alexa Detectives track Sh14.2 billion scam at power supply company - Daily Nation

Detectives track Sh14.2 billion scam at power supply company

Monday February 4 2019

Ketraco chief executive Fernandes Barasa at a

Ketraco chief executive Fernandes Barasa at a past function. PHOTO | FILE | NATION MEDIA GROUP 

JOHN KAMAU
By JOHN KAMAU
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Taxpayers could have lost as much as Sh14.2 billion through fraudulent payments to landowners by the Kenya Electricity Transmission Company (Ketraco), a Nation investigation shows.

On paper, the money was paid to genuine landowners on whose property Ketraco put up electricity transmission lines, but detectives believe a huge percentage of the money was swindled by officials at the State agency.

Detectives say one case in Kisaju, Kajiado County, where a landowner was paid 10 times more than the value of his land, mirrors hundreds of others during the construction of the Mombasa-Nairobi transmission line.

They propose that some of the officers be charged with failure to comply with the law.

Investigators are combing through land compensation documents related to the 450-kilometre, 1,500-megawatt Mombasa-Nairobi power line — the biggest such project by Ketraco — whose mandate is to build infrastructure for high-voltage electricity transmission.

If the loss of taxpayer billions is confirmed, Ketraco will join an expanding league of state firms accused of swindling Kenyans.

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Others are the National Land Commission and the Kenya Railways Corporation, whose senior officials have been charged with manipulating compensation figures and illegally paying millions of shillings to individuals presenting dubious documents during construction of Phase One of the Sh327 billion Standard Gauge Railway line.

CONTRACTORS

While the government had projected to spend Sh3.8 billion on land compensation in the SGR project, the first phase from Miritini to Embakasi consumed Sh30 billion, or 10 times the original budget.

It now appears that the Mombasa-Nairobi power line project took a similar route. Detectives told the Nation that construction of the line was so badly managed that billions of shillings could have been wasted through various fraudulent schemes, including stoppage of works, idling of machinery and staff, and questionable length of the transmission lines.

Ketraco Managing Director Fernandes Barasa did not respond to our queries or answer our calls, but Criminal Investigations Director George Kinoti, confirmed that detectives were investigating various transactions involving the Mombasa-Nairobi line.

An internal audit, by Ketraco, on the project indicated that the Tsavo-Embakasi phase was delayed by four years and six months, and that these delays had “a huge cost impact to Ketraco as the contractors claimed their overheads, idling equipment and manpower, stoppages, acceleration, mobilisation and demobilisation”.

To worse matters, the supply lines and sub-stations were vandalised even before they were completed, and the internal audit found that a transmission line with an installed capacity of 950MW was only evacuating 20MW, a two-per-cent capacity.

Auditors noted that there were no standard compensation rates for limited use of land, thus giving officials a chance to negotiate different payments for similar land.

Sell land to his workers

Documents seen by the Nation show that detectives have zeroed in on a test-case in Kajiado, where a landowner was paid Sh35.6 million for 8.4 acres of land. The market value of the land, detectives note, was Sh4.5 million.

Initially, the then Ketraco managing director, Mr Joel Kiilu, had written to the landowner telling them that the wayleave will traverse only 8.5 acres, and that the value of land in Kisaju was Sh1.8 million.

VALUATION

“The compensation amount will, therefore, be Sh4.59 million, based on the acreage affected by the power line,” Mr Kiilu said in the letter dated February 20, 2013.

But the owner argued that he intended to sell the land to his employees at a cost of Sh500,000 per eighth of an acre. At the time, the land had not been subdivided and the property was still in his name as a single unit.

Investigators say Ketraco allowed the landowner to carry out his own valuation of the property, and that three officials at Ketraco “conspired” to pay the hefty amount.

Ketraco’s then land economist, Ms Salome Munubi, in a letter dated October 28, 2013, told the managing director to pay the amount indicated by a valuation report undertaken “on the instruction of (Ketraco).”

“This was not true as the valuer had been instructed by the owner of the land,” says an investigation brief seen by the Nation.

A Nairobi firm commissioned by Ketraco had put the value at Sh1 million per acre, but the parastatal’s officials allowed the owners of the land to bring in independent valuations, which pushed the prices to between Sh2 million and Sh2.8 million an acre.

Transport tycoon

Moreover, the Ketraco land economist had told the MD that the plots “had been allocated to members”, but minutes in our possession indicate that the deal had not been sealed between the transport tycoon and his employees.

Auditors had also noted that another company was paid Sh72 million with no paperwork or valuation of its land in Kajiado.

WASTAGE

“The payments were not accompanied by a land valuation report, the compensation rate applied, and how the Sh72 million was arrived at,” noted the auditors.

Detectives are studying this payment, which was authorised through an internal memo. The owner is said to have claimed that he wanted to build a golf course on the land, and so demanded Sh80 million for the affected 5.1 acres.

It was expected that, by 2022, some 4,000 kilometres of modern power lines would be switched on to improve reliability of electricity supply, but with the high cost brought about by delays and wanton wastage, the taxpayer will pay more than the value.

Whether Ketraco officials colluded with landowners, who demanded, and got, exorbitant compensations — some as much as 10 times more than the market value — is a matter that the DCI is currently investigating.