 and 30: 3.4 Energy Sector Legislation and R
Page 31 and 32: Figure 4.1: Overview of Approach to
Page 33 and 34: Table 4.1: Variables Considered in
Page 35 and 36: Figure 4.3: Location of Administrat
Page 37 and 38: In order to provide a realistic vie
Page 39 and 40: The planning approach compares the
Page 41 and 42: • Presidential priorities for ele
Page 43 and 44: Figure 4.8: Least Cost Grid Priorit
Page 45 and 46: Figure 4.12: Least Cost Grid Priori
Page 47 and 48: Figure 4.14: Least Cost Grid Priori
Page 49 and 50: Off-grid micro hydro systemsThe com
Page 51 and 52: Table 4.4: Social Institutions Elec
Page 53 and 54: Figure 4.17 (below) indicates the l
Page 55 and 56: Figure 4.19: Overall Electrificatio
Page 57 and 58: 5 Funding for the Access ProgrammeT
Page 59 and 60: The average contract size is expect
Page 61 and 62: Estimates of the capital cost of th
Page 63 and 64: ased on how much is needed to meet
Page 65 and 66: which estimate 370GWh of domestic e
Page 67 and 68: Table 5.5: Capital Cost of Sector I
Page 69: on approximately 75 percent of resi
Page 73 and 74: • EPC contracts for half of the n
Page 75 and 76: Managing Director of RECO will then
Page 77 and 78: Figure 6.2: Overview of Programme M
Page 79 and 80: The electricity utility is well-pla
Page 81 and 82: To account for funds committed to t
Page 83 and 84: Impact on funding requirements-US$1
Page 85 and 86: 7.3 Management of Development Partn
Page 87 and 88: ReferencesColumbia Earth Institute.
Page 89: T: +1 (202) 466-6790F: +1 (202) 466
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