African private power producers take government to task over late payments

Several power producing companies in Rwanda have complained to parliament about the government over delayed payments that have caused them to not be able to pay their bank loans and taxes.

The government has been late in paying for the energy it is buying from the power producers. It had in 2015 leased 17 hydro power sites to companies to generate electricity for the next 25 years. The companies then invested and took bank loans to build and refurbish the sites and plants. The government also committed to buying the electricity generated to distribute to the rural communities through the national grid.

But the power companies are now complaining that they have not been paid, and that the government did not deliver on the promise to build feeder roads to the sites.

One of the companies, Novel Energy Group, borrowed 2 billion Rwandan Francs from the Development Bank of Rwanda and currently has three months of unpaid bills from the government worth 57.5 million Rwandan Francs.

This means company might have to pay a 4% additional fine to the bank for failure to pay the instalments of 11-12 million Rwandan Francs every month.

Another consequence of the government’s delayed payments is that the company is producing less electricity at its plant, at 130,000 watts instead of 500,000 watts as agreed in the lease terms.

Another company, Repro Ltd, got a loan of $250,000 to work on a plant but experienced delayed payments by Energy Utility Corporation Limited, a government body, resulting in them paying a fine over unpaid taxes.

The companies have since taken the matter up to Rwandan parliament, and a committee has been set up to resolve the issue.

A member of parliament, Odette Uwamariya, said the committee was told by the Ministry of Infrastructure that the delayed payments were the result of price fluctuations of the Rwandan Franc against the US Dollar. Agreements are signed in dollars and its value keeps changing.

But other lawmakers like Jean Chrysostome Ngabitsinze were not convinced that the exchange rate is a reason to explain delayed payment.

“We may be misled by this explanation from the ministry because when you look at the exchange rate variations in the past one year, a Franc dropped by 14 Francs (sic). Their argument can only hold if this happens in (a) ten-year period,” Ngabitsinze said to KT Press.

The Rwandan Franc ended 2018 at 850 to the US Dollar, and is currently hovering at around 910 Francs to a dollar. The rate was about 550 Francs to the dollar at the beginning of 2009, 10 years ago.

The parliament has recommended giving the government up to six months to sort out its payments to the power producers.