Out of court deal could breathe new life into Kinangop wind power project

Wind power turbines. The protracted legal battle pitting the government against a private company that was to construct a Sh15 billion wind power farm in Kinangop, Nyandarua County, could be resolved soon through an out-of-court agreement. FILE PHOTO | NATION MEDIA GROUP

What you need to know:

  • Justice Grace Nzioka allowed the parties to study the deal with a view to recording a settlement next month.
  • The Attorney-General wants a court order granted on June 30, 2016 stopping the sale of the wind power project's assets be set aside.
  • The controversial Kinangop wind power project was started in 2013 as part of the government's strategy to increase electricity generation.
  • The case will be mentioned on November 1, 2016 for further directions.

The protracted legal battle pitting the government against a private company registered in the British Virgin Islands that was to build13 billion wind power farm in Kinangop, Nyandarua County, could be resolved soon.

The government has crafted an out-of-court settlement to resolve the dispute with Kinangop Wind Park (KWP) and its financiers in order to ensure the project is implemented.

KWP is a consortium of Norwegian private equity firm Norfund, South African asset manager Old Mutual and Sydney-based fund Macquarie.

The proposal was filed at the High Court in Nairobi on October 18, 2016.

Justice Grace Nzioka allowed KWP, PricewaterhouseCoopers, and Standard Chartered Bank of South Africa to study the deal with a view to recording a settlement.

ATTORNEY-GENERAL'S PROPOSAL

The Attorney-General, on behalf of the government, is proposing that a court order granted on June 30, 2016 stopping the sale of the wind power project's assets be set aside and replaced with an order allowing PwC and its appointed agents, Mr Muniu Thoithi and Mr Kuria Muchiru, to continue with the process of disposing off the assets, subject to the terms of consent.

Initially, Stanchart SA, which had lent KWP $55 million (Sh5.5 billion), placed KWP under receivership for failing to repay the loan and appointed PwC Ltd as receiver managers.

The Attorney-General then filed an urgent application and obtained orders stopping the sale until its application was heard. The AG had argued that the government intends to pursue the project and allowing the sale of 38 wind turbines which were to be used in the project, alongside other equipment, would seal its fate, especially given that a related matter was pending determination before the International Chamber of Commerce.

But the bank's position was that the equipment PwC seeks to auction had been offered by KWP as security for the loan.

INCREASE POWER SUPPLY

The controversial Kinangop wind power project was started in 2013 as part of the government's strategy to increase electricity generation from 1664 MW in September 2013 by an additional 5,000 MW.

Some farmers in Kinangop voluntarily leased 1,600 square meters of their land to a subsidiary of KWP for construction of wind turbines, but other farmers opposed the project.

An environmental dispute followed, and in March 2016 Justice Munyao Sila ruled that a new environmental impact assessment be done.

Following this, KWP appeared to have abandoned the project.

SELL TURBINE GENERATORS

An advertisement was then placed for the sale of 38 wind turbine generators and related assets.

However the proposed consent provides that KWP, Stanchart Bank SA, PwC and its appointed agents Mr Thoithi, Mr Muchiru, to agree that, the two agents will continue with the process of disposing off the assets of KWP, on condition that the assets will only be offered for sale to a party that will agree and demonstrate financial and technical ability to complete the wind power project at the Kinangop site where KWP was to implement it.

The AG has also suggested in the proposed out-of-court settlement that PwC and the two agents agree that they will jointly develop a criteria for selecting a buyer of the assets of the KWP, who has the capacity to implement the project at the Kinangop site.

"The government of Kenya shall, through the Ministry of Energy and other relevant government departments, provide support to the successful bidder identified in the process to be administered by PWC's two agents,” the AG says in the proposed consent.

The Attorney-General has maintained that the government has the intention of ensuring that the project proceeds to completion, whether by KWP or by any other means, "as the power supply deficit in the country requires to be eliminated."

The case will be mentioned on November 1, 2016 for further directions.