Solar photovoltaic plant in Rwanda

Project profile
August 14, 2015

Our client

Gigawatt Global, an American-owned Dutch solar developer acting through its Rwandan subsidiary, Gigawatt Global Rwanda Limited.

Location

Rwamagana district in Eastern Rwanda, 60km from the capital city Kigali, on greenfield land belonging to the Agahozo- Shalom Youth Village (ASYV), a not-for-profit village for children orphaned during and after the 1994 Rwandan genocide.

Project description

With a population of over 12 million, Rwanda has approximately 155MW of installed generating capacity with a penetration rate of only 22 per cent. Although, with the assistance of the Rwanda Electricity Access Rollout Program (EARP), funded by various development finance institutions, the penetration rate nearly tripled between 2009 and 2012. The overall figure is however still low compared to Sub-Saharan Africa’s average electricity access rates of 31 per cent. Accordingly, the government of Rwanda is targeting 563MW installed capacity by 2017 including from renewable energy sources. The project was envisaged under the Rwanda government’s Energy Sector Strategic Plan 2013–2017.

Our project proves the viability of financing and building large-scale solar fields in sub-Saharan Africa, and we hope that this solar field serves as a catalyst for many more sustainable energy projects in the region.  - Chaim Motzen, Managing Director and Co-Founder, Gigawatt Global, who led the project from concept stage to completion.

In July 2013, we advised Gigawatt Global on its entry into a concession agreement, government guarantee and power purchase agreement for an 8.5MW solar photovoltaic power plant. Electricity from the power plant will be supplied to the national grid operated by the Rwanda Energy, Water and Sanitation Authority (EWSA)1 over a term of 25 years. The power purchase agreement was conditional on financial close occurring within six months (later extended to seven months) of the date of the project documents. This bound the completion of financing arrangements into a definitive, and extremely ambitious, time period.

In July 2013, we advised Gigawatt Global on its entry into a concession agreement, government guarantee and power purchase agreement for an 8.5MW solar photovoltaic power plant. Electricity from the power plant will be supplied to the national grid operated by the Rwanda Energy, Water and Sanitation Authority (EWSA) over a term of 25 years. The power purchase agreement was conditional on financial close occurring within six months (later extended to seven months) of the date of the project documents. This bound the completion of financing arrangements into a definitive, and extremely ambitious, time period.

Through a competitive international EPC tender process Scatec Solar AS (Scatec) was chosen to provide construction and operation services to the project as EPC contractor, operation and maintenance provider, and management services provider. Scatec also took on the role of the lead equity investor along with Norfund and KLP Norfund (KLP vehicle is jointly owned by KLP, the largest pension fund in Norway, and Norfund).

The US$23.7 million debt financing package was arranged by FMO, which acted as senior lender along with Emerging Africa Infrastructure Fund (EAIF). Norfund provided a mezzanine loan. I&M Bank Rwanda took on the role of Onshore Security Agent, and Bank of New York Mellon served as Offshore Security Agent.

The equity and finance documents for the project were signed on January 31, 2014 and the project reached successful financial close on February 14, 2014. The project began operations in July 2014.

The development of the project was partially funded through grants from the Energy and Environment Partnership (EEP), a partnership of the British, Finnish and Austrian governments and the United States Government via the Overseas Private Investment Corporation’s (OPIC) Africa Clean Energy Finance Grant. Astrom Technical Advisors, S.L. (ATA) served as technical adviser, SEDI Labs served as a key project development partner, with Remote Partners assuming the role of local project manager.

The structure of the transaction is shown in the following diagram:

Scope of work

We acted as international legal counsel and advised Gigawatt Global on all legal aspects of the project, including:

  • negotiating the concession agreement, power purchase agreement and government guarantee with the Government of Rwanda
  • negotiating a land lease agreement with ASYV’s pro bono legal counsel
  • advising on the request for proposals issued by Gigawatt Global for construction and operation services to be rendered to the plant, including bid evaluation and selection of Scatec as the qualified contractor
  • advising, drafting and negotiating the equity funding documents entered into by Gigawatt Global, Norfund, KLP Norfund and Scatec
  • drafting and negotiating the construction and services agreements between Gigawatt and Scatec.
  • advising on the debt financing and completion matters to enable the project to achieve financial close within three months of lenders’ being mandated.

Our role as international legal advisers required us to act as a central point of contact for Gigawatt Global and the new shareholders, as well as coordinate with local counsel, Trust Law Chambers, in order to undertake and complete local permitting and security registrations at unprecedented speed.

Key issues

  • The project, East Africa’s first utility-scale solar field, has increased Rwanda’s power generation capacity by approximately six per cent and is a model for the region.
  • Agahozo-Shalom Youth Village, whose mission is to care for Rwanda’s most vulnerable children, is leasing land to house the solar facility, the fees from which will help pay for a portion of the Village’s charitable expenses.
  • The financing of the project was completed within record time – within approximately a year of Norton Rose Fulbright first being approached – and is Norton Rose Fulbright’s second landmark project in Rwanda after the Kivuwatt project.
  • Norton Rose Fulbright made a substantial financial contribution to the project as part of its commitment to developing countries and its strong CSR policy.
  • The project is another example of Norton Rose Fulbright’s commitment to the East Africa region, alongside its office in Dar es Salaam.