The government paid over Sh7 billion in penalties to investors behind Lake Turkana Wind Power (LTWP) generation plant for electricity that did not reach Kenyans, in what could be the latest mega scandal.
This came up as MPs approved the Supplementary Budget III on June 30.
The penalties, according to the MPs, are due to delayed completion of the Sh28.9 billion 430-kilometre high voltage power line from Lake Turkana Wind turbines to Suswa sub-station in Narok County, which is the country’s main interchange for power coming from different sources.
The contract for construction of the line was awarded in 2014 to Grupo Isolux Corsan, a Spanish company.
It was to be completed in 2016 but it wasn't until September 2019 that President Uhuru Kenyatta inaugurated the power line at Suswa substation following years of delays after the Spanish company ran into financial headwinds.
The wind farm, the largest in Africa with a capacity of 310 megawatts, enough to power up to one million homes, was supposed to inject the first 50 megawatts into the grid in October 2016, and the whole capacity by July 2017.
What is emerging is that the government spent billions to pay foreigners in penalties as well as casual labourers shipped from China to complete the power line after the previous contractor closed shop.
Interestingly, the latest batch of Sh1.16 billion was paid by the government despite recommendations by the National Assembly that no more payments be made until a special audit into all payments has been carried out.
The amount was approved by the National Assembly during the Supplementary III budget.
The timing of the payment by the same MPs who had advised the government not to pay is quite suspect.
Initially, what made MPs raise eyebrows was the fact that Sh6 billion had been paid to LTWP investors during the Supplementary II budget for 2017/18, for power that had not reached Kenyans and was therefore not making the cost of power in the country cheaper.
In seeking to block further payment of penalties for the deemed energy, the Energy Committee of the National Assembly, chaired by Nakuru Town East MP David Gikaria, recommended to the Budget and Appropriations Committee that no other payments should be made until a special audit on LTWP and the evacuation line is done.
But how the MPs went ahead to approve the payments in disregard to their own recommendations, could baffle keen observers.
Ordinarily, to approve the payments, it requires MPs to overturn their previous recommendations that had blocked further disbursement.
Yesterday Mr Gikaria confirmed to the Nation that what is raising more issues on the two contracts is the fact that the cost is not clearly known.
“Officers in charge from the government keep on giving us different figures in terms of the cost of the contracts,” Mr Gikaria said in reference from the Ministry of Energy and Kenya Electricity Transmission Company (Ketraco).
“The only thing that will unearth all these issues is the special audit that we have requested as a committee,” he said adding, “we also need an audit into the transmission line and the deemed power that we have been paying for.”
From June 2018, the government was to pay an additional penalty of Sh1 billion monthly for delays in connecting the plant to the national grid.
The genesis of the scandal is such that the government engaged two contractors for the construction of the transmission line and the wind power plant in Turkana.
The line was to evacuate power from Lake Turkana Wind Power plant to Suswa substation in Narok County.
What constitutes careless management of the limited public resources is the fact that the government acceded to the punitive clauses in the contract with LTWP that if they finish their work but transmission line is delayed, they get paid in penalties.
In what could establish a clearly drawn script to swindle public coffers, the Spanish contractor would be declared bankrupt thus causing unnecessary delays as the government maneuvered procurement processes to get another tender.
In the process completion time was delayed, exposing the government to the punitive contract clauses with LTWP.
At the time, the budget committee recommended that the House block payments to LTWP investors, Kikuyu MP Kimani Ichung’wah was its chairman.
He noted that it is inconceivable that the government may have lost so much debt money to finance penalties that did not add value to the economy.
“Bad decisions and careless management of public resources has cost the government a lot of money. This is money that could have gone to connecting hundreds of thousands of poor Kenyans to electricity,” Mr Ichung’wah said at the time.
According to Mr Ichung’wah, it appeared no due diligence was done before the Spanish company was financially and technically evaluated for the bid.
Mr Ichung’wah notes that by the time the Spanish contractor was being hired for the job, it had problems back home and in Greece as well.
“How sure is the government that the billions were justifiably paid? The project is debt financed. The money paid in penalties is also debt financed. So where are we headed as a country?” he wondered.
The contract for the completion of the power line would later be awarded to a Chinese company.
Information before the House committees indicates that over 1,000 Chinese were brought in as casual labourers.
Whether they have left the country after completing the line last year remains unclear.