Project Description
ARC Power Rwanda Limited (the Project Enterprise, or PE), a subsidiary of ARC Power Limited of United Kingdom (ARC Power), has signed a Strategic Power Partnership Agreement (SPPA) with the Government of Rwanda (GoR) to implement a project which includes: a) The pre-financing, design, construction, commissioning, and short-term maintenance of medium (30 kV) and low voltage (0.5 kV) lines, transformers, and auxiliary components to interconnect approximately 150 villages in multiple locations around Rwanda (each an Extended Power Distribution Network or EPDN); and b) The financing, ownership, design, construction, operation, and maintenance of solar photovoltaic (PV) generation facilities that are located on the ground to provide electricity directly to approximately 25 to 30 productive user customers in total, such as schools, health centers, local government offices, small and medium enterprises, commercial centers, and business parks (ARC Generation Assets). The EPDNs and ARC Generation Assets together are the “Project". The Phase 1 on the SPPA which is the scope of this Project plans to connect 30,000 households from around 103 villages on the Rwanda public power grid.
Under the SPPA, Rwanda Energy Group (REG) a government owned utility company will be responsible to select the sites and facilitate the development rights for the sites within rural villages which will be connected to the national grid through the EPDNs. Under this agreement the PE will establish approximately 30,000 connections by the end of 2024 and will retain ownership of the ARC Generation Assets across the country, selling power directly to productive users and to the national utility at agreed tariffs. The ownership of each EPDN will be transferred to REG with a one-year warranty period upon completion after which REG will be responsible for operation and maintenance of the EPDNs.
As part of the SPPA between the PE and REG, the PE will be responsible for the construction of medium voltage (MV) lines, the generation sites (solar panels) and LV lines to provide electricity access to approximately 150 villages. Households will be REG customers while productive users will be PE clients. Currently most of the households have no electricity connection, so most of the customers will be new users.
MIGA is requested to provide political risk insurance coverage to Triodos Groenfonds N.V., Triodos SICAV II (acting for TRIODOS EMERGING MARKETS RENEWABLE ENERGY FUND), and Oikocredit Ecumenical Development Cooperative Society U.A., against the risk of Breach of Contract for its equity investment into the PE amounting to US$10.0 million and for a period of up to 10 years.
Environmental Categorization
The Project has been categorized as category B under the MIGA’s Policy on Environmental and Social Sustainability. The environmental and social review summary (ESRS) will be disclosed at least 30 days in advance.
The ESRS and Strategic Environmental Assessment for Rwanda Universal Energy Access Program can be accessed below:
Development Impact
The Project is aligned with World Bank Group (WBG) Country Partnership Framework (CPF) FY21-26 for Rwanda. One of the five objectives of the CPF (Objective 3: Expanded Access to Infrastructure and the Digital Economy) includes facilitating the long-term reduction of the high retail cost of electricity (currently around US¢22/kWh) and supporting the Government’s target of achieving 100% electrification by 2024. To this end, the Project is included in Rwanda’s current Least Cost Power Development Plan (LCPDP) which aims to systematically develop Rwandan generation resources prioritizing the least cost options to optimize tariff affordability. The Project also contributes to the WB’s upcoming programs such as the Rwandan Urban Development Phase II Project which will incorporate nature-based solutions to strengthen climate resilience and mitigation.
MIGA’s support on this Project will be a key to mobilizing private investment and supplying more than 30,000 connections for the people in remote areas within upcoming years. The Project will also help establish energy stability to the end part of the national grid by installing emergency energy supply sources – the ARC Generation Assets - throughout the Project sites.
