Parliament has opened a full-scale inquiry into Sh2.4 billion that the Geothermal Development Company (GDC) paid to a UK firm that drilled incomplete wells in the Menengai geothermal field.
The National Assembly’s Public Investment Committee on Commercial Affairs and Energy has summoned the Attorney General (AG) Justin Muturi, who handled the arbitration case at the London-based International Arbitration Tribunal (LCIA), which awarded Sh2.7 billion ($26,264,509) to a British energy firm.
The committee chaired by Pokot South MP David Pkosing wants Mr Muturi and Solicitor General Shadrack Mose to appear next week to shed light on the controversial payments.
Mr Pkosing wants former GDC Managing Director Silas Simiyu, whose tenure the contract for the drilling of 20 geothermal wells in Menengai geothermal fields was awarded, the local and external lawyers who represented Kenya in the arbitration to appear before it to shed light on the payments.
The committee took the decision after Paul Ngugi, the GDC Managing Director revealed that the Sh2.4 billion arbitral award was paid despite the company having cleared Sh1.9 billion ($14,551,954) for the 14 wells the British energy firm drilled.
The GDC was slapped with a hefty bill by a London-based LCIA which awarded Sh2.7 billion ($26,264,509) claim to UK's Cluff Geothermal Company.
“We want to get to the bottom of this matter. At one point, you told us the GDC solely drilled the Menengai wells. Now you have told us there were private firms that did the surface drilling and you came in to complete the wells with rigs you said were slow,” Mr Pkosing said.
“How were the UK and local partners procured? We will start a full-scale inquiry starting with the Attorney General and Solicitor General next week. This arbitration case was a conduit to steal taxpayers’ money.”
MPs questioned why GDC contracted the services of Cluff, which Mr Ngugi confirmed had smaller rigs that could not deliver the wells.
“The arbitration to us appears to be like a kangaroo court where people cut deals to defraud the people of Kenya. You had no money to pay the contractor, he abandoned work, went to arbitration, won an award and got paid Sh2.4 billion immediately. This entire thing appears suspect,” Mr Pkosing said.
“Where did the GDC get the billions of shillings to pay the arbitral award and not the project cost?”
Mr Ngugi told MPs that UK's Cluff Geothermal Company and its local partners-Great Rift Drilling and Ardal Risk & Support Services (K) limited-sued the GDC after decommissioning works.
The UK firm moved to London Court or International Arbitration (LCIA), accusing GDC of breach of contract.
Mr Ngugi said the GDC in 2013 entered into a contract for provision of drilling services for 20 geothermal wells at its Menengai geothermal field at a cost of Sh4.2 billion (US$41,219,208).
Each well was to be drilled (top holed) to a measured true vertical depth or 1,000 meters or total true vertical depth to a minimum of 2,000 meters.
Mr Ngugi said due to financial challenges, Cluff Geothermal and its local partners abandoned works, suspended operations and demobilised the drilling crew and equipment on June 23, 2016 and started charging stand-by charges even when his personal demobilised from the site.
Cluff proceeded to declare a dispute and filled a notice of arbitration at the LCIA on April 15, 2017 seeking an amount of Sh2.7 billion ($26,264,509) in unpaid invoices for the period from March 2015 to June 2016, damages in the form of lost profits and consequential losses related to delayed payments of certain invoices.
Cluff also threatened to bring a suit against Kenya under the agreement for the promotion and protection of British investments in Kenya signed in September 1999.
Mr Ngugi said the Attorney General took over the case and entered an appearance before LCIA for and behalf of GDC and appointed a co-counsel to handle the matter.
“The Solicitor General wrote a letter to the Head of Public Service Informing him of the outcome of the arbitration,” Mr Ngugi said.
“In the said letter, the office of the Attorney General & Department of Justice opined that the award was favorable to the State and GDC having knocked off over Sh2.4 billion ($23,000,000).”
Mr Ngugi said the Solicitor General in the letter further stated that the government of Kenya has incurred significant savings by defending the case fully.
On June 3, the LCIA ruled that GDC would pay the claimants the sum of $2,259,680 (Sh232 million) in respect of invoices issued for work done and a further $593,497.33 (Sh61 million) in interest.
Former Attorney General Kihara, former Solicitor General Ken Ogeto and a British lawyer, Michael Sullivan QC represented Kenya in the London arbitration case.
